Unanticipated Recessions (Commentary)

Unanticipated Recessions (Commentary)

Why are economists so bad at forecasting recessions? According to a 2011 Federal Reserve Bank study, most private economists and Fed staff failed to foresee the “Great Recession” – the greatest economic downturn since the 1930s. Dr. Richard Salsman, President & Chief Market Strategist at Durham-based InterMarket Forecasting, says forward-looking indicators like the US Treasury yield curve have a better track record of anticipating recessions than consensus forecasts of both business and government economists, whose built-in biases impede their ability to spot red flags. “The next US recession won’t be forecasted by economists, least of all by a ‘consensus’ of them,” writes Salsman, whose firm advises institutional investors such as banks, pension plans and hedge funds. “Forward-looking market prices, like those embodied in the yield curve, will more likely do the job right – yet again.”

 

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