Brexit

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Re: Brexit

#1781  Postby Imp » Mar 13, 2018 7:05 pm

It's almost as if the UK hasn't left yet
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Re: Brexit

#1782  Postby Thommo » Mar 13, 2018 7:12 pm

Imp wrote:It's almost as if the UK hasn't left yet


It is, and almost none of the commentary has reflected that, which I have found a continual source of predictable disappointment.
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Re: Brexit

#1783  Postby Tracer Tong » Mar 13, 2018 7:39 pm

Imp wrote:It's almost as if the UK hasn't left yet


The linked predictions were for the two years following the vote to leave, George.
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Re: Brexit

#1784  Postby Sendraks » Mar 13, 2018 7:47 pm

Tracer Tong wrote:
Imp wrote:It's almost as if the UK hasn't left yet


The linked predictions were for the two years following the vote to leave, George.


The work of George.

As opposed to the work of the Treasury analysts.
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Re: Brexit

#1785  Postby Thommo » Mar 13, 2018 7:56 pm

It hardly seems to matter when no economic forecasts relating to Brexit (or, frankly anything else, ever) are correct, does it?

J K Galbraith wrote:The only function of economic forecasting is to make astrology look respectable.


The mistake we all make is giving any of this stuff the time of day. We have to wait and see. Like the weather forecasters of yesteryear, or the fund managers of today, they don't pass the basic test of doing better than a coinflip, or of "the variable tomorrow/next year/next decade will be the same as it was today".
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Re: Brexit

#1786  Postby Sendraks » Mar 13, 2018 8:05 pm

Thommo wrote:It hardly seems to matter when no economic forecasts relating to Brexit (or, frankly anything else, ever) are correct, does it?


I think it matters.
I think it matters that rather than just say someone got things wrong and people accepting that, we have to add accusations of deceit into the mix because that appeased fevered egos. Then the "being wrong" and the learning opportunities are lost because the argument becomes being about whether someone lied or not and all the defensiveness that entails.
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Re: Brexit

#1787  Postby Thommo » Mar 13, 2018 8:11 pm

Sendraks wrote:
Thommo wrote:It hardly seems to matter when no economic forecasts relating to Brexit (or, frankly anything else, ever) are correct, does it?


I think it matters.
I think it matters that rather than just say someone got things wrong and people accepting that, we have to add accusations of deceit into the mix because that appeased fevered egos. Then the "being wrong" and the learning opportunities are lost because the argument becomes being about whether someone lied or not and all the defensiveness that entails.


I don't know, it was a Treasury report. It wasn't directly written by Osborne, and it's not exactly incompatible with the prevailing view that seems to come out of the civil service.

I guess we can all make assumptions about exactly how much political pressure, editing, drafting and redrafting went on, but ultimately the point is that definite forecasts were made about just how badly off we would be today, and they were total, 100% horse cock.

The papers today (and I assumed this was what Tracer Tong referred to) were reporting the reversal of the previous downgrade of the UK growth forecast for 2018, back to a figure of 1.8% for the year, and of a potential Brexit windfall of £12bn per annum in trade with non EU developing markets (I think the figures were roughly that in the EU they would expect £48bn of trade per annum with the countries in question and out of the EU they would forecast £60bn of trade per annum, or something similar). They also, tangentially, reported that the CBI was forecasting a Labour government would cost Britain as much every year with with it's renationalisation programme as Brexit would cost.

People (and sadly, this includes people in this thread) have been behaving as though we've already committed "economic suicide" and the fact is that we have zero reason to think that's the case. There are positive forecasts there are negative forecasts, these I would all put in that same basket of utter horse cock. We'll find out when we get there*.

*With the caveat we undoubtedly won't, because we'll only ever be able to compare to a counterfactual and all the economists will claim they are right, no matter how far wrong their forecasts were.
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Re: Brexit

#1788  Postby Sendraks » Mar 13, 2018 8:18 pm

Thommo wrote:
Sendraks wrote:
Thommo wrote:It hardly seems to matter when no economic forecasts relating to Brexit (or, frankly anything else, ever) are correct, does it?


I think it matters.
I think it matters that rather than just say someone got things wrong and people accepting that, we have to add accusations of deceit into the mix because that appeased fevered egos. Then the "being wrong" and the learning opportunities are lost because the argument becomes being about whether someone lied or not and all the defensiveness that entails.


I don't know, it was a Treasury report. It wasn't directly written by Osborne, and it's not exactly incompatible with the prevailing view that seems to come out of the civil service.

I guess we can all make assumptions about exactly how much political pressure, editing, drafting and redrafting went on, but ultimately the point is that definite forecasts were made about just how badly off we would be today, and they were total, 100% horse cock.

The papers today (and I assumed this was what Tracer Tong referred to) were reporting the reversal of the previous downgrade of the UK growth forecast for 2018, back to a figure of 1.8% for the year, and of a potential Brexit windfall of £12bn per annum in trade with non EU developing markets (I think the figures were roughly that in the EU they would expect £48bn of trade per annum with the countries in question and out of the EU they would forecast £60bn of trade per annum, or something similar). They also, tangentially, reported that the CBI was forecasting a Labour government would cost Britain as much every year with with it's renationalisation programme as Brexit would cost.

People (and sadly, this includes people in this thread) have been behaving as though we've already committed "economic suicide" and the fact is that we have zero reason to think that's the case. There are positive forecasts there are negative forecasts, these I would all put in that same basket of utter horse cock. We'll find out when we get there*.

*With the caveat we undoubtedly won't, because we'll only ever be able to compare to a counterfactual and all the economists will claim they are right, no matter how far wrong their forecasts were.


"The Treasury report was wrong."

Vs

"George was lying."

One of those is the opener to a potentially edifying discussion about the how, the what and the why of economic predictions.

The other is an opener to a pointless ego fueled shitshow.
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Re: Brexit

#1789  Postby Thommo » Mar 13, 2018 8:23 pm

Maybe. I don't much care to make the distinction. I suspect both are true.

Osborne's pathetic punishment budget speech was widely ridiculed at the time by pretty well all credible commentators in the media, and I seriously doubt anyone here (left wing bastion that we are) is going to be queueing up to defend him.

I'll gladly offer my own thesis on why economic forecasts fail though: Because there are no genuine experts. The subject matter is too unpredictable, there are too many variables, and it is inherently chaotic. Like weather forecasting before the advent of the modern weather satellite there's just too much guesswork and into the gap people insert their own prejudices, faiths and convictions and that is just plain unreliable.
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Re: Brexit

#1790  Postby Sendraks » Mar 13, 2018 8:59 pm

Thommo wrote:I'll gladly offer my own thesis on why economic forecasts fail though. Because there are no genuine experts. The subject matter is too unpredictable, there are too many variables, and it is inherently chaotic. Like weather forecasting before the advent of the modern weather satellite there's just too much guesswork and into the gap people insert their own prejudices, faiths and convictions and that is just plain unreliable.


I agree with this up to a point. Analysts try to provide their predictions to the best of their ability but, it's still something of a crapshoot given all the variables.

However, knowing how civil service analysts work, I disagree with the latter part because the system for supporting their work is designed to eliminate balance. There's more devils advocating that one starts to wonder if a circle of hell is empty.

That doesn't mean they get it right. But, at least they put some thought into it.

As opposed to folk who turn out to be right by chance.

And no one needs to get called a liar. Just because what they believed to be true didn't turn out to be.

Of course one could insist that Gideon didn't really believe it would all go to shit economically and secretly knew it would all be fine. That would make him a liar. But, that scenario doesn't seem at all likely to me.
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Re: Brexit

#1791  Postby ronmcd » Mar 13, 2018 10:05 pm

So let me get this right - the internal reports that the government were forced to release * which show every possible brexit outcome being a reduction in GDP of between 2 and 8%. But today the Chancellor says what? Sunny uplands?

* well, publish, with redactions, in a room at the head of the HMRC, allowing MPs ... our elected MPs ... to view only, under supervision, with no recording devices phones or transcriptions...
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Re: Brexit

#1792  Postby ronmcd » Mar 13, 2018 10:08 pm

Frankly, I'd believe internal predictions that weren't for public consumption compared to political statements.
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Re: Brexit

#1793  Postby minininja » Mar 13, 2018 10:41 pm

Tracer Tong wrote:Pretty positive economic news today.

It's almost as though George Osborne was fibbing, or something. And I always thought him so reputable and honest.

Yeah if you believe what Hammond says.

And you know a lot of what was predicted did happen don't you? The Pound dropped by 15%. The Bank of England took measures to prevent recession. They cut the base rate to 0.25% and pumped billions more into the economy through QE.
[Disclaimer - if this is comes across like I think I know what I'm talking about, I want to make it clear that I don't. I'm just trying to get my thoughts down]
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Re: Brexit

#1794  Postby OlivierK » Mar 14, 2018 12:05 am

Thommo wrote:I guess we can all make assumptions about exactly how much political pressure, editing, drafting and redrafting went on, but ultimately the point is that definite forecasts were made about just how badly off we would be today, and they were total, 100% horse cock.

Well, not 100%.

There were forecasts of a 12% fall in the value of the pound, and since the referendum it's fallen 14.1%; there were forecasts of a rise in inflation of 2.3% and it's risen by around 2.4%; there were forecasts of 10% falls in house prices and just this week we've had reports of falls around that size in a year in London, a region that usually leads on property price trends; and there were forecasts of real wage growth falls of 2.8% and real wage growth has fallen from around 2% to -0.5%. All pretty much spot on.

There were also forecasts of GPD growth falling to below zero, whereas in reality it's fallen but remained positive. The employment and net borrowing forecasts may have been 100% cock, but there's a lot in that document that stands up ok.

Now all of those forecasts were for what would happen relative to business as usual, not the (then) present, but it's still unfair to characterise that document as completely wrong. In particular, the slow progress in negotiations may extend the timeframe that some of the predicted effects take to occur, as uncertainty remains over key issues like the customs union.
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Re: Brexit

#1795  Postby Tracer Tong » Mar 14, 2018 2:39 am

Sendraks wrote:
Tracer Tong wrote:
Imp wrote:It's almost as if the UK hasn't left yet


The linked predictions were for the two years following the vote to leave, George.


The work of George.

As opposed to the work of the Treasury analysts.


Yeah, it was the work of treasury analysts. Unfortunately, they were presumably working towards a brief.
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Re: Brexit

#1796  Postby Tracer Tong » Mar 14, 2018 2:46 am

minininja wrote:
Tracer Tong wrote:Pretty positive economic news today.

It's almost as though George Osborne was fibbing, or something. And I always thought him so reputable and honest.

Yeah if you believe what Hammond says.

And you know a lot of what was predicted did happen don't you? The Pound dropped by 15%. The Bank of England took measures to prevent recession. They cut the base rate to 0.25% and pumped billions more into the economy through QE.


Hammond is reporting the forecasts of the OBR.

Beyond that, almost nothing, if anything, of the projections I referred to happened (you can see a summary of them at the bottom of the page I linked to earlier). For all the talk of the lies of the 'Leave' campaign, the lies of the 'Remain' campaign were just as great, and indeed enjoyed the sponsorship of the state. But so it goes.
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Re: Brexit

#1797  Postby OlivierK » Mar 14, 2018 3:20 am

Tracer Tong wrote:
Hammond is reporting the forecasts of the OBR.

Beyond that, almost nothing, if anything, of the projections I referred to happened (you can see a summary of them at the bottom of the page I linked to earlier). For all the talk of the lies of the 'Leave' campaign, the lies of the 'Remain' campaign were just as great, and indeed enjoyed the sponsorship of the state. But so it goes.

OlivierK wrote:There were forecasts of a 12% fall in the value of the pound, and since the referendum it's fallen 14.1%; there were forecasts of a rise in inflation of 2.3% and it's risen by around 2.4%; there were forecasts of 10% falls in house prices and just this week we've had reports of falls around that size in a year in London, a region that usually leads on property price trends; and there were forecasts of real wage growth falls of 2.8% and real wage growth has fallen from around 2% to -0.5%. All pretty much spot on.

There were also forecasts of GPD growth falling to below zero, whereas in reality it's fallen but remained positive. The employment and net borrowing forecasts may have been 100% cock, but there's a lot in that document that stands up ok.

But apart from correctly predicting the impact on the pound, inflation, the property market and wage growth, what have the Romans ever done for us?
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Re: Brexit

#1798  Postby Thommo » Mar 14, 2018 7:30 am

minininja wrote:
Tracer Tong wrote:Pretty positive economic news today.

It's almost as though George Osborne was fibbing, or something. And I always thought him so reputable and honest.

Yeah if you believe what Hammond says.

And you know a lot of what was predicted did happen don't you? The Pound dropped by 15%. The Bank of England took measures to prevent recession. They cut the base rate to 0.25% and pumped billions more into the economy through QE.


That wasn't what was predicted. The predictions were of rising unemployment, an immediate recession following the vote and the need for immediate, severe fiscal action. Yeah, they got some minor details right, but unless we engage with the Texas sharpshooter fallacy, that hardly seems significant. Make enough predictions and you're bound to get *something* right.

Reproducing the table From Tracer Tong's link:
Code: Select all
Immediate impact of a vote to leave the EU on the UK (% difference from base level unless specified otherwise)
     Shock scenario (1)    Severe shock scenario (1)
GDP    -3.6%    -6.0%
CPI inflation rate (percentage points)    +2.3    +2.7
Unemployment rate (percentage points)    +1.6    +2.4
Unemployment (level)    +520,000    +820,000
Average real wages    -2.8%    -4.0%
House prices    -10%    -18%
Sterling exchange rate index    -12%    -15%
Public sector net borrowing (£ billion) (2)    +£24 billion    +£39 billion

(1) Peak impact over two years. Unemployment level rounded to the nearest 10,000. (2) Fiscal year 2017-18.


Taking them in turn
  • GDP has grown by 1.9% in 2016 and 1.8% in 2017. This is roughly in line with pre-vote forecasts (or just trends) and nowhere near 3.6% or 6% lower than previous forecasts.
  • Inflation has risen from 0.5% at the time of the vote to 3% now, a total of +2.5%. You can call this a win for the forecasters, but it's worth bearing in mind that the inflation target is 2%, and we are now closer to that than we were before the vote.
  • Unemployment has fallen from 5% to 4.4%, that's a 0.6% move in the opposite direction to the forecasts.
  • Average Real Wages have fallen from an index of 101.5 to 101.1, a drop of 0.39% and nowhere near the forecast of 2.8% to 4%.
  • UK wide house prices have risen from £212,887 to £226,756 an increase of 6.5%, nowhere near forecasts of a decrease of 10% to 18%.
  • Sterling to Dollar exchange rate has fallen from a pre-vote peak of 1.49036 to 1.39783 a 6.2% drop, markedly short of the forecast.
  • Sterling to Euro exchange rate has fallen from a pre-vote peak of 1.30999 to 1.12742 a 13.9% drop and within the range of the forecasts, another win for the forecasters.
  • The Exchange Rate Index has fallen from 86.6711 to 78.9604 an 8.9% drop, noticeably short of the target range of 12% to 15% - albeit the trough value of the drop to 74.7185 represents a 13.8% drop and lies within the range, making this a win for the forecasters.
  • Public Sector Net Borrowing dramatically fell compared to forecasts, let alone increased by £24 to £39 billion.

The report itself also made clear its attitude towards the short term forecasts:
https://www.gov.uk/government/uploads/s ... eu_web.pdf  wrote:There are significant downside risks which imply that the impact could be even larger. First, these scenarios do not allow for so-called ‘tipping points’, such as the crystallisation of financial stability risks. Nor do they incorporate the risk of a ‘sudden stop’ in financial inflows, reflecting concerns about the size of the current account deficit.

Nor has the impact of a sharp tightening of fiscal and monetary policy to restore credibility been modelled. In both scenarios monetary policy is held fixed. Fiscal policy is assumed to support the economy through the operation of the ‘automatic stab
ilisers’. The analysis does not make any assumption about what policy decisions might be taken to contain the resulting increase in borrowing, but these would need to be significant as net government borrowing would increase by around £24 billion in the shock scenario, and by around £39 billion in the severe shock scenario, compared with a vote to remain.

Moreover, if negotiations took longer than two years to conclude, or if the outcome were to be less favourable than expected, the UK economy could be subject to repeated and persistent rises in uncertainty which would depress further economic prospects.


So in summary, of the 7 headline predictions (I am counting the two unemployment predictions as one as they are the same conclusion formulated in different ways) they got 2 out of 7 correct and could hardly have been more wrong on the other 5, of which 3 moved in the opposite direction. The two they got correct were the least significant to ordinary people's lives, with both being changes that can't even be categorised as negative (lower exchange rates aid exports and harm imports, higher exchange rates aid imports and harm exports; inflation aids borrowers and hurts lenders, so exceeding the 2% target creates a similar number of winners and losers to falling short of it).

I do notice that the forecast has massively underperformed the benchmark I set yesterday of just predicting that current trends continue.

Edit: Re: London House prices. The Treasury report does not mention them, they made no prediction on this front, but the fall has been widely attributed to the policy change on stamp duty (on top end houses, not the more recent allowance for first time buyers) and on market overheating and not Brexit anyway.
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Re: Brexit

#1799  Postby OlivierK » Mar 14, 2018 9:47 am

Average real wages have fallen by 0.4%, but were steadily growing at 2% before the referendum. All that growth has been lost, plus another 0.4%, making the forecast seem quite reasonable, so I'd call it 3/7, with some indicators that housing may decline, although not in the time frame projected.

That's still a long way short of 100% cock, to me. I'd also contend that one of the reasons things seem to be closer to the old status quo is that I think most forecasters would have figured on a hell of a lot more actually happening on Brexit by now. Progress has been glacial, and I'm not sure too many people, even the most pessimistic or cynical, would have, in Jun 2016, predicted that in March 2018 the UK government would still be standing on the starting line with no concrete proposal on the Irish border, or customs arrangements (or indeed that it would have taken 9 months to trigger Article 50, which is probably a fairer starting point, and one which we're still not even one year on from). I think that the UK government has cultivated a level of reality denial about what needs to happen to achieve Brexit, and many of the decisions that might lead to impacts, like foreign firms relocating jobs out of the UK, are on hold until there's some clarity, because these are not decisions that companies can make big commitments to when the government is still blowing in the wind on what Brexit means.
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Re: Brexit

#1800  Postby Thommo » Mar 14, 2018 9:54 am

OlivierK wrote:Average real wages have fallen by 0.4%, but were steadily growing at 2% before the referendum. All that growth has been lost, plus another 0.4%, making the forecast seem quite reasonable, so I'd call it 3/7, with some indicators that housing may decline, although not in the time frame projected.


I'm really not convinced that changing the way you count to increase the change by a factor of 6, to 2.4% and then saying that 2.4% hits a prediction of between 2.8% and 4% is a fair way of counting*.

OlivierK wrote:That's still a long way short of 100% cock, to me.


I'm overstating my general disdain for economic forecasting for comic effect (it's all economic forecasting that is terrible, not Brexit forecasting specifically). It's not 100% horse cock. They hit 2 of their 8 predictions and did worse than guessing, with more indicators moving in the opposite direction entirely than hitting their target. I guess you could say that's 75% horse cock?

*And the ONS statistics show that in the previous year real wages had grown 1.5%, not 2% anyway, with the rate down to just 0.4% in the first 6 months of 2016, with no steady trend of 2% at any time in recent years.

Edit: As far as real wage growth goes, there have been reports of a "lost decade" on wages going back years. Here's a Guardian article from 2014, before the Brexit referendum was even on the agenda: https://www.theguardian.com/business/20 ... ons-record reporting wage stagnation going back a decade.
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