Quite a long article
first couple of paras
QUOTE
The economy and to a great extent the world today is run by would-be economic seers and prognosticators, probably more so than ever before in history. I say "would-be", however, because their track records are rather spotty. This contradiction should be no surprise to anyone who has been paying attention to the plentiful (and well-deserved) criticism of the Fed's recent actions (and statements), but many have also noted that it seems the Fed and its economic peers and groupies never seem to "get it right". There is a structural problem here, I would say; I think it has something to do with the true objective of these people being political rather than predictive success.
The investment community, surprisingly, doesn't do much better, and I include in that the "contrarian" crowd -- and to some extent even the Austrians. This group has been preoccupied with an "inflation vs. deflation" debate for at least the last two years (myself among them), and it shows no signs of letting up. As I will argue below, I think there is now ample evidence to make the call one way or the other.
First, regarding prognostication, I want to share a little trick I use that works pretty well. All you do is look at the current picture -- putting aside at least for hypothetical purposes one's own pre-conceived ideas of the answer -- and make a genuine attempt to see the situation for what it is. By "current picture" I mean actual data, though one doesn't usually need to dig too deep into minutiae.
This is how the Mortgage Lender Implode-o-Meter came about and became such a success: with a basic understanding of the importance of housing finance to the US economy, I looked at a nascent trend of imploding, non-integrated mortgage lending shops, and said "that's the end of that game." I then made a web site about it, and people were shocked! Some caught on quickly, but amazingly (or not), the mainstream took well over a half year to finally come to terms with the total upending of the housing market (some still think the problem is just "subprime", sadly).
A handicap I think a lot of the commentators have is that they don't really invest or trade in a direct way corresponding to the theses they write extensively about. In other words, they don't "put their money where their mouth is". I always strive to do so -- and even when I don't, I approach the economic prognostication game with the secondary question "so how should I invest?" If I can't answer that secondary question, then I probably don't really know the primary answer either!
When I combine this discipline with looking at the current data in the most comprehensive
The investment community, surprisingly, doesn't do much better, and I include in that the "contrarian" crowd -- and to some extent even the Austrians. This group has been preoccupied with an "inflation vs. deflation" debate for at least the last two years (myself among them), and it shows no signs of letting up. As I will argue below, I think there is now ample evidence to make the call one way or the other.
First, regarding prognostication, I want to share a little trick I use that works pretty well. All you do is look at the current picture -- putting aside at least for hypothetical purposes one's own pre-conceived ideas of the answer -- and make a genuine attempt to see the situation for what it is. By "current picture" I mean actual data, though one doesn't usually need to dig too deep into minutiae.
This is how the Mortgage Lender Implode-o-Meter came about and became such a success: with a basic understanding of the importance of housing finance to the US economy, I looked at a nascent trend of imploding, non-integrated mortgage lending shops, and said "that's the end of that game." I then made a web site about it, and people were shocked! Some caught on quickly, but amazingly (or not), the mainstream took well over a half year to finally come to terms with the total upending of the housing market (some still think the problem is just "subprime", sadly).
A handicap I think a lot of the commentators have is that they don't really invest or trade in a direct way corresponding to the theses they write extensively about. In other words, they don't "put their money where their mouth is". I always strive to do so -- and even when I don't, I approach the economic prognostication game with the secondary question "so how should I invest?" If I can't answer that secondary question, then I probably don't really know the primary answer either!
When I combine this discipline with looking at the current data in the most comprehensive
