The 'Uncertainty' Myth Died On Friday

A quick eulogy is in order for the ‘Uncertainty’ myth, the notion pushed by business leaders that what’s holding back the economy is a lack of stable policy in Washington. And that if Washington would just make regulations more clear, and provide certainty on taxes, then the economy would boom. They love this argument, because it’s an excuse to argue for lower taxes and fewer regulations.

Washington remains as uncertain as ever (See: Plan B), but on Friday we witnessed a rebound in investment spending on equipment for businesses.

These are not the purchases that are made when business managers are paralysed because of uncertainty of what’s going on in DC.

These are purchases that are made when demand is picking up (due to stronger end demand) and businesses have to invest more to keep up. That’s what drives the economy. That’s what’s always driven the economy.

This chart shows the jump in the growth rate of core capital goods orders.

Capital Goods New Orders Nondefense Ex Aircraft

Photo: Bloomberg, Business Insider

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