Can economists and financial analysts really tell investors the future or should they be consigned to join charlatan fortune tellers and mediums?
Millions of investors rely on these professionals to make their financial decisions.
But however economics is dressed up as a science, these people cannot tell the future. All they can do is best guess and try to authenticate their claims by citing past history.
If the world has learned anything over the recent years of financial turbulence, the lesson is economists and financial pundits cannot see what’s likely to happen tomorrow.
Surely if they could, the global credit crisis would not have happened.
Many economists work for investment houses and banks that want investors to stake their cash in funds they run so they can skim money as administration fees.
Scams and fiascos
These are the same funds and banks that brought the global economic system to its knees with esoteric investment and borrowing scams, rigged money markets and the foreign exchange rate fiasco.
Experts look at their key indicators, such as inflation rates, commodity prices and food prices and base growth rates and economic performance on historic readings.
That’s fine until variables like Russia annexing The Crimea come into play.
The Russian economy was going along nicely thank you very much until Vladimir Putin decided to flex his military muscle into The Ukraine.
Since the incursion, inflation has surged sky high. The ruble has weakened and the economy has contracted.
Some financial experts are zeroing in on the cost of cabbages in Moscow as indicators of how the economy is failing
Signals economic indicators really give
The bottom line is why would anyone want to take a chance investing in Russia with money they cannot afford to lose anyway?
Investors do not have to be economic experts to see Putin is unpredictable and any money staked to Russian companies is clearly at risk.
What these inflation figures and other economic indicators signal is how the government and central bank in a specific country is handling the economy – and that’s the deciding factor that perhaps should be uppermost in an investor’s mind.
Two recent examples of how this has worked are India and Japan.
Both changed governments and economic policy and both economies are perking up.
Another example is how the Eurozone has languished in the doldrums until the European Central Bank started a program of economic stimulus.
