Working in the dark
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It’s ironic, we live in the Information Age with facts, figures and financial modelling software at our finger tips but judging by our recent economic performance we are probably more information poor, relative to the complexity of the modern world, than our forbears back in the Dark Ages.
We think we have data on almost everyone and everything but as Nassim Taleb observes in The Black Swan, a big part of the problem is not what we know but what we don’t know, or can’t know, simply because even with our information technology and our economic forecasting techniques, clairvoyance is not within our gift.
That accepted, I have dashed off a list of a few things that we really should know, rather than what we can’t know, and that offers an interesting insight into how the country is run (on a hope and a prayer) and probably throws some light on how we headed, eyes wide open, into a financial meltdown in the first place.
Here’s the list:
· We don’t know if we are in or out of recession and, if we’re still in it, whether we can afford to keep on spending our way out of it. Moreover, opinion is divided on whether or not this is the best way forward.
· We don’t know what impact quantitative easing and deleveraging the balance sheets of banks and building societies will have on the economy.
· We don’t know how we will cut public spending and reduce the government deficit.
· We don’t know why we are waging war in Afghanistan or if our resources could be better deployed in the UK.
· We even don’t know if we have enough gas and rock salt to see us through the current cold snap.
Given all these “should knows”, can we really anticipate what is going to happen to interest rates, house prices, fuel prices, unemployment or repossessions in the months to come?
I suppose that’s why the regulators have had to come down so hard on the lending community because they can’t see where things are going either.
There’s some comfort in that but when Captain Brown ignores the fact that there could be icebergs in the water, it is worth remembering that even with water tight compartments the ship can go down.
