Who are these economists who continue to forecast so badly? Economists are not supposed to be like meteorologists. They are supposed to be able to study the economic conditions and accurately predict the future.
Higher energy and food costs pushed U.S. consumer prices up in July at twice the expected rate, resulting in the U.S. inflation rate to the highest level in 17 years. Who couldn’t have predicted this was coming? I just don’t get it. Why are the majority of the economists still not seeing a major economic decline? Here are some of the very obvious recent events:
- Bank losses in the trillions
- Inflation increasing faster then the last 17 years
- 450,000 jobs lost in the last eight months
- Housing market in the worst correction since the Great Depression
- The largest government bailout of banks and homeowners in history
The jump in inflation marked the third straight month of oversized inflation increases following jumps of 0.6% in May and 1.1% in June. And it leaves inflation rising by 5.6% over the past year, the biggest 12-month gain since January, 1991.
The jump in inflation left consumers even more squeezed, when the Labor Department said that average weekly earnings, after adjusting for inflation, fell by 3.1% in July compared to a year ago, the biggest year-over-year decline since November 1990.
Maybe we need new economists who can get a grip on reality and give the nation some better predictions of the future. I can tell you right now that inflation will be closer to 10-12% within one year. Just take the average of the last three months (0.6+1.1+0.8)/3 = 0.83 and multiply it by 12 months and you get, 0.83*12 =10%.
The government is still using something like 0.9% inflation to calculate quarterly economic growth, which is why they can say we are not in a recession yet. But as time goes on, they are re-calculating the numbers. They have already adjusted the Q4 2007 numbers to show that the economy declined in Q4 of 2007 and it's very likely that they will adjust the Q1 2008 numbers to also show negative economic growth - which is two consecutive quarters of negative growth - which is the definition of a recession. It's very likely that the nation has already been in a recession for close to one year.
Federal Reserve Chairman Ben Bernanke has been printing money faster and faster to try to keep the financial system from sinking, while hoping and praying that the market returns to normal, the losses are cleared and the system holds together while the storm passes. But in the process, the system is taking a lot of water and the cargo is becoming worthless. It's time to move away from the windows and start inflating the lifeboats. As inflation eats away at the value of the dollar, the last guy holding dollars will suffer the biggest losses.