Bank economists still just don't get it

Wow.  Here is a great graph from Franco Busetti’s blog (TickerTalk.co.za) that shows just how dead wrong bank economists that partake in the Reuters econometer poll have been in the past.

Clearly our predictions for a USD-ZAR below levels of 6.40 in 2010 have not been included.  Not that we want to partake..  Did you know? Every month a ‘winner’ of the econometer is announced. The ‘winner’ is the person who’s forecasts were the closest to the median forecast of the respondents.  No reward for being right, you’ve just got to be the most average.  Mmmm.

What this chart tells us is that, if anything, the risk going forward is that the USD-ZAR will drop below 5.00 in 2011.

Getting it dead wrong 101

We have weighed in on the subject on many occasions, with these two the most relevant.

In “The problem with bank economists” (4 Feb ‘10) we said that

“The problem with bank economists is that they’re so utterly embedded in the central bank/commercial banking cartel that any hope of logical economic objectivity is all but lost. The current arrangement between the central bank and the commercial banks is a cosy one for all concerned. Commercial and investment banks have a sweet deal like no other industry in the economy. They can lend, borrow, invest, trade and engage in all other manner of profitable activities and have an explicit solvency safety net and printer of first and last resort in the form of the central bank….

The problem with bank economists is they all have ‘formal’ economics training from the mainstream universities who peddle the same economic drivel.  Most of the sharpest economic minds I know are accountants, lawyers, equity analysts and business owners who actually have experience in how stuff works.

The problem with bank economists is that they work for banks.

As a general rule, don’t listen to bank economists.”

In “Rand is setting up to surprise in 2010” (12 Jan’10) we said that

“We also get the sense from paging through Business Day and listening to analysts on CNBC Africa that the consensus amongst SA economists’ has turned toward a ZAR bullish bias. We find this rapid change in sentiment a bit disconcerting, but find comfort in the fact that our forecasters are still only moderately bullish, with no mention of a sub-6 USDZAR, not to mention a sub-5 USDZAR in 2010.

It will be interesting to see what our Reuters poll participants come out with in December and January 2010; just in November 2009 the 20 ‘pollsters’ came out with a median (and mean) forecast for the USDZAR of 8.05 (and 8.12) in 2010. Our core view remains for an average USDZAR of 6.40 in 2010. We foresee a high probability that the Rand runs to 5.50 or lower in 2010, but that at this point local industry and policymakers will be publicly wailing and gnashing their teeth, in the process providing ammo and authority to the SARB to step in and forecefully manage the value of the Rand weaker.”

Bank economists are really marketing and sales people for the banks’ corporate client relations.  And you wouldn’t trust a sales person with your savings and investments, now would you?