As the U.K. responds to voters' rejection of the
European Union, the U.S. presidential election comes to a head and other
disputes play out across the globe, uncertainty is at a record high in 2016,
according to a new index that tracks newspaper articles in over a dozen
countries. Uncertainty about how policy-makers will affect the
economy can lead to underinvestment by firms, reduced hiring and slowed
consumer spending. In the last five years, the average global uncertainty index
has been about 60 percent higher than in previous years, surpassing even the
period around the 2008 housing crisis and recession. Most of the recent
increases have been driven by events in other nations — most notably the Brexit
decision, which caused a massive spike in Europe and was felt as far away as
Japan. Brazil is facing a down economy, a spate of corruption charges and the
impeachment of its president. Turkey recently blocked a coup and had its credit
rating downgraded, while military conflicts, political changes and other
disputes have raised policy questions in Russia, China and Syria. Those economic
uncertainties can influence short-term hiring decisions, as well as long-term
plans for factory construction or expansion.
http://www.cnbc.com/2016/10/26/global-uncertainty-about-economic-policy-is-at-record-highs.html
The graphics that are found on the article are interesting to look at the differences between certain countries and then between certain years. It makes sense that uncertainty has generally been growing since 2008 with the financial crisis. The article mentions that uncertainty about how policy-makers will affect the economy can lead to under investment by firms, reduced hiring and slowed consumer spending. This goes along with the self-fulfilling prophecy that we have talked about quite frequently in class. When people are uncertain about the future, they will start taking steps to be prepared for the worst and then the worst often happens because of it.
ReplyDeleteIt is impressive and surprising to me that the uncertainty level is even higher now than it was during the 2008 crisis. Is it possible to bring uncertainty rates down? It seems like every year there is always something peculiar happening in the world which would prevent the level of uncertainty from returning to that of years prior to 1999. I find it interesting that with the global events that affect policies pertaining to partners of Russia, Russia still has decreased uncertainty compared to the rest of the world who is increasing drastically.
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