Tuesday, November 18, 2008

Uncertainty is bad for the economy

Note: This video was posted on ReasonTV on Halloween, so when he talks about 6 weeks ago, he is talking about September.

Uncertainty is bad for the economy. Some parts of the future are easy to predict: The sun will rise in the morning. The Detroit Lions aren't going to the playoffs. And prices, wages, and the stock market usually go up. Crisis and disasters, whether real or imagined, can cause investors to be a whole lot more cautious with their money. They pull their money out of stocks and put it into bonds. Or they pull it out of bonds and put it into gold.

To give a example from the 90's, remember when Clinton finally admitted to the affair? In hindsight, that was a big nothing. But as he was confessing his sins on TV, CNN had a stock ticker with a red arrow pointing down. People didn't know what was going to happen, so they expected the worst.

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