An Anecdotal Allegory

This brilliant piece by John Kay in today's Financial Times is a must-read due to its ability to tailor to your own needs. It starts with a competition to guess the weight of an ox and then wonderfully descends into a calculated spiral of estimates, guesses and a gross misuse of our standard law of large numbers.

Moreover, it's an apt illustration of how we come so far down the line that when we look back, it's almost impossible to see how we got here.

Amidst so much financial melodrama, was the real economy forgotten, ignored and slowly starved?

Take away what you must. In a way, Kay's piece serves most as a generic metaphor for the dangers of forgetting the fundamentals.  

Nostradamia

Along with  transforming a generation, the financial crisis has made a mockery of modern day 'nostradamia'. Ritholtz speaks of the difference between situational awareness (being aware of the present real-time environment) versus the much more difficult task of forecasting (using this awareness to extrapolate in order to determine future outcomes). 

This "Decade of Punditocracy" is at once, enlightening and depressing - enlightening because it's easy to see who was right, who was wrong and who was in between; depressing because it's just as easy to observe a near singular correlation between the 'wrong-uns' and the people in whose hands the power of policy and influence lies. 

The one who told us to "Get Ready for Inflation and Higher Interest Rates" back in mid-2009 is the same one who postulated (over three decades ago!), that the revenue maximizing tax-rate was at a much lower level than previously believed. Common sense tells you that at a rate of 0% and 100%, your revenue will be identical, i.e: zero, but it certainly does not tell you that it should be at a lower level than it is. 

And of course, there are a couple of statements from the effervescent W, who felt that when people looked back at this "moment in our economic history, they'll recognize that tax cuts work".