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Type "rubbish
economist" into Google. Then hit "I'm Feeling Lucky"...
The INCOVENIENT TRUTH about statistics, as Al Gore
would no doubt confess if you threatened to stop him flying, is they look
backwards, not forwards – and not even quite to the present.
That's as true of last-quarter earnings as it is of GDP. You're left guessing
what today's outcome will be, right up until it becomes historic and you can
try to claim it as fact. Even "up-to-the-minute" inputs have to
exclude the very minute we're in, and corduroy-patch models like Greg Mankiw at Harvard should know
this. So too should his chum, the White House's own Larry Summers.
Yet Summers – formerly head of Bill Clinton's Treasury and also of Harvard
University, before
coming back as Obama's chief economic advisor – used a speech on Friday
to highlight a statistic that suggests he's forgotten the basics of empirical
research. (Previous gaffes already said he'd forgotten to use sound judgment
in public.) Bundling himself into blind fortune's get-away car, he told the
Peterson Institute for International Economics that it shows "the
economic free-fall has ended."
What is this killer stat? "The number of people searching for the term
'economic depression' on Google is down to normal levels," he's quoted
by Politico.com.
Hurray for Larry!
As you can see, searches
for the term "economic depression" were apparently four times their
typical level coming into 2009, as Summers noted at the start of the
year.
The search-engine depression was greater still as Larry dusted off his Team
America badge ahead of last November's election. But now, "The recent
shift goes to show consumer confidence is higher," he claimed last week.
"If we were at the brink of catastrophe at the beginning of the year, we
have walked some substantial distance back from the abyss."
Now, let's forget how absurd it might be to base an economic conclusion on
the broad pattern of Google searches. Never mind that on Summers' logic, Led Zeppelin were never so popular as
in late 2007...demand for food stamps is now in a secular bull
market...and the campaign to "free viagra" – that
famous political prisoner – hasn't been this hot since 2004.
(Larry himself shows a very erratic
pattern
on Google Trends, but unlike him, we guess here at BullionVault that it
doesn't mean much.)
No, the real trouble with Summers' thesis is that the data series has yet to
end.
Ooops! Just look what's
crept into the data since Larry last checked and the start of July entered
Google's query results.
Yes, Summers' own
comments helped push that spike higher, of course. Google
Trends
confirms it on a 30-day chart. But he was only adding on Friday to a clear
new uptrend in people searching for the dread phrase. And besides, Obama's
advisor is only driving us back to the abyss himself, back to the brink of
catastrophe, if he really believes this marker counts for something.
Better leave that forced march to the Treasury and Fed instead.
Adrian
Ash
Head
of Research
Bullionvault.com
Also
by Adrian Ash
City correspondent for The Daily Reckoning in London, Adrian Ash is
head of research at BullionVault.com – giving you direct access to investment
gold, vaulted in Zurich, on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead
it. Only you can decide the best place for your money, and any decision you
make will put your money at risk. Information or data included here may have
already been overtaken by events – and must be verified elsewhere
– should you choose to act on it.
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