Thursday, 18 August 2011

Confidence trick

The irony is that whereas confidence is everything right now, absoutely everything, confidence surveys are a piece of pish. Partly, this is because they’re all about ordinal data i.e. stuff that can be rank ordered, but not precisely quantified, and as such can never be much of a guide e.g. if I’m a very, very confident consumer as opposed to just a confident one does that mean I’m going to buy 3 new tellies as opposed to one (neither, I’ve got a perfectly serviceable telly already thank you)?

However, its also because they’re based on a stupid premise. How I feel and what I think today may not translate into what I do tomorrow plus how I feel today may well be influenced by specific today things like say the fact the curry in the staff canteen was actually quite passable for a change. And when you start asking people what they think they might be doing in 12 months time, well that’s just pish really.

At best what you might get out of a finely tuned confidence survey is advance warning as to the probable direction of a more significant metric e.g. a downturn in a consumer confidence survey today probably means the retail sales data published in a fortnight will also be heading down. But, then that’s no so much foresight as it is methodology - it takes longer to produce retail sales data than it does consumer confidence surveys.

Despite this all these business sponsored surveys get trotted out as if they were somehow meaningful because of how we get spoon fed economic news. The process this entails goes a little something like this:

1) Company A wants to boost its brand, present itself as a credible organisation etc.,
2) Company A makes widgets, so it pays some people to do a widget confidence survey
3) Company A issues the widget survey with its brand plastered all over it
4) Company A also makes available a spokesperson too thick to produce a widget survey, but with enough chat to talk about the significance and meaning of it
5) News Organisation B needs news. It receives a copy of Company A’s widget survey, gets in touch and gets some quotes. If the survey is considered really important it gets some rent-a-quotes from a range of widget experts in other companies.
6) Repeat on a monthly basis

Everyone involved in the above process has a vested interest in taking it all terribly, terribly seriously - Company A wants to punt its brand, News Organisation B doesn’t want to be seen printing dreck/does want to fill up some column inches quickly and the rent-a-quotes get to ride on Company A’s coat tails.

What we get as a result is distracting shite and noise instead of analysis. Actually its worse than what. The process set out above, especially the uncritical way in which things get presented, has established the survey and the specially commissioned report as a key means of justifying well absolutely fucking anything really with the public sector a big offender here. Hence we get expert reports on the economic benefits of not smoking, Edinburgh trams, high speed rail links, renewable energy and so on and so on, each and every one of them you realise, the instance you look at the assumptions in the appendix, being rotten pieces of shite.

So aye, back to confidence and how it can’t be measured. Well it can sort of, ish, like right now share prices and the cost of insuring sovereign debt against it not being repaid (i.e. the CDS spreads of say Greece compared to Germany) provide bloody good clues as to how financiers are feeling and its scary, scary biscuit time let me tell you in an oh fuck are we going to see another liquidity crisis with institutions no lending to each other again. And if that happens it will fuck shit up for everyone else.

And because we all have a clear vested interest in this I reckon the brute human aspect of what's going on should be drawn out far more than it is. Like fuck the references to high falutin’ financial models, business plans, exogenous econometric growth theories, the need for credible fiscal re-balancing vs consumer deleveraging programmes and what no, essentially, it’s a bunch of people going “fucking hell, fuck knows what’s about to happen” and in a self-fulfilling prophecy type styley holding onto all the cash they can to protect themselves in a way that destroys the circulation of cash capitalism needs to function (oh the joys of individually self-interested and rational actions leading on to a collectively irrational outcome). Probably the only saving grace right now is that it’s a Thursday i.e. there’s only tomorrow left to panic before the weekend stops trading/allows for emergency meetings by the great and the good.

The other point of course is that the same people doing the panicking are typically the same ones who move asset prices in response to waste of time confidence surveys. They do this because its easy, because everyone else does and because they‘re not as bright as they‘re presented as being and don't understand what's happenning, in fact them realising they don't is part of the problem. They and the companies they work for are also the same ones squealing about the notion of a Tobin tax and extra regulation despite the fact the only thing that’s going to sort this shit out is governments i.e. the tax funded public sector, setting out a clear plan and a clear direction.

No comments:

Post a Comment