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Finance and Economics

Central hub for discussion on Finance & economics

Suhani Singh , Inquisitive snobbish arrogant. I am Golum and Aug, 01 2016

Economists Don’t Tend to Forecast Recessions


There’s no question that the economy has softened in recent months, but policy makers at the Federal Reserve tell us not to worry, that it’s mostly just bad weather and the normal ups and downs of the economic data. But what if they’re wrong? Would they tell us if they thought we were heading for a new recession? Could they bring themselves to tell us if they did think it? The experience of the last recession, which started at the beginning of 2008, is telling.
There’s no question that the economy has softened in recent months, but policy makers at the Federal Reserve tell us not to worry, that it’s mostly just bad weather and the normal ups and downs of the economic data. But what if they’re wrong? Would they tell us if they thought we were heading for a new recession? Could they bring themselves to tell us if they did think it? The experience of the last recession, which started at the beginning of 2008, is telling.

manoj , Aug, 01 2016


I have always questioned whether people really appreciate the difference between forecasting based on measurable trends, versus forecasting based on uncertainty. The first involves extrapolating from existing evidence, and there is some concreteness to such measures they are best-guesses based on what is known. The second is more diviners art than science, because it relies on assumptions in the absence of evidence. Uncertainty is always viewed as a risk that tends to push people to devaluate certain projections. The existence of a "negativity bias" is well known in behavioral psychology. But the trick with uncertainty is that bits and pieces of new information steadily trickle in, forcing you to constantly reevaluate on the fly. It is sort of like the difference between playing chess, where all the information you need is set out in front of you, versus playing something like poker or backgammon, where some information is out in front of you, but a significant element is unknown and random chance which could be positive or negative. As more information becomes known, your predictive ability improves. As a consequence, when people drive expectations down based on uncertainty, I think that people implicitly assume the outcome to be negative, and this may be leading to an unjustified bias towards negative projections.
I have always questioned whether people really appreciate the difference between forecasting based on measurable trends, versus forecasting based on uncertainty. The first involves extrapolating from existing evidence, and there is some concreteness to such measures they are best-guesses based on wh


John , Aug, 01 2016


Not enough actionable intelligence is collected combined with failure to assess the non-linear impacts of evident turbulence. In 2008, U.S. gasoline prices soared from less than $2 to $4 a gallon, only to drop at year end to below $2. On June 8, 2008, the Federal Reserve published its household balance sheet figures, showing that owner-occupied aggregate real estate value dropped from $20.2 trillion in Q2 2007 to $19.7 in Q1 2008, despite major additions of new housing units. These mutually reinforcing sources of turbulence were "known" but not appreciated. Indeed, the Congressional Budget Office (CBO) then and now ignores household balance sheet data in its analysis and forecasts even though our last two recessions have been asset bubble affairs. Further, the U.S. then and now has no "lockup" metric nor a buyside "wallet" oversaving lockup metric. However, the same Federal Reserve report shows a substantial net increase in bank deposits $7.0 trillion in Q2 2007; $7.6 trillion in Q1 2008, an "oversaving" of about $300 billion. Macroeconomic gibberish simply does not provide actionable intelligence about the real economy.
Not enough actionable intelligence is collected combined with failure to assess the non-linear impacts of evident turbulence. In 2008, U.S. gasoline prices soared from less than $2 to $4 a gallon, only to drop at year end to below $2. On June 8, 2008, the Federal Reserve published its household bala


Akhilesh Agarwal , Aug, 01 2016


There is tremendous bias in the economics profession against the idea that a shrinking economy can be a good thing. But in an age of climate change and ecological collapse, use less, share more just might be the prescription for prosperity in many places. We sure as hell know that making the rich richer and calling that growth is not working very well. Time for a plan based on healing ecosystems and economic justice.
There is tremendous bias in the economics profession against the idea that a shrinking economy can be a good thing. But in an age of climate change and ecological collapse, use less, share more just might be the prescription for prosperity in many places. We sure as hell know that making the rich ri


Shalini , Aug, 01 2016


Somehow, the middle class needs to have the purchasing power again to mop up the excess production. What the world need is not a trickle down effect, its a pour down effect.


Sameer , Aug, 01 2016


What surprises me is that the ratio between savings/ consumption/ and investment is not more closely observed. As the crisis loomed many, far too many refinanced their houses for the purpose of spending.As a result the ratio of financial income in GDP came close to 20%. I shorted the market that summer of2007, took a moderate profit and looked around. The stocks in a different land rebounded optimistically, so I repeated the short with good result. Renewed the short at home and made a acceptable profit that could have been a killing had I been better at predicting the bottom. Well, I am no expert, just thinking that when a nation as dominant as the US stops saving and economists are happy that consumption creeps up as a procentage of GDP something is fundamentally wrong.That was the sign. Any person living beon his means will fall back. An economy is simply the sum of its participants. Now we save a little, credit is for free, investing is dismal and total leverage is increasing as central bankers provide credit at the behest of the political class. It is called independence. It will end in tears, but when I cannot tell, still some smell of rat is in the air.
What surprises me is that the ratio between savings/ consumption/ and investment is not more closely observed. As the crisis loomed many, far too many refinanced their houses for the purpose of spending.As a result the ratio of financial income in GDP came close to 20%. I shorted the market that sum


Anamika , Aug, 01 2016


Forecasting a global recession depends upon correlation forces around emerging countries throughout the world. At first it has to do with eurozone especially related to aspects like monetary policies. The Euro is about to experience a tumble, and there are expectancies around the way ECB could manage monetary situation in a scenary where Spain and Italy are not facing a good position.
Forecasting a global recession depends upon correlation forces around emerging countries throughout the world. At first it has to do with eurozone especially related to aspects like monetary policies. The Euro is about to experience a tumble, and there are expectancies around the way ECB could manag


Pranay , Aug, 01 2016


When Brazil was growing 7.5% a year on the coattails of the PRC, it appeared as though Brazil was rising. However, beyond certain recession indicators there was tell tale signs that it would come to a crash. To understand an economy, one must not rely solely on figures. The very soul of a country, and its idiocracies must be also understood. The way money flows and to whom it flows as in past boom times should have given an indication of the crash coming. In many social media and media comment sections, there are countless many that still wonder why Brazil failed to rise. Those who knew the soul of that country are not counted among these countless fools. People dont change much over centuries. Else, Northern Italians would have long ago embraced their Southern "Brethen" as their countrymen. There is a reason why in many countries some regions remain underdeveloped for decades and centuries through booms and busts. People seem fixated on numbers, but not on people. That is why they dont tend to forecast recessions well.
When Brazil was growing 7.5% a year on the coattails of the PRC, it appeared as though Brazil was rising. However, beyond certain recession indicators there was tell tale signs that it would come to a crash. To understand an economy, one must not rely solely on figures. The very soul of a country, a