How did we miss the economy's warning signs?

[Francis2004]

As much as economist missed these signs of a recession, they have always been known to be off the mark. Being an economist is like being a weather man and if you are right 1/10 of the time you can brag of being great..

The reality of economic slow downs is not that hard to actually predict when you think about it. They go in cycles much like everything else in life. Calculating when that cycle will hit is the magic no one has been able to figure out yet and how deep, long and hard it will hit..

Early last year, the Bank of Canada forecast the country's economy would grow by 2.8 per cent in 2009; predictions that $200 (U.S.)-a-barrel oil was in view seemed plausible; and subprime mortgage losses in the U.S. were widely expected to cause little more than a temporary slowdown.



Needless to say, things haven't turned out that way.


Canada's central bank now sees the economy shrinking by 1.2 per cent this year. Oil prices have plunged below $40 (U.S.) a barrel, after peaking last summer at around $147. And the insidious effects of the subprime mortgage crisis have raced around the world, triggering what many are calling the worst economic crisis since the Great Depression.


It hasn't been a good year for those who make their living predicting the economy. As Bank of Canada governor Mark Carney wryly noted in a speech in December: "Few forecast these events, although in an outbreak of retrospective foresight, an increasing number now claim they saw it coming. The reality is that among all the banks, investors, academics and policy-makers, only a handful were able to identify ahead of time the causes and potential scale of the crisis."

The Star Article

 

[petros]

How? Easy! The blindness of greed never sees the end consequences.

 

[darkbeaver]

How did we miss the economy's warning signs? "We"must have been reading the wrong papers because everybody I know saw it coming eons ago.

 

[Francis2004]

How did we miss the economy's warning signs? "We"must have been reading the wrong papers because everybody I know saw it coming eons ago.

Notice the comments in the article say the economist missed the signs.. Those of us in business or dealing in business could see this coming back at minimum last summer in Canada and back last Dec 2007 in the US.

As I said the cycle was due and economist missed it clearly..

 

[Cliffy]

I've been predicting it for decades. A system based on speculation is designed to fail.

 

[petros]

I've been predicting it for decades. A system based on speculation is designed to fail.

Finally a good answer.

 

[Francis2004]

I've been predicting it for decades. A system based on speculation is designed to fail.

Cliff, I can predict another recession within the next 10 year at minimum. Even within the next 100 years again a massive one at that.. Seeing economies go in cycles it is obvious but how deep and how bad it gets is what economist are supposed to try to tell us in advance so we can minimize the effect and stay more stable.. Hence a more flat line within reason.. Fact is they cannot and do a lousy job..

 

[Cliffy]

Finally a good answer.

...and I'm not an economist! Economists only know numbers but have no idea that their numbers are based on hot air. They have been putting band aids on this bubble for so long that there is no more bubble, just a sphere of band aids and it has collapsed. People who think the economy is going to recover have their heads where the sun don't shine. What we have had is slavery through dept. Why anyone would want it to recover is beyond me.

 

[petros]

It was economists who put us in this mess and thinking they will get us out is just plain silly thinking.

 

[Scott Free]

I didn't miss the signs.

My father decided to invest a large windfall a few months before the sub-prime disaster. I spent an afternoon trying to talk him out of it but to no avail. He's nearly lost it all now.

 

[bobnoorduyn]

I've been predicting it for decades. A system based on speculation is designed to fail.

Cliffy; It hasn't failed, it only grew at a rate where it could not sustain itself. As SF says, the magic is not predicting if, but when and how much. I waited to invest but didn't wait long enough, and I didn't invest in real estate either. I wasn't as hard hit as most, but I still took a hit, and the value is slowly coming back. How many of these things have you been through? I don't think I've been around as long as you, but I can remember at least 5 now. And yes, the sky was falling each time. (I worked with one fellow who lost $270,000 overnight when the tech bubble burst, he now works for Investors Group ;-)). But we recovered each time. The biggest variable is the human factor, fear feeds fear, and that determines the length and depth of the downturn.The economy is dynamic and needs a rest now and then. I predict the economy will recover, and will be stronger than before, as it has in the past. Again, the magic is knowing when.

 

[petros]

How did we miss the economy's warning signs?



Too busy shopping for more useless disposable junk to notice or too ignorant to care. Take your pick.

 

[Cliffy]

Several points:
- It could all be wishful thinking on my part, but I hope the economy stays down for good.
- All economic downturns are manufactured by those filthy rich because they always make a killing, just like JP Morgan made a killing in 29 when he started the rumor that many of the banks were insolvent. Or as a friend put it, this is a controlled demolition (just like 911).
- petros is right

 

[petros]

-Cliffy is right too....

How long have you and I been discussing the crash before it happened? 2-3 years?

 

[SirJosephPorter]

Economists or financial experts are rarely good at predicting the future. Usually their prediction is that whatever is currently happening will continue to happen. Thus if times are good, they predict good times endlessly. If times are bad, they predict doom and gloom until kingdom come.

Somebody mentioned that when oil was 140 $ a barrel, economists were predicting oil at 200 $ a barrel. There are several examples like that. When Nortel was trading at 120 $, experts were predicting that it will go to 200 $, that 200 $ was the real value of the stock (from 120 $, Nortel has crashed into a penny stock). When NASDAQ was standing at 5500, the only thing experts were arguing about was when it will reach 6000, and not when it will reach 1100 (as it did).

Similarly, currently none of them are predicting a recovery, even though we know it is highly likely that there will be recovery in a few years at most. But you wouldn’t see any economists predicting the recovery. I haven’t seen anybody predict when DOW will again hit 10,000, or when NASDAQ will hit 3000, or when unemployment will hit 6%, etc.

Economists were never good at predictions.

 

[darkbeaver]

Several points:
- It could all be wishful thinking on my part, but I hope the economy stays down for good.
- All economic downturns are manufactured by those filthy rich because they always make a killing, just like JP Morgan made a killing in 29 when he started the rumor that many of the banks were insolvent. Or as a friend put it, this is a controlled demolition (just like 911).
- petros is right

Ah the filthy rich banking scum have always worked the magic cycles to scrape off the profits whenever and whereever the worker bees have hived it up, the pricks are parasitical upon the body human, we control other diseases, we will control this one, or we will not survive. So we still need an economy after we have disposed of the rich and thier concubines. Banking will be a very different thing in the near future, we have studied the problems for several hundred years now, there is no doubt where the problems lie.

 

[Cliffy]

DB,

Can't say that I subscribe to your rhetoric but I agree with the gist of your statement.

 

[Tyr]

As much as economist missed these signs of a recession, they have always been known to be off the mark. Being an economist is like being a weather man and if you are right 1/10 of the time you can brag of being great..

The reality of economic slow downs is not that hard to actually predict when you think about it. They go in cycles much like everything else in life. Calculating when that cycle will hit is the magic no one has been able to figure out yet and how deep, long and hard it will hit..



The Star Article

Quite a few "Economists" saw the "gaping maw" of the financial collapse long before it happened, but their warnings went unheeded or took a back seat to the greed and personal ambitions of the people that pull the levers.

I guess "they" needed some time to get as much finacial gains out before the floor collapsed.

 

[petros]

We only hear the doom and gloom about the Class B & C stocks which never really impact the true owners who if smart are currently gobbling up their own lower class stocks at bargain basement prices to shore up the A stocks.

 

[darkbeaver]

Economists or financial experts are rarely good at predicting the future. Usually their prediction is that whatever is currently happening will continue to happen. Thus if times are good, they predict good times endlessly. If times are bad, they predict doom and gloom until kingdom come.

Somebody mentioned that when oil was 140 $ a barrel, economists were predicting oil at 200 $ a barrel. There are several examples like that. When Nortel was trading at 120 $, experts were predicting that it will go to 200 $, that 200 $ was the real value of the stock (from 120 $, Nortel has crashed into a penny stock). When NASDAQ was standing at 5500, the only thing experts were arguing about was when it will reach 6000, and not when it will reach 1100 (as it did).

Similarly, currently none of them are predicting a recovery, even though we know it is highly likely that there will be recovery in a few years at most. But you wouldn’t see any economists predicting the recovery. I haven’t seen anybody predict when DOW will again hit 10,000, or when NASDAQ will hit 3000, or when unemployment will hit 6%, etc.

Economists were never good at predictions.

I think you're being very optimistic about an early recovery especially with our sorry industrial capacity, but it's not a crime to be overly optimistic as long as nobody suffers because of it.