June 23, 2024

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Top US economists are often wrong – should we trust their predictions?

2 min read

Photograph: Mandel Ngan/AFP/Getty Images

They’re Ivy-League educated, brilliant academic minds and experienced in the ways of markets, governments, data and statistics. Many have access to information not readily available to the general public. They attend meetings, forums and conferences with each other. They write books, review papers and oversee research. They are our nation’s top economists. And they oftentimes get it wrong. Very wrong.

Both the treasury secretary, Janet Yellen, and Fed chairman, Jerome Powell, were wrong about inflation, having first called rising prices “transitory” after Covid disrupted the entire world’s supply chain. Nobel winner Paul Krugman publicly admitted his mistakes. They were not alone.

Related: Trump and SBF blamed their accountants – but your taxes are your responsibility | Gene Marks

In 2021, 16 of the 36 living American Nobel economists declared, incorrectly, that “whatever upward pressure on prices all this new money (ie government stimulus) might bring there was no threat of inflation”. According to a recent report, 70% of economists polled by Bloomberg expected a US recession in 2023 and at the same time another poll from the National Association for Business Economics (NABE), found that 58% of economists believed there was a more than 50% chance of the US entering a recession this year. Never happened. GDP growth rate in the third quarter (4.9%) rivaled some of the strongest post-war periods in American history.

Could any of these people have told us 18 months ago that interest rates above prime charged to many of my clients would be in the double-digits today? Could they have had an inkling that, despite wars, volatile prices, historically low housing affordability, uncertain markets and wages that have been trailing sticky inflation levels that American consumers would still continue to spend at historically high amounts? Our great economists missed all of that too.

Now, many of them are making their…

2023-11-19 07:00:03

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