Word: bankes
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Dates: during 2000-2009
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...like a cop-out. At least until you consider how many other economic forecasters got it wrong. Dozens of states have found themselves with budget shortfalls, some quite massive, partly because economists weren't ratcheting down expectations of tax revenue nearly fast enough. In late November, the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters indicated GDP would decline at an annual pace of 1.1% for the first three months of 2009. The economy proceeded to shrink at a pace of 5.5%. (See what to expect when the recession ends...
...compensate is to pay attention to a broader range of forecasts. That's why there's no shortage of publishing and financial firms surveying groups of economists, presenting all of their opinions as "consensus" forecasts. A 2003 study by researchers at the Federal Reserve Bank of Atlanta found that the Blue Chip Consensus Forecast, which polls some 50 economists each month, is consistently better than any of its individual members. The researchers dubbed that result a "reverse Lake Wobegon effect": everyone was below average. During economic turning points - like the one we're currently in - the individual forecasts veered further...
...being forecast falls into an ever broader range of possibilities. "The more you think in terms of distribution of outcomes, the better," says Gregory Mankiw, a Harvard economist who chaired President George W. Bush's Council of Economic Advisers. "You're always keeping in mind the inherent uncertainty." The Bank of England is a big user of the fan chart when its economists talk about inflation forecasts. Plenty of U.S. agencies, like the Social Security Administration, use them...
...Others remain unconvinced, viewing China, in effect, as an economy on steroids. Bank-lending numbers announced last week showed an extraordinary leap. New loans in June totaled the equivalent of $224 billion, more than double the previous month's lending. The total amount of money that banks have loaned thus far in 2009 already exceeds the total amount loaned for all of last year. Speculative froth in China's financial markets abounds. Long-futures interest on copper contracts on the Shanghai Metals Exchange - bets that the price of copper will continue to rise - recently exceeded the total amount of copper...
...Much of that investment growth came from the brute force of the government, which is directing bank loans to state-owned companies, which in turn have been building everything from high-speed rail networks to new highways and bridges across China. But economists were quick to note that other sectors of the economy besides construction now seem to be joining the party. In particular, property investment rose by nearly 18% in the quarter, well above what many economists had expected...