You may not have seen it on the News at Ten but Bank of England Monetary Policy Committee member Kristin Forbes delivered a fascinating speech last week on the nature of economic uncertainty and how best it can be measured. As Donald Trump said when he delivered his victory speech, “it’s a complicated business, folks”.
So complicated in fact, that disputes over the accuracy and validity of forecasts factoring in economic uncertainty now rage between the economics profession and top Tory MPs who are sick and tired of hearing gloomy post-Brexit predictions.
In her speech, Forbes drew on Voltaire who said “uncertainty is an uncomfortable position, but certainty is an absurd one”. The problem with many of the economic predictions made before the referendum was that the lurid claims about mass lay-offs and an overnight recession were made with such certainty that – armageddon having failed to materialise – those making the claims do indeed now appear absurd. This isn’t to write off the economics profession. As the OBR’s Robert Chote said in defence of forecasting, “the thing about uncertainty is that it’s uncertain”. He’s no Voltaire but his point stands.
So how is uncertainty measured? A bit of digging reveals the Bank of England’s methodology. They consult FTSE option-implied volatility, the CBI’s “uncertainty limiting investment” score and the GfK unemployment expectations balance, among other data sets. All perfectly sensible. Perhaps more bizarrely, they also draw on the number of times the phrase “economic uncertainty” appears in press articles. Even more digging reveals that just four papers are studied to achieve a score here: The FT, the Guardian, the Indy and the Times. All of these outlets backed Remain in the referendum and often repeated the most dire economic claims. Some still do. Maybe the Bank should broaden its reading material? Just for balance.
Post-truth politics and fake news in Richmond
Few of us can claim to have been gripped by the Richmond by-election but one element of it has caught my attention. The LibDems have been distributing campaign material in the guise of newspapers. The “Richmond Gazette” even claimed to carry stories by “a senior Gazette reporter”. In an age of fake news, this is brazen stuff – as was the distribution of another fake paper called “City News” – complete with our own blue colour scheme...
Sadiq Khan gets into bed with business
To the Lancaster Hotel for the annual dinner of the Institute of Directors. I ran communications for the IoD for two years and so it was a happy reunion. Sadiq Khan was a speaker, introduced by IoD Chair Lady Barbara Judge – who praised the mayor’s openness to business. “He has been intimate with IoD members,: she said. “Not literally,” added the mayor, hastily, when he took to the stage. Well he did say he wanted to be the most pro-business mayor, ever...
The banner to the right of Corbyn, just out of shot, reads “Solidarity with Venezuela.” The South American state has descended in to poverty and misery after years of socialist rule. The country’s largest bank note is now worth just 2 US cents as the currency lost 65 per cent of its value in November. Closer to home and bank notes are making headlines for other reasons. It seems the Bank of England is buckling under the weight of online outrage, and is looking at removing the trace amounts of animal fat from its new fiver.
Just send the bill to the White House
People have their own reasons for fearing a Trump presidency. As the cast of a Broadway musical made clear in the days after the vote, some groups are nervous that he won’t protect the rights of minorities. Others fear what his win will do for America’s standing in the world. For some, the grounds for concern is based on experience. I’ve heard of one US law firm whose top dogs are aghast at his victory because he still hasn’t paid them for work done years ago.