Friday, December 19, 2008
"In an article published in 1997 titled "Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,' I advanced the idea of regime uncertainty in an attempt to advance our understanding of the Great Depression's extraordinary duration and of the highly sucessful postwar transition to a genuinely prosperous market-oriented economy. ... In my conception, regime uncertainty pertains above all to a pervasive uncertainty about the property-rights regime. ... Treasury Secretary Henry Morgenthau tried repeatedly to persuade [FDR] to make a public statement that would reassure investors, and as the president continued to reject his entreaty, Morgenthau became so frustrated that in a 1937 cabinet meeting, he blurted out to his boss: 'What business wants to know is: are we headed toward Socialism or are we going to continue on a capitalist basis?' ... Morgenthau [also said in 1937] 'Uncertainty rules the tax situation, the labor situation, the monetary situation, and practically every legal condition under which industry must operate. Are taxes to go higher, lower or stay where they are? We don't know. Is labor to be union or non-union? ... Are we to have inflation or deflation, more government spending or less?' ... However, it is clear that government's frantic actions of the past several months have created a situation in which investors have little confidence about the character of future property rights in the United States", Robert Higgs (RH), 6 December 2008 at http://www.independent.org/blog/?p=635.
Yes RH. My "tax instability" concept seems to be an application of RH's broader "regime uncertainty", my 23 November 2008 post for example, http://skepticaltexascpa.blogspot.com/2008/11/war-story.html. RH's concept also helps explain the recent stock market crash. US government policy instability is increasing real discount rates.