Global systemic crisis 2013: The Huge Statistical Fog makes it necessary to change from instruments to visual navigation – Traps, benchmarks and templates
March 17th, 2013
leap2020.eu / – Public announcement GEAB N°73 (March 16, 2013) -
In the Up & Down trends published in the GEAB January issue, our team wrote the following in the Down section “Economic indicators”: « Between short-term economic indicators which describe only what occurred in the week, others which are manipulated by governments to reflect the message they want to give, and finally others which no longer have any relevance in today’s world, economic reality is at the very least very badly portrayed, even disguised, by these figures followed however by businesses, banks, and even countries. As an example, only currency exchange rate variations make it no longer possible to say if it’s Brazil or the United Kingdom which is the sixth largest world power. This statistical fog prevents dependable navigation which is paramount in these times of crisis ». Whether it be the fruit of intentional manipulation by the players in their efforts to survive or the result of the extreme volatility of the bases for calculation (such as currency values and the US dollar in particular), this trend is, in fact, confirmed.
Reliable and relevant indicators on the world economic, political and social situation are, however, essential in order to get through the crisis without mishap. But those used by governments or businesses are, at best, useless in the current period of major world restructuring and, at worst, harmful. This is why in this GEAB issue our team has decided to detail which indicators reflect the true situation and those which are window-dressing. This work also makes it possible to highlight that it’s not always the indicators themselves which are skewed, but the way in which they are interpreted or the reasons studied which make them change.
In a world where so many “phantom assets” or doubtful debts, so many opaque or worthless derivative products circulate, finance is increasingly disconnected from reality. Financial indicators (particularly stock exchange prices) must therefore be interpreted with the greatest care as we will see further. In the same fashion the weekly soap opera of “economic life” keeps us on tenterhooks, sometimes with the publication of “confidence” or “sentiment” numbers, sometimes with central bank announcements… But fundamentals don’t evolve at this pace and reality has no use for this Coué method consisting of holding onto psychological data. This short-term information has more of an effect of hiding the economy’s profound ill health than to really influence reality as they claim, in particular during this time of major crisis.
As for the true statistics, the way these numbers are calculated sometimes doesn’t reflect the true economic landscape at all: the same applies for example to the unemployment or inflation numbers, two criteria well anchored in reality however and rightly playing a significant role. But as the popular expression says, “in failing to stop the fever one broke the thermometer”. And the question is then to decipher the statistics to have a clearer view, as we will do for the United States below.