TOPICS : Economists and prophecies
As a kid I would often wishfully look at an aircraft zoom off above my head and secretly hope that I rule the skies some day just as those folks in the cockpit did. That gave me a sense of power. The stars unfortunately had something else in store for me and I ended up as a software engineer. However, it wasn’t very long before it dawned upon me that a pilot, an engineer, or even a doctor didn’t mean much in the real workplace. They were merely cogs in the huge economic machinery the lever of which is firmly held by guys who could be heard talking about supply and demand all the time. The elusive creature called economist wielded the real power.
And why not? In a manner that is reminiscent of medieval crystal gazing, economists predict how the future of a company, nation,
or the world would be like. That too with the seemingly simple concept of supply and demand. But
in recent times my faith in economists has been shattered and I
have found myself seriously doubting their crystal gazing capability. Take oil prices. Until six months
ago prominent economists and investment bankers in Wall
Street continued to create a mass hysteria across the world by
projecting that the oil prices would shoot past $200 per barrel in no time. The economy, however, is a whimsical beast that doesn’t quite dance to the tunes of an economist. Today, the oil prices have taken a nosedive to $58 per barrel.
The renowned economist John Maynard Keynes couldn’t have exemplified an economist better when he said he changed his mind when the facts changed. No prizes for guessing that the same economists and analysts are projecting oil at $50 per barrel. Just a few months ago when the US dollar was in continued decline, the economists were quick to announce that the days of the greenback were over. The Indian rupee (to which the Nepali rupee is tacked) had appreciated to INR 39 (NPR 62.4) against the dollar. The Indian IT industry was specially hit hard because the lion’s share of its revenue came from the US. The economists sent a chill down the industry’s spine when they said we should be preparing for the rupee at 35 (NPR 56). The industry resorted to extreme measures to prepare for what was supposedly inevitable.
When this piece was ready, the dollar had surged back to NPR 80 and both the INR and the euro are down in the dumps. The analysts have, undoubtedly, lost no time in reviewing their stance and could recently be seen writing on how the US dollar will strengthen over time. The industry is bewildered.
And now that the recession has finally hit the streets, we can see the western banks queue up to file bankruptcy and people lose jobs in hundreds of thousands. Predictably, the economists have suddenly awakened to the need to devise new theories. I am clueless where they were when the same banks were lending out to borrowers who didn’t have the ghost of a chance to pay back. It was not until global financial crisis hit my business that I began actually questioning an economist’s true value.