Eddie Hobbs: Confidence needs to be tempered with caution
The frailty of the human mind and unforeseeable events mean optimistic forecasts carry some risk
It's that time of the year when, relying on shaky economic models, hubris and groupthink, attempts are made to forecast the next 365 days, a measurement of time decided by a dead Roman Emperor over two thousand years ago.
Of course, forecasts are invariably wrong, it's just a question of by how much. Determining the long-term direction of mega-trends such as population ageing, oil depletion or new technologies is tough enough, but precise forecasting is a lottery, there's just too many moving parts, incomplete data and dodgy economic science to process it and then there's the inevitable unexpected game-changing event, which can be positive like inventions that ramp up productivity -- the jet fuel upon which rising prosperity is sustained -- or, negative ones, like 9/11.
Still we try and, remarkably, this year the overriding sentiment seems to be upbeat, positive and enthusiastic throughout the media, sensing that readers are fed up, that the economic mercury is rising and it's time to get with the mood music. What's unnerving is the unusual strength of that consensus -- that 2014 and beyond is going to be characterised by several years of modest economic growth, that quantitative easing has worked, that all the excess debt and the new debt added since the 2008 crisis can be serviced in a benign environment of open-ended low interest rates, rising employment and asset price recovery, especially in property and stock markets.