Tag Archives: forecasts

The IMF warns us of economic stagnation & suggests fixes. We should listen.

Summary: Today’s post looks at an important new report about the IMF, another step by economists towards recognition that we’ve left the post-WWII order for a new world. Now that’s a world of persistent slow growth, in which repeated rounds of fiscal and monetary stimulus (conventional and unconventional) prevents recessions but cannot reignite strong growth. The IMF’s economists discuss possible causes and solutions.  {1st of 2 posts today.}

Slow Economic Growth


  1. The IMF discovers secular stagnation.
  2. Slowdown since the crash.
  3. What comes next?
  4. What should we do?
  5. For More Information.


(1)  The IMF discovers secular stagnation

One of the great issues of our time concerns our future. Do we face continued slow growth (aka secular stagnation) or the accelerating growth of a new industrial revolution? These paths offer different challenges and require radically different central bank policies.

But central banks have been unable to prepare for either alternative because they’re stuck in the first — and often the most difficult — phase of the problem resolution process: recognition. Since the crash they’ve expected economic growth to return to normal. Year after year they’ve been disappointed, responding to a series of ad hoc improvisations that have poor grounding in economic theory and history. Yet time brings insight, and the international economic agencies have slowly come to grapple with these questions.

This post looks at the April 2015 IMF report “Where Are We Headed? Perspectives on Potential Output“.  Here’s a summary for a general audience from the IMF’s survey magazine. They open by comparing forecasts made in 2007 and 2008 with actual economic growth through 2014. Slowing, slowing, slower.

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A look ahead at the New America, after the gender wars

Summary: Before we start this series speculating about our new society as gender roles change unrecognizably, I’ll reverse my usual procedure and give the conclusions at the beginning. The early signs of these things have already appeared, but most readers will be shocked — and many will be horrified.  {1st of 2 posts today.}

“Always in motion is the future.”
— Yoda, Jedi-Knight.

Gender Roles

An outline of this series

A combination of social evolution and technology — with complex feedbacks between them — has greatly changed gender roles during the past 150 years, and the process has just begun. We can only guess at possible outcomes ahead from trends already running, which is what we’ll do in this series.

I believe that women will continue to outperform men in education and therefore taking an increasingly powerful — and eventually a dominant — role in the professions, business, and politics. Accelerating this trend will be their natural advantages in bureaucratic organizations (from classroom to boardroom) as the weight of sexism fades.

In such a world fewer women will be able to marry up (aka hypergamy) as the balance of power shifts in their favor, putting further stress on the institution of marriage and the nuclear family structure.

As patriarchy dies marriage will offer ever fewer benefits to men. They’ll compare the  consequence-less sex so easy available without marriage — with the burden of marriage, raising children, doing half the housework — and the high odds of one’s wife initiating divorce, taking the kids, and levying a decade or two of child support payments. At home paternity tests might increase their cynicism about the institution, as 2-3% of men discover that they’re not the biological father of their children. These things will wreck the already decaying structure of the nuclear family.

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Today’s forecast for the US economy & stock market: cooling, perhaps with storms.

Summary: Today we have another briefing on the US economy and stock market. The situation grows darker, cliffs might lie ahead, but it’s still too soon to say more than that. Read on to learn the details.  {1st of 2 posts today.}


This is a new economic regime, profoundly different than the post-WWII era. Many of the relationships we used to navigate by have changed, as things considered extraordinary have become normal (e.g., long periods of zero interest rates and even negative rates). Yet there are warning signs with a long history of accuracy.

Don’t be comforted by economists’ optimism; many studies have shown their unreliability (especially their inability to foresee recessions). Listen instead to the 30 central banks that have cut interest rates this year, showing their true view of the situation.

For clear advice I recommend reading Albert Edwards of Société Générale, among the most insightful of investment strategists. In this from his 12 February report he gives the essential facts about our situation:

The market seems pretty convinced that the Fed will tighten in the middle of this year and maybe it will. Certainly the labour market is tighter and the Fed tells us that the recovery is well established. But, the Fed always spins a bullish yarn. Their track record of over-optimism is only surpassed by the appalling record of private sector forecasters – most especially in forecasting recessions. A rate hike this year when deflation pressures are intensifying could go down as big a policy cock-up as the BoJ raising VAT {valued-added taxes} in 1997, triggering recession, or the ECB tightening rates in July 2008 when the global recession was already well underway!

His report on 26 February updates that with the missing part of the equation: bad news. US economic data has grown worse since he wrote this.

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John Bolton reveals a serious threat to America

Summary: Since 9/11 our leaders have become increasingly militant, urging America to attack an even invade an ever-growing list of nations for flimsy or imaginary reasons. We’re powerful but not omnipotent. War is a game that cannot be played forever with painful consequences. Eventually we’ll attack someone (a nation or group) who either retaliates irrationally but severely, or we’ll spark growth of a coalition of nations determined to restrain our military adventures. Our leaders work to make such disasters happen. A little bad luck and they will get their way.  {2nd of 2 posts today.}


An op-ed in today’s New York Times shows what might be the greatest threat to America: “To Stop Iran’s Bomb, Bomb Iran” by John R. Bolton. It’s another volley in the well-funded multi-decade propaganda campaign to involve America in an endless series of foreign wars, a program that no series of failures and revealed lies can derail. Let’s review the high points.

… the president’s own director of National Intelligence testified in 2014 that they had not stopped Iran’s progressing its nuclear program. There is now widespread acknowledgment that the rosy 2007 National Intelligence Estimate, which judged that Iran’s weapons program was halted in 2003, was an embarrassment, little more than wishful thinking. Even absent palpable proof, like a nuclear test, Iran’s steady progress toward nuclear weapons has long been evident.

Bolton’s acknowledgement that there is no proof is the only fact in this essay. He offers no evidence of the “widespread acknowledgement” about the 2007 NIE. Bolton’s statement about Clapper’s testimony is incorrect since he does not say that Iran has a “nuclear weapons program”, let alone that it’s “progressing” (international agreements allow Iran — like other nations — to have a civilian nuclear program). Clapper said:

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Embrace the weird news. It signals the transition to a new world.

Summary:  Every day brings new strangeness in the news. It’s easy to become disoriented (I am). The weirdness is a signal telling us that we’ve left the post-WWII era and begun the transition to a new world. Here we discuss three areas of oddness — and how to cope.  {1st of 2 posts today.}

Keep calm and trust the experts/


  1. Weirdness is a signal; don’t ignore it.
  2. Economic weirdness.
  3. Our weird wars.
  4. Climate science weirdness
  5. Conclusions
  6. For More Information

(1)  Weirdness is a signal; don’t ignore it.

Much of the best content on the FM website during the past 8 years has been the forecasts, which have proven quite accurate. You have not seen many lately, since events have completely disoriented me. While searching for solid ground I realized that the weirdness of events is the signal — not the noise. As I have said since 2007, the post-WW2 world was ending and a new world emerging. This weirdness is a natural effect of the transition, just as it was from late 1920s through 1940s.

A side effect of this is the increased fallibility of experts. As the saying goes, accurate predictions are difficult — especially about the future. During periods of regime transition the difficult becomes almost impossible. As we see in our daily news. Here are just a few of the many examples of weirdness in the news.

(2)  Economic weirdness

A February 2 report by the San Francisco Federal Reserve stated what’s long been obvious: “Since 2007, Federal Open Market Committee participants have been persistently too optimistic about future U.S. economic growth.” Forecasts by economists in the private sector have been equally or even less accurate.

Since 2009 they have expected the economy to accelerate back to “normal” (i.e., pre-crash) levels. Remember talk of the “V-shaped” recovery? GDP in 2014 was 2.4%, within the range of the previous 4 years (2.5%, 1.6%, 2.3%, 2.2%).

As usual since the crash, 2015 was to be the break-out year. Unfortunately, it’s starting slow and slowing (e.g., retail sales down in Dec & Jan; manufacturers’ new orders down in Oct & Nov & Dec). The negative effects of the oil & natural gas price crashes have barely started (e.g, corporate bankruptcies, massive layoffs). As Christopher Woods of CLSA explained in his Feb 12 report:

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Tips to find the experts that help you see the world more clearly.

Summary: Today’s post continues our discussion about experts. Here are a few tips to help distinguish reliable and useful experts from those that dominate the news media, plus some warnings.

“For now we see through a glass, darkly.”
1 Corinthians 13:12

“Nature is objective, and nature is knowable, but we can only view her through a glass darkly — and many clouds upon our vision are of our own making: social and cultural biases, psychological preferences, and mental limitations (in universal modes of thought, not just individualized stupidity).”

— Stephen Jay Gould, Full House (1996)

How to pick out the real experts?

How to pick out the real experts?

We can only understand the world — even imperfectly — by seeing it through the eyes of experts. Journalists showcase experts, usually a selected coterie (note how the same few show up repeatedly in a newspapers’ article on each subject). Unfortunately, journalists’ criteria for choosing experts don’t well meet our needs. The catchy sound-bites they favor tend to come from the over-confident and arrogant, especially those that endorse the current narrative. Caveats, uncertainties, and long explanations — these are things seldom found in the news.

How can we find better sources to rely upon? How can we use them most effectively?

Evaluating experts

In my experience, one hallmark of a reliable expert is their recognition of uncertainty. The experts I trust recognize how quickly the world changes, its complexity, the severe limitation on the data we have about it, and the crude state of our theories.  These traits distinguish headline-grabbing experts from economists like Nouriel Roubini, Brad Delong and Paul Krugman, physicists like Robert Hersch, climate scientists like Roger Pielke Sr and Judith Curry, and others.

How they grapple with uncertainty makes them more interesting to read, in contrast to the boring black and white certainties that dominate the news.

These experts have another useful characteristic distinguishing them from journalists’ favorites: they admit errors. Half of what we know is wrong, and top experts work to find which of their beliefs lie on each side of that line. From example, Brad DeLong (Prof Economics, Berkeley) runs posts about “smackdowns” of his work, which practice I copied in the Smackdowns page (top menu bar). Krugman often runs columns about his errors.

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We must rely on forecasts by computer models. Are they reliable?

Summary: Computer models have opened a new era across the many fields of science. Our confidence in their forecasts has opened a new era in scientists’ ability to influence public policy. Now come the questions. How can we determine the accuracy and reliability of these models, knowing when their forecasts deserve our confidence? What can make them more useful?  {1st of 2 posts today.}

“The criterion of the scientific status of a theory is its falsifiability, or refutability, or testability.”
— Karl Popper, Conjectures and Refutations (1963). Thomas Kuhn.

“Probably {scientists’} most deeply held values concern predictions: they should be accurate; quantitative predictions are preferable to qualitative ones; whatever the margin of permissible error, it should be consistently satisfied in a given field; and so on.”
— Thomas Kuhn, The Structure of Scientific Revolutions (1962).

Forecasting with models

About predictions

Thomas Kuhn explained that predictions are the gold standard that often decides the winner between competing scientific theories (“paradigms”). The Structure of Scientific Revolutions described failed predictions that undermined the current dominant paradigm (the Michelson–Morley experiment) and successful predictions that helped establish new paradigms (the orbit of Mercury).

With the increasing prominence of science in public policy debates, the public’s beliefs about theories also have effects. Playing to this larger audience, scientists have developed an effective tool: computer models making bold forecasts about the distant future. Many fields have been affected, such as health care, ecology, astronomy, and climate science. With their conclusions amplified by activists, long-term forecasts have become a powerful lever to change pubic opinion.

Unfortunately, models are vulnerable to confirmation bias in their construction and selection (a problem increasingly recognized, for example in the testing of drugs). Equally problematic are issues of measuring their reliability and — more fundamentally — validation (e.g., falsification).

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