Saturday, June 23, 2007

How Noshbag will get out of jail free

Predicting The Future

Good article explaining how mainstream economists/analysts will use an unforeseen world event to explain how they got it totally wrong.

Just like inflation was out of control in the 1970s before the oil crisis began

Posted by sold 2 rent 1 @ 09:33 AM (509 views)
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4 thoughts on “How Noshbag will get out of jail free

  • There is some truth in the idea that economists use unpredictable events to explain unrelated events (why exactly would the 9/11 have result in a world recession?) but it doesn’t always mean that there’s a clear-cut underlying cyclical trend, like K cycles.

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  • sold 2 rent 1 says:

    Quite often economic decline leads to wars and conflicts.
    These wars and conflicts then make the economic decline more entrenched.
    The wars and conflicts will take the blame for the downturn but are they really the cause or are they the effect.

    There are many cases in history of this happening.
    The best example is Hitler’s rise to power after the 1929 crash and 1930s depression.

    K-cycles aren’t so much about clear-cut underlying cyclical trends but more about extremes that have to be reached before the trend reverses.
    Only the extremes can be identified easily.
    The middle of a trend tends to be vague – this is why mainstream economists only flirt with k-theory.

    We know the approximate timeframe for each reversal is 15-20 years.
    We know the extreme conditions that have to be reached before a reversal takes place.
    Many unexpected things can and do happen in the trend but they don’t stop the final outcome.

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  • One of the hard truths of life is that we always plan as though tomorrow will be more or less the same as yesterday. However, one thing that you can say with certainty is that tomorrow is very unlikely to be the same as yesterday. Yet very few of us even try to do anything like investigate what might happen. If you don’t get this, try reading up about Scenario Planning, there are some good books on it and some poor ones but the truth is that successful companies like Shell use it the whole time. Yes, markets go in cyclical patterns, of that there is no doubt but you can’t say one bubble will be like a previous one other than, if it is a bubble, it will burst at some point.
    From a personal point of view, living in a house that sold for £140K last autumn and paying a rent equal to about half monthly payments on an interest only mortgage tells me loud and clear that without the massive tax breaks and rising prices BTL is a busted flush.

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  • This is known as the retrospective trigger.

    People are still blaming the last crash (80s) on a variety of incorrect factors.

    In reality it is always the same:

    People get greedy, throw reason to the wind (lenders and borrowers alike). Few people , if any, can withstand the peer pressure and make reasoned logical argument and find themselves making all kinds of nonsensical , ludicrous statements and doing stupid things.

    Infact all that matters in creating wealth in the long term is to be able to ignore the weak minded idiots around you and take the pain of being looked down on as a moron for a while.

    This actually requires more confidence (sometimes perceived as arrogance) in your own view than you might at first believe. It also requires being able to stomach this situation for a lot longer than you might at first believe.

    In addition you will not have the satisfaction afterwards of telling anybody “i told you so” because they will either:

    a) never talk to you again
    b) never talk to anybody again and suddenly find an urge to move to New Zealand
    b) come up with a scenario that still makes you wrong and them right because they cannot bear to have been wrong. “Well house prices didnt crash did they? So you were wrong.”. (yes but how could i compensate for the morons at the FED and in the MPC .. everything else inflated in value to leave you worse off didn’t it? Happy?).

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