“If tomorrow everybody was your friend. Anyone could take you in, no matter what or where you’ve been. If tomorrow everybody had enough. The world wasn’t quite so rough. Don’t you wish it were true? If tomorrow everybody under the sun, was happy just to live as one, no borders, no battles to be won. If tomorrow everybody was your friend. Happiness would never end. Don’t you wish it were true?”
– John Fogerty, Credence Clearwater Revival
On the Money: Alan Steel
In November 2010 a group of “renowned economists”, “top” academics (including Professor Niall Ferguson of Harvard) and “leaders in business” wrote an open letter to the chairman of the US Federal Reserve, Ben Bernanke. No, it wasn’t a thankyou letter for his work in saving the global financial system. In response to what has become known as quantitative easing (QE) these ten know-alls promised that Bernanke’s initiatives would prove to be disastrous to the US and a global economy.
Their open letter was published in the Wall Street Journal. In it they argued that QE wouldn’t achieve his objective of “promoting employment”, and that it should be “discontinued” immediately because it would trigger uncontrolled inflation, otherwise known as runaway price rises, or as we would say, “jings, no another bluidy increase”.
So what happened? Did any of their predictions come true? At the time the US inflation rate was 1.5%. Almost 10 years later, it’s much the same, though some argue there’s deflation around. Interest rates, which they predicted would rise substantially, kept falling. And until this coronavirus farce, US unemployment actually fell off a cliff. Nothing that they predicted happened.
Now there’s nothing wrong with making mistakes in forecasting. The world out there is hellish complicated especially when it comes to economics. When you’re wrong, just admit it, and learn from your mistakes. So have they owned up to theirs? Nope. Remarkably, almost 10 years later they still claim that they got it right. “When I said inflation I didn’t specify what kind”, one “famous” economist said. Another commented: “I didn’t say when”. Presumably he likes big whisky measures, as well.
This is a classic case of what’s known as “cognitive dissonance” which is still widespread amongst cults of scientists, politicians, economists, and medical “experts”. It’s about not admitting that you were wrong. And that’s dangerous, especially when the media refuses to challenge them, or give any airtime to others who think differently.
Which leads me on to Coronavirus. Thanks to my natural scepticism and my belief in “Nullius in Verba”, the Latin motto (“go check for yourself”) of the Royal Society, I’ve spent ages reading up as much as I can about this virus, checking statistics, comparing methodologies, and speaking to those on the frontline: nurses and doctors. I’ve also spoken with undertakers, the last people to let you down.
Let me tell you, there’s definitely something very strange going on. As my old granny would say… “it just disnae add up”, and using her own version of Nullius in Verba, she’d add “don’t forget that there’s always two sides to every story”. Don’t worry, Gran, I haven’t. Sadly, too many others have forgotten.
She was born in 1902. By the time she was 12 World War One had started. When it finished in 1919, she was 17, and 20 million had died. Between 1918 and 1920, when she was still a teenager, 50 million people died from a Spanish flu pandemic. The world population was 1.8 billion. So 2.8% of the population died from that flu. She survived because her immune system kept her safe. And she passed her genes to her family. Lucky me.
Today, the world population is 7.8 billion. If the numbers are accurate (and I don’t think they are) then so far some 250,000 have died with this virus. For those who love numbers, that’s only 0.00032% of the world population. That’s a helluva difference. So why are we still locked down? Well, that’s thanks to a model guessed at by yet another Ferguson, this time, Professor Neil (not Niall) of Imperial College London. I see he’s resigned for having double standards. Good riddance.
His “guesswork” predicted that in the UK, 200,000 people were likely to die of coronavirus, and as many as 500,000. A similar model developed in Harvard (of all places) predicted up to 2.5 million could die in the US. So you can understand why Governments suddenly panicked. Except a) his models were up to 96% wrong and b) other experts with completely different views, such as in Sweden, weren’t listened to. Over there they didn’t lockdown people but concentrated on protecting the vulnerable. The Swedes use a system that wasn’t in Ferguson’s model… their word for it is “folkvett”, which translates as commonsense. A rarity these days.
By the way, Ferguson’s model predicted that 40,000 Swedes would die of this virus by 1 May. The actual fatalities were below 2,700. Don’t think I’ve seen that mentioned on telly. Neither have I seen that in the US, official statistics show that compared to every other year since 2013, deaths from pneumonia this year have mysteriously plummeted.
Speaking with local undertakers they claim that for the first time in their careers secondary causes of death are replacing the primary cause. That’s confirmed by senior nurses in North East England. There’s something really weird going on, and I think its cognitive dissonance at work, yet again.
Meanwhile as politicians do their damnedest to cover their mistakes and destroy economies, you would assume that you’d have been glad you sat in cash this last month, despite suggestions in my previous article.
And like professors Ferguson you’d be wrong. Quality collective funds across the board have bounced significantly, some well into double figures.
Ah, say the perennial pessimists, not according to our theories. Well, they can continue to hide from reality in their cognitive dissonance. But my money is on optimists correcting the damage they’ve caused. Keep dripping into quality funds. Hold your nerve. A strong hand on the tiller in a storm is your best hope for a safe voyage.
Alan Steel is chairman of Alan Steel Asset Management
Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.