The Business of Economic Prediction

“Most economists shy away from thinking about the future much beyond a quarter or two, but David Hale thinks contemplating unconventional scenarios of the future is just what the field needs to provoke new ideas. Hale is the co-editor of the new book: “What’s Next?: Unconventional Wisdom on the Future of the World Economy,” which compiles reflections from many economists on a range of topics and on countries around the world.

In this INET interview, Hale says he wanted the contributors to not be too concerned with quantitative predictions about what might happen in the future. Instead, he wanted them to present ideas and develop plausible scenarios that would run against conventional wisdom or “the Davos consensus.” In turn, he hopes readers will be provoked to rethink their default views.

Hale observes that China buys gold in order to position the RMB as future reserve currency. The US, he points out, benefited from the reserve currency status of the dollar, which enabled the Reagan and Obama administrations to finance fiscal deficits.

Hale also talks about the political struggle in Japan and the labor shortages in China. The labor shortages squeeze firms’ profit margins and feed inflation, which will constrain Chinese growth rates in the next two or three years. Hale praises the German success in emerging markets, and tells us why Anatole Kaletsky, a contributor to the book, expects the euro to weaken.”

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