Regime uncertainty weighs on growth – Globe Asia – October 2014

In his article Regime uncertainty weighs on growth in the October 2014 edition of Globe Asia, Professor Steve Hanke describes the effect of regime uncertainty on the investment decisions of investors. In the article he presents a series of diagrams that depict economic activity in the US economy.

Hanke also describes and illustrates the profit-interest gap method of analysis developed by Professor Kenneth Boulding who he says, “reasoned that businesses would tend to hire workers when there was an increasing gap between expected profit and interest. With an increasing gap, the profit rate associated with a new hire would be increasing, relative to the cost of interest. Alternatively, if the profit-interest gap is decreasing (or negative, as it was during the Great Depression) a business would have an incentive to reduce its labour force because the cost of interest is rising, relative to the rate of profit.”