The absurdity of 'expert' economic forecasts
by our secret columnist in Brussels
09 August 2012
Economic forecasts have become so unreliable that they are often not worth the paper they are written on. So, given that highly-paid 'experts' continually fail to predict the economic health of sovereign states, our resident satirist Schadenfreude thought he would get in on the act and chance his arm
If highly-paid economic forecasters can publish their handiwork and a few weeks on report that circumstances have changed and the forecast is revised - often downward - Schadenfreude thinks he is free to make some equally tenuous predictions. After all, a forecast of 0.4 per cent corrected to 0.3 per cent is a generous 25 per cent error rate.
So here goes. After a bit of on the one hand and on the other hand, the German Constitutional Court will decide that with some parliamentary massage the government can endorse the European Stabilisation Fund. Spain will announce that to complement the refinancing of its banks, it is asking the eurozone for a contribution to government funds in the form of loans from the European Central Bank.
Greece will not meet the qualifications for a further tranche of bail-out but will be said to be moving steadily towards the targets, needing only a certain supplement to reach them. Italy will continue to impose austerity but on a slower time-scale than originally required. Cyprus will need eurozone help in some form, to offset its losses in Greek banks.
Britain will continue to say that it is high time that the single currency sorted itself out, without help from the United Kingdom. This is not a prediction but a certainty. Ireland will continue to recover from its crisis but without drawing attention to itself, just in case. Germany will try to restore its cooperation with France, but France will need more evidence that Germany will join in a growth plan for the single currency area.
Britain will continue to highlight the good bits - inflation down, employment up - and say as little as possible about growth because there isn't any. The European Commission is seasonally silent but the French commissioner is working on French ideas about regulating investment funds - almost all British, of course. The British prime minister will declare unyielding opposition. This is the safest of bets. But do not put any money on them; we all know how wrong forecasts can be – even when you are paid a whopping salary to be an expert in the field.
If highly-paid economic forecasters can publish their handiwork and a few weeks on report that circumstances have changed and the forecast is revised - often downward - Schadenfreude thinks he is free to make some equally tenuous predictions. After all, a forecast of 0.4 per cent corrected to 0.3 per cent is a generous 25 per cent error rate.
So here goes. After a bit of on the one hand and on the other hand, the German Constitutional Court will decide that with some parliamentary massage the government can endorse the European Stabilisation Fund. Spain will announce that to complement the refinancing of its banks, it is asking the eurozone for a contribution to government funds in the form of loans from the European Central Bank.
Greece will not meet the qualifications for a further tranche of bail-out but will be said to be moving steadily towards the targets, needing only a certain supplement to reach them. Italy will continue to impose austerity but on a slower time-scale than originally required. Cyprus will need eurozone help in some form, to offset its losses in Greek banks.
Britain will continue to say that it is high time that the single currency sorted itself out, without help from the United Kingdom. This is not a prediction but a certainty. Ireland will continue to recover from its crisis but without drawing attention to itself, just in case. Germany will try to restore its cooperation with France, but France will need more evidence that Germany will join in a growth plan for the single currency area.
Britain will continue to highlight the good bits - inflation down, employment up - and say as little as possible about growth because there isn't any. The European Commission is seasonally silent but the French commissioner is working on French ideas about regulating investment funds - almost all British, of course. The British prime minister will declare unyielding opposition. This is the safest of bets. But do not put any money on them; we all know how wrong forecasts can be – even when you are paid a whopping salary to be an expert in the field.
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