Don’t confuse forecasters with ‘forecasters’….

Tuesday 25th April 2017

Don’t confuse forecasters with ‘forecasters’….

Rising prices and stagnant wages continue to tighten the noose on British households….

IHS Markit reports its Household Finance Index fell to 42.5 in April – the lowest reading in three years. Brits are feeling increasingly insecure about their finances.

Retailers are feeling the pinch too as consumers tighten purse strings. The ONS says retail sales posted their biggest quarterly fall in 7-years during the first quarter of 2017 – prompting fears of a larger slowdown ahead….

Meanwhile, taxes look set to rise regardless of who wins the upcoming election….

The Chancellor says commitments not to raise taxes in the 2015 Conservative manifesto limit his ability to manage the economy. The shadow Chancellor wants £70k+ earners to be redefined as ‘rich’. Both men are seeking ways to squeeze more juice from the public lemon….

Mrs. May called the snap election after previously insisting she wouldn’t. She might want a clear Brexit mandate. Or to deflect attention from 30 Conservative MPs under investigation for election expense fraud….

Either way, the stock market had its worst week in 5-months on the back of her announcement….

  • Spare a thought for forecasters….

Portions of the electorate report being fed up with being called to the ballot box. First a general election. Then a referendum. Now another general election.

The public are bored to tears. But spare a thought for forecasters. They are quaking in their boots….

The pointy-heads who get paid to figure out the future and how it will affect the economy – before it happens – are lacking confidence….

They got it wrong with Brexit. Forecasters predicted Remain. The public voted Leave.

Then they miscalled the US Presidential election. The prognosticators predicted victory for Clinton. Trump won….

Most recently, Marine Le Pen made the election play-off final in France – a defeat for the establishment and for forecasters who refused to see it coming….

Back here, the Conservatives are long odds-on. After recent wrong-headed predictions, forecasters must be tempted to play safe and stick with the consensus. Who wants to swim against the tide, predict a Labour victory and then look foolish if Mr. Corbyn gets body-slammed into the concrete?

But then, what’s the point of forecasting the obvious? And silence isn’t an option. If there’s nothing to tell, why do we need you?

  • Shining a light into dark corners….

It’s tough being a forecaster. The last year has brought nothing but criticism and mockery….

But the forecaster performs a useful function – even when wrong. The well-intentioned forecaster shines light into the dark corners of an unknown future.

A forecast represents an estimation or prediction made in the absence of certain knowledge. We use forecasts precisely because we don’t have known outcomes to work with….

Forecasts amount to guesswork. Sometimes accurate. Other times not. Mostly somewhere in-between.

The well-intentioned forecaster thinks about the future and uses his data and models to project what it might look like. He helps business leaders and policy-makers formulate plans ahead-of-time.

He doesn’t always see clearly. But the intention is always to illuminate. To light the path ahead. And we must accept his failures as the price of any success he enjoys….

  • Giving the art of forecasting a bad name….

The problem for well-intentioned forecasters is the bad press they receive when seen to be splashing about in the same pig-swill bucket as ‘forecasters’ not so well-intentioned….

Ex-Chancellor, George Osborne, for instance. You’ll recall the apocalyptic ‘forecasts’ he made ahead of last year’s referendum….

A vote to Leave ‘would cause an immediate and profound economic shock’ which would ‘push the UK into recession’….

‘As many as 820,000 jobs’ would be lost. Interest rates would rise.  House prices would plummet. ‘The value of people’s homes will be affected….’

Ordinary people would struggle. ‘Britain would be poorer by £4,300 per household….’

On it went. Like the blurb of a dystopian novel….

They called it Project Fear. But nobody made any serious attempt to debunk Mr. Osborne. Nobody asked him what he thought he was up to. Nobody questioned how he could make such outrageous claims and keep his face straight….

He made 19 forecasts in all. A year on, just two have come to pass. For a man who sat atop the economic food chain, two from 19 is a pitiful outcome. Staggeringly inept, you might say….

  • A toothless press….

Of course, in referring to Osborne’s ‘forecasts’ as if they were genuine and made in the spirit of public service, I’m doing what mainstream media does. I’m playing my part in the pantomime….

If Osborne genuinely believed his ‘forecasts’ would come to pass, there are grounds for questioning his competency. He was as wrong as anybody could be.

His ‘forecasts’ were so far off-radar, you could hear the Magic Roundabout theme-tune playing in the background as he made them….

Osborne has acknowledged his shortcomings – but passes off his record of failed ‘forecasts’ as a series of honest and genuine misreads.

Nobody has pressed him. No journalist has sunk his teeth into the issue. Perhaps they should.

‘George, how did you get it so wrong? Talk us through it. How did you get there?’

  • Expediency over honesty….

Nobody bothers. The press room knows Osborne’s ‘forecasts’ were never intended to discern the future or provide genuine illumination.

His ‘forecasts’ had but one objective: to terrify the public into voting Remain.

It hardly mattered whether the ‘forecasts’ were based on real data or meaningful observations. All that mattered was that people watching the evening news were frightened to death.

This was a case of political expediency over honesty. Forecasting didn’t come into it. Nor did truth.

The mainstream media knows it. The odd columnist occasionally alludes to it. But none state it baldly or boldly.

Instead, they observe the pantomime when they should ask if senior politicians ought to abuse high-offices of state by passing off fiction as fact to the electorate. Or what it says about ‘democracy’ when they do and are not robustly – or even lamely – challenged.

  • What Michael Gove really meant….

George Osborne was exactly the kind of ‘expert’ Michael Gove was referring to in the run-up to the referendum when he said: ‘people in this country have had enough of experts’.

Gove wasn’t saying that society is dumbed-down to a point where any form of expertise is intolerable. Just that the public is tired of a politics in which fabrications, fictions and frauds are routinely dressed up as ‘forecasts’ or ‘facts’ by ‘experts’ serving vested interests….

No wonder Brits are dreading another few weeks of the lies, the nonsense and the play-acting that passes for political campaigning.

A never-ending flow of experts will be dusted-off and wheeled-out to face the cameras – each with his own warped brand of the truth to sell. Some genuine. Many others less-so.

The public has lost the enthusiasm necessary to distinguish one from the other. Who can blame them?

I predict the lowest turnout in electoral history on June 8th. And a topsy-turvy ride for the pound and the markets between times. That’s the Money Truths forecast….

But there is a silver lining. George Osborne won’t be on the election trail. This man of many talents is to leave politics to focus on a new role – Editor of the London Evening Standard.

All we can hope is that the news the Standard reports going forward does not turn out to be as fake as its new Editor’s ‘forecasts’ last summer….

That’s how it looks from here….

Look out for me in your inbox on Friday morning when I’ll have something interesting to bring you….

All the best,

Dave Gibson

Money Truths