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Thursday, 25 August 2011

Proof that sending politicians on holiday increases FTSE performance

Over at The Freedom Association they have a new “Freedom Factsheet” out, this one on the positive correlation between upswings in the stock market and House of Commons recesses.

It’s quite a neat idea. These are their findings and conclusion:

“We find that in the 6,439 days that the House of Commons has been in session days since the opening of the FTSE 100 in 1984, the stock market has had a net increase of just 30 points – essentially flat lining.

During the 3,476 days in recess, when the Commons couldn’t pass legislation, the index experienced a net rise of 4,704.3 points – an average of 1.35 points per day.

“Hence, if we want to up the stock market, increase much needed investment and stop reducing pension funds, we need to send the politicians on holiday – or at least get the government to credibly commit to a pro-business policy of reduced red tape and lower taxes.”

On the face of it, I think any classical liberal would support that notion, which would certainly make my life easier as all I would have to do would be to post the above quote onto this website with “hurrah!” as my commentary.

Unfortunately, life is rarely that simple (particularly when we’re dealing with long term statistical analysis). For, a moment after I read the page, one phrase jumped out at me: “since the opening of the FTSE100 in 1984″ 1984?

When Thatcher was already into her second term pursuing tax-slashing, inflation-reducing, business-freeing policies with zeal? In short, when she was enacting precisely the sorts of policies that the Freedom Society is advocating in their conclusion?

In order to reach the conclusion that the Freedom Association has, we need to know what the net rise on the FTSE 100 had been during recesses in Thatcher’s era, v’s the net rise in the Labour years that followed. Sadly that information is not given, but we have been offered a handy graph at the end of the page:

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