by George Dorgan
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Update 2013:
From Guggenheim’s Scott Minerd and Zerohedge:
“Since the U.S. Federal Reserve first began to release economic projections three years ago, it has consistently downgraded its outlook. In the latest Federal Open Market Committee meeting, the Fed further lowered its projections for GDP growth in 2013 to an average of 2.15 percent, compared with an average of 4.15 percent from its initial projections in January 2011.”
On the other side the Swiss are upgrading their forecasts again.
UBS’s initial forecast for 2013 of 0.9% growth was ridiculous: It barely matched the population increase caused by immigration (+0.6% per year) and the natural rate of population growth (0.2% per year).
The History of Wrong Forecasts of Fed and Swiss Economists
Or how to talk down and how to talk up an economy with wrong forecasts
American and Swiss mentalities are very different, the Americans have the tendency not to care about the future a lot, the Swiss, however, do things only after careful consideration of potential risks. This tendency can be proven economically with the savings rate that is very low in the U.S. but about 13% in Switzerland.
Even if economist would doubt it, mentality, wanted understatement or maybe deliberate lying can affect economic forecasts and potentially manipulate rational expectations of markets (like equivalently the EUR/CHF exchange rate).
The Fed’s wrong forecasts
The following were the forecasts of the Federal Reserve on the U.S. growth after the official end of the recession. Typically for the American mentality, or maybe because the Fed thought that everything will be again like before the Lehman meltdown.
In November 2010, the Fed came up with a forecast of 4% GDP growth for 2012 that was lowered each quarter down to finally reach 1.75% in December 2012. Similarly for the year 2013, forecasts were revised downwards from 4.15% growth for the 2010 forecast to 2.65%. Needless to say that also for 2010 and 2011 the U.S. growth was revised downwards.
The SECO’s wrong forecasts
The following are the historic forecasts of the Swiss government economic agency, the SECO, for the years 2009 and 2010.
Read here the details of wrong forecasts by the SECO and other Swiss economic institutes.
