Why hoard?

Why hoard? Because agents in the market expect a scarcity of a commodity in future. If scarcity is predicted, then consumers hoard, retailers hoard, wholesalers hoard, and producers hoard. Hoarding is not without costs. First, rent on space; second, waste; third costs of pest control; and fourth interest on financing hoarding. Those costs rise with time. Even though each person hoards a small amount, those amounts sum up to a large withdrawal from the market. The expected scarcity actually takes place. Then prices rise. That is true of rice, of foreign exchange or of bonds and shares in the market. In our country the price of rice has gone up, the price of the US dollar has gone up, and in the case of the share market where prices keep rising, it is a game played by a few people; and what goes on there has no relation to the real economy as casinos went on as the Titanic sank.

In as much as hoarding is a situation where buyers abound and sellers are scarce, dishoarding is a situation where sellers abound and buyers are scarce. Where prices are expected to fall, everybody dishoards. You have seen that best in share markets. Most recently, you saw it when share markets collapsed in 1987 and 2007.

The antidote to hoarding is to flood the market, the clearest instance in the share market. We had thrown away the key to the floodgates, after the scarcity of foreign exchange shut them firmly. We cut off domestic supplies with wrong policies and practices. Hoarding and high prices follow, as do cart and the oxen.

USVATTE-ARATCHI