John McCallum

What makes economic forecasting so difficult is that, ultimately, it is a call on the behavior of people. It is the willingness or not of consumers to spend, executives to invest and create jobs, savers and money managers to buy stocks and bonds and so on that determines the direction of everything that matters about the economy. Unfortunately for the economic forecaster, behavior is driven by things like feelings, attitudes and fashions, things that can change on a dime. Confidence and fear are the big ones. When people are confident they behave in ways that tend to have good economic outcomes. Fear brings out the worst in us. That people can go from supreme confidence to blind fear and back seemingly instantly will always be the economic forecaster’s curse.

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