Businesses can usually cope with high taxes, inflation, or tough regulations as long as the rules stay stable. Over time, they adjust their prices, reevaluate budgets, or even shift their operations.
What really stifles investment, though, is uncertainty. When governments are constantly changing policies, regulations are all over the place, or companies can’t plan ahead confidently, a lot of investors tend to hit the pause button instead of taking risks.
Some economists say high taxes hinder growth, while others think inflation is the main issue. But I sometimes wonder if uncertainty is actually worse since it can prevent decisions before any money is put on the table in the first place.
Do you guys think uncertainty has become a more significant hurdle for economic growth than taxes or inflation? Which one do you believe does the most long-term damage and why?
No I don't think uncertainty is the bigger obstacle economic growth, uncertainty is not even not even a concrete economical obstacle like taxation or inflation, uncertainty is abstract or should I say you can't point it out directly and for me uncertainty is unavoidable, it is always constant infact in life uncertainty is always constant.
Uncertainty is something you should always plan for in any economy even investing in Bitcoin is presumably an uncertain decision but we still make it.
If you consider uncertainty as an economical obstacle then how do you solve an uncertainty as an obstacle? For me you only have to plan for uncertainty because it's usually constant.
No I don't think uncertainty is the bigger obstacle economic growth, uncertainty is not even not even a concrete economical obstacle like taxation or inflation, uncertainty is abstract or should I say you can't point it out directly and for me uncertainty is unavoidable, it is always constant infact in life uncertainty is always constant.
Uncertainty is something you should always plan for in any economy even investing in Bitcoin is presumably an uncertain decision but we still make it.
If you consider uncertainty as an economical obstacle then how do you solve an uncertainty as an obstacle? For me you only have to plan for uncertainty because it's usually constant.
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I agree that uncertainty is something we can never completely eliminate. Every investments involve some level to it.
The distinction I was trying to make is between normal market uncertainty and policy uncertainty. Businesses can usually prepare for market risks but it is much harder to plan when tax rules, regulations or government policies change unexpectedly. In that case some investors simply delay projects u til they have more clarity.
I dont think uncertainty can ever be removed completely but government can reduce unnecessary uncertainty by being more predictable and consistent with their policies.
There is no way to measure it because sometimes, it's the taxation and inflation that cause uncertainty. Sometimes, political instability and incompetent government cause uncertainty.
There was a time in my country when the inflation was so unpredictable that it made businesses become confused. You could buy a product for $10 today, and you go back tomorrow to find out that the same product is not at $15. It's not like the trader got new stock, but he can see how the price of the product is changing in the market, so he has to sell at the new price or else he would be at a loss when he goes to buy new stock.
The inflation affected everything, and there was so much uncertainty everywhere. It got to a stage where vendors needed to confirm the price of goods from their suppliers before they sell to customers. A lot of businesses closed down temporarily and waited for things to become stable, but this increased the inflation even more.
The point is, yeah, uncertainty is bad in business, but something causes that uncertainty. The market or economy does not just stay on its own and become uncertain. So you don't measure uncertainty as a problem on its own, you look at the cause.
It can't be the biggest obstacle because before you even start a business there are some risk you must look into to ensure a long term growth. During this period, you eliminate whatever thing you think you are not sure or certain about.
Every business need to pay up their tax and adjust to the inflated economy that's where market strategy and planning comes into play. But then inflation would to me be one of the biggest draw down a business has to face.
When the the cost of production becomes more than what you used to spend, you have to find ways to make sure the business survive, customer satisfied and profits too must be made.
But uncertainty is not always the biggest villain or enemy.
What I think is that excessive taxes and inflation destroy a business very quickly. Because they directly bite your profits. But yes, you are right that frequent changes in policies make everything more hellish. Governments of all countries are almost the same in this regard. They change the rules every few months. And then they wonder why investors are holding on to money without taking risks! ,,, lol
That's how politicians work, they love to create uncertainty by introducing new regulations and changing plans frequently. This way they get attention and keep some people in their favor by giving special benefits. But it paralyzes any planning. Those of us who invest in crypto also feel very strongly that they may be relaxing the rules today, but there is no guarantee that they will not start cracking down again tomorrow.
And speaking of uncertainty, it may be the silent killer of the moment. Because it stops any decision before it even begins
But uncertainty is not an actual real obstacle, like taxation, inflation, shortage of man power, migration, even weather or wars, all of these obstacles could also be an uncertainty.
The OP was comparing Uncertainty with real concrete obstacles like inflation and taxation which could also pass as something that can be considered uncertainty if not well planned for
I think uncertainty has always been the norm for every economy since the dawn of human economy. And it has caused a lot of damage to the point where you would think we would have developed some kind of hedge against it by now...
But just as uncertainty damages investment, it provide opportunity elsewhere.
With pure certainty we would see economies led by undying monopoly, when a business has sole control over the market. And with certainty, that would be the outcome.
There are many countries in the world that are facing uncertainty regarding business matters. And this is because of many reasons, like this can be due to that country policies, rules or regulations. And honestly, if we see these kinds of things in the current time frame, then such things are right now more dependent on the situation between Iran and America, which is starting to worsen again.
And if things keep moving toward bad verge, then I believe that the whole ecosystem can be disturbed, and the reason for that will be hiking rate of oil and gas. And why would this happen? Because each industry highly depends on oil and gas prices. Because if the rate of such things increases, then the rate of production will also increase. So, we should hope for the best so that things cool down between Iran and America.
There has definitely been heightened levels of uncertainty injected into global trade lately and the majority of those would be coming from America and more specifically Donald Trump. His scattergun approach - attacking allies and enemies at the same time, is a clusterfuck of incompetence. He might gain some small victories like a few extra factories built in the US to appease him and some companies will suck up to him because they have no choice, but ultimately it just makes trade with the US prohibitively expensive. So they get left behind as trade finds new markets and routes around all the extortionately expensive tariffs that defeat the point of globalization. It's also highly dangerous to peace in general because all those bonds that joined them to the world are severed for no purpose than to satisfy the narcissistic tendencies of one man.
If businesses already knew the situation then they can handle high inflation and taxes easily for a long time but the main problem is not knowing what is going to happen next when government is changing their rules and economic policies on daily basis then companies has to be very careful and they has to stop the new hiring and this will affect the economic growth because less money is being invested into the businesses and people feel very insecure for investing in but if inflation is very high and there are heavy taxes then it can cause damage to the businesses if it continuous for a long period of time. A country that have pre defined policies, they have stable rules and inflation is controllable is more attractive for the investors then the one with lower taxes but frequent policies changes and economic uncertainties.
Uncertainty in business makes one lose more because they can't fit their financial models into the equation and that makes expenses become erratic and unrealistic.
However, when we combine government policies that are uncertain with high unpredictable inflation, we have the results as catastrophic as can be which is detrimental to a business that wants to grow and make profit.
Uncertainty to me is worse than having to pay high taxes and be faced with constant inflation because when you as a business owner or investor can put these into your investment equation you can see an end but when there's uncertainty in the mix with policies that can change tomorrow without warning, making profit or having a return on investment for long term is almost an impossibility to calculate and envision in the scope.
Uncertainty may be the biggest short-term cost because it freezes decisions. But it is also where the greatest opportunities emerge. Stable periods reward participation; uncertain periods reward preparation, discipline, and the courage to act before clarity returns.
The Architect.
Uncertainty is what can be experienced in all spheres of human lives which shouldn't be taken as a major obstacle to economic growth of any nation. Nations economy grows base on the economic policies on ground and how they're drive at implementing them. You don't expect a politically unstable nation to experience a stable economy that should lead to investors coming in to invest with foreign capitals that should stabilise economic growth.
Increasing/multiple taxations can actually drive away investors and hamper an economy more than anything, it can chase away investors to neighboring countries where they find it tax friendly. When this happens it can bring about inflation as fewer companies that tends to cope with the high taxation may decide to redirect the cost on the citizens by increasing the cost of products and services of the few goods they're producing as demand is gradually exceeding supply since many investors may have left due to the taxation.
Its a fair point and uncertainity will restrict business and if true overall in an economy easily can trigger the start of a recession. Its one of the excuses given for having a 2% inflation target instead of the stability of zero inflation, the idea being its better to have a steady target aided by a constant known decline in currency value.
Another perspective would be the outright admiration some have for a command economy, this is common where a military or undemocratic regime can force through policy at every level of the nation forcing consistency. Some will say no choice is the best choice for a country forcing rapid advancement without delay or inconsistency of free will or economic freedom otherwise. Genuinely there is some advantage though I will always favor democracy and proper capitalist economy for the best advance possible.