Wednesday, June 20, 2012

Yo, Adrian. Stanford here.

The politicians did it...created uncertainty, say two Stanford economists, Scott Baker and Nicholas Bloom, along with U of Chicago's Steven J. Davis;
...uncertainty leads firms to cut back or defer hiring and investment decisions. It also drives consumers to put off buying new goods. As a result, uncertainty stalls both the corporate and consumer sector drivers of a recovery. Indeed, the Federal Reserve Board’s recent Beige Book - the summary of their anecdotal evidence from business contacts around the US found here – highlights policy uncertainty as a key issue that businesses claim is stalling the recovery.
Looking ahead, there is more policy uncertainty on the near horizon for the US economy: Presidential and congressional elections, the fiscal cliff, potential for another partisan fight over the federal debt ceiling, and prospects for large-scale battles over taxation. In Europe, there is the spectre of an outright Greek default, fiscal collapse in several European countries, the intensification and spread of bank runs, and a possible dissolution of the Eurozone.
We fear the US recovery, like Rocky, will be down on canvas again, pummelled by another round of policy uncertainty. If that happens, will the US economy spring back again, like Rocky? Perhaps, but even the most resilient fighters suffer long-term damage from repeated heavy blows.
Which might be something for congress to think about before preening before C-Span cameras and shaking confidence further, looking for scapegoats

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