Posting in Government
Federal Reserve Bank study says atmosphere of uncertainty increased unemployment rate by up to two percentage points.
There are tangible, and often painful, fundamentals that determine the course of the economy -- unemployment, interest rates, housing prices, inflation, industrial production, government debt. But more than anything else, markets are psychology, and an atmosphere of fear and panic among producers and consumers leads to scaling back of purchases, which further exacerbates a downturn.
Over the past few years in particular, there have been plenty of messages of impending doom circulating through the mass media. Like Eeyore, the miserable mule from Winnie-the-Pooh, many pundits ignore any bright spots and flood the airwaves with grim predictions of imminent collapse and despair just around the corner. In an economy heavily tied to consumer confidence, such talk could have far-reaching consequences.
Such downbeat messages may eventually result in a self-fulfilling prophecy, actually translating into job losses. A new analysis by and
"During the Great Recession, the increase in uncertainty appears to have been much greater in magnitude.... Our model estimates that uncertainty has pushed up the U.S. unemployment rate by between one and two percentage points since the start of the financial crisis in 2008. To put this in perspective, had there been no increase in uncertainty in the past four years, the unemployment rate would have been closer to 6% or 7% than to the 8% to 9% actually registered."
Policymakers and pundits can't be pollyanish in the face of economic troubles, of course. But the Fed authors suggest that as media channels fill up with dire and downbeat talk, fear levels go up, and people start to lose their jobs. "Heightened uncertainty acts like a decline in aggregate demand because it depresses economic activity and holds down inflation," the Fed economists observe.
Another thing is clear as well: when analysts and pundits put their Eeyore faces on, it doesn't help anybody. What is needed is more discussion and ideas about solutions and disruptive innovation that create opportunities, improve our world, and provide people more control over their economic destiny.
(Thumbnail photo: Joe McKendrick.)
Sep 18, 2012
Another excuse for Obama and Progressives running the nation into the ground as hard as they can so they can "fundamentally transform" it.
As some of us like to say, Paul Krugman has predicted 9 out of the last 1 recessions. The media and like-minded pundits were aggressively cheering for a downturn since 2003. They finally got one in 2008. It's not all that hard, really; just a case of convincing enough people that even though they and everyone around them might be doing okay, somebody somewhere else they they don't know may not be. Now, trying to do the same for a boom (as they've been trying for the last 3 years now; "Recovery Summer III" wasn't any better than I or II) is much more difficult. It's much more difficult to convince people that things are looking up when everybody is or personally knows someone who is unemployed, underemployed, or has just given up.
It's the Nature of Capitalism to boom and bust. Even though Glass-Stegal was wonderfully helpful (until voted out so we could enjoy our recent economic collapse) we are faced with having millions of jobs shipped over seas by Godfull Red Blooded American Capitalists to Godless Communist China that are gone forever. The stock market is completely gamed by computers making split second massive buy/sell orders (it is gambling anyways) for the high stakes crowd. There are no surprises here. We are screwed - buy our betters (bettors). Read up on, Richard Wolff, an economics professor. There is no prophecy self-fulfilling or otherwise; let's no blame the victims (us.). Cheers.
Obama is just the logical progression of Bush policy. Little is different. Even Obama admits it when he says that he is unable to "Change Washington from the inside". If he wins come November, it will simply be Bush's 4th term.