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Thursday, June 9, 2011

The myth of uncertainty

According to Time Magazine's latest cover story, it is just a myth that American corporations are holding two trillion dollars on the sidelines due to uncertainty about the rules which will apply to business in the USA. Time points out that these same corporations are investing in other countries and claims that this proves their point.

Well that was cerainly a non-sequitur, even for Time. If a company invests in Brazil or China or India, why would that show that uncertainty in the American market is not affecting investment in the USA? The obvious answer is that there is no such relationship, no matter what Time or its "experts" may say.

Right now, there is uncertainty in the USA over what the future cost of healthcare will be for business. There is uncertainty over what financial regulations will govern which may affect the availability of credit. There is uncertainty over the likelihood that energy supplies will be augmented keeping prices steady or if energy prices will rise due to government policies. There is uncertainty over what environmental regulations will be enacted that may cause costs of manufacturing to soar. There is uncertainty over whether or not companies in non-right to work states will be allowed to relocate new facilities into right to work states. There is uncertainty whether or not the government will raise taxes on the most successful small businesses and drain them of working capital by doing so. there is a lot more uncertainty, but each of the items that I just listed is a critical factor that is more uncertain at this time than it has been in decades. These are not questions about what future changes might be put forth by a future government; these are issues raised by the Obama government which could easily make any investment go from profitable to unprofitable in an instant. Any rational businessman will only invest if he thinks that the prospects of profit are likely; that is how the market system works. When the government makes it impossible to tell if there will be a profit or not, investment dries up. That is what Obama has done.

So the next time you hear that it is a myth that uncertainty caused by Obama has reduced economic growth, remember these points and set straight the fool who gives you that view, even if he or she works for Time Magazine.

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