Don’t trust anyone who wants to predict the future

The closer Christmas gets, the more tempting it becomes to bring references to the festival in entirely different contexts. And indeed, who would have thought that, even economists who love numbers are quite speculative. Findings from a research report of a large German bank: “Belief in inflation expectations, perhaps even in their decimal places for a period of several years, is as well grounded as belief in Santa Claus.”

If I leave Santa Claus to children who want (or should) believe in it, there is still an overall serious debate: Is the current, much-reported 5 percent inflation a prelude to a massive devaluation of money — such a position that is gaining ground among money experts ? Or is it a shot based on special effects, and the whole thing will calm down again next year – is it likely to be the prevailing view, with the ECB on its side as well? The topic is important to everyone who wants to plan their future, make provisions, create values, and handle money – that is, for almost all citizens.

Alarmists and Denials – both can make arguments worth considering in their own right; There was a lot to read about it in this business section. For now, Quiet Voices seems to have a better score, only when they note that the 5 percent increase is the same month last year, not the previous month, which some ventilators overlook.

But it cannot be said that inflation will remain the same for many years: just a concern. It could also get real very quickly (“Every year five percent, my money will be half worth in 14 years”), related to the uncertainty that made the bank’s economists seek help from Santa Claus. There are many developments that can influence each other in one way or another, and any deviation in fact from the assumption is detrimental to the prediction made earlier; Economists talk about systemic complexity.

Specifically, the development of inflation also depends on inflation expectations, which in turn also depend on expectations, etc. Inflation also largely depends on whether the ECB correctly assesses all uncertainties and whether it has chosen the appropriate monetary policy for the scenarios that will actually occur. So many doubts.

Basically, the world has become particularly uncertain for at least two reasons: First, because of the astonishingly rapid progress of digitization. Growing computing power will dramatically change industry, business, and society – but how?

Don’t freeze in fear, but accept the challenge

On the other hand, because of Corona. The epidemic started as a complete surprise in China two years ago because many factors came together in a uniquely dramatic way. If only one development had gone differently, the world would have survived this trial by now. However, things could have come together since unhappy years, for example at the beginning of the twentieth century, when Germany was economically the “sick man of Europe”, the economic situation would not be relatively calm as it is now. Whether it stays that way depends, among other things, on when and how international economic exchange really comes back.

And because all this and other things are intertwined, the outlook for the future at the end of this year is especially cloudy. However, there is reason for hope. The fact that Germans voted for a “business as usual” government in the 2021 federal election and voted to try an unprecedented traffic light shows how to deal with uncertain situations: Don’t be paralyzed by fear, accept the challenge. Although many political scientists have long predicted that the majority of voters, who are getting older and therefore more settled, are no longer willing or able to conduct the experiments.

After all, the Germans are able to respond, which is why they will face digitization – according to expectations here – with more enthusiasm and creativity than some think, which is why there is no need to fear the future. There’s one thing you don’t have to think about, through thick and thin: that you already know what’s coming.

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