The course that the economic crisis will take is not predictable
27-Jan-2009 •Dhirendra Kumar
Some people consult astrologers and some don't. Out of the ones that don't, some believe that there aren't any good astrologers around nowadays while others believe that it isn't possible to foretell the future. Out of the ones who believe that foretelling the future is impossible, some believe that the future can't be foretold because there is no future yet. Meaning, the future is not preordained so there's nothing to foretell. It happens when it happens.
Not just astrology, I find the equivalent of all these views among investment analysts. In investments, there are times when the one can forecast with some degree of confidence because the current trends can be expected to continue unchanged. There are often long periods when trends just extend themselves in a linear fashion. There are other times, when there's a break in the trend and the past stops being a good guide to the future. When trends are smooth, then these expectations are true and the forecasts are also true. However, when there's a break then the future is not predictable. Which is exactly what is happening now.
Currently, there is no shortage of experts trying to predict when the economic crisis will end and growth will resume. I've seen predictions ranging from immediate (as in, the crisis has ended we just haven't noticed yet) to one estimate that said it will 'take a generation for things to be normal again'. Between the two extremes lie more frequent estimates like late 2009 or 2010 or early 2011. These 'reasonable' estimates occur with a greater frequency so they've started sounding reasonable.
However, nothing that has happened since about mid-2007 is reasonable. From US Fed chief Ben Bernanke downwards, everyone who has been making reasonable estimates has by now built up a solid history of being utterly and ridiculously wrong about the nature and the extent of the global economic crisis. I'm continuously amazed at the parade of talking heads happily looking for patterns and signals in the mess that the global economy is in right now. The gullibility of those who listen to them and believe in them is no less amazing. Which part of this crisis was predicted by anyone at all? The last 18 months have been one long parade of surprises.
Unfortunately, the shock of recent events hasn't driven us out of the habit of predicting seems to have driven people to simply try and figure out a better way of predicting. To go back to the astrology parallel, the search is on for better astrologers and better methods of making accurate horoscopes. It's a quest that is doomed to failure. We don't need better astrologers. We just need to realise that at least at this point of time, the future is inherently unpredictable. There are so many unknown variables in this equation that it simply can't be solved. Jobs, businesses, investments-everything is up in the air. All around us, we see people in stress not so much because things are bad, but because things are uncertain.