Dylan's Diary

    Why Price Controls Always Backfire

    Dylan Jovine
    Monday, January 26, 20263 min read
    Why Price Controls Always Backfire

    Dear Reader,

    Good morning.

    This is Dylan Jovine with Behind the Markets.

    Happy Monday.

    Today is Monday, January 26th.

    My goodness — this year is already flying by. Time moves faster as you get older… and it certainly doesn’t help that it feels like we’re living through world-historical events every single day.

    Honestly, there are moments when I envy the folks on a ranch in Wyoming who don’t plug into the news at all. God bless them.

    But today, I want to talk about something that’s quietly moving into focus — President Trump’s push to cap credit card interest rates.

     width=508 height=286 /></span></a><span style=font-weight: 400><br /></span><span style=font-weight: 400>In plain terms, this would amount to </span><b>price controls on credit</b><span style=font-weight: 400>.</span></p><p><span style=font-weight: 400>And the longer you watch Trump operate, the more you realize how </span><i><span style=font-weight: 400>Nixonian</span></i><span style=font-weight: 400> his instincts really are. This isn’t Reagan-style conservatism. It’s a much more activist, interventionist approach — closer to post-war Republicanism than modern free-market orthodoxy.</span></p><p><span style=font-weight: 400>That’s not a judgment. It’s an observation.</span></p><p><span style=font-weight: 400>So let’s talk about how this actually works in the real world.</span></p><p><span style=font-weight: 400>Credit cards are unsecured debt. There’s no collateral. Which means lenders price risk very carefully.</span></p><p><span style=font-weight: 400>Imagine you’re running a credit card business.</span></p><p><span style=font-weight: 400>You don’t lend the same way to someone with an 800 credit score as you do to someone with a 500 score. You </span><i><span style=font-weight: 400>can’t</span></i><span style=font-weight: 400>. The higher the risk, the higher the interest rate — not because lenders are evil, but because math demands it.</span></p><p><span style=font-weight: 400>High-risk borrowers pay more because many of them don’t pay on time… or at all.</span></p><p><span style=font-weight: 400>If the government steps in and caps interest rates across the board, here’s what happens — and this is business 101:</span></p><p><span style=font-weight: 400>Lenders tighten underwriting standards.</span></p><p><span style=font-weight: 400>They stop lending to high-risk borrowers entirely.</span></p><p><span style=font-weight: 400>Credit limits get cut.</span></p><p><span style=font-weight: 400>Rewards disappear.</span></p><p><span style=font-weight: 400>Annual fees rise.</span></p><p><span style=font-weight: 400>Monthly maintenance fees appear.</span></p><p><span style=font-weight: 400>In other words, </span><b>credit becomes scarcer — especially for the people who need it most</b><span style=font-weight: 400>.</span></p><p><span style=font-weight: 400>I’m not here to defend credit card companies. I don’t like them any more than you do. But pretending this won’t happen is childish.</span></p><p><span style=font-weight: 400>We’ve seen this movie before.</span></p><p><span style=font-weight: 400>Illinois tried it. Credit dried up.</span></p><p><span style=font-weight: 400>Oregon tried it. Same result.</span></p><p><span style=font-weight: 400>The UK tried it. Same story.</span></p><p><span style=font-weight: 400>Chile tried it. Same outcome.</span></p><p><span style=font-weight: 400>Price controls don’t lower costs. They change behavior — and usually not in the way policymakers intend.</span></p><p><span style=font-weight: 400>Ironically, once you’re financially stable, credit is thrown at you constantly. When you actually </span><i><span style=font-weight: 400>need</span></i><span style=font-weight: 400> it, that’s when it becomes expensive — or unavailable.</span></p><p><span style=font-weight: 400>That’s the cruel irony of the system.</span></p><p><span style=font-weight: 400>My suspicion? Trump will extract a “win” here.</span></p><p><span style=font-weight: 400>Banks will roll out a new capped-rate card — maybe 10% — issued only to ultra-low-risk borrowers. Trump gets a headline. The banks protect their margins. Everyone claims victory.</span></p><p><span style=font-weight: 400>But if this turns into a true cap across the industry, lenders will simply exit the riskiest parts of the market.</span></p><p><span style=font-weight: 400>And that’s when the unintended consequences begin.</span></p><p><span style=font-weight: 400>So this isn’t about politics.</span></p><p><span style=font-weight: 400>It’s about understanding incentives.</span></p><p><span style=font-weight: 400>And as investors, that’s always the real game.</span></p><p><span style=font-weight: 400>That’s all I have for today.</span></p><p><span style=font-weight: 400>Have a wonderful day.</span></p><p><span style=font-weight: 400>I’ll see you tomorrow.</span></p><p><span style=font-weight: 400>“The Buck Stops Here,”</span></p><div data-below-article-slot class=

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