Thursday , August 13 2020
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We don’t believe this for a moment and yet…..

Summary:
This level of macroeconomic forecasting is only done to make astrologers look good:Brussels is forecasting an 8.3% drop in GDP for the 27 economies of the European Union in 2020 followed by a 5.8% rebound in 2021. The eurozone is forecast to contract by 8.7% this year, with 6.1% growth in 2021. Both are worse declines and weaker rebounds than the historic downturn that the commission had forecast in May. The UK economy will shrink by 9.75% in 2020, putting it among the worst-hit economies in Europe, although France, Spain and Italy are facing even steeper falls in output (10.6%, 10.9% and 11.2% respectively). Germany, facing a 6.3% fall in GDP in 2020, and the Netherlands (-6.8%) confront less severe downturns, while Poland is forecast to escape with the shallowest recession (-4.6%).It

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This level of macroeconomic forecasting is only done to make astrologers look good:

Brussels is forecasting an 8.3% drop in GDP for the 27 economies of the European Union in 2020 followed by a 5.8% rebound in 2021. The eurozone is forecast to contract by 8.7% this year, with 6.1% growth in 2021. Both are worse declines and weaker rebounds than the historic downturn that the commission had forecast in May.

The UK economy will shrink by 9.75% in 2020, putting it among the worst-hit economies in Europe, although France, Spain and Italy are facing even steeper falls in output (10.6%, 10.9% and 11.2% respectively). Germany, facing a 6.3% fall in GDP in 2020, and the Netherlands (-6.8%) confront less severe downturns, while Poland is forecast to escape with the shallowest recession (-4.6%).

It would appear, from the way that is put, that flouting the EU’s strictures on civil liberty and democracy - as it is claimed Poland has done and we make no comment on whether it’s true or not - protects the economy against the effects of the coronavirus. We think that’s unlikely.

The mistake being made here is to be using zero as the baseline to measure those effects. Something which is always wrong - the effect of something is what we expected to happen without it as compared to the what happens with it. Poland has been growing at around the 5% level and we’d expect, as it climbs up out of the effects of far too many decades of socialism, that growth to continue. Thus the effect upon that country is 9.6% (the decimal point being used to show a sense of humour, see above about astrologers) not the 4.6% listed.

Yes, this is important and is of much wider application. For example, it is indeed true that Cuba has free at the point of use healthcare. This is not a justification of the Cuban Revolution as so does the UK have free at the point of use healthcare and we got there without shooting the bourgeois and driving everyone else in destitution. Actually, darn near everywhere has free at the point of use healthcare for those who require it. Thus our judgement of Cuba should be based upon not where it is but where we should expect it to be - as with Poland and GDP, the effect is not the baseline of zero but where would it have been without the coronavirus?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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