
![]() Econ 101…remember? For most people economics was required learning and not an elective in school. If we paid any attention at all it was to nod our heads in agreement with the teacher and believe everything we were taught so we could pass the test. But economics really belongs in philosophy class, which was also equally ignored if we took it. The reason that economics is more of a philosophy and is not a dependable a science is because so many “Laws” have failed over time. So be careful believing that economic forecasts are an absolute we can depend on, because they are not. There are so many assumptions baked into a forecast about financing and buying patterns and inflation and employment etc. etc. Use an economic forecast as a framework for learning and not as the end all for making decisions. For instance, if the economic consensus had been correct then the 2007 and 2008 meltdown would not have happened but the assumption was that financing was going to be available for consumption and suddenly it wasn’t. That sudden lack of financing made all the difference in the world to the demand side of the equation. It didn’t matter how many people still “wanted or needed” a home (i.e. the demand side) there simply wasn’t any money available to make that happen. The “why” had everything to do with banks making too many leveraged bets on mortgages and very little to do with delinquent sub-prime borrowers. But at the time no economist had access to the secret banking activities and therefore could not have anticipated that the money spigot would be suddenly frozen. Economics Professor, Author and Speaker, Mary Kelly of http://productiveleaders.com/ says that an economic forecast is really packaged in a way that inspires confidence in the economy. So, the lesson is, do your homework and question the assumptions. Don’t just listen for what makes you feel good about what you are doing in the economy but look for new perspectives that will help you develop your own economic learning.
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12/6/2013 04:06:30 am
US Government forecasts are frequently packaged to be optimistic.
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