By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com
The purpose of this article is to draw the widest attention to the chronic inability of the economic establishment to forecast recessions. Next time you hear an economist make a prediction on mainstream media, your default assumption should be he or she is simply wrong.
Why do I allege this? An IMF economist, Prakash Loungani, did some interesting research in 2000 about the accuracy of economists’ forecasts. Using data taken from a publication called Consensus Forecasts (published by Consensus Economics), which is widely used as a source of independent estimates of economic growth by individual governments, Loungani found that of the 60 recessions recorded since 1989 in the 63 countries sampled, only two were forecast in April the year before and two-thirds remained undetected in the April of the year they occurred. Furthermore, analysts’ forecasts emanating from both private and public sector economists were little different, and had a strong bias towards optimism.