The global economy changes so fast that relying on carefully researched reports and forecasts from economists seem of little worth any more.
Only yesterday, respected credit rating firm Moody’s predicted ‘muted growth’ for the global economy and cited a continuing threat of a Greek exit from the Eurozone as one of three key reasons underpinning the opinion.
The today, the German and Spanish governments back the Eurozone’s third bailout for Athens as the threat that has cast such a long shadow over the future of the euro for so long has lifted.
Moody’s, Standard and Poor’s, Fitch and other institutions and economists have made more than a good living over the years dictating policy for governments, business and investors.
Now, with a world with stock markets and business open 24/7, change happens so fast that even a supercomputer would find difficulty in keeping up with what is going on.
Reading the omens
Technology has made governments, banks and businesses so interlinked and dependent on each other that a slight cough in the Federal Reserve reverberates around the world, as markets ebb and flow according to how economists and other interpreters divine the omens.
Perhaps technology is just the modern world’s way of gutting a chicken to read the signs offered by the entrails.
The point is hard cash is spent by the billion trying to get ahead of the markets to turn a quick buck, but what we are left with is economic fact and economic theory.
The first is set in stone – what has happened and why.
The second is opinion based on past performance, and as we all know, what’s happened before is no guarantee that the same will happen again under a given set of circumstances.
Turning a quick buck
Moody’s also says besides the Greek bail-out problem, a slowdown in China and the prospect of higher interest rates in the United States are the other headwinds blowing against global growth.
G20 economies are likely to grow and average 2.7% instead of the previously forecast 2.9% because of this.
So Moody’s has downgraded and earlier forecast based on three factors, one of which does not figure any more.
That means another rework of the figures is on the way in a report that costs US$550 a time.
My forecast is Moody’s is making a good profit on information that’s out of date by the time the details are in print.