Wednesday 13 December 2017

David McWilliams: Marie Antoinette's notion wasn't all that half-baked

Happy New Year and I sincerely hope it is a good one -- for all of us. Around this time it is customary for economists to write about what the new year might hold, as if a collective new year's resolution can have an impact on the economic or business cycle. The economy doesn't work like that.

The annual forecast should always be taken with a salt cellar because why should we think that the Roman calendar has anything to do with the economic cycle? The economic calendar and the annual calendar are two totally different things.

In fact, there are two distinct times: there is calendar time and there is economic time. They are not the same. The economic time, better known as the economic cycle, can take years (as we know here too well), while the official annual year takes a measurable and pre-ordained 12 calendar months. Consider this recession and the ludicrousness of linking economic time to calendar time. The recession started when people didn't expect it and it has lasted longer than most people feared. It was not dictated or influenced by, in any way, the calendar as we know it.

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