It’s Uncertainty, Stupid!
By Jonathan Bean • Saturday August 7, 2010 7:56 PM PDT • 3 Comments
Apparently, the “Brains Trust” really is stupid if it doesn’t understand “Government and the Uncertainty Trap,” year after recessionary year.
For years, economist and historian Robert Higgs emphasized (and measured) “regime uncertainty” as a cause of the Great Duration — i.e., why the Great Depression “lasted so long.”
Higgs’ “delicious expression” is starting to enter the mainstream:
“If Stocks Are in Turmoil, Blame the Feds: Investors Fear “Regime Uncertainty,” by Declan McCullagh (CBS News)
“Washington Post Cites ‘Regime Uncertainty’,” by Tad DeHaven
To my friends in finance, I wonder what role—and what message—YOUR regional Fed “outreach” person is sending? Word is there is division within the Fed over these issues. Perhaps some people are waking up to the “uncertainty trap,” but until the administration actually takes the economy seriously Fed divisions only exacerbate uncertainty.
So, please Mr. Obama, stop tilting at windmills and solar panel factories. It’s YOU that business is uncertain about.
Tags: Budget and Tax Policy, Business, Economics, Great Depression, Money and Banking, Presidential Power, Property Rights 
They misunderstand the economy because of their Keynesian lenses obscure their vision:
“Keynesians emphasize spending. Austrians emphasize production. People earned money from previous production, their work. The Keynesian focus on total spending and total employment omits the production structure. The Keynesian belief in total spending as the basis for economic growth omits the role of capital investment which improves production which leads to higher living standards. If for a month most people in a city use the maximum credit on their credit cards to buy stuff, Keynesians easily confuse the temporary spending with economic growth because of their focus on total spending, not production, especially sustainable production. The Keynesian focus on totality leads to the devaluation of what is produced. An example is the Keynesian celebration of World War II spending that they claim ended the Great Depression for the United States. Keynesians focus little on if cars or tanks are produced as the long as total production rises. Excluding military production during World War II shows the U.S. civilian economy was still depressed. The Keynesian misdiagnosis of recession leads Keynesians to advocate government spending to support malinvestments which diverts resources from profitable businesses to unprofitable malinvestments continuing the unsustainable production structure. Malinvestment liquidation would lead to general falling prices allowing the factors of production, the resources used to make stuff, to adjust to sustainability. The Keynesian solution to recession will deepen and extend a recession possibly into a depression. Inflationary spending will stop the necessary fall in prices, stopping the production structure from correcting itself. The inflation will lead to more malinvestments that will have to be liquidated. An example is the U.S. housing bubble which was created from the inflation used to cushion the bursting U.S. dot-com bubble.” —Viception
Z | Aug 8, 2010 | Reply
I completely agree. I have an MBA and have been studying this Economic situation for years. The Keynesian’s have got it dead wrong.
While some of their theories have merit as Viception above details, they are creating ever larger and larger bubbles.
Before the Housing Collapse the US Appraiser’s Association was going WEEKLY to the Government telling them that the House Market was WAY Overvalued, but the government did nothing. I was an appraiser at the time and one of our TEXT BOOKS was about “How to Properly Value a House in an Over Valued Market.”
But I digress, the POWER of the US Economy comes from the US populous WORKING, not makeshift, but actual production.
There are SO many problems with this US economy that I don’t know even where to start.
How about Subsidies for the Transportation companies bringing in Foreign Products? Or Subsidies for Wal-Mart and other purveyor of Foreign products?
The Foreign Products we purchase each day are not CHEAPER, they are PAID for with US TAX DOLLAR$$$! That’s the 20% you see removed at the end of the month.
The US has been Economically Colonized by International and Foreign Corporations JUST as Thomas Jefferson warned us we would be.
In a few months I will be starting a Ph.D in Economics, but I worry for the future of our Republic. Are we a “Hyper Empire” as so many have described or a “Fading Rome” ?
Raymond Rose | Aug 8, 2010 | Reply