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

Larry Kummer, Editor

9 years ago

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.}

Content

Weirdness is a signal; don’t ignore it.
Economic weirdness.
Our weird wars.
Climate science weirdness
Conclusions
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(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:

{In Texas} direct employment in the oil and natural gas industry amounted to 24% of total US direct employment in the industry. It is, therefore, a risk from a housing sector context that Texas currently accounts for 15% of the houses built in America, up from 4% 25 years ago. It is perhaps even a bigger risk to the US economy that Texas accounts for 63% of the jobs generated in America over the past seven years (see Figure 16). Thus, nonfarm payrolls in Texas have increased by 1.25m or 11.9% since the end of 2007, while total nonfarm payrolls in America have risen by 2.0m or 1.4% over the same period.

Prices of industrial commodities (e.g., oil down by half) and shipping (e.g., record low Baltic Freight Index) are crashing. Since the crash, the world has widespread negative real interest rates (i.e., below the inflation rate). Three central banks have set their key overnight rate below zero (Sweden, Switzerland, and Denmark); the ECB loans to banks at negative rates.

All this is without precedent. Few or no economists predicted these things (rather, most expected the opposite). Most economists respond with even firmer belief that these events are consistent with their models; their confidence remains untarnished. Most financial experts pretend that these things are normal and under control. We all pretend that we’re still in Kansas, a consensual hallucination.

For more about these things see this post from October (before the current round of weirdness): Look at the economy. Fight the illusion of normality. Feel the weirdness.

(3) Our weird wars: ignore the record; we’ll win the next one!

Since 9/11 each new conflict begins with high expectations for not just success, but nation-building. Afghanistan, Iraq, Libya, Yemen — our geopolitical experts had few or no doubts about the outcome. Oddly, each country now burns — with fundamentalist (even jihadist) groups gaining strength.

But don’t worry. They’re planning new interventions in Ukraine and Syria — and even Iraq II. They’re confident, so why worry?

(4) Climate weirdness: not just the weather, but the scientists.

On 20 March 2000 The Independent told us that “Snowfalls are now just a thing of the past“. We’ve heard so many of these during the past decade, in various forms (no more skiing, the north polar ice cap melted). Now the newspapers tell us of climate scientists saying that a warmer climate means more snow. Which is fine. Progress in science means overturning past knowledge. But these stories read like something out of 1984, with no mention of the previous opposite predictions (unfortunately for them, the internet has no memory hole).

That’s been the norm since 2000, as confident short-term predictions for stronger storms, more wildfires, more tornadoes, and a warmer surface atmosphere all proved false. That is weird, but means little and proves nothing. The larger weirdness is the failure of scientists, those who boldly made these predictions outside the IPCC consensus in terms of magnitude and confidence, to ‘fess up’. Making new predictions while ignoring failure of past ones has diminished public confidence in the whole enterprise (as so many polls have shown).

Conclusions

Experts benchmark their insights to the past. Periods of rapid change — social, economic, technological (they run together) — upset the assumptions that experts rely upon (often unquestioned assumption, or even unaware assumptions). Frequent failed predictions are markers, telling us that we’ve entered a transitional era with a new world ahead.

Unfortunately, experts’ failures inevitably diminish our confidence in them, while rapid change means we need them more than ever. No matter how bad, their analysis provides better guidance than the equally confident and often more aggressive ignorant people that replace them on the public stage (cue the anti-vaxxers, stage left).

All this will only grow more intense as we accelerate towards the future, like a starship diving towards a black hole. They, like us, can only guess at what lies ahead. Meanwhile, enjoy the strangeness. Don’t let your desire for comfort and reassurance override your sense of wonder.

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Where to find reliable information sources: