The Source of Most Economic Prediction Errors at Present

This should be regarded as a small “opinion piece” of mine.  My big gripe with economic predictions over the past five years, is that forecasters use the old closed economy simplifications that worked when the US was a unique capitalist economy, and international trade flows did not affect the total picture much.

Today, I don’t try to analyze the US economy as a whole.  I look at its sectors and try to analyze them in a global context.  Even if the domestic US economy is in a funk, it is possible for sectors that serve other countries that are growing to do well.

So, I don’t make much of those who assume a recession will restrain inflation.  Perhaps a global recession will do so, but a US recession will not.  We need to look more closely at how the US is devaluing its currency versus other countries, and that might give us better clues regarding future inflation.

It is much richer to look at the sectors of the US economy, and look at them separately.  They have varying exposure to the US and Global economies.  That difference is critical now for investment decisions.