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The Accountability of Economists: Do They Bear Responsibility for Predictions?

We are well into 2024, and I realize the U.S. Economy has not had a recession over the last three years, which made me wonder. What about all those doomsayer economists and banking professionals who predicted a forthcoming recession in '21 and '22? Several years ago, when hearing these predictions, I assumed a recession was forthcoming because many experts said so. Who was I to quarrel with their data and expertise? Years later, with no recession to speak of, how could so many experts in finance and the economy be so wrong? I needed to validate my suspicions to prove that many of these professionals incorrectly predicted an impending recession. Therefore, I did some online research to confirm what my gut was telling me.


Writer's Note: The professionals' quotes are included in each section, followed by my comments in yellow. All quotes are from online sources.


CNN Business, October 20, 2022

Former US Treasury Secretary Larry Summers said on Thursday that it’s “substantially” more likely than not that the United States will enter a recession next year. Recession became “almost inevitable” once inflation rates grew above 5%, he said. On an annual basis, prices rose 8.2% in September.


(Since 2022, Mr. Summers has multiple times predicted a recession in the USA in ’23. Has he ever publicly admitted that he was wrong about a recession occurring in the U.S. in 2023? Has he ever publicly admitted when his predictions didn't occur?)

 

Reuters, October 10, 2022

JPMorgan Chase & Co, Chief Executive Jamie Dimon said the United States and the global economy could tip into a recession by the middle of the next year, CNBC reported on Monday.


(Perhaps there’s a slowdown in mid-2024, but that would be a year after what Mr. Dimon had predicted. Is there a website that tracks the accuracy of what the CEO of JP Morgan Chase has said or predicted over the years? Quick note: About one week ago, Mr. Dimon again mentioned the possibility of a recession later in '24. A cynic may say if you frequently make predictions, you're bound to get it right sometime.)

 

CBS News, December 8, 2022

The CEO of the largest bank in America, Jamie Dimon, is eyeing world events for signs of how severe a potential recession in the U.S. may be. Many on Wall Street, including Dimon's own bank, JPMorgan Chase, predict the U.S. will tip into recession early next year.

"It's turbulent," Dimon said of current geopolitical risk. "It's like anything can go wrong," he told CBS News "Face the Nation" moderator Margaret Brennan in an exclusive interview.


(Again, Jamie Dimon's assessment was incorrect. With someone with so much clout and influence, Mr. Dimon has made many predictions about the economy and stock market over the years. When a consumer of finance and politics realizes he's prone to sometimes make inaccurate predictions, how should they take his future prognostications?)


Fox Business, June 16, 2022

During his latest "My Take," "Varney & Co." host Stuart Varney discusses the "financial storm" gathering steam and barreling towards Americans' wallets, arguing a "recession seems inevitable," as well as a “Democratic wipe-out in the midterms.


(Two things: the recession seems inevitable and has not come to fruition as of March 5, 2024. Two, the Democrats were not wiped out in the midterms. Republicans gained nine seats. However, there was never a “red wave” that many political pundits had predicted. Because of Stuart's British accent, do consumers perceive him to be more intelligent and more likely to trust his advice?)

 

American Enterprise Institute, July 22, 2022

I think it is unlikely that the Fed will be able to engineer a soft landing. I think the odds of a recession at some point in the next 18 months are two-thirds, maybe higher. I think the severity of that recession is TBD. The arguments in favor of a mild recession are that there is no real underlying structural problem in the economy right now. We don’t have a situation, for example, where people own more houses than they should.


(This organization suggested a recession within the next 18 months, which would take us to January of ’24, but there has been no recession. The American Enterprise Institute also didn't think the Fed could engineer a soft landing. Were these economic predictions that became political?)


It's the economy stupid

Financial Times, June 12, 2022

The US economy will tip into a recession next year, according to nearly 70 percent of leading academic economists polled by the Financial Times. The latest survey, conducted in partnership with the Initiative on Global Markets at the University of Chicago’s Booth School of Business, suggests mounting headwinds for the world’s largest economy after one of the most rapid rebounds in history, as the Federal Reserve ramps up efforts to contain the highest inflation in about 40 years.


(Unfortunately, they don’t list the economists polled by the Financial Times. This claim was made over 18 months ago. Have the Financial Times updated their economic forecasts for '23 and '24? It's also important to note that, unlike many other economic predictions, these individuals are leading academic economists.)

 

CNBC.com, July 20, 2022

Banks, including Citigroup, Deloitte and PNC Financial Services, previously predicted a slowdown in 2023, but recent forecasts say a recession could occur in 2022 or earlier in 2023 than formerly expected. Last week, Bank of America followed an earlier forecast by Japanese investment bank Nomura, predicting a ”mild” recession in the remaining months of 2022. The outlook is a revision of earlier forecasts that only predicted slowing economic growth. Similarly, Wells Fargo has changed its outlook from an economic “soft landing” to a “mild recession” in the first quarter of 2023.


(We know certain banks predicted a recession in ’23, but we’re unsure which economists from these banks predicted a recession in late '22 or sometime in '23.)


From Fox Business, November 22, 2022, Larry Kudlow: America's economy is in jeopardy

But I have to depart from this optimistic script for just a little bit. I’m talking about the economy. I got to tell you, I see a number of important indicators that are all pointing to recession. I don’t like this, but that’s what I'm looking at. We may already be in a recession, but next year looks like an even deeper downturn.  


(The first part of the article talked about his optimism, especially around Thanksgiving, and then he pivoted, saying that "important indicators are all pointing to a recession.")


(The Director of the National Economic Council during the Trump Administration from 2018 - 21. Former Trump economic advisor Larry Kudlow conceded that his prediction of a looming recession was wrong. He admitted that the U.S. economy is doing much better than expected under President Joe Biden. Talking on Fox News ' America Reports on Thursday, Kudrow offered a "mea culpa." "I was wrong about the slowdown and the recession.)


Economy

PBS.org, April 28, 2022, Interview with Diane Swonk (Quoted)

"It's over a five million gap right now. What I worry about is that we're not going to be able to do that without raising the unemployment rate as well and increasing the supply of workers. And I think the probability of recession is very high in the second half of the year and as we move into 2023. In fact, we're forecasting what's called a growth recession, which is when growth is not enough to hold unemployment down, and it continues to rise in 2023 to derail the inflation we have and get it back to being insignificant to most consumers."


(Another economist is predicting a recession as we move into 2023. It sounds as though she was pretty confident of this occurring. Her last sentence in the paragraph appears to be the word salad, which I'm not exactly sure what it means.)

 

Reuters, October 26, 2022

RIYADH, Oct 26 (Reuters) - Former U.S. treasury secretary Steve Mnuchin said on Wednesday he believed the United States was in a recession and said this would continue.


(Realizing that he was the U.S. Treasury Secretary from 2017 - 2021, it doesn't appear that he predicted a recession for that time. However, in late '22, he suggested the U.S. was in a recession. I'm hopeful politics didn't play a role in this.)


Conclusion: The Accountability of Economists: Do They Bear Responsibility for Predictions? In other words, I've included quotes from critical U.S. economists and senior banking professionals who predicted a recession during the Biden administration. I have no issues with predictions; the economy is tricky to predict. However, when you're completely wrong about something made public, show integrity by admitting your mistake. I will commend Larry Kudlow, who publically predicted a recession and later realized he had made an error. If we had a database available, including their quotes and predictions, it certainly would give consumers much more information when determining whether an expert is relatively accurate and, when mistaken, admit they errored.


Addendum: The point of this article is that when professionals make a prediction or calculated guess in the public space, and this error is observed, they need to be accountable and revisit this prediction authentically. They may be quick to take credit when correct, so why not show integrity and honesty regardless of the results? If I trust what Jamie Dimon says, is it not helpful to know the "full picture" of his predictions (accurate and inaccurate) when moving forward? An online database where you're better positioned to know their reputation scale (accuracy scale).


This online database could be used by consumers to better understand what's reported in the media -- to become a more informed consumer. This database could include statements made over the last several years by politicians, medical professionals, business people, sports announcers, and others in the media. This information could help readers and listeners to help determine the legitimacy and accuracy of a news or sports program. Indeed, this could apply to podcasts, too; we need to hold people accountable from a consumer perspective. The more we know, the better we are as consumers when it comes to consuming. When you buy yogurt, you need as much information as possible to make a viable choice. The same principle could apply to those professionals who are quoted and make guesses and predictions about all sorts of things, sometimes without considering the complete picture.





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