Everywhere I go, I talk to business men and women and when we talk about the economy they almost universally add to the discussion that they have no intention of expanding, investing significantly or hiring until after the next election. Yesterday I was with a man in the construction trades. He said the same thing. I asked him why and he shot back "regulation and taxation. . .these guys have an active regulatory arm and no one knows what is going to happen with taxation."
Read the rest at Cultural Offering.
4 comments:
The "uncertainty" meme is a canard.
Economic activity eats, sleeps and breathes one reality: demand.
No amount of uncertainty, or any other adversity or perceived threat, stops investment.
Illegal drugs are a case in point as well as civilian contractors competing for business in war zones.
Demand derives from disposable income.
Unfortunately that resource is scare as the result of the bursting of the worst credit bubble of our lifetime.
John,
Judging from the business people that I talk with and from my own business experience, the uncertainty issue is far from a canard. You have to factor in overhead when hiring and pricing and if that is uncertain, then that will indeed inhibit investment and hiring.
Uncertainty expands risk and there are times when although the demand is there, a business will conclude that investment/economic activity is not worth the candle. I have personally turned down projects requested by clients where the risk was too great due to the uncertainty. The demand was there, but the situation looked like a quagmire and the ultimate costs were unpredictable.
Michael
Of course. All investments have some measure of uncertainty. Even then some of the most sure-fire ventures by old-line operators don't yield good results. (I'm thinking here of Coke's second attempt to mess with their brand image. And I'm sure not every retail location with a famous name is a winner.)
I was referring specifically to the "regulations and taxes" uncertainty in the post, which is why my illustrations included both illegal and legal examples, both of whom are loaded with uncertainty, even extreme risk, seemingly not deterred from economically risky ventures.
After one of those high-profile kidnapping cases by pirates off the coast of Somalia a couple years ago I did some reading and discovered that there is a market for K&R insurance (Kidnap and Ransom). Companies who send staff into dangerous areas take out such policies with regularity.
And uncertainty surely didn't deter the criminals dealing with credit default swaps, derivatives and other permutations of nose-bleed financial arrangements that led to the global meltdown now underway (which many still argue started with poor people trying to buy property they couldn't pay for). Ask John Corzine how he feels about uncertainty about how. But don't let me get started...
This is another of those matters we need a gentlemanly agreement to agree to disagree.
Sorry, Michael. I'll be good.
John,
Thanks for the follow-up. You're right. We'll have to agree to disagree.
Michael
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