The importance of forecasting humility

forecasting

It is natural to want to rush to judgement about the long-term changes the coronavirus pandemic will bring, whether in an attempt to get ahead of the game or simply impose some order amidst the chaos. But as understandable as that impulse is, it can also be dangerous, allowing highly speculative claims to circulate and gain currency – almost like the virus itself.

Take the common assertion that this will finally be the crisis that gives way to an era of much higher inflation. The narrative is deceptively simple. To prevent a deep recession from turning into a depression, governments are racking up deficits rarely seen outside of war time. Because growing our way out of the resultant debt overhang will be impossible, inflating away its real value, aided and abetted by central bank asset purchase programmes, is the only viable escape route.

View Full Article – published by Aberdeen Standard Investments on 15th April 2020