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We’re building an economic house on financial uncertainty

   As odd as this must sound, progress and decline are increasingly connected in this country. Seemingly, we can’t have one without the other
Dennis-Grubaugh-head-shot    What else explains the ramp-up of the stock market, the best in years, even as poll after poll of Americans shows disenchantment with the economy?
    Why are we clearly not happy unless we’re uncomfortable? Why can’t we get beyond this boom-and-bust mentality?
    The reason most certainly is … uncertainty.
    Four years into our recovery, we’re still running from the recession, even as some fiscal signs point to better times. Perhaps we’re influenced by the continuing clamor out of places like Springfield and Washington, D.C., where no one ever is satisfied unless they’re warring.
    Truly, every thread of confidence in our leaders is shaved short by some new escapade. Last month, it was the federal shutdown. Then, it was the abysmal rollout of the Affordable Care Act (and the discovery so far that it’s not all that affordable). Next month, it may again be back to shutdown. After that it will be the elections — and it will all seem like a year in review.
    This publicity has us locked in place. Try as we might we can’t quite seem to get past a basic premise: Our economy, no matter the appearance, rests on the shifting sand of federal stimulus, held in place by the weakest of interest rates. Everyone is holding their breath against a strong puff of financial wind.
    What person — or business — wants to build on that kind of foundation?
    Business is hoarding billions in reserves rather than investing it in people and equipment, both of which would bring employment back to respectable levels. And business tends to echo business when it comes to trends and originality. When one seizes up, they all seem to. Individual consumers are no different.
    As if there is not enough confusion, there continue to be mixed signs. The U.S. economy saw higher growth in the gross domestic product in the third quarter — 2.8 percent compared to 2.5 percent in the previous three months. That marked the fastest rate of growth in a year and came despite predictions among economists that third-quarter growth would be closer to a mere 2 percent.
    At the same time, consumer spending, which accounts for more than two-thirds of GDP, grew at only 1.5 percent. That’s the slowest pace of growth in more than three and a half years. People are buying cars, but not nearly enough else.
    The trouble is, sustained growth is based on confidence. And setbacks are based on lack of same. Without confidence, business has no reason to move forward in ways that get a ball rolling over a period of years. And, worse, we risk falling back into 2009.
    Federal Reserve chair nominee Janet Yellen, whose actions may well determine the direction of the broader economy, told a senate nominating panel that she foresees continuing interest strategy along the lines of current Fed chair Ben Bernanke, whom she hopes to succeed. That means continuing to pump money into the economy, in hopes that business will eventually speed up its involvement, even though such artificial approach risks inflation down the road. Ironic, that the propping up effect has mostly helped prop up the stock market and not much else.
    No amount of handwringing and politicizing is going to fix the overall economy. Only getting people back into the workforce — and in decent jobs — is going to do that. The sooner our monetary policies begin encouraging all kinds of investment, the better. The sooner business in general has faith in its government, the better still.
    Dennis Grubaugh is editor of the Illinois Business Journal. He can be reached at or (618) 977-6865.

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