Lordship 516

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Jenny1 Wrote: ------------------------------------------------------- > I really appreciated Simon Jenkins' books on > churches and cathedrals. But I don't find his > political journalism very thoughtful or > convincing. ....I agree entirely. His political economics is superficial & subjective & generally anti-science. Most economists recognize the limitations of their forecasts and advise that they should only be used as a framework within which the client [government or private] will consider possibilities, interrogate & develop queries that require further investigation/analysis. If you take forecasts literally & out of context then it leads to a baseless conjecture which wll ultimately fail. Jenkins & his ilk have no patience to take the time to examine the various positions and invariably look for pat answers which will never be forthcoming. Its much easier to demolish than to build. Andy Haldene is a very readable & erudite commentator and he is valued widely by economists worldwide, However, you must read what he says carefully & not presume to read between the lines what is not there. Jenkins was a creature of the Blair era & he generally rants against all science & celebrates most scientific failures. He should stick with his churches, cathedrals & the London party glitterati where he has many well-off fellow travellers.

???? Wrote: ------------------------------------------------------- > ...that's maybe, but i found his views on > Economists to my liking Take away the economists & what would you have..? Theresa Maybe. Boris Johnson, Liam Fox, David Davis ...Oh, my days...

???? Wrote: ------------------------------------------------------- > We know who he is we aren't complete ignoramuses > to your towering intellect and fantastic forecasts > :) He's a wannabe economist, described as a "professional miserabilist" in The Londonist. As to my intellect, it is modest but I try to be objective & honest. As to forecasts - these are in Theresa Maybe's waiting room so let's see where we are in 12 months time....

???? Wrote: ------------------------------------------------------- > rahrahrah Wrote: > -------------------------------------------------- > ----- > > Chief economist of Bank of England admits > errors > > in Brexit forecasting: > > > https://www.theguardian.com/business/2017/jan/05/c > > > hief-economist-of-bank-of-england-admits-errors > > > Personally I'm nearer this.... > > https://www.theguardian.com/commentisfree/2017/jan > /06/economists-economic-policy-brexit-crash-failur > e Sir Simon Jenkins [PPE degree] on his usual rant against science & mathematics of any sort. A truly regressive chappie - ex liberal turned small conservative in every way. Tried his hand editing the Evening Standard - moved on. Tried his hand at editing the Times - was moved on by Murdoch due to poor sales. Tried his hand as Political Editor at the Economist - moved on. Writes for the Guardian & Huffington Post. Quite a mover. He's in favour of handing back the Falkland to Argentina. Famous for saying "Wave a banknote at a pundit and he'll predict anything" He's not so slow at taking a few pounds for his own brand of punditry. Gave great parties at the expense of the National Trust. You are welcome to him.

engine

JohnL Wrote: ------------------------------------------------------- > OK Economy people riddle me this > > The BOE and Government states we are growing > faster than other economies > > However when calculated in Dollars our GDP (last > years in the link) will have shrunk > and not only that we will have fallen behind > France since June 16. Also if the > pound tumbles after May invokes article 50 we > could fall behind India putting us > 7th in the world (we were 5th). No doubt in > France our economic performance is being > reported in Dollars. > > Some people say there is a danger of us even being > relegated from the G7 and the pound > losing its status as a reserve currency yet > everybody saying the economy is great and > the BOE apologising. > > > https://en.wikipedia.org/wiki/Economy_of_the_Unite > d_Kingdom Nominal GDP is still expected to grow but at a slower rate in the coming years, mainly due to Brexit uncertainty. It has already fallen in Construction, Agriculture & Industry but was offset by increases in Services. However the effect of the devaluation in sterling will lead to a reduction of GDP measured as PPP [Purchasing Power Parity] & this will affect not only the UK ranking but also the UK capacity to perform internationally. We have already fallen behind France See the following comment from the Wikipedia article "In the third quarter of 2016 wages were still 7% below the level they had been at prior to the Great Recession in real terms.[94] The previous 10 years had been the worst decade for real wage growth since the 1860s. Mark Carney, Governor of the Bank of England, described it as a lost decade. Productivity was 16% below the long-term trend." There are two systemic issues in the current economy 1] Distribution - between regions & income/wealth levels experienced by different levels in society. 2] productivity - Krugman has made the comment "?productivity isn?t everything but in the long run it is almost everything? Krugman was talking about the determinants of growth, and hence living standards, in the economy over the longer-run. The raw numbers, looked at over long spans of history and large cross-sections of countries, suggest Krugman is right. The effects of any improvement in the economy have been skewed & not everyone can recognize the claimed improvement. Reserve currency ststus - SDR The respective weights of the U.S. dollar, euro, Chinese renminbi, Japanese yen, and pound sterling are 41.73 percent, 30.93 percent, 10.92 percent, 8.33 percent, and 8.09 percent. These weights were used to determine the amounts of each of the five currencies included in the new SDR valuation basket that took effect on October 1, 2016 & are set every 5 years but also adjusted daily taking relative currency values into account. The next review is in 2020 & yes, the UK could fall out of being a reserve currency or have its weighting reduced. Sterling has been falling as an influence since the creation of the SDR in 1969. Andy Haldene is a great economist and has been very hard on himself. He is a down to earth person and well grounded without any airs or pretensions. We all admit to failing to measure the uncertain & irrational elements in the economy & have to do better in the future at evaluating the seemingly irrational micro behaviours that can radically influence the macro outturn. Comparing economic forecasting to weather forecasting is a bit tongue-in-cheek - we don't have the luxury of having multiple satellites broadcasting real-time information that we can use. Much of our data is lagging & the uncertainty data is mainly compiled from social feedback & analysis which is subjective & varied. Brexit is a unique scenario & is made more so due to the lack of information/direction coming from the government. Who knows what is inside any of their heads - Brexit is Brexit; Red, white & Blue Brexit; more like BS Brexit; - we are in a state of suspended animation until this dormant government actually says/does something comprehensible & that could be made more difficult in the light of whatever the Supreme Court might rule. We are directionless policy-wise & we can only wait & see. Addendum - The Economist article on May is telling. They don't make commentaries lightly but their Theresa Maybe tag is hard-hitting & timely. The article was obviously written by a Tory sympathizer but they spared her little and characterized her openly as a personification of Eden rather than a Thatcher reincarnation. Let's hole it doesn't turn into Theresa Mayday....Mayday...Mayday...

Light

red devil Wrote: ------------------------------------------------------- > But it does make a difference, uncertainty isn't > some form of mathematical constant... Don't know what you are trying to say, but your statement here is true - if it were a constant then it could be computed accurately. Uncertainty is chaotic, but it can be modeled to reflect particular circumstances - we can apply certain deviation factors that are relatively dependable; the greater the range of the model the less accurate will be the answers you get. But for particular circumstances we can use uncertainty indices to point the way forward for specific issues. The biggest problem is that uncertainty typically rises abruptly but declines very gradually due to issues of trust & confidence. The BoE has done its best to allay uncertainty but the government has exacerbated an already very uncertain economic environment - most economists are scratching their heads in frustration & foreigners are bemused with the UK government [non]performance.

Jenny1 Wrote: ------------------------------------------------------- > rahrahrah Wrote: > -------------------------------------------------- > ----- > > @Red Devil - From the article I linked to: > > > > "It is not good enough to say most forecasts > were > > based on an assumption of an immediate UK > > notification of Article 50... Brexit > uncertainty > > exists regardless of when the UK informs the EU > of > > its intention to leave " > > Logically that should be the case. But have you > noticed how financial markets, and the economy as > a whole, often don't seem to react to the prospect > of events on the horizon, but only respond when > things actually happen? I'm not sure why this > happens - but I have noticed it before. The markets mainly moved on the basis of receiving huge quantities of QE which flowed more or less directly into the pockets of the banks & larger companies thus boosting the already rich with what was effectively unearned income that was reflected in their share prices. We are not all in it together when the benefits flow - only when they need bailing out. Others got caught up in the feel good factor thinking that they too were to benefit in this supposed economic uplift & spent & spent & spent.... It is a financial chimera. Too late will they realize that this will not be so - the people who have loaded their credit/debit cards, overdrafts & remortgages with debt will learn a very sorry lesson over the next few years when there are the inevitable price increases, wage stagnation, job losses, cutbacks, less working hours etc that are on the horizon, as various businesses cut back on expenses & beyond that when interest rates do go up as they struggle to pay for their excessive spending. The Chinese government has recently taken radical action to prevent further capital flight to protect its shaky economy - they are preparing for the Trump economic war. Heretofore [up to 1st January 2017] every Chinese was able to export $50,000 per year with no questions asked. Now they have to justify every purpose for its use including invoices from schools/universities, invoices from foreign companies for supply of goods [permission not now given if similar is available in China]. The Chinese buyers are already defaulting on property purchases in Australia, New Zealand, UK, US, Germany, France, Brazil, Canada. So the marketing in China will come to an end and developers of properties in these economies will suffer a crash in their cashflow - prices will fall. House prices for 2017 will be flat at best & will likely fall. This will affect our economy as they were significant buyers of property & other assets. This will not offset inflation in the construction industry as much of the purchases are in $ or are energy linked - on top of a flat market we will have inflation at 7%+ in construction [last year 6% - RICS figure]

More like Cognitive Dissonance than bias... Economists cannot forecast illogical behaviour of the herd...excessive borrowing to spend... overoptimistic expectations based on unreal criteria etc., etc. When the chickens come home to roost don't blame the economists - we can only comment on what reality is or might be, either historically or otherwise. Current account - deficit; current budget - deficit; Government borrowing - all time high; Personal borrowing - all time high; Currency - trending definitely devaluation; Inflation - soon to rise dramatically in certain critical sectors; Health sector - underfunded; Education - underfunded; Housing - underfunded; Brexit negotiations - not even started, totally unknown even to ministers. Prognosis - doubtful & uncertain. What more signs do you need ?

retrieve

Bresignations have started.....

???? Wrote: ------------------------------------------------------- > @#$%& me guys - it is self-idnulegeunt pseuds > corner on here with you two. You really are > confusing speaking an over complicated flowery > academic language with knowledge and insight. > Ironically there's a whole sociology on coded > language (read it) .....a lot of hot air. You are > both not suggesting much confidence in your > ideas/hypothesis if you can't or are not willing > to express them in a more accessible language - > it's translatable but tedious as is. Have you no > confidence in the merits of your arguments to > express them clearly rather than in academic > bullshit? Sorry about your bother. I avoided using more technical language & simplified my contribution as much as possible. There are some issues that require a vocabulary - easy enough to look up the meanings. Not all academic/theoretical expression is bullshit except to those who want to distill everything into meaningless soundbites. Just because you cannot understand something doesn't make it bullshit ! A lot of what I read here I find boring also but I just move on. One person's meat is another person's poison. Tolerance is the name of the game !

Jude

jaywalker Wrote: ------------------------------------------------------- > Economics is therefore a doomed enterprise. Economics versus the economy - these are not always compatible but we must keep doing our best in an ever changing & diversified world where the main players are at odds with each other. We can only find a wormhole through the whole chaotic morass of political & commercial shenanigans. A plan is better than no plan - laissez-faire is not a real option - Smith, Keynes & Hayek all acknowledged that.

Philip's Curve Many criticize the Phillips curve because they believe it implies that growth causes inflation and repudiates the theory that excess growth of money is inflation?s true cause. Not so. One can believe in the Phillips curve and still understand that increased growth will reduce inflation. The misplaced criticism of the Phillips curve is ironic since Milton Friedman [one of the co-inventors - with Phelps - of its expectations-augmented version] was also the foremost defender of the view that ?inflation is always, and everywhere, a monetary phenomenon.? I have a preference for the Lucas critique & the new classical school of economics. One important application of the critique is its implication that the historical negative correlation between inflation and unemployment, known as the Phillips curve, could break down if the monetary authorities attempted to exploit it [which has happened]. The Lucas islands model is an economic model of the link between money supply and price and output changes in a simplified economy using rational expectations. It delivered a new classical explanation of the Phillips curve relationship between unemployment and inflation. The Phillips curve was lauded in the 1960s as providing an account of the inflation process hitherto missing from the conventional macroeconomic model. After 40 years or so the Phillips curve, as transformed by the natural-rate hypothesis into its expectations-augmented version [short-run Phillips curve], remains the key to relating unemployment (of capital as well as labor) to inflation in mainstream macroeconomic analysis. It is still a relevant touchstone - but just now it has to be accepted that conditions are volatile & the criteria for equilibrium are somewhat chaotic to regard the Philip's Curve as currently useful - but it will return to relevance, probably in a further development of the Lucas model after Kydland & Prescott.

jaywalker Wrote: ------------------------------------------------------- > "Historical data is always imperfect, but it is > the only measure without bias that we have to > measure risk and make hypotheses about the > future". > > ok, clearly at one level this is very sensible. > Yet I am troubled in a number of ways. > > Historical data is always-already selected: the > principles of selection bias the notion of > 'history' they then present. I think this is > orthodoxy in the academy (at which point I get > ridiculed, but there it is). You could have heard > your words out of the mouth of Barber in 1971 - he > had not read (or at least understood) Friedman's > critique of the Phillips Curve. Since 2011, both unemployment and inflation have fallen, with little sign of the inverse relationship associated with the Phillips Curve. The Philips Curve's usefulness has receded already as it became altogether incapable of producing the pattern of inflation and unemployment we see during the first five years of the recovery from the recent recession. What we see during the past few years is persistently high unemployment combined with low and stable inflation expectations and a falling observed rate of inflation. The Philip's Curve has to be put back in the tool box for now and not used until there is a significant change in circumstances. > > My guess is that measuring risk is really only a > projection of the status quo. If we have calm-ish > weather and know the time of year then we can > posit a distribution. But for the interesting > risks we can't. There is, simply, no underlying > distribution to posit. This is because complexity > operates BOTH in the unknown of the initial > conditions AND because the non-linear feedback > loops characteristic of the mythologised 'the > economy' (and I do mean that this is a myth) > themselves are both poorly modelled AND CHANGE, at > times chaotically. We have seen such phase shifts > this year. The modelling effort really only homes > in on precision when times are not a changing. You misunderstand the application of modelling uncertainties, particularly 'known' uncertainties. These can be given discrete interpolated values using custom techniques. By running these models dynamically over time we can get a pattern of outcomes that can help us further narrow their results. I mainly use these for micro scenarios - what if, what not to do, when to do, when to stop, when to go, how much, when to hedge, what to hedge - all for particular narrow scenarios and we can have quite a success rate using these techniques. I'm sure the BoE have far more sophisticated ABM/MAS models doing the same every day.

Johnson

Jaywalker wrote: >As for computing uncertainties, I'm not sure you can. But my technical knowledge in this area has a datestamp of c 1983 >(Buiter). After that I turned to other things. I guess I would worry about the economist's notion of contingency: what >we understand of the past shifts in ways I suspect AI cannot accommodate. But that is a deep question for sure. Historical data is always imperfect, but it is the only measure without bias that we have to measure risk and make hypotheses about the future. The difficulty is deciding on what the band(s) of the past do we use in our work. We also have to go outside the historic boundaries in considering risk. We have to consider questions about the implications of using particular data all the time & avoid the temptation to input arbitrary criteria into our models - ignore popular commentary & political noise. During uncertain times only the past can keep us close to reality. It is how we use the historical data that will guide us to a better understanding of the present & future. In modelling, the past can usually only tell us what NOT to do - other than that the past is useless. We have to find our own way out for the future. Computing or modelling uncertainties is not done to forecast the actual future economy - it merely serves as a tool whereby decision makers can evaluate the effects of different factors & the resultant analysis can never be regarded as an absolute. To do so would be foolish - we do several [hundreds] iterations & many are self excluding. The remaining iterations are used selectively to assist in eliminating possibilities & refining contingencies rather than defining absolutes or even near absolutes. These models have to be constantly updated [months, years, boring but the end results are satisfying] & in doing so become nearer to reality over a specific time sequence - if you like, they are funneling the results into a narrower band of deviations towards a more 'normal' distribution, reducing the 'fat tails' to 'skinny tails' over the sequence [a bit simplistic but essentially correct]. Then & only then can a determination be made. Too many people, including many economists, have the idea that modelling can reflect/forecast the real economy - it cannot - when used dynamically rather than absolutely they assist rather than determine decision making. Only in Harry Potter do you get magic wands but clown politicians can ruin an economy at the wave of their gob.

angst

Using Dornbusch in the current circumstances is limiting as it cannot compute uncertainties - the tools for dealing with uncertainty didn't exist in his time. I am building some Agent Based Models [ABMs]for various scenarios & hopefully will develop enough models to progress towards integrated Multi Agent Systems [MAS] that will enable dynamic modelling in the current environment. Data & defining parameters from H1 will help refine these models for practical use and inform and make parallel DSGE models more usable & relevant. The big elephant in the room especially for the UK is stagflation but many of my colleagues don't wish to consider this too loudly - however, all the markers are present & it will take a lot to prevent it happening. I feel another interest rate drop will happen in the New Year. There isn't much left in the armoury & bluff & bluster just won't cut it. Seneca committed suicide on Nero's order because he was involved in a plot to murder Nero & a possible sub-plot to install himself as Emperor. He also loaned forty million sesterces to the British. The recall of the loans prompted the British to revolt - what might today's British citizens revolt against?

jaywalker Wrote: ------------------------------------------------------- > This is a very savvy post, Lordship. I think > about a mean estimate. Fat tails on the > distribution suggest to me 0.90 for pound/euro Q3 > (Dornbusch overshooting hypothesis). For cable, > much more difficult because Trump himself an > outlier. Running scenarios on that at the moment, trying to establish suitable criteria to hedge against tail risk. Trump as a outlier is not such a huge problem as his policies have been trialed before under Reagan, they won't be so different this time around - there are boundaries of reality & opposing influences that will reduce the Trump effect. The Reagan period had an advantage insofar as the administration had the leading advantage - this time around there will be many significant influences that will seek to mitigate the Trump effects. There will be a 'reality' check in Q3 [which is why I don't have numbers for that period] as it becomes more clear what Trump's policies are in reality & what he is likely to be able to deliver - this will clear from Q4/17 or Q1/18. Taking jobs back to the USA will be a longish campaign as a factory takes about 2 years to tool up - this effect will first have to get industry on board & then go through a delicate process of maintaining existing supply whilst gearing up so it won't make much impact until about 3 to 4 years, if any. Spending on national infrastructure such as he is boasting about is a little more difficult than building one of his speculative Trump Towers. For the UK internally there will be erratic periods that cannot be quantified - 1]after the Supreme Court decision - not a great impact, as it will only signal undefined possibilities 2] after Brexit is notified formally - this will have a greater impact and will usher in a prolonged period of uncertainty that will last for a yet to be determined period of years. The ? falling is not a bad thing - the UK needs to attract investment from a wider group of investors & needs to make itself attractive to investors. The current account deficit & the budget deficit need funding & therefore need to offer better returns that other destinations for funds. A cheaper currency is preferable to a deep seated recession or a sharp financial squeeze on consumers & business. Once there is cogent definition on the future relationship with the EU then the UK can begin to move ahead & forge their relationships worldwide & develop the new UK economy - this is likely to take more time than May & co are hoping. We will likely go into the next election without everything being settled and a lot of political squabbling not only between the parties but also within the parties, particularly the Conservatives. An early election might suit May a lot better than a full term but I doubt the opposition will facilitate that.

Lordship 516 Wrote: July 19th 2016 ------------------------------------------------------- > Rook Wrote: > -------------------------------------------------- > ----- > > Agreed ??? > > > > Interestingly GBP got a jolt higher today [?:$1.33]as > MPC > > member Weale has just made some pretty positive > > comments about future policy (or should I say > far > > less negative). This is in direct contradiction > to > > comments by MPC member Andy Haldane late last > week > > which pushed GBP lower and got very widely > > reported on / jumped on LORDSHIP WROTE: > It's interesting that you pointed to the 'jolt' > that the ? received yesterday - so what would you > attribute today's drop of 1.3% to ? > > Also, what do you think about the prospects of the > ? devaluing to sub $1.25 & when ? 23 December 2016 ----- ?:$1.229; Euro:$1.045 - My clients have been happy to follow my advice My projection was for ?:$1.20 to $1.22; Euro:$1.05 to $1.07; Seems the odd projections can be useful sometimes PROJECTION FOR 2017 Q1 ?:$1.18; Euro:$1.02. Q2 ?:$1.15; Euro:$1.00 Q4 ?:$1.10; Euro:$0.98

???? Wrote: ------------------------------------------------------- > 3rd quarter GDP (post referendum) upgraded to > 0.6* > > *"BUT WE'VE NOT LEFT YET" Yup . however GDP is a grossly lagging indicator. First estimates of GDP can be misleading and they often miss radical changes in GDP. Initial estimates often involve a degree of guessing and so miss out real changes. First month estimates for economic growth in Q2 2008 was 0.2%. Yet three years later, this positive growth was downgraded to -0.6% using actual data ? a serious downturn. The first month estimate for Q3 2008 was -0.5%. But, three years later, this was revised to a much more serious -1.7% ....so lets see what the actual reality of GDP is for Q3 2016...... How about -0.5% to -0.7%..? [my number currently being used] Look at the trend...not the actual number......the trend slopes are down for the foreseeable future & scary.