Monday, 14 June 2010
OBR: The Truth hurts...a little
Well, first up the OBR is copying the Bank of England in using fan charts. This is a way of making it seem that your predictions are never wrong. Two lines with a nice spread in between. The BOE use this to show inflation is within their guidelines when plainly they have been wrong for some months; now the OBR joins in this charade. They would be useless company down the bookie.
However, the central prediction (page 13) is that the economy is likely only to grow at around 2.8% for the next 3 years. Below Alistair Darling's heroic 3% growth forecasts, but I say politically so. Not enough to really dent the public finances and yet a little to show Labour were wrong - a perfect political fudge. However, not much approaching the truth there and an ignorance of the fact that with GDP growth below inflation there seems to be a continuing diminution of the Country's wealth in real terms for the whole Parliament.
Page 16 has an output gap too, I am yet to understand what this is. Many people have tried to explain it too me, but in reality it is a bogus economic concept. There is not real way of knowing if there is slack int he economy or not. The inflation rate and money supply creation rate will give you the answer eventually.
The final page says it all, Government spending is to fall considerably, whilst Private Investment takes up the slack to produce good GDP growth, along with house prices and exports. Quite a bet, better than pouring more Government money in forever, but somehow this set of predictions does not sit well with the world we live in.