Wednesday, December 28, 2011
As we now close the books on four (four!) years of dismal economics, I’m reminded of a post I wrote back in early 2009 tied to the launch of When Growth Stalls. It was a little more than a year into the recession and I called it “Uncertainty is the New Certainty”. While I would have thought it highly unlikely at the time, the post has retained its relevance nearly three years on.
Unfortunately, three years is nothing when it comes to lessons unlearned. Have a look at this excerpt from a book of essays written forty years ago that refers to a paper written fifty years ago regarding an event (the Great Depression) that happened eighty years ago:
As Alan Greenspan points out in “Stock Prices and Capital Evaluation“, the obstacle to business recovery did not consist exclusively of the specific New Deal legislation passed; more harmful still was the general atmosphere of uncertainty…Men had no way to know what law or regulation would descend on their heads at any moment; they had no way to know what sudden shifts of direction government policy might take; they had no way to plan long-range.
Sound familiar? Francesco Guerrera thinks so. In a column aptly titled “Reflections From a Year of Tumult” he says, “Hurtling between New York and Washington in a bouncy metal tube seems an apt metaphor for the year that is drawing to a close…For much of the year, investors were dazed and confused by a cacophony of news, rumors and wishful thinking…the Dow Jones Industrial Average swung 100-plus points from open to close more than 100 times.”
Guerrera doesn’t see the uncertainty abating, not only because 2012 is an election year but because of government’s “hulking shadow over capital markets” and a coming “storm of regulation” that will “unleash its full force in the next few months”. His conclusion: we have the choice between “ramping up risk in anticipation of a global recovery, or keeping the hatches battened down on fears of a prolonged downturn.”
Three years ago I think we all would have leaned toward the former. Given what’s going on in the centers of power both in the U.S. and abroad, I fear a continuation of the latter. Uncertainty, we despise thee.