DrFever
New Member
How clueless have Keynesian econometric trend forecasters become? One measure that provides an indication is the Citigroup Economic Surprise Index.
The CESI is a quantitative measure of actual economic news that is contrasted with econometric forecasts of what the news will be .The measures are defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A positive reading of the Economic Surprise Index suggests that economic releases have on balance beating consensus. The index is calculated daily in a rolling three-month window.
An examination of the index shows that since since mid-August it has turned upward, indicating that more and more Keynesians are underestimating strength in the market. (Only Keynesians, of one sort or another are quizzed in the survey). See a chart of index here.
Most economists are simply trend followers. They have no theory to explain changes in the economy. For them, there is some kind of deus ex machina event that causes a change in consumer demand, which to them means the demand must be coaxed back on track. They have no way of forecasting a change in the economy before this supposed shift in consumer demand occurs.
Only Austrian Business Cycle Theory sees the different phases of the business cycle developing before the data turn. ABCT rejects the Keynesian consumer demand theory and looks at money flows, specifically central bank newly created money. The economy in manipulated fashion will "boom" when newly created money is created. It is a distortion of what would be a non-bankster economy.
Currently, Bernanke is printing money (M2) at very aggressive double digit rates. It is this money printing that is fueling the manipulated boom. Since Keynesians don't watch or understand the role money creation causes in the Fed created boom-bust cycle, they don't see the manipulated boom coming until it is actually reflected in the economic data. That's why, at present, the data are surprising them to the upside. The new Fed created money is pushing the economic data higher, but since they don't understand ABCT, they won't understand what is going on in the data until months of data role in showing the change in trend.