Smart Economic Tracking

Getting the Noise Out

We have identified a fundamental flaw in most economic analysis—the excessive reliance on recession, or absolute decline in the economy (as opposed to slowing rates of change), as a measure of economic distress—and we have seen that this flaw has almost guaranteed that businesses, investors, and economists alike are late in reacting to economic downturns. However, even if we switch to the more facile ROCET approach, we must still correct the second major flaw in much economic discourse and analysis: the standard practice of measuring change over periods of time—quarter to quarter or month to month—so short that a great deal of fluctuation is created and the underlying real trends are ...

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