Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Please Support CounterPunch’s Annual Fund Drive
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We only ask you once a year, but when we ask we mean it. So, please, help as much as you can. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. All contributions are tax-deductible.
FacebookTwitterGoogle+RedditEmail

Uncertainty is the Root of the Current Market Craziness

For months after his inauguration, US president Donald Trump bragged that he was single-handedly producing an economic boom, citing a rising stock market as evidence.

Recently, however, he’s stopped that line of self-promotion. The market has seemingly gone nuts. Sudden one-day drops pare back weeks of gains, followed by a cautious recovery of the lost ground. There’s a strong correlation between those swings and Trump’s mouth, whether he’s making formal policy announcements or just tweetstorming his latest obsession.

To understand the problem, let’s look to the seemingly unrelated fields of economics and physics.

In a 1997 paper on the Great Depression, Austrian School economist Robert Higgs articulates his theory of “regime uncertainty.” Simply put (if I get this wrong, blame me, not Higgs), investors dislike unpredictability.

Investors put their money into enterprises under certain tax and regulatory conditions. When those conditions  start suddenly changing or looking like they may change, the investors worry.  And when they worry, they get more cautious about where their money is and what it’s being used for. They sell off, move their money into what they hope are less volatile assets, and the stock market takes a hit.

German physicist Werner Heisenberg studied uncertainty too, and likewise named a principle for it. Again simply put (and again, blame me, not Heisenberg, if I get this wrong), there are limits to what we can know about multiple aspects of things. Specifically, we cannot precisely determine both the position and the momentum of a particle at a particular moment. The more certain we are about one, the less certain we are about the other.

Donald Trump resembles one of Heisenberg’s particles. Sometimes we know where he’s at on an issue for the moment, but we needn’t bother trying to predict how fast he’s going to move or in what direction. He may double down, or he may turn 180 degrees.

One minute he’s demanding that regulations be slashed. The next minute, he’s nixing multi-billion-dollar aircraft deals over foreign policy. First it’s tax reform and tax cuts. Then suddenly it’s imposing new taxes — tariffs — on steel and aluminum.

This is not to say that any particular idea or policy he comes up with is bad, although some of them obviously are. What matters to investors is predictability.

If there’s one predictable characteristic of Trump, it’s that he is, and will remain, unpredictable. That unpredictability  can only produce negative economic consequences.

More articles by:

Thomas L. Knapp is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

October 15, 2018
Rob Urie
Climate Crisis is Upon Us
Conn Hallinan
Syria’s Chessboard
Patrick Cockburn
The Saudi Atrocities in Yemen are a Worse Story Than the Disappearance of Jamal Khashoggi
Sheldon Richman
Trump’s Middle East Delusions Persist
Justin T. McPhee
Uberrima Fides? Witness K, East Timor and the Economy of Espionage
Tom Gill
Spain’s Left Turn?
Jeff Cohen
Few Democrats Offer Alternatives to War-Weary Voters
Dean Baker
Corporate Debt Scares
Gary Leupp
The Khashoggi Affair and and the Anti-Iran Axis
Russell Mokhiber
Sarah Chayes Calls on West Virginians to Write In No More Manchins
Clark T. Scott
Acclimated Behaviorisms
Kary Love
Evolution of Religion
Colin Todhunter
From GM Potatoes to Glyphosate: Regulatory Delinquency and Toxic Agriculture
Binoy Kampmark
Evacuating Nauru: Médecins Sans Frontières and Australia’s Refugee Dilemma
Marvin Kitman
The Kitman Plan for Peace in the Middle East: Two Proposals
Weekend Edition
October 12, 2018
Friday - Sunday
Becky Grant
My History with Alexander Cockburn and The Financial Future of CounterPunch
Paul Street
For Popular Sovereignty, Beyond Absurdity
Nick Pemberton
The Colonial Pantsuit: What We Didn’t Want to Know About Africa
Jeffrey St. Clair
The Summer of No Return
Jeff Halper
Choices Made: From Zionist Settler Colonialism to Decolonization
Gary Leupp
The Khashoggi Incident: Trump’s Special Relationship With the Saudi Monarchy
Andrew Levine
Democrats: Boost, Knock, Enthuse
Barbara Kantz
The Deportation Crisis: Report From Long Island
Doug Johnson
Nate Silver and 538’s Measurable 3.5% Democratic Bias and the 2018 House Race
Gwen Carr
This Stops Today: Seeking Justice for My Son Eric Garner
Robert Hunziker
Peak Carbon Emissions By 2020, or Else!
Arshad Khan
Is There Hope on a World Warming at 1.5 Degrees Celsius?
David Rosen
Packing the Supreme Court in the 21stCentury
Brian Cloughley
Trump’s Threats of Death and Destruction
Joel A. Harrison
The Case for a Non-Profit Single-Payer Healthcare System
Ramzy Baroud
That Single Line of Blood: Nassir al-Mosabeh and Mohammed al-Durrah
Zhivko Illeieff
Addiction and Microtargeting: How “Social” Networks Expose us to Manipulation
ADRIAN KUZMINSKI
What is Truth?
Michael Doliner
Were the Constitution and the Bill of Rights a Mistake?
Victor Grossman
Cassandra Calls
Ralph E. Shaffer
Could Kavanaugh’s Confirmation Hearing Ended Differently?
Vanessa Cid
Our Everyday Family Separations
Walaa Al Ghussein
The Risks of Being a Journalist in Gaza
Ron Jacobs
Betrayal and Treachery—The Extremism of Moderates
James Munson
Identity Politics and the Ruling Class
P. Sainath
The Floods of Kerala: the Bank That Went Under…Almost
Ariel Dorfman
How We Roasted Donald Duck, Disney’s Agent of Imperialism
Joe Emersberger
Ecuadorian President Lenin Moreno’s Assault on Human Rights and Judicial Independence
Ed Meek
White Victimhood: Brett Kavanaugh and the New GOP Brand
Andrew McLean, MD
A Call for “Open Space”
FacebookTwitterGoogle+RedditEmail