Most of us would like to be able to rely on forecasts from an authoritative source.
Predictions, of course, often are wide of the mark, but it is simply unacceptable when they prove to be completely unreliable – and a government’s policies and actions are based on that misinformation.
Many years ago, in an effort to discredit Prime Minister John Diefenbaker, James Coyne, Governor of the Bank of Canada, forecast that our economy would be mired in deep trouble, and that over the next few years Canada’s economy would be very weak. The sole proviso was that he had a list of reforms, whose enactment would be the only way to escape his grim forebodings.
What happened then was the opposition Liberals capitalized on that controversy and forced Diefenbaker out of office. Few of the Coyne proposals were enacted, nevertheless Canada began an extended period of economic prosperity. Obviously, that Coyne prediction was a total failure.
Last year, Mike Carney, Governor of the Bank of Canada, prophesied extraordinary expansion of our economy in the year 2010. His projection was far more optimistic than that of most economists. He was brought before the House of Commons’ finance committee, but stuck by his wildly optimistic scenario. Carney proved then to be a very unreliable prognosticator.
Businesses that counted on his statements as having some validity were misled by costly mistakes. Then, over the past year, almost alone, Canada has raised interest rates three times as he assumed incorrectly that our economy had to be restrained.
Perhaps the most egregious errors have been made by the United States’ Federal Reserve Board. Its chairman, Alan Greenspan, flatly stated there was no bubble in house prices and, at worst, the prices would stabilize. He also said events subsequently would justify the stock market’s boom psychology.
All those forecasts were made just prior to the worst business contraction since the 1930s.
Although during the past two years the Federal Reserve Board has stuffed banks with over $1-trillion in cash reserves, bank credit and the United States’ economy remained stagnated and probably on the verge of a further decline.
That organization predicted the nation’s gross domestic product in 2011 would expand by about 4.5 per cent and hence, the United States’ unemployment rate would fall to 8.5 per cent. Needless to say, those predictions were so erroneous that they were thoroughly ludicrous. Any reliance on those forecasts proved to be disastrous.
It has become obvious that we no longer can count on central banks to provide worthwhile information. It is no surprise, then, that the public is angry with political officialdom.