by Peter Latona

Created on: June 05, 2009   Last Updated: July 09, 2009

Economists and Weathermen

Our local weathermen have historically been the brunt of many jokes. They are seen as being good guys, just inept at predicting the weather. Economists on the other hand are bastions of academics. Very well respected and very well educated people. However, can they predict anything? If statistics could be gathered to measure the accuracy of the forecasts of economists vs. our local weatherman, I am betting on the weatherman. Of course, in gathering these statistics we would be confronted with the myriad of opinions put forth on any one topic. We all know you can always find at least one economist to back you up. For our purposes we would just have to use the most prevalent opinion.

90% OF ALL ECONOMISTS FEEL THE ECONOMIC RECOVERY WILL BEGIN LATER THIS YEAR.

No kidding, these are headlines happening today as this article is being written. Please take a time out and go out and buy some stock right now! How could you possibly lose? It's 90% for goodness sake! Okay, let's settle down until we get this question answered; Were these the same 90% who had no idea whatsoever that we were about to experience the worst economic crash since the Great Depression? Were these the same advisors that gave us no warning that might have helped us save our homes, jobs and retirements? It was like they were trying to hit a 90MPH fastball with their paper diplomasthey whiffed!

So why the positive forecast? This author is not bright enough to debate these people on their own terms, but from a simple perspective this is what I see. They feel the economy is getting better because things are getting worse at a slower rate than before. Still declining mind you, just not as fast. Based on historical models, when the decline slows down we are nearing the bottom. Let's beware of these historical models because there is a new world order and they might not apply. Economists now understand the interconnectedness of the world's economy and this was not factored in to the historical models. Therefore, how can we expect old models to forecast accurately in the modern environment?

Here is another perhaps naive concern. Initially during the financial meltdown we heard economists say that they did not fully understand the interconnectedness of the world's markets. There was a discernable domino effect in play and it became apparent just how much one nation's economy affects the other. Okay, good to know, but is anyone doing anything to address this now? It seems that

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