The new line being touted by those in favor of more stimulus into the economy is that low taxes for businesses and the wealthy have been tried and they are sitting on capitol instead of hiring and reinvesting into new capitol goods. Why is this hiring happening?I’ve heard several theories about with the most popular one seeming to be that they are uncertain about the future and that they are waiting, but I want to know what you guys think.
They’re afraid more progressive legislation is going to hurt their returns if they decide to be bold. I read an op-ed in Barron’s recently that many investors are afraid of doing business with the uncertainty over the tax break on derivatives, which would go from around 15% to 40%+ if the tax cut expires. I don’t know why a lawyer in Washington thinks he knows how to run Billy Bob Badass’s hedge fund. He obviously doesn’t know how.
LIQUIDITY TRAP!
Just kidding, y’all.
My uncle is a airplane mechanic, his little shop really only does personal planes (not like jets, the hobby ones, cant remember name) and helicopters for wealthy people. His clients were saying to him they were worried if obama won (this was 2 years ago) that there would be large social spending enacted, so they were waiting.
The real reason is different for each individual. I think a lot of it comes from the doom-and-gloom, blood and glory media.
Who wants o play ball in the middle of a storm, even when your big brother offers you a brand new ball?
They’re afraid more progressive legislation is going to hurt their returns if they decide to be bold. I read an op-ed in Barron’s recently that many investors are afraid of doing business with the uncertainty over the tax break on derivatives, which would go from around 15% to 40%+ if the tax cut expires. I don’t know why a lawyer in Washington thinks he knows how to run Billy Bob Badass’s hedge fund. He obviously doesn’t know how
This is what I’m thinking as well, but the Democrats are most likely getting kicked out this November and in a last ditch effort to save themselves they are thinking about “temporarily” extending tax cuts and even giving more cuts to small businesses.
Marc Faber in one of his sanests moments (the ones that made him a good bit of money) said it all: all the liquidity that hit the markets back in 2008 has generated enormous volatility. This volatility is scaring big and small business alike. To top it all up “stimulus” programs aren’t working. As Gary North rightly put it “they are sitting scared”.
In such a moment nobody in his/her right mind would go out and start hiring people or investing in, say, new factories. Who knows what will happen in six months time? Take the case of Germany: they are posting record GDP growth figures (which should be discussed somewhere else) but unemployment is still very high by their standards: 7,96%, a figure very aking to Italy’s. The media, after trumpeting the “German model” went quiet the instant unemployment figures came in. If it’s a bad piece of news, don’t report it or bury as soon as possible.
Also take the case of Japanese firms, which I know quite well due to business connections. Back home it’s still business as usual, though they are “a bit worried” about the strength of the yen relative to the dollar and to the euro. They are still innovating and researching as hard as ever and there are no lay-off plans at home. But they are scared, no, they are terrified. Both Yamaha Motor and Honda shut down one of their main factories in Europe; Honda went a step further and even shut down their motorcycle factory in the US, moving all tooling back to Japan. This isn’t exactly the rosey scenario we were told 2010 would be. Do you think these giants firms would shut down whole factories and lay off people if GDP figures equated to reality?
Finally: most Western governments seem to be considering “tax breaks” for people investing in R&D and hiring people. While this is all fine and dandy on paper we know how the scenario will play. Leaving the effectiveness aside, I think that pulling a Reagan after all that gobbledygook about national debts is a sympton of how stupid people truly are.
So basically businesses are making enough with the amount of workers they have right now but they are afraid to invest and hire more workers to increase profit because of things like unexpected tax hikes,etc…?
I don’t know why there isn’t an ordoliberalism movement in this country. I’m going to try to organize one. Germany is the largest economy in Europe, after imploding, getting invaded, being split in two, and reunification, because of ordoliberal ideas on organization of the relationship between government and economy. One of the key theorists in this movement was… bumbumbum… Hayek!
It’s more complicated than that. Volatility can take many forms, so discretion is once again becoming the better part of valor. In present economical and political climate tax hikes are only possible to a point. Expensive to comply legislation is also seen as a no-go: that’s why Global Warming is quietly fading in the limelight. Also do not believe for a second that Mr Trichet and Mr Bernanke don’t know what all that liquidity they generated is doing. They are just playing stupid and willingly confounding cause and effect. Finally there are bubbles bursting all over the place: cars and motorcycles have already popped (mostly because they grew hideously bloated due to cheap credit and various “cash for clunkers” schemes), housing is bursting as we speak (despite allegations to the contrary), the food industry is probably the next… who knows when it will be your turn. So sit tight and brace for impact.
“Why aren’t businesses hiring?”
The question is tantamount to the question of why are consumers not buying.
The straightforward answer is this: Because the price is not right.
The question of why employers don’t hire or consumes aren’t buying is really missing the whole point of subjective value. People must assume objective value in order to make the claim that there is a problem that nobody wants to buy commodity X for Y dollars. There is no such problem! X is simply not valued at Y dollars but somebody is insisting it is.
If a man is sitting at home unemployed because he cannot find a job, the question should not be: Why nobody is hiring him but rather, why is his selling price not being adjusted so that he makes the sell, i.e., gets hired.
All of the talk about government uncertainty and increased risk, etc…is of course relevant to as why factors of production may be valued less then before or as compared to if there was no such uncertainty caused by government, but it is irrelevant to as why there remains unemployment. There is unemployment because prices are not being adjusted. They are of course not being adjusted because of government policies.
In Ontario the minimum wage was raised to $10/h last year.
That’s an interesting take DD5 though I don’t really suscribe to it. Prices for consumer goods have been relatively stable and in a recession it’s natural for them to go down as there are less people to buy them.
Caleb I was just reading about that a couple weeks ago. Apparently the only industries that have gotten back up are industries that pay more than that such as the mining and oil industries while everything else is relatively stagnat.
In other words Canada is crap except Alberta. Ontario is going to seed by the day.
And so I hear. I talk to someone from Alberta on another board who says most Canadians don’t really like the province since it’s the most conservative.