I guess what I want to know is, if that prediction is hype and BS or if it is based on facts and my friend should sell her house (for the cash) like she is thinking.
As far as I can tell, the US economy is doing fairly well and with low gas prices, there should be more people spending money.
I know Europe and China are slowing down and quantitative easing is going to stop eventually. Perhaps the Fed will raise interest rates? Will all this drag our economy down? Is the stock market due for a large correction?
I would like to know what more informed people think about the possibility of a depression.
Doubt there’s a GQ answer to your question though. There’s always some people predicting the next year is going to herald economic ruin, usually they’re the same people who predicted the same thing last year and the year before. I wouldn’t worry about it too much.
The economy is innately unpredictable, and anyone who tries to tell you they know what’s going to happen is a liar (or maybe they have inside knowledge, or are a genius. Take your pick).
Any future knowledge will be price in today; if someone knew that the US economy was going into depression (yeah, right), they could make a fortune in derivatives. The fact that they aren’t is evidence they either aren’t very bright, or know that they’re quacks and are trying to make a buck parting fools and their money.
Im fairly pessimistic about the future of the US economy though plenty of others disagree. What you should always remember is; it’s virtually impossible to tell when a financial crisis/collapse/economic downturn will occur. Plenty of people have predicted such collapses, many have been proven correct over the years and many have been proven wrong. However, the number of people who have accurately predicted exactly when a major economic downturn will occur can be counted on one hand.
Since then, the stock market has zoomed, unemployment is below 6%, the housing market has recovered, the dollar reached a four-year high, and the drop in oil prices is providing stimulus to the U.S. economy while hurting various enemies, i.e. the perfect time to stop government stimulus programs.
All sorts of disasters could appear next year. But check out Rickards’ track record before you accept his claim of “this time for sure!”
The only thing we know for certain is that you can’t time the markets/economy.
If someone is worried about an upcoming depression, I think it’s reasonable to watch current spending and pad your emergency savings fund. This is the kind of thing that puts you ahead financially, even if there’s no depression.
But you buy and sell a house based on your needs for housing and how well a house fits those needs. If you bought or sold a house everything Chicken Little ran by, the only person to get rich would be your real estate agent.
Personally, I don’t think a 2015 recession (let alone depression) is at all likely. It’s the same bullshit we’ve heard about the double-dip recession that’s been recycled every year since 2009.
In the quote you posted from Rickards he does not give a timeframe for his predictions. Judging him from only the quote posted he barely has a track record to adequately analyze. All that can be said is that so far he has been wrong.
With many of these doom mongers there is no doubt a lot of scare tactics going on. Scare tactics which mainly bring money into the bank acounts of the doom mongers themselves.
Entering many of those stock symbols into the grading service I use reveals many of those companies to be sells or holds. None of them are shown as ‘strong buy’. It could be that Buffet, et al, are just dumping stocks that are no longer performing as well as they should.
It’s implicit in his doomsaying on QE in the quote, which is wrapping up now after several years and trillions in monetary policy dollars. He no longer has any time left to be “right”.
Unless there is economic catastrophe by July of this year (in the article linked in the OP), he’s pretty much been wrong for years and will be wrong yet again.
“But quantitative easing is the gift that keeps on giving. Even after the purchases end, its effects will persist. How could that be? The Fed will still own all those bonds it bought, and according to the agency itself, it’s the level of its holdings that affects the bond market, not the rate of addition to those holdings. Having reduced the supply of bonds available on the market, the Fed has raised their price. Yields (i.e. market interest rates) go down when prices go up. So the effect of quantitative easing is to lower interest rates for things Americans actually care about, such as 30-year fixed-rate mortgages.”
I have argued about Rickards before on here. I have no doubt an element of scaremongering clickbait is going on, but the consequences of many economic policies have proven beneficial in the short term disastrous in the longer term. Keynesianism is particularly prone to this. Im willing to wait quite a bit longer before I pronounce Rickards as being proven wrong on the matter.
Which means his arguments are completely worthless.
Rickards’s descendents could wait a hundred years for an event to match his prediction, and then claim that he was prescient. “He didn’t say when! He didn’t give a timeframe!”
Random shit will happen randomly along a long time span. The longer the wait, the bigger the possibility for random shit to happen. Charlatans with no timeframes will always be willing to step forward to claim their imprecise prognostications are gold. Sensible people will ignore them. Suckers and easy marks who don’t understand confirmation bias will get hooked every time.
Sorry, I disagree. Giving predictions of an economic catastrophe in an accurate timeframe is the ability of very, very few people. A number of individuals predicted the housing bubble, very few of them will have predicted as to when the market would actually crash. Such ability is found in the likes of Warren Buffet and George Soros not authors or professors of economics. Economics is not a precise science. Precise timeframes therfore should not be expected.
A bit like those who predicted communisms collapse. Many forseeing the downfall of communism could predict the “why” I rather doubt any of them could have predicted the “when”.
The logical conclusion is that economic predictions are then worthless and should be disregarded.
I predict you will die.
Well, obviously that statement is true over a sufficiently long time frame, just as it is true that over a sufficiently long time frame, there will be another economic depression.
That statement is worthless to you for purposes of making plans unless I give a more specific time frame. Better yet, I should be able to provide some reasoning for my prediction that can be backed.
In this particular case, we don’t have to look at big scale effects like depressions. Rickards makes fairly specific predictions about narrower things like interest rates over relatively short terms. He’s been wrong about those. For years.
So, if he’s been consistently wrong about how interest rates will react for several years now, why should we give him any credence at all on the ability to predict anything? I can always just guess “heads” to a coin flip and be right eventually just as he’ll eventually be right one of these days. That doesn’t give me any special insight into how coin flips work nor does always guessing that interest rates will rise eventually (a pretty safe bet when they’re at historic lows right now) mean you are vindicated when they eventually do.
This is a not a debate, and you are flatly mistaken on this point.
Nobody asked for a “precise” timeframe. You could give a distribution, and in fact a distribution is the more sensible way to approach this sort of idea. Precision is unnecessary, or even counterproductive. I can personally assure you that professors of economics know the importance of looking at a spectrum of possibilities.
I expect X to happen within two years. / I would be mildly surprised if X doesn’t happen within three years. / I would be highly surprised if X doesn’t happen within four years. / My idea is wrong if X doesn’t happen within five years.
That’s the bare minimum structure that comes from any honest prediction. That doesn’t rely on perfect precision, but it still gives a clear notion that the person making the prediction is willing to update their beliefs if the event doesn’t happen. Without that sort of safeguard, then we’re left with the example of intellectual deficiency you so helpfully represent in this thread: a prediction that can always be pushed off into the future because the prediction is ideologically held rather than based in fact. It’s not yet this year, and it’s not yet next year, and it’s not yet ten years from now. A hundred years can pass and charlatans could still be whining not yet.
You don’t have to draw a precise line between the pure light of truth and the pitch black of falsifiability. There can and should be shades of grey. But if it’s uniformly the same shade of grey across all possible time spans, an eternally hazy not yet with no possibility of it ever becoming black, no possibility of the prediction ever being disproven, then that’s just empty rationalization. It’s not a real prediction.
This is just more empty vagueness that doesn’t mean anything.
You haven’t bothered to cite any real person, so it’s impossible to determine the nature of the “predictions”. Soviet Communism under Stalin wasn’t the same as communism post-Stalin, so depending on your purely hypothetical example, “collapse” might be fairly construed as the fall of Stalinism with his death and its replacement by what followed. Or depending on a different definition, communism still hasn’t collapsed because China is still a nominally communist state.
What’s more, you ignore the possibility that the “collapse” of communism – however defined – could not have been reasonably predicted from the information available. A doofus who has never played poker before might go all-in with 7-2 off suit… and then win the hand. The fact that they somehow achieved victory does not mean they made a reasonable decision. It was a dumb decision. They were just lucky. In a subject like historical prediction, there’s essentially no cost of going all-in on a prediction when the real evidence wouldn’t support such a decision. People who predict collapse every year will eventually be right, but that doesn’t make them visionaries. Just because a person “predicted” the collapse of communism doesn’t mean their argument was good. Dumb luck happens all the time, same with deliberately predicting the same thing every year and playing the odds that the rare-event will eventually spring up.
So, looking at the Wiki entry for Baltic Dry Index, it mentions a historic low of 647 in early 2012. Here we are nearly 3 years later, the current BDI is 771. The trend chart shows quite a few up/down fluctuations, but at this point the BDI is only slightly elevated from the aforementioned low. Does this imply a certain degree of stagnation? A slowing of economic growth?
Thank you for bringing this to my attention Duckster. It’s a rather interesting way of visualizing the overall economic health of the world economy. I’m not sure I understand it but I’m hoping you’ll clear it up for me if I’m wrong in a major way.
To find out his distribution then you need to read his book. I don’t think either of us will be doing this. We only have brief quotes from him in the article. In an area of expertise which deals with economics, human psychology and geopolitics I do think it unreasonable to expect too much precision.
Having clicked on the article I admit it is pure 100% clickbait. It is the article that is clickbait not necessarily clickbait from Rickards.
Yes, my point about communism was a bit vague. It was not meant overly seriously. My point was simply to show some of the similarities between the fall of communism and the type of predictions Rickard makes. The fall of communism also dealt in economics, human psychology and geopolitics.
Yes, he has been proven wrong on interest rates so far.
You dont give him credence. You certainly dont make any major investment decisions on predictions in his books or speeches. All you do is watch and wait. Again, I am not about to sit here and post that Rickards is correct, or, that he is especially skilled in his previous predictions. However, from what I remember of his arguments they are not of the nutjob variety: that many of the Fed policies are at best problematic; they are a huge gamble; the value of the dollar should not be risked; that official data is being massaged; the world is a more geoplolitical minefield than it has been for quite some time.