Beware economists predictions of the end of the world!

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Forums › Finance and wealth management › Beware economists predictions of the end of the world!

Geektastic

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#288857 28-Jul-2021 08:21

Came across this from August last year. Put a wry smile on my face.

"Most of New Zealand’s bank economists now expect that the official cash rate will slip below zero in April next year.

The rate is currently at a historic low of 0.25 per cent, which the Reserve Bank has pledged to keep at that level until next March.

ANZ chief economist Sharon Zollner predicted the official cash rate would drop to -0.25 per cent in April."

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#2751025 28-Jul-2021 08:27

Yeah, true. It's going up again.

Batman

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#2751026 28-Jul-2021 08:30

economists and weather report - it's the same

"it will rain". well 50% chance it will, 50% chance it won't.

tripp

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#2751029 28-Jul-2021 08:43

Well something is up, just look at China and the US. Reverse repo in the US is almost at 1 trillion and going up more each day.

Dynamic

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#2751047 28-Jul-2021 09:07

tripp: Well something is up, just look at China and the US. Reverse repo in the US is almost at 1 trillion and going up more each day.

Could I please ask for a quick summary of what this is and means? Brief Googling hasn't made it any clearer to me.

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Handle9

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#2751050 28-Jul-2021 09:14

Dynamic:
tripp: Well something is up, just look at China and the US. Reverse repo in the US is almost at 1 trillion and going up more each day.

Could I please ask for a quick summary of what this is and means? Brief Googling hasn't made it any clearer to me.

MikeB4

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#2751051 28-Jul-2021 09:15

timmmay:

Yeah, true. It's going up again.

The Reverse Bank rate has not gone up yet.

MurrayM

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#2751052 28-Jul-2021 09:16

I heard this was mentioned recently on the radio, found an article about it: The problem with economists' forecasts

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Handle9

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#2751054 28-Jul-2021 09:19

MikeB4:
timmmay:

Yeah, true. It's going up again.

The Reverse Bank rate has not gone up yet.

It's coming. Inflation is here and it's not going away in a hurry.

wellygary

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#2751058 28-Jul-2021 09:23

Geektastic: Came across this from August last year. Put a wry smile on my face.

"Most of New Zealand’s bank economists now expect that the official cash rate will slip below zero in April next year.

That's a bit unfair thou...

We had only left the 6 week national lockdown in May, and in August Auckland was under level 3 restrictions for 2 1/2 weeks,

We had very little data on the impact on the economy at that time,

Social Welfare benefit numbers were continuing to rise

The June quarter GDP was not released until mid September and just to remind people what it reported

New Zealand economy declined 12.2 percent, the largest decline on record
service industries fell 10.9 percent
primary industries were down 8.7 percent
goods producing industries fell 16.3 percent
GDP per capita fell 12.6 percent
real gross disposable national income was down 12.3 percent

Geektastic

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#2751078 28-Jul-2021 10:10

It's hardly unfair. These people are supposed to be professional. They're foolish in expressing themselves in such a way as to create a hostage to fortune.

Also it's notable that all the economists in NZ appear to work for banks. There's rarely if ever comments from private economic think tanks.

FineWine

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#2751098 28-Jul-2021 10:54

"Lies, damned lies, and statistics"

Whilst the difficult we can do immediately, the impossible takes a bit longer. However, miracles you will have to wait for.

Batman

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#2751104 28-Jul-2021 11:03

if you keep "predicting" something, eventually it will happen. to guarantee it will eventually happen you need to stick to the same prediction.

frankv

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#2751120 28-Jul-2021 11:47

Geektastic: It's hardly unfair. These people are supposed to be professional. They're foolish in expressing themselves in such a way as to create a hostage to fortune.

Also it's notable that all the economists in NZ appear to work for banks. There's rarely if ever comments from private economic think tanks.

The whole point of economics is to predict. So economists must make predictions. Presumably their economic models will in future include parameters relating to pandemics and lockdowns.

Presumably private think tanks are using their presumably better economic models for the benefit of their paying clients.

I wonder if any of them predicted the covid-created construction/car sales/asset purchasing boom, which presumably was behind the RB not lowering the OCR again? Certainly no-one I know did.

tripp

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#2751124 28-Jul-2021 11:53

Dynamic:

tripp: Well something is up, just look at China and the US. Reverse repo in the US is almost at 1 trillion and going up more each day.

Could I please ask for a quick summary of what this is and means? Brief Googling hasn't made it any clearer to me.

My understanding of it, please feel free to correct me if i have it wrong...... the reverse repo is what banks and others use to park cash in exchanges for bonds etc. One must remember that cash held by a bank is not a asset but a liability (as it's normally other peoples money). During Covid the US money printer went nuts, interest rates are sh**, no good place to put the money so they park the money overnight in the reverse repo in exchange of bonds they can then say is an asset.

Handle9

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#2751125 28-Jul-2021 11:54

Geektastic: Also it's notable that all the economists in NZ appear to work for banks. There's rarely if ever comments from private economic think tanks.

The CTU, NZ Institute, BERL all come to mind. There are also the likes of Brian Easton.

You need to read a bit more widely.

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