Your correspondent has a long history of following and writing about economic and financial matters as a financial advisor to governments, banks and companies while living and working in dozens of countries – and he is still working hard at understanding better what cannot normally be forecasted accurately.
It is a fact of life that economists are just not able to forecast share prices, currency movements, the prices of houses, raw materials, or food very accurately because there are just too many things that cause surprises and big jumps.
Most economists who get airtime on the news are highly paid ones dressed in the following: silk ties, white shirts or silk blouses, dark suits, black shoes, or long blond hair or long dark hair with Brylcreem or bald, and dark rimmed glasses or thin metal ringed ones that look like NHS ones.´
These economists get to talk on TV or in the newspapers because they come from big banks, and “they must be good” because they get relatively big salaries… Well, the opposite is true because they always, always, always talk their own book, which is the bible of their employer for whom they work. They are not employed to generate honest useful opinions for consumers, but for making fat profits for their owners. Yes, they are a kind of well-paid slaves that only dare to sell the official policy line… That is why the likes of Paul Krugman and others like him are so despised by these “mainstream talking heads”. It is bad if you have independent hard thinking economists “who do not toe the line”.
However, the following things were clear to anybody who did not have a vested interest in saying the opposite like bankers, investment salesmen and big fossil fuel users:
- Interest rates would rise from the complete madness of zero interest rates.
- The price of shares would fall when these interest rates climb.
- The prices of “new technology companies” would fall because they were just too high especially when they are not making a profit or if they rely on slave labor!
- The price of housing would fall especially in those countries where house prices have soared like Sweden, UK, etc…
- The prices of raw materials, food, fertilizers, and fossil fuels would rise when madmen like Putin brutally attack a neighboring country in Europe.
Then another thing you can be pretty sure about is how the bosses at central banks behave. They too are dependent on the same economists either because they have come from a bank like Draghi or intend to go to one as a highly paid advisor like a dozen others!
Our local boy, Mr Olli Rehn, who heads up the Central Bank of Finland is one of the worst sorts. He does not want to be an advisor to any bank, but merely wants to be the next President of Finland! Quite a jump for a country boy who was a confirmed Center Party politician who has always been too ambitious to hold down a normal job like the rest of us. He has used his political friends to get plum jobs without any great show of competence… His expertise is to talk about the need for austerity and higher interest rates because the folk at the European Central Bank say so and they are his bosses…
…and then there is another bad apple at the European Central Bank (ECB), a Ms. Christine Lagarde, who is the head of the European Central Bank (ECB) and former head of the IMF. Both appointments are difficult to understand because she is neither an economist nor a banker, just a lawyer who became a French politician.
In 2016, the Cour de Justice de la République, a French court that considers cases against current and former government ministers, found Ms. Lagarde guilty of criminal charges linked to the misuse of public funds when she was France’s finance minister nearly a decade ago. But the court did not impose a fine or a sentence.
She was found guilty of criminal negligence in “a position of public authority,” related to a 2007 arbitration case involving Bernard Tapie, a French tycoon close to Nicolas Sarkozy, then France’s president. In the case, Mr. Tapie was awarded more than €400 million to settle a dispute with Crédit Lyonnais, a French bank.
Now at the ECB she talks to the press as if she is Master of the Universe about how we need austerity and high interest rates to beat down inflation. A few years ago, the brilliant economists at the ECB wanted to save the world with negative interest rates and that caused a huge bubble in the equity, bond, and real estate markets without any major new investments in the real economy and resulted in inflation followed by Putin’s aggression. Now they want to have higher rates to kill inflation that interest rates will not cause any fall inflation – quite the opposite, it will cause prices and wages to jump even more…
The outcome will be a massive fall in GDP, with ordinary folk suffering from a double whammy of high food costs and horrible costs to repay their mortgages. These central bankers just do not understand that unemployment is higher in most countries in absolute terms, with many people having dropped out of the labor market. Investment is stalling and big companies are letting staff go…
Lagarde & Co. have no idea that they are wreaking havoc on our economies. What do they care when they work and live in their own small bubbles without any democratic checks and balances. You can see that even though she was found guilty, no fine or sentence was imposed! They are virtually untouchable and that is not healthy.