Thursday, October 30, 2008

Economics - Artistically Deceptive?

Day before, Dow lost more than 200 points despite another Fed rate cut. Investors are down 44% so far this year loosing around $10 trillion just this month - much more than the crash of 1929!

Consumer confidence in the United States (yes US, the biggest consumer, the my-baap of all) has hit an all-time low in October. The Conference Board reported that "expectations have turned significantly pessimistic with the percentage of consumers expecting business condition to worsen over the next 6 months rising to 36.6% from 21%".


Many placed their bets on the emerging markets and how they will remain untouched by the Western turmoil… But as we all know, this is so far from the truth. Even India is clearly feeling the heat of the financial crisis now (No citations here; if you are in the Indian job market, or if you need some credit, or if you’ve invested just about 10K in BSE like me, you just know it!).
Fair enough, I feel. If we benefit from their flamboyant consumption in good times, how can we remain unaffected by their super huge crisis?

Even oil is touching almost $60 now! Weren’t many pundits shouting that oil would just move up & up? So when stocks and realty is going bust – its competing asset, i.e., gold, should go up! Even that’s not happening because people are selling gold, instead of investing in this so-called safe & stable asset.


Just about a year ago, things were so bright and booming that the question every1 was asking was where is the next big opportunity? And now, the question is “where is the next big threat”? Seriously, what’s next in store in this turmoil? Credit card crisis?? Electricty Crisis? (Tell us, else we’ll speculate and speculate, till we ruin it all…)


I don’t know all the nitty-gritty’s of economics, but I really wonder if economics is all about sentiments. The economy grows even amidst poor infrastructure and high interest rates when the investor is confident…. And if he has his confidence shaken, no amount of liquidity injection, govt assurances or policy changes seem to work!

Maybe that’s why Economics is at best an Art! No amount of econometrics, mathematical models or calculus application can make it a science. Its artistically deceptive!

4 comments:

ranjit nair said...

Well you are abs right Sugandha. At least one thing is pretty clear now,day to day happenings can make even the best of the economists and market pundits look like kindegarden kids. And what they say is indeed what they call it - mere predictions !

«« hAdez »» said...

Only black swans are able to create ripples like these. Ripples that move 'economic thinking' totally... Know the best thing abt 'em ? They are beyond the domains of predictability(totally).

en.wikipedia.org/wiki/Black_swan_theory

Sugandha said...

ET, it seems, seconds me...

http://economictimes.indiatimes.com/Opinion/Columnists/The_end_of_certainty_in_economics/articleshow/3777465.cms

zoram said...

a good read i must say :)

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