Saturday, August 10, 2013

Uncertain about 'uncertainty'

And now the latest myth bites the dust: No, “economic policy uncertainty” — created, it goes without saying, by That Man in the White House — isn’t holding back the recovery.
Let's see what they have to say about that in Italy;
In Italy, Fiat has proposed giving its underused factories a new lease on life by assigning them to build fewer but more profitable cars for export ....
So far, the company has spent more than €2 billion retooling assembly lines and retraining workers at three factories. ....
In early July, Fiat suffered a setback in implementing the strategy because of a protest lodged by Fiom-Cgil. The union got a court to knock down an article in the labor law, throwing into question part of the labor contract that Fiat had negotiated with other unions in exchange for new investments in Italy.
Fiat has suspended future investments in the country, leaving in limbo Mirafiori and one other plant that had yet to be assigned new models and money.
"I'm not ready to confirm any investment…until we get the certainty, the clarity that we need to manage our factories," Fiat Chief Executive Sergio Marchionne said. 
Which would seem to validate the work of Bhagat and Obreja, from whom we've quoted before;
If firms perceive future cash flows as risky they will postpone investment and post-recession corporate investment will take longer to rebound. flow uncertainty during the post-recession period 2008-2009 has declined very slowly, and consequently corporate investment including corporate employment increases very modestly.
These findings have significant policy implications. To wit, if policy makers would like corporations to increase their investment activity, they should focus on policies that decrease corporate cash flow uncertainty. 
And we can't let this 'correction' from Herr Krugman pass without a chuckle;
In my column on Monday, I somehow misstated the Republican plan on food stamps, which was for a doubling of planned cuts — a significant cut but not, as I said, a halving of benefits.
 What he managed to misstate being; Then House leaders announced plans to hold a vote cutting spending on food stamps in half....

The Economics of QWERTY, the invention of Thomas White's felonies, the impossibility of Fannie Mae and Freddie Mac being involved in subprime mortgages, the footnote grows.

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