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"By its nature, punditry craves attention, which is easier to attract with certainties than with equivocation."
I agree with this statement and it is too bad because those who do make predictions with certainty have profoundly bad track records over time. I know many of us have learned how poorly market forecasters do and so it was nice to see an article not proclaiming to know what inflation will be like in 5 years but just asking good questions. The three Mankiw poses are,
How long will it take for the economy’s wounds to heal?
How long will inflation expectations remain anchored?
How long will the bond market trust the United States?
Think about these questions as well as how it would change our national discussion if economists quit pretending that their predictions are absolute facts.
I agree it's a refreshing read and that nobody can predict the future, especially years into the future, so this made sense to me. Too many "forecasters" believe their predictions are certain and get carried away with how likely it is to happen.
ReplyDeleteI am interested to know what people think of when discussing the US economy and when it will be fine again. There are many factors that determine the state of an economy (GDP, unemployment, external debt, etc.) so I am interested to see what factors influence these forecasters the most.
Interesting article.. While I do agree that 'forecasters' believing their predictions are certain is wrong, I also think that these 'forecasters' can be very beneficial. I believe we can not only learn a lot from studying economic cycles, but these 'forecasters' can predict certain things with a respective amount of certainty. Obviously nobody knows exactly what will happen, but as I mentioned these are business cycles.. so it is understandable how 'forecasters' can predict certain things accurately due to the phase of the cycle that we are in. I'm not suggesting that we focus most of our efforts on these predictions, rather we can learn a lot from them. Long term prediction on the other hand is completely different and I think there are too many factors that go into the long run that there simply is no way to accurately predict anything.
ReplyDeleteI liked this article. Thanks for sharing. I thought it also was a refreshing read and sometimes predictions when said confidently can make themselves come true. I think sometimes that that is the case and a lot of predictions are wrong but in my hope it is because they are too optimistic...
ReplyDeleteVery interesting article, although I'm not exactly comforted to know that apparently most economists are just flying by the seat of their pants when it comes to the financial crisis these days. I also agree with Matt that forecasters can be beneficial. While they are unaware of what truly is going to happen, they are able to base their predictions off past events and factual evidence. But this is the closest we are going to get to someone being able to tell us what is going to happen because the fact is, no one really knows what is going to happen. And that is a little scary to think about...
ReplyDeleteI think that the prognosticators still have jobs because we like the feeling of certainty in uncertain times. It reassurance that the world isnt going down the toilet. Particularly when talking about the universal language of money. Everyone understands that. And, as skiddish as stock markets and economies have become, people will cling to the words of those who can sell certainty the best.
ReplyDeleteThe only thing that is certain, is the uncertainty itself.
ReplyDeleteTo answer the question: How long will U.S bond buyers trust treasuries? Here is an interesting article about Bill Gross head of PIMCO investments and one of America's largest traders of treasuries.
ReplyDeletehttp://www.cnbc.com/id/42536993/Everyone_on_Wall_Street_Agrees_with_Bill_Gross_Short_Treasuries
Gross is net short U.S treasuries (meaning he expects the price of bonds to decrease and yields to increase. Gross cites "Too much debt, fear of inflation, foreigners exiting the market, the desire for yield after too many years of low interest rates." Basically, he is saying he believes trust in the U.S is already decreasing or will be in the future and force higher yields to encourage buying.
This reminds me of what Hannah said in class a few weeks ago about economic theory, that generally it's not whether one is right and one is wrong, but which one suits the state of the economy at the time. It is refreshing to read this article because it's not shoving economic theory down our throats but its asking us to consider the state of the economy and what policies might bring full recovery.
ReplyDeleteThis is a really interesting article because it delves into some our discussion topics from class. I think it is very difficult to prognosticate any of those questions in particular. I love that all those who say that predicted major economic events. I especially took close notice to a particular economist, Mark Faber. He is an investor and well documented prognosticator of economic events. He correctly called the market crash in 1987, the tech downturn in 2000, and the market bottom in 2009. Mr Faber is highly sought after on television and radio for his advice, and can be seen often on CNBC, and Bloomberg.
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