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Hoarding And Its Causes

Hoarding by dictionary definition is the accumulation of food or other items during periods of scarcity for future use. In this article we will be looking at hoarding in the
31 Oct 2016 13:06
Hoarding And Its Causes
Hoarding

Hoarding by dictionary definition is the accumulation of food or other items during periods of scarcity for future use. In this article we will be looking at hoarding in the economic sense as a cause of raising or maintaining the market prices of the same or similar goods.

It is the purchase of large quantities of a commodity with the intent of pushing up the price. An investor hoping to increase the price of a commodity can do so by leveraging his or her demand for it, and buying physical inventory as well as purchasing future contracts for that commodity. Hoarding can also take place in financial instruments like bonds.

Under the Commerce Commission Decree 2010 (CCD2010), hoarding becomes a breach if –

  1. It raises, or tends to raise, the cost of other similar goods, or maintains the market price of the goods or;
  2. It is done in order to charge a price higher than the price it is normally sold at a time convenient to the person or immediately before the higher price is fixed in accordance with section 59 or 44 of this Decree.

Economically speaking, hoarding occurs due to individuals obtaining and holding assets thought to be undervalued and build up reserves of it in hopes to profit or save money later. It is nowadays considered an unproductive and somewhat antisocial habit. Overall it can be deemed the illegal keeping stock of goods, which creates demand of goods in the market with lesser supply and results in price rising

 

Common causes of hoarding?

  • Fear, whether fear of imminent society-wide danger or simple fear of a shortage of some good.
  • Civil unrest or natural disaster may lead people to collect foodstuffs, water, gasoline, and other essentials which they believe, rightly or wrongly, will soon be in short supply.

 

Why is hoarding an economic problem?

Hoarding is an economic problem for the following reasons –

  • It leads to an inefficient distribution of scarce resources, making the scarcity even more of a problem than a solution;
  • It can create unnecessary fear amongst consumers;
  • It can lead to price gouging (when a seller spikes the prices of goods, services or commodities to a level much higher than is considered reasonable or fair, and is considered exploitative, potentially to an unethical extent.

 

Examples of Hoarding

In Fiji, hoarding happened on a few occasions before –

  1. Short supply of local chicken in 2010 in local supermarkets in anticipation for the price increase scheduled for May of the same year;
  2. Short supply of some basic food items like canned tuna, milk, potatoes, etc in some large retail outlets in the north following the in 2009.

III. Hoarding on dairy products after the devaluation of the Fiji dollar in 2009 in conjunction with price submission for increase being sought.

 

Next Week: Black Marketing

This is a weekly column compiled by the Fiji Commerce Commission in the hopes of raising awareness on what the FCC does so people can benefit from developing a better understanding,

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