How to Predict a Crash
Why are economists so bad at forecasting a downturn? Are markets any better? We hear from both sides and from two so-called "Super-forecasters", on the tricks of the trade.
Another rocky day on the markets yesterday, with some investors talking up the risks of a global recession. Not most leading economists though. Take the IMF's top experts, for example. They say we can expect 3 and a half percent global growth this year, and the OECD and World Bank's forecasters are almost as sanguine, foreseeing 2.9 per cent growth. So who can we trust? Well Ruchir Sharma, head of emerging markets and a global strategist at Morgan Stanley, has conducted research suggesting that while economists have failed to predict all of the last five US recessions, the markets did at least predict more than half, by recording 15% falls at least six months in advance. We look at the numbers, hear the economists' view from George Magnus, an associate at Oxford university's China Centre and senior economic adviser to UBS, and we hear from two so-called "Super-forecasters", amateur crystal-ball-gazers who have demonstrated a remarkable record at foretelling the future. What are the tricks of the trade?
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