How to forecast the direction of an economy

I have just come across a paper I wrote in the 1990s that has continued to subsist on the net: The Construction and Use of Coincident Indicators Based on the Data Contained in Business Surveys. It remains alive since it was a paper I presented to the OECD which has meant that it still has a lingering life out there in the net.

It’s not as if I don’t remember the paper, which I do. The OECD even took action based on it, and began to pay more attention to business surveys along with the usual consumer confidence surveys which I thought then (and to the extent I still think about such things still do) as utterly useless in trying to stay on top of the business cycle. The article begins:

Knowing how well an economy is performing is a far more difficult task than it often appears to be. There are so many aspects to economic conditions that it can be extremely difficult to gauge with any sort of precision our actual position at any given moment in time.

There is also the problem that for most of the major activity measures, such as the level of national output or the rate of investment, official figures are at the minimum three months out of date on the day they are published, and even then, if we are to identify an actual trend, the data may well be half a year old before one can infer that the direction of the economy has changed.The National Accounts are the most comprehensive measure of economic activity available within any economy. They are also the most watched measure because they bring together into a single framework all the different aspects that make up the total level of economic activity.

Yet aside from the delay in having such data published there is also the “noise” that surrounds the figures each time they are produced. Because the National Accounts are a complex array of different features of the economy, the underlying direction of economic activity is often obscured. That this is the case is widely understood which is why a slowdown in a single quarter is never taken as in itself evidence that the economy is indeed slowing. The random factors which affect the measurement of not just the total level of activity but also each of the individual components make it impossible to draw any hard and fast conclusions about economic conditions from quarterly shifts in national accounting estimates.

The rest of the article presents my approach to keeping up with the direction of an economy. This is the conclusion to the article:

The kinds of series that can be developed from business surveys allows such surveys to be used in a more systematic way than at present. They provide information that is timely and because of the form of construction provide an indication of the strength of the current trend in economic activity.

The accuracy of the barometer over the past not only provides strong evidence that it will continue to provide genuine assistance in measuring the strength of the economy, but it also demonstrates the value and accuracy of the business surveys which lie beneath. These surveys provide comprehensive data on the condition of the economy and do so far earlier than any other source.

Although official statistics provide a series of partial indicators on the level of various aspects of the economy, they do not provide a full range of indicators on conditions overall. It is why business surveys are so important to the stability of an economy because they provide virtually immediate information on current conditions available from no other source. But they provide information only to those who are attuned to the messages they send. One obviously cannot react to every fluctuation in business surveys as they, in company with official statistics, have a random component which will suggest strength where there is none, or weakness when the economy is strong. However, over time, these are a critically important measure of the health of an economy that the barometer allows for presentation in a more systematic way.

And because the barometer is focused on the private sector, and is not obscured by data from non-market activities, it provides a more concentrated view of current economic conditions. The strength of this barometer lies in the basis of its collection. The views in such surveys are those of the chief executives of businesses. These are the decision makers across the economy and it is they who determine the level of output, investment and employment.

These surveys tap into a different form of data from those found in official statistics since they seek from those who make these decisions an indication of the decisions they are in the process of making. This is information of the most crucial kind and the results of such surveys deserve to be listened to closely. The Business Barometer systematises the views of those who own, operate and manage firms. They therefore provide the data necessary for policy making in a form that is easy to understand and which can be incorporated into the official family of major statistics used for assessing economic trends.

Alas, the problem with the Business Barometer was that it was too accurate. It annoyed Treasury and the Reserve Bank at the time since there we were, this miserable business association, able to accurately foretell turning points in the cycle. I will just leave this out there just in case someone might see this and think they might give it a go. 

 

 

We are governed by totalitarians with the battleground worldwide and not just in Melbourne

This is the background which I was sent a few days ago. The video was released yesterday – one hour and forty-one minutes in length. This is what you are being prevented from seeing.

As you may be aware, Battleground Melbourne, a feature-length documentary is out in a few days and is free to watch! I think they accumulated over 100 terabytes of data for this one. 

Topher has been making videos for quite a long time but this will be his finest. 

Here’s Topher’s latest post:

This is the Full Trailer for Battleground Melbourne, a documentary which tells the story of the fall of the World’s Most Liveable City through the eyes of those who risked everything to save it.

Melbourne was voted the World’s Most Liveable City 7 times… now Melbourne is the most locked down city, and has spent the last 2 years being rocked by anti-government protests and unprecedented levels of police violence in return.

Battleground Melbourne tells the story of these protests, the people, the events, the courage, the violence, the hope… through the eyes of the people who were there.

Who are they really? Are they really as bad and evil as the media and politicians claim? Why did they keep going even as police were arresting, assaulting, and shooting them?

You’ve heard the politician’s side of the story, you’ve heard the media’s version of events… now see it through our eyes.

Above is what you get if you now try to watch the full video which was released yesterday and them immediately suppressed. Below is the trailer which you can still watch as I post it here, but I wouldn’t count on it lasting very long.

Basically, it is the story how Melbourne went from being the World’s Most Liveable City to an ash heap and dump under Daniel Andrews and his mates. Still, they remain odds-on favourites to win the next election so who is there to blame for any of it?

The cult of covid

This originated back in the old country, written by a Mountie, who was put on unpaid leave for not being vaxxed: RCMP member sent on unpaid leave writes this powerful letter you must read. Long, as it says at the link, but very powerful and dead on the mark. Here’s a bit to get you going.

Since most members make a goodbye email before they leave, I figured I should as well, despite the “special” circumstances around my departure. Anyways, my time here in the RCMP is up. For now. The low T wannabe tyrants in Ottawa have decided that I can no longer serve as a police officer because I refuse to tell them if I have submitted to their “vaccine” edict. I’ve served in the RCMP for 21 years and one of the first things I said to any person I ever arrested was “you don’t have to say anything to me.” Unfortunately, our government has told me that I have to tell them what’s in my body, and if the right drug is not inside me, I have to get it as condition of my continuing employment, human rights be damned. Why did I put vaccine in quotations above you ask? More on that later. Buckle up and tighten the straps on your government mandated shame muzzle, this goodbye email will likely ruffle some feathers.

My journey to this point of our dystopian, medical, apartheid state started like many of yours. Watching the television almost 2 years ago as reports started coming in of some strange virus out of Wuhan. I was a little concerned, but not much. You see, for the last 10 years of my life I had spent a lot of time as an amateur researcher of history and learned to my dismay that the official narrative of most events is usually a little suspect at best. Like weapons of mass destruction in Iraq, or the January 6th “insurrection” in D.C., the examples are sadly numerous.

That’s how it starts. Go to the link to finish it off.

Economic and social reality in a few pics

These are a few graphical representations of something called reality but these are merely statistics which seem to conform with my own view of how things actually are.

I particularly like this one since it demonstrates how useless any composite measure of economic performance is. Comparing today with a century ago using some measure like GDP is beyond full-on empty. 

Then there is this which is inexplicable to no one even though there will be some who pretend to find it incomprehensible.

Finally, I wrote a children’s book one time – Economics for Infants – which explains how governments do not care about any of us whatsoever. My aunt read it to her five year old grandson who had a virtual nervous breakdown crying jag on being told this. My own granddaughter, also five, read it herself and now apparently quotes this to everyone else. She will be so far ahead of the curve as she grows up. But this is the truth.

By the way, there is much more in Economics for Infants than just that. Highly recommended, mostly for children, but also for some adults as well.

These statistical pictures, by the way, came via Powerline’s Geek in Pictures.

Economists are the last people you should ever ask to design an industrial relations system

Went out to dinner a few nights ago and out of nowhere found myself in an argument about industrial relations. Having been involved in one National Wage Case after another, even having presented the employer economic submission on a number of occasions, after having written many others before that, this was an issue close to my heart. And here is my central conclusion having represented employers in so many forums over so many years:

The free market system depends for its survival on providing buffers between buyers and sellers and between workers and employers.

Leaving such matters “to the market” as it is often put is certain to end in some kind of socialist/anarchist revolution which would not be long in coming. The notion that someone who successfully manages a business enterprise is in any way evidence that such a person is actually in any way morally superior is absurd. They may put their own capital at risk, or perhaps it is the capital they have borrowed that has been put at risk, but beyond that, there is no evidence of superior virtue and moral authority of the entrepreneur. There must therefore be laws and regulations in place to create industrial peace as best as a community is able.

That there must be some kind of wage setting process in place has been discovered by every market economy that has ever existed. No one agreed with me, but what’s new about that?

These were then my morning-after thoughts following this conversation. The central issue was whether Australia’s system of conciliation and arbitration, which embeds a minimum wage adjustment process, is consistent with good economic theory and practice. That virtually no economist thinks this is true only shows what a useless preoccupation economic theory has become.

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Tampering with the employer-employee relationship that leaves employees without any recourse to the actions of employers will not work anywhere. And I am conservative enough to recognise that a system that has evolved over more than a century embeds within it all kinds of features that no one can identify but which make it work out there in the real world.


The market system depends for its existence on institutions that buffer the relationships between businesses and their customers and between employers and their employees. This is the Australian system.

So let me begin. Even more than ever I was reminded that economists know almost nothing worth knowing about the practicalities of running an economy, and this is shown in spades in their thoughts, such as they are, about industrial relations. The last thing that will work is “to leave it to the market” where union power exists, and where socialist trouble makers are to be found at every turn. So I did the tiniest bit of research when I came home, and was amazed I still remembered where to look, given that I have not been personally involved in any of this for eighteen years.

The Fair Pay Commission

First there was The Fair Pay Commission. How did I even remember its name? And what a name! It might as well have been “The Just Price Commission”. Australia’s IR system was in its origins designed “to prevent and settle industrial disputes” that ranged beyond the compass of a single state. Being fair to both employers and employees was obviously a necessary ingredient if it were to function, but that was not its purpose. The aim was to provide a structure to encourage industrial peace.


“Fair pay” is not a market principle. Do economists nowadays discuss “fair” prices? The discussion of The Fair Pay Commission at the link is a generally sympathetic account, andgets the story mostly the way I remember it. There we find under the heading “2006 decision”:

On 26 October 2006, the Commission handed down its first decision. The Commission’s media release stated: The Australian Fair Pay Commission today announced an increase of $27.36 per week in the standard Federal Minimum Wage and in all Pay Scales up to $700 per week. This covers just over one million Australian workers who rely on the Commission’s decisions for adjustments in their wages.

The Commission also awarded an increase of $22.04 per week to all Pay Scales paying $700 per week and above, or more than $36,000 per year, representing another 220,000 workers, about 2% of the workforce.

In hourly terms, the Australian federal minimum wage increased to $13.47 per hour (for workers on pay scales of less than $700 per week), with effect from 1 December 2006….


Many commentators were surprised the Commission’s first decision was so generous. For example, the Australian Council of Trade Unions had asked for a minimum wage increase of $30 per week.

An absurd decision which virtually granted the entire ACTU claim in full. “Surprised” is not the word for such an extravagant decision based on nothing whatsoever, and certainly neither on economic sense nor industrial need. And just for the record, let me mention who were the members of the FPC who had made this decision.


The inaugural chairman of the Commission was Professor Ian Harper and there were four commissioners: Hugh Armstrong, Patrick McClure AO, Mike O’Hagan, and Honorary Professor Judith Sloan.

Work Choices

Work Choices was the name given to changes made to the federal industrial relations laws in Australia by the Howard Government in 2005, being amendments to the Workplace Relations Act 1996 by the Workplace Relations Amendment (Work Choices) Act 2005, sometimes referred to as the Workplace Relations Amendment Act 2005, that came into effect on 27 March 2006.

This is how it is described.


In May 2005, Prime MinisterJohn Howard informed the Australian House of Representatives that the federal government intended to reform Australian industrial relations laws by introducing a unified national system. WorkChoices was ostensibly designed to improve employment levels and national economic performance by dispensing with unfair dismissal laws for companies under a certain size, removing the “no disadvantage test” which had sought to ensure workers were not left disadvantaged by changes in legislation, thereby promoting individual efficiency and requiring workers to submit their certified agreements directly to Workplace Authority rather than going through the Australian Industrial Relations Commission. It also made adjustments to a workforce’s ability to legally go on strike, enabling workers to bargain for conditions without collectivised representation, and significantly restricting trade union activity.

I was also long gone from involvement with the system by then so just watched from the sidelines. This is where it ended up.


WorkChoices was a major issue in the 2007 federal election, with the Australian Labor Party (ALP) led by Kevin Rudd vowing to abolish it. Labor won government at the 2007 election and repealed the whole of the WorkChoices legislation and replaced it with the Fair Work Act 2009.
The FWA was a disaster and I did a lot of work on trying to overturn it working with various IR organisations. Not mentioned, for some reason, is that not only did Labor win, but John Howard lost his own seat, the only time other than in 1929 this had happened, which also happened to be the only previous occasion when a government had tried to get rid of the Federal industrial relations system. Lots of detail at the link, but this is where it comes down to.


The Australian Government stopped using the name “WorkChoices” to describe its industrial relations changes on 17 May 2007. Workplace Relations Minister Joe Hockey said the brand had to be dropped due to the union and community campaign against the WorkChoices laws. “It has resonated because it has been the most sophisticated and articulate political campaign in the history of this country.” The ACTU countered that the name may have changed but the laws were the same. The Government did not rename the brand, but did launch a new advertising campaign that did not refer specifically to WorkChoices.

And the political washup.

Howard’s successor as leader of the Liberal Party, Brendan Nelson declared that his party has “listened and learned” from the Australian public. He also declared that WorkChoices was “dead” and would never be resurrected as part of Coalition policy, and called on Rudd to move quickly to introduce draft industrial relations legislation. Former IR minister Joe Hockey said the laws “went too deep” but were introduced with “the best intentions”. “As I said yesterday and I’ve said since election day, WorkChoices is dead, and there is an overwhelming mandate for the Labor Party’s policy of tearing up WorkChoices,” he said.And from the sidelines:

Former Prime Minister John Howard broke his post-election silence in March 2008 by attacking Rudd’s industrial relations policy while defending WorkChoices.

Tampering with the employer-employee relationship that leaves employees without recourse to the actions of employers will not work anywhere. And I am conservative enough to recognise that a system that has evolved over more than a century embeds within it all kinds of features that no one can identify but which make it work out there in the real world. 

The market system depends for its existence on institutions that buffer the relationships between businesses and their customers and between employers and their employees. This is the Australian labour-relations system. No one will think of dismantling it any time soon. There may well come a time, but it won’t be in any time soon. 

The meaning of leisure

This is a quite interesting article whose story is not quite revealed by its title, The Value of Work. Let me provide some of the text as a way to encourage you to read it all. It is about the US but has implications everywhere. It seems that people want more from their jobs than just a means to pay the bills, which hardly surprises me since that is what I wanted myself.

It seems 2021 was the year of “footloose and fancy-free.” That’s the impression one would get, at least, from employment trends. Almost 39 million Americans said “au revoir” to their employers in 2021. September alone saw a record-breaking 4.4 million employees voluntarily quitting their jobs. Labor economists are still busy crunching numbers, trying to make sense of this “Great Resignation.”…

My age cohort [late 30s early 40s] is extremely confused about work. Throughout our lives, we have struggled to answer the most basic questions about its meaning and significance. Why do human beings work? What sort of work is most fulfilling and honorable? What do dedicated workers deserve, from employers, the state, or society at large?…

When people expect work to fulfill their deepest hopes and dreams, reality will generally disappoint. This may partly explain why an event like Covid could trigger a flurry of resignations. Even if their current jobs are acceptable, workers want more. Why settle for a job that merely pays the bills, when things could be so much better?…

If the Great Resignation has taught us anything, it is this. No one fully understands what is happening in American labor markets. Our economy is still changing rapidly, but that’s not the only variable. Workers are changing too. Both conservatives and liberals are coming to see the defects in the paradigms that dominated their approach to labor across the last 40 years.

But no matter how you slice it, if we are going to go to cafes and travel the world people will need to work behind the scenes to allow it to happen. Even a day at the beach requires an enormous collective communal effort. Work can give a person meaning, but there are other ways to make sense of one’s life as well. We are not yet in an automated world where human effort can be reduced to a minimum.

But it may be coming and sooner than we might think.

 

If laughter is the best medicine, will it cure Covid?

This is from Donna Laframboise via Tony who sent these along. One day we will all look back at this and laugh, but why not even laugh at it while we are in the midst of it all? 

Unvaccinated Man Feeling Left Out As All His Vaccinated Friends Have COVID

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Australian Hospitals Over Capacity With People Beaten By Police For Not Wearing Masks

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White House Sends Out Christmas Cards With Heartfelt Message, ‘You Will Get Sick And Die This Winter’

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CDC Reminds People To Listen To All Medical Professionals Except For The Tens Of Thousands Who Refused The Vaccine

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New York Restaurant Adds Voting Booth So They Can Allow People In Without ID

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‘1984’ Prequel Released Where People Beg Big Brother To Take Away Their Rights To Protect Them From Virus

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Biden Declares We Must Spray Sunscreen On Everyone To Protect Those Already Wearing Sunscreen

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Costco Introduces New 5-Gallon Family Size Pfizer Vaccine

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Experts Warn That If Children Between The Ages of 5-11 Aren’t Vaccinated Then Pfizer Executives Won’t Get Their Sales Bonuses

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Boy Who Pointed Out The Emperor Has No Clothes Banned For Misinformation