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Anyone Can Be a Doomsayer...

It should be tiring to anyone who has the panache to still watch network news that every professional, academic or layman called on to give their commentary on coming economic events has to have his name suffixed by the eulogical phrase "the man who predicted this economic crisis."

Economic prophets seem so abundant that you would wonder why anyone would think of them as remotely surprising. Of course there is a systemic bias in the way humans look at events that make them sympathize with the apparent predictions of the unlikely.

For a commentator, it serves no good to be anything but unreasonably pessimistic. It's not just that people are bored by optimistic outlooks, but in the long run something generally bad has to happen, so you might as well capitalize on it.

If I prognosticate an imminent economic collapse right now I may be wrong for several more decades. But if forty years pass until the next inevitable downswing, people won't look at me as being dead wrong for forty long years, but will say that I had forty years of prescience. It's a win-win situation: the longer you're wrong the righter you are in the end.

This works for any kind of prediction; it's a technique that psychics, religious prophets and other charlatans take advantage of: within the next year there will nearly certainly be new armed conflicts, earthquakes, and business failures so it's a safe bet to predict some will happen. When has there ever not been wars and rumors of wars?

The enterprise is a little more complicated in economics; there is a wide horizon of economic maladies ranging from hyperinflation to a debt crisis to a general recession, but people with average education typically don't know one from the other. That works to the particular advantage of the doomsayer.

As an example, Peter Schiff is a professional non-economist who has managed good air time in the last few years often with that eternal suffix: "the man who predicted this economic crisis." And it was true, Schiff had been decrying the Fed's interest rate policies as bubble-inducing.

In reality of course, that is a slight hit among many misses; Schiff is still predicting hyperinflation and the demise of the dollar next year for years now. A fervent Austrian, he reasons any stimulative policies will only serve to exacerbate the fiscal situation, which as he thinks is a result of gross American debt rather than a classic Keynesian downswing. Most importantly, for all his alleged foresight, his Euro Pacific Capital experienced its own tremendous losses during the crisis even though he had been peddling books on how to make one's firm "crash proof" for the inevitable crisis.

The general public doesn't know the difference between a financial crisis, sovereign debt crisis, depression and a bout of hyperinflation is, so it's little wonder why the don't react the generalized doomsaying with more skepticism. This isn't to pick on Schiff, he's only representative of the members of various economic heterodoxies who are incessantly preaching the coming destruction of "everything we know and love" etc.

The best part about doomsaying is that people, even ones prone to optimism will buy into whatever prophecy if it additionally carries a moralizing tone. People who think that stimulative spending is morally wrong will say that it leads to disaster in every way, people looking to end pollution will revel in the most morbid forecasts of climate change, and people who think most everything about modern society is corrupt and sinful wait patiently for Armageddon.

That's not always something bad, nor does it disprove the factuality of the statement. It's all just part of human psychology, but for those who are looking to de-emotionalize their thinking and look honestly into the future, it requires a degree of corrective thought.