Sunday, August 03, 2014

Reviewing positions with the benefit of hindsight

I spend quite a lot of my time analysing events, a process that sometimes ends with a prediction or forecast. Something else that I often do is to review some of my predictions or positions with the benefit of hindsight. I don't do it all the time, just whenever something catches my attention.

Hindsight is a great thing and spending some time contemplating one's previous positions or opinion can be very enlightening. Often it can reveal flaws in reasoning; biases or facts that should have been taken into account. Even when we find ourselves on the wrong side of history we can learn something from our mistakes. It is part of process of refining ones thinking and ideas; an essential part of learning. 

Less frequently, when one is proved right, there is a certain satisfaction that is derived, something that will drive one to be more forthcoming in one's opinions.

After years of rejecting the need for any inquiry, the Government has made an unexpected U-turn and announced its own international panel to establish if war crimes took place.

Following the (seemingly incredible) war victory five years ago many an educational institute or university held seminars and workshops on the subject of management lessons to be learnt from the war victory; a few examples are here, here, and here.

I don't know if the results of the seminars or workshops were published in full but five years on, may we revisit the question again?

What management lessons did we believe we learnt? Do these need to be reviewed further in the light of recent events ? Were there real lessons to be learnt or were these bodies simply trying to cash in on some cheap publicity?

On the bigger question of the economy, many expected a post war boom. There was a boom but it only lasted a couple of years before ending in a bust in 2012.  Despite the rosy statistics there is now no serious question that things have been in decline since then. What went wrong? More seriously where will it end?


Anonymous said...

jack, can you substantiate your claim that the economy is heading downwards, as many would argue otherwise. exports have double since 2008, the currency has been brought under control, very useful infrastructure projects are being put into place, the energy crisis is being rectified, the economy is amongst the fastest growing in the world.

Where do you see the economic problems?

Jack Point said...

To start with, the statistics put out by the Central Bank are suspect because they do not appear to 'gel' with other available data.

For example, how can there be economic growth if bank loan books are shrinking? (Negative credit growth) see report below:

Second, if there is growth there should be jobs? Why do we have such high youth enemployment (19%) and why is it that people keep trying to go overseas for jobs? This unemployment, mind you is AFTER the state has increased its cadre by 700,000 to 1.3m between 2006 to 2013.

See link below for unemployment figures

Third, if there is growth, why is domestic consumption so lacklustre?

Fourth, we expect to see increased investment, particularly FDI in a growing economy. Why are our FDI figures so poor?

We also have an ongoing structural fiscal problem - a primary deficit. In simple terms day to day consumption expenditure exceeds income. We are borrowing for day-to-day consumption as well as for investment. In other words, we are in a debt trap, which is why the IMF has warned of issues of debt sustainability:,-inflation-watch-urged/1785873048

Anonymous said...

Nice analysis jack I. The comments. It would be very intersting if you analyze the methodology the CB used to get such glowing economic statistics versus the picture you paint with yours

Jack Point said...

Thanks Anon.

There are number of things that are done but the most important is with the inflation index.

The GDP number is generally stated as the "real growth" - ie nominal growth less inflation.

In simple terms, if nominal growth in output is 20% and inflation is 12%, we will be left with "real" growth of 8% (20-12=8%).

Now if inflation is understated, say it is recorded as being 9% then growth will be overstated. From the above example 20%-9%=11%).

They have been playing around with the inflation index since 2007, see stories below:

The second thing to note is that almost all economic numbers are quoted as a % of GDP. The budget deficit government debt and everything else. Now if we have a larger reported Real GDP (thanks to a lower inflation index) then EVERY other ratio (expressed in relation to GDP) starts to look very good.

When you think about it, they have been very clever in their trickery.

Verite research has done an excellent job in analysing the mirage (far better than I could) read their report here: