How long will the recession last? Is the doom and gloom forecasting accurate?
It all depends on which economics commentator or actual economist you listen to. Are any of them right? At least one will be, but that's just playing the odds. Someone usually wins the lottery every weekend too - and those odds are 8 million to one.
Because the truth of it is, economists and commentators almost never get it right.
Think back to the bull market, where the economy was going full steam ahead. That wasn't so long ago - 2007 in fact. How many commentators were predicting a recession? Few indeed.
We were told of how much good value there was to be found in the stockmarket. Buy recommendations outweighed Sell suggestions by about four to one. They said that prices of essential commodities like copper and iron ore would keep rising - we had to satisfy the insatiable Chinese demand after all. Any property was a solid investment. Any mention of the word "unemployment" was far outweighed by the phrase "skills crisis". The only bogey on the radar for economists and commentators was Inflation.
Turn it forward to the present day - a bear market. Now economists and commentators are scrambling over each other to tell us how bad it is going to be. Sheeplike. The recession will be long lived, with some predicting a few years. Unemployment will skyrocket (what skills crisis?) And the stockmarket could still be in for a rough time ahead. High inflation is but a distant memory.
But do they know something that the rest of us don't? Are they oracles or founts of all knowledge? Not even by a long shot.
Take the IMF as an example. They have had 5 new world economic forecasts in the last 6 months, each one worse than the last. Their predictions keep changing.
They might argue that they are responding to changing conditions. That's true. But they are also making forecasts for the future. Commentating on current conditions is one thing, we can all do that. Predicting the future when things change day by day is somewhat more difficult. Almost impossible in fact.
But commentators and economists are asking us to believe them on their latest forecasts.
To an extent, all the doom and gloom talk is self perpetuating - the more we talk the economy down, the more likely it is to stay down. Its a crisis of confidence. You don't encourage consumer spending by being a doomsayer.
Self perpetuation is also evident in a bull market. During good times, talking up the economy can lead to overconfidence. It certainly helped create the overinflated prices of property and many stocks.
Unfortunately, economists and commentators very rarely get the balance right. For them, a happy medium is just a smiling clairvoyant. Because soon enough, some commentators will start to predict a vision of a light at the end of the tunnel. While still a stab in the dark, more will follow, and the merry go round will start again. (Too many metaphors? Yes, but im taking their lead)
That's not to say that they will be right then either. But when they start to engender more confidence in the economy, consumers will move back in. Its what Ben Bernanke, Chair of the US Federal Reserve suggested recently, that there were green shoots emerging on the way to recovery. But he will only be as right as the commentators allow him to be.
So how long will the recession last? A better question might be, How long is a piece of string? Answer that and i will gladly bestow on you the title of economist or economic commentator.
About Just Grumpy
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