Garbage In – Garbage Out is a term used to state that in computing and other fields that incorrect or poor-quality input will produce faulty output:
Obvious really and this column has spent more than a few thousand words exposing the dire results of “official” modelling results, be it from just about any public sector department within any country and from the growing band of so called “independent” organs of state, such as Central Banks, with the last exposure being, “Let the Carn-age Begin,” in respect of the Bank of England’s dire record on interest rates and CPI inflation guidance.
The UK’s Office for Budget Responsibility (OBR) was created in 2010 to provide independent and authoritative analysis of the UK’s public finances, following the atrocious record of accuracy from the treasury itself. It is one of a growing number of official independent fiscal watchdogs around the world and quite whether this growth rate is a genuine effort by lawmakers to actually improve analytical forecasting OR as a way to “muddy the waters” when the inevitable “blame-game” resulting from “shock events,” such as the 2007 financial crisis, transpire?
Yesterday’s UK Autumn Statement, which is effectively a second budget within the year and sets out the fiscal situation, proposed changes to it and forecasts expected to result from it, has caused a particular divisiveness between the quoted “experts.” At the heart of the division were the OBR forecast of an extra £118BN borrowing requirement over the next 5-years, and used by the Chancellor, which suggested that the bulk of it, £60BN, will be the UK’s cost of brexit, with most of the residue being down to the planned £23BN “infrastructure investment.”
So here we go again, “Blame it on Brexit,” even though there are no details of the brexit plan, let alone costings available yet!
What we lesser mortals can state factually is that UK public debt has trebled since 2005, from £0.5 trillion to £1.6 trillion. Furthermore, we can factually observe from a chart on Japan, post its 1989 financial crisis, when various debt induced infrastructure spending was central to the “forecasts” of higher growth to come:
Bearing in mind (please excuse the pun) that the bulk of the infrastructure spend, including miles of new roads to nowhere, new airports with no passengers etc, transpired between 1994 through 1998, with the result that economic growth, GDP, actually contracted.
Note also the exponential rise in Debt to GDP, an IMF figure, which has co-incided with lacklustre and contracting GDP, observed and forecast by this column on a frequent basis and for a variety of countries, including the UK.
The other variable dividing the “experts” has been the £GBP exchange rate and its impact on economic growth, which again have been woefully inaccurate, including the OBR and the Bank of England.
Our recent addition to this column, a currency exchange-rate forecasting service, can be accessed here, where you will note that the £Sterling’s woes were predicted a full six-months before brexit.
A suitable conclusion to “Garbage IN—Garbage Out” is a response against the criticism of the OBR forecasts, aired on BBC radio this morning, which said “there is no right or wrong in forecasting,” so good luck with that guidance.