Foot in mouth – taking those predictions with a pinch of salt
This article is written by someone with insider knowledge of the industry. I will be saying what everyone is probably thinking.
As the New Year begins, politicians and economists like to make predictions about what may be around the corner. At best this is foolhardy and at worst it can be downright dangerous to careers. In these cold winter days, I thought it would be good to have a quick chuckle at previous examples of people speaking with foot in mouth about future economic developments and getting it horribly and publicly wrong.
To this end I have gathered for your amusement a small chorus of quotations that have some relevance to the economic climate in which we find ourselves and to the extraordinary over-confidence which brought us here. Those of you who are regular readers of this column will know that I love a pithy quote that sums up a situation in a few words, so here we go with a few choice ones.
Looking back over recent years, let’s start with a quotation from Gordon Brown, speaking as Chancellor of the Exchequer at the Mansion House in June 2007, just before the first signs of the global financial crisis began to emerge.
He said, and I quote…"Over the ten years that I have had the privilege of addressing you as Chancellor, I have been able year by year to record how the City of London has risen by your efforts, ingenuity and creativity to become a new world leader … So I congratulate you, Lord Mayor and the City of London, on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London."
Just so that I cannot be accused of being partisan, here are a few words from David Cameron in a speech given at the London School of Economics just a few months later: "The world economy [is] more stable than for a generation … Our hugely sophisticated financial markets match funds with ideas better than ever before."
Moving on, in May 2008, Mervyn King, governor of the Bank of England, was still trying to reassure us, saying: "It's quite possible that at some point we may get an odd quarter or two of negative growth, but recession is not the central projection at all."
Across the pond, Barney Frank, US chairman of the House Financial Services Committee, remarked in July 2008: "I think this is a case where Freddie Mac and Fannie Mae are fundamentally sound. They're not in danger of going under … I think they are in good shape going forward."
In September 2008 he had to eat his words as Freddie and Fannie were taken into government conservatorship.
And they keep on coming! On September 14, 2008, on the day before Lehman Brothers filed for bankruptcy, triggering the stock-market crash, Donald Luskin, US investment guru, said in the Washington Post: "Anyone who says we're in a recession, or heading into one—especially the worst one since the Great Depression—is making up his own private definition of "recession.""
Granted, all these illustrious speakers may have been trying to shore up confidence by their brave words and we would not really have expected them to say what they were personally thinking, yet surely they must have blushed a little as the extraordinary events of the last few years unfolded.
In October 2008, Queen Elizabeth II asked during a visit to the London School of Economics: "Why did no one see it coming?"
Perhaps the answer lies in the words of Mark Steel, British comedian and author, who wrote in the Independent on February 11, 2009: "An army of experts assured us on a daily basis that this boom couldn’t possibly crash like previous booms because this boom was still going on whereas all previous booms had ended." Ho, ho, ho!
And remember, it may be wise at this time of year to apply a pinch of salt to the predictions of seemingly well qualified and wise men as well as to sprinkle more than a pinch on the icy roads.
So a Happy New Year to you all and, if you are listening to other people’s predictions, take care - life is like a field of cowpats so be careful where you tread!
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