Wednesday, January 23, 2008

Ex post facto -its economic deja vu again. 

One way of spotting pseudo-economics flannel in these uproarious days is to watch for Bloomberg-TV style ‘market’ announcements. Bloomberg (and other Market Report TV services) have cross-screen banner reports of this kind:

“Megacorps down 3 following oil price jitters. BigBang soars by 6 after boardroom revamp”

In other words commentators claim to know exactly why thousands of shares have moved or stuck over a short timescale. The possibility that it may all be noise or random dances or due to sheer cussedness just isn’t acceptable. So ex post facto reasons have solemnly to be attached to price reports.

If the commentators really were able to give such precise analysis at such short notice they wouldn’t be out on TV or on the financial pages or even on the blogs. They would be in some back room making money. Except that in the backrooms the old story of economic pride blinding sane judgements hits us once again. So being out of sight is no guarantee of economic sanity either. Déjà vu anyone?

There are serious analysts out there but they tend to look at more fundamental things. The Bloombergistas are no more knowlegable that political ‘reporters’ who hyperventilate on opinion polls and bar-room gossip.

Only (begin to) trust analysts who admit that we are today like a ship in a huge storm, that nobody can micro-predict where wind and currents are pushing us, and that there are no easy solutions like interest rate cuts to bring us to port or even calmer waters. We have years of greed and stupidity (including uncritical market-worship) to undo and the reason it is happening now is that we reached a point of instability.

What we need is economic seamanship, and for me that includes scepticism of knee-jerk ‘market analysts’.

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