The politicians speak, the governing bodies regulate and the public at large reacts -- often in the opposite way that a new law or decree envisioned. If a government wants to incite panic buying or selling, it simply has to put some artificial controls in place or even just state an intention of doing so.
We've seen this play out time and time again. President Richard Nixon's inflation-fighting wage-and-price controls of 1971 were a disaster, while price controls on gasoline in the early 1970s ultimately led to the long lines at gas station (as some of us remember).
Similarly, we've seen U.S. gun sales soar in recent years at the prospect of more regulation -- or at the extreme, a fear of confiscation. Buyers have overrun gun stores any time President Obama suggested the need for new legislation following a tragic mass shooting.
For instance, a 2013 run on ammunition in America created a major bullet shortage. Manufacturers reacted, with Remington recently opening an ammunition plant in Arkansas. (The panic buying and scarcity appear to have subsided somewhat, although .22 ammunition is still a bit hard to find.)
Obama's recent executive action on guns -- and even just the prospect that arose in recent weeks of him taking such a move -- have actually driven more consumers to purchase firearms. I sincerely doubt the president wanted more guns in Americans' hands, but that's exactly what his words and actions have led to.
There have been beneficiaries, of course -- perhaps most notably Smith & Wesson (SWHC) and Sturm Ruger (RGR), both of which have seen their stock prices enjoy nice runs higher over the past several years. But there are countless examples on the world stage of government regulations backfiring.
Consider Argentina's attempts to combat inflation over the years by implementing price controls. That merely made the situation worse by causing scarcities, and the country is finally trying something different under new President Mauricio Macri.
Most recently, the Chinese stock market's circuit breakers halted trading twice in the past week to quell panic once stocks fell 7%. But the circuit breakers arguably made the situation worse. There's simply no way to control the Chinese market's roller-coaster ride, and regulators junked the circuit breakers last week.
These are all fascinating lessons in economics, consumer behavior and demand. And they show us just how massive an effect authorities can sometimes have on markets -- not just through regulations, but sometimes simply through words alone.