John Kenneth Galbraith once said, “The only function of economic forecasting is to make astrology look respectable.” It’s a harsh critique, but he was right. Making economic predictions is notoriously difficult. And the late Prof. Galbraith would not have been surprised to discover astrologers looking even better compared with economists today.
Economists have never convincingly outperformed astrologers when it comes to predicting the future because the future is unknowable. However, the confluence of three major shifts in 2013 has cranked up the volume on the “unknowable” dial.
The first shift is the slowing of the BRIC countries (Brazil, Russia, India, China) and the flow of capital from emerging markets. For a decade, they were the assumed engines of the global economy. But for a variety of reasons, growth in the BRICs has slowed and they can no longer be expected to do all the heavy lifting.