04 Sep The dictatorship of statistics

When they run out of arguments, and this was often the case lately, bank economists who are forced to lay forecasts every quarter, turn to statistics in order to find and match their expectations with what happened in the past since the economy is cyclical.

They rely on graphical analysis to predict what the economic landscape will look like in the coming quarters. Currently, apart from a single private Swiss bank listed on the stock market that remains optimistic, the majority of bank economists expect a recession, which we will probably end up having, with regard of the recent market atmosphere rotten by the pessimism of the forecasters.

Consumers are starting to pay attention to the expense and this is not going to fix the situation.

The dominant idea is that a cycle of economic expansion lasts at maximum during ten years, yet we are in the eleventh consecutive year of expansion since the 2008 crises. The last four recessions in the West took place in 1974, 1980- 1982, 1993, 2001 and 2008.

What about the “glorious Thirty” (1945 – 1973) of continuous expansion of the world economy?

Economists have decided, without explaining why, that there is a recession when GDP falls for at least two consecutive quarters. In Germany, even though 2019 GDP will increase by about 0.5% comparing to 2018, it would be in a recession as GDP dared to shrink by 0.1% in the second quarter of 2019, and economists anticipates that the third quarter would be down too. With a decrease of 0.1% the newspaper Le Monde wrote on August 14th, 2019:

“In the eurozone, the model pupil of the last decade is now a shamble, doing less well than Italy (0%) and France (+ 0.2%) in the past quarter”.

Therefore, a ridiculous variation of the GDP on the rise or the fall makes pass a heavyweight economy of 3 trillion per annum from champion to poorest. Search for the error!!!

I published this article in the journal BON POUR LA TÊTE (in French).

Elie Hanna