Policy fetishism

Are we making a fetish out of economic policy?
I ask because of an omission from today’s newspapers. None, AFAIK, reported that the Bank of England said yesterday that the cash holdings of non-financial companies have risen at an annualized rate of 22.8% in the last three months, having fallen sharply for most of last year.
But this turnaround is great reason for optimism; the more cash firms have, the less likely they are to cut spending on jobs and inventories.
And yet, whilst omitting this fact, the dead trees are full of talk about the G20 meeting, even though most sensible observers doubt it will produce anything other than banalities.
It seems that newspapers - aided of course by Brown - believe the fate of the economy hangs upon the actions of policy-makers, but are ignoring evidence of whether it might recover anyway, even if fiscal or  monetary policy do little to help.
Which raises the question. Why do they pay so much attention to policy, and so little to the underlying economy? Here are three possibilities:
1. The availability bias. Policy is big and obvious - more so than Bank of England statistics - and it’s natural to think that things that leap easily to mind must be important.
2. The leadership illusion. Newspapers are hugely hierarchical organizations. This contributes to a faith in the power of leaders to affect things. This faith might be exaggerated.
3.  The glamour bias. From a distance, policy looks exciting: all that power! All that testosterone! And it’s easy to think that this matters. But in fact, the question of when the economy will recover rests upon deeply unglamorous and downright dull evidence - about such things as the inventory cycle and monetary growth.

Comments

[kinglear]

and about people thinking they can get a better return for their money than what's available in a deposit account...( adjusting for risk of course - which means the longer things are stable the more likely an upturn is)

[Alice Cook]

Stumbling,

I have prepared a partial response on my blog to your concerns about inflation.

See my posts on a) unit labour costs, b) productivity, c) the relationship between house prices and monetary growth.

Alice

http://ukhousebubble.blogspot.com

[Diversity]

Er;...

Are you predicting a 22.8% rise in cash holdings, or noting a 5% rise?

That apart, when the magician says he is about to pull an elephant out of the hat, don't you find it diffcult to not look at the hat and the stage setting? Whether the magician succeeds or fails, it really is a news story.

[dearieme]

Look, macroeconomics is to microeconomics at astrology is to astronomy. And the papers carry horoscopes.

[chris]

Diversity - I'm predicting nothing. The figures show that private non-financial companies M4 rose 1.9% in December, 0.5% in Jan and 2.8% in Feb. Annnualize these figures and we have 22.8%. Yes, this is sexed up - but that's to pose the puzzle of why the press ignored it.

[Luis Enrique]

I'm hoping for some pretty major policy responses to the crisis - does that make me a policy fetishist?

[Brad Taylor]

It could be due to the perception that policy is something we do, and is thus under our control. Regardless of the effect of policy relative to other factors, it is intuitive to take extra notice of our own actions.

[Glenn]

couldn't the rise in cash holdings be explained by companies selling off their current and summer stock at a discount, and pocketing the cash but not re-stocking?

This way they improve their cashflow position. Also keeps their businesses solvent.

this is what's happening in my part of the world apparently...

[Diversity]

Chris - I guess that the reason is because monetary statistcs have a whole lot of noise in them at present. If I had been on the FT economics desk when the February figures came in, I would have hesitated between writing them up as a posssibly hopeful sign and waiting for the March figures. The decision would depend on what space other stories left available. Light economic news days have been rare in recent months, so this got put aside.

One of the joys of the blogsphere is that space expands to meet the supply of things worth discussing. Column inches or TV minutes don't, as you know better than I in your daytime incarnation..

[raivo pommer-eesti-www.google.ee.]

Raivo Pommer-eesti.www.google.ee
[email protected]

Erste kleinere US-Banken geben Finanzhilfen zurück

Knapp ein halbes Jahr nach dem Start des US-Hilfsprogramms für die Finanzbranche haben vier kleinere Banken als erste Institute mit der Rückzahlung der Kapitalspritzen begonnen. Auch mehrere große Häuser wie die Bank of America, J.P. Morgan Chase und Goldman Sachs dringen auf eine möglichst rasche Rückgabe der Gelder.

Die Banken wollen den Staatseinfluss reduzieren und sich die künftig steigenden Zinsen für das Kapital sparen. Anzeichen einer breiteren Erholung der Branche sehen Experten in dem Schritt noch nicht. Die vier Regionalbanken, die am Dienstag mit der Erstattung begannen, zahlten nach eigenen Angaben zusammen insgesamt 338 Millionen Dollar (254 Mio Euro) zurück.

[raivo pommer-eesti-www.google.ee]

Raivo Pommer-eesti-www.google.ee

[email protected]

NPD KRISE

An den Termin beim Berliner Verwaltungsgericht hatte die NPD große Hoffnungen geknüpft. Am Freitag soll dort eine mündliche Verhandlung über die Klage der rechtsextremen Partei gegen die Bundestagsverwaltung stattfinden. Denn der Bundestag weigerte sich Anfang des Jahres in einem vorläufigen Bescheid, der NPD wegen Fehlern im Rechenschaftsbericht die ihr für das erste Quartal 2009 eigentlich zustehenden 300.000 Euro zu überweisen.

Doch nur einen Tag vor dem Gerichtstermin teilte der Bundestag am Donnerstag mit, dass die Prüfung nun abgeschlossen sei: Auf das zum Überleben dringend benötigte Staats-Geld kann die Partei nicht hoffen. Im Gegenteil: Der Bundestag fordert nun Sanktionszahlungen in Höhe rund 2,2 Millionen Euro - ohne den einbehaltenen Abschlag wären es sogar 2,5 Millionen Euro. Denn die NPD habe in ihrem Rechenschaftsbericht für 2007 staatliche Mittel falsch ausgewiesen, das Parteivermögen falsch angegeben. Zudem seien notwendige Erläuterungen zu „sonstigen Einnahmen“ unterblieben. Das Parteiengesetz sieht in diesem Fall eine finanzielle Sanktion in zweifacher Höhe der unrichtigen Angaben vor. Nicht nur die finanzielle Zukunft der NPD ist damit völlig offen.

[replica rolex]

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html