Was This The Worst Economist Forecast Of All Time

Tyler Durden's picture

When it comes to predicting the future, there has traditionally been a stealthy contest between economists and weathermen as to who is the worst predictor of coming events. Lately, there was some confusion when economists - this includes central bankers and market "strategists" -  tired of being humiliated in public for their terrible predictions, decided to become Monday Morning weathermen (ironically, none more so than those who competed with Groundhog Phil and lost) and blame their lack of foresight on the weather.

This led to even more humiliation for said economisseds (sic) and entertainment for everyone else.

But there is little confusion about what may have been the worst economic forecast of all time. For the answer go to Japan, and back 30 years in time, just after Japan's mega asset bubble burst when in their desperation to preserve the myth that "all is well", economists were "predicting" how little Japan's growth would be impacted as a result of the burst bubble.

They were all wrong.

As HSBC's Stephen King points out, nowadays, Japan’s "lost decades" are seen to be a blindingly-obvious consequence of the bursting of Japan’s late-1980s stock market and land price bubbles (ahem China). At the time, however, few managed to predict what was apparently so obvious in hindsight.

Which brings us to what probably is the worst economic forecast of all time: in the mid-1990s, the forecasting consensus had every confidence that nominal Japanese GDP would rise 25% over the next five years. Consensus was wrong: by 2000, nominal GDP was more than 24% lower than had been projected five years earlier.

Did the forecast humiliation end there? Oh no. 

The gap between forecast and reality got bigger and bigger thereafter. In fact, over 30 years later, Japan's nominal GDP and GDP per capital now is where it was 30 years ago even as Japan has piled up a total debt load that is now over 400% of GDP.

Finally, as a consequence, bond yields fell further and further, continuously undershooting forecasts.


Does this look familiar? If not, recall this chart?

And this:

Comical economists aside, "Japanification" is precisely what is happening to the rest of the "developed world" as global growth continues to deteriorate, global debt grows and the only short-term resolution is to keep rates as low as possible... and now, negative across 28% of the entire world.

This weekend we will lay out HSBC's thoughts on what "turning Japanese" means for the rest of the world. Spoiler alert: only bad things.

In the meantime we ask, when will "economists" be finally laughed off the global stage for the charlatan comedians they all are?

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Vampyroteuthis infernalis's picture

Might as well throw darts at a dartboard. At least the hot weatherlady is eye candy compared to Mr Yellen.

chicaboomboom's picture

The chickens are coming home to roost. America is now beginning to pay for its awful sins, especially this one >>> http://wp.me/p4OZ4v-3z

NoDebt's picture

"In the meantime we ask, when will "economists" be finally laughed off the global stage for the charlatan comedians they all are?"

I'm gonna say 'no' on that one.

Stuck on Zero's picture

The mercantilist trade policies of Japan worked until the rest of East Asia adopted the same policies.

Escrava Isaura's picture



Isn’t Japan deflating for 26 years?

And they still going, even that many are trying to crash it?

Japan will crash at 1 Minute to Midnight—next decade. Not at 3 Minutes.  

hxc's picture

It's always word soup out of you, man.

johngaltfla's picture

I don't know; it's pretty hard to have a worst forecast than the Congressional Budget Office who in 2010 said we would enjoy 4%+ GDP growth last year and in 2016

Escrava Isaura's picture



So tell us, how is their forecast any different than ours?

Try writing this, instead: The Congressional Budget Office is always wrong because it’s run by organic beings like us. Anyone that thinks we can keep growing in a finite planet is out of their mind or very ignorant of geography.

Arnold's picture

So, what's the spread on the Brazil?

I'll take Rousseff and points.

JRobby's picture

Yes it was, by design! Must keep stawks up / sheep in line at all costs.

But unexpected costs have become too high as the sheep are awakening. The machine that ran like clockwork for years as all wealth was robbed from the world is breaking down.

overmedicatedundersexed's picture

inequality of wealth ..is just the outcome of most crimes..the thief steals from many others and if not brought to justice, why that wealth concentrates in the hands of a few criminals..now how does the differ from the inequality our western .govs have handed us?? it's a rigged game at the highest levels and those in power benefit so why change?

OldPhart's picture

Fuck this, I'm going to spankwire.

The Fed circle-jerk is getting old.  And I really don't want Yellen's hand anywhere near my my vienna sausage (fully enraged amounts to a doubling of one inch.)

I'm so sick of this sort of shit that I read it, log it mentally, and ignore so much.  It's overwhelming how controlled everything is.  And I choose to not participate.  But I do try to pay attention.

It's the paying attention part that totally fucks my life.

FredFlintstone's picture

Vienna sausage! Maybe we share a common lineage?

Nutsack's picture

Palestine is a fictional country. It never existed.



Try again, coward.

Eirik Magnus Larssen's picture

It is an occupied land.

Occupied due to the same far-right policies which demented nutcases like you obsessively advocate for.

try_it's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.earnmore9.com

TeaClipper's picture

Let me guess, your a bomb maker for ISIS right, and your recruiting

holgerdanske's picture

Might, but they could only hit that by mistake.

JamaicaJim's picture

As long as the FED prints/thinks up FRN's/digitizes/outright fucking buys the stawk "market" -

....this shit-show will continue....

It's EXACTLY the musical chairs/fore-caddy the shift - when they halt it/talk it/manuver it/TPTB go "reverse skate"

chart away..........but

We're LONG been in uncharted modern time/nuclear waters....

jm's picture

This is a terrific article.

One day some lucky pothead will get rich shorting JGB40s. The market has to destroy all hands that forecast it before this will happen.

She ain't called the widowmaker for nothing.

Farqued Up's picture

Panic now travels close to the speed of light. There are no prerequisite actions required for panic to blast everything, the forecasters can pound their puds with both hands and the panic will obliterate the procrastinating fucks before God gets the news.

This is inevitable, and no holy rollers will be raptured out of this shit, either.

We's be fucked, uh, FARQUED!!

hooligan2009's picture

be better to pay economic forecasters to dig ditches for the average 250k a year, least there would be a ditch - well an odd shaped ditch, J-curve, U or V shaped, liquidity enriched ditch or an improving ditch or even a "we can fix it ditch",

i take that back, bext to re-emply economists as 50's sitcom characters

ebworthen's picture

Central Banks are designed to reward speculators and punish savers and the working class.

Central Banks were formed to benefit the banksters, the corporatists, the elite.

All Hail the Kleptoligarchy!  Until the People have the guts to hang them all.

Tom Green Swedish's picture

We are being "fed" some shit. This is a gigantic bubble.

Great link.  Whenever this guy comes on television you know the shit is going to hit the fan.  Next thing we need to hear is Ben Stein saying buy Bear Stearns.



Another good one on the giant "econmic experiment"



gregga777's picture

"In the meantime we ask, when will "economists" be finally laughed off the global stage for the charlatan comedians they all are?"

Economisseds are certainly charlatans, but they are only comedic from a very dark, evil perspective. While attending University, studying Engineering following service in the United States Marine Corps, I observed that the least Mathematics-capable students were studying to be economisseds. It is certainly no coincidence that economisseds models so often poorly represent reality. Economisseds are the second least useful and most dangerous professions that I can think of, politicians being the absolute least useful and most dangerous.

Arnold's picture

You know Mr NoDebt is an economist, don't you?


If you imagine economists as buxom, weather forecasters, you would be very close to a 1;1 correlation.

Farqued Up's picture

And they pompously call their branch Political SCIENCE. Fuck me running.

Dragon HAwk's picture

As the Saying Goes..  Well we now know what Won't Happen.

Dead Canary's picture

The difference between an economist and weather forecaster. If the weather man predicts sunshine and we get rain you won't hear him say.

"My detractors, who say it's raining today, are peddling fiction."

conscious being's picture

Terrific post. Wait out the collapse.

RopeADope's picture

That is not forecasting. It is carrot on a stick to fool everyone into believing the unsound reasoning being offered up.

Street Hustle 101 folks...

homebody's picture

Okay so this crap in America can go on for another 30 years or longer - too much world wide currency manipulation for the country to go under - slow decline into oblivion.  

Bopper09's picture

Japan must be close to a debt:GDP number where the central bank will own 100% of the market.  I'll just throw out there about 700% debt to GDP?

I mean, surely we're getting close to accurately calculate that.  We all know the direction will never reverse.

Conax's picture

There are too many potential black swans out there to get all cozy around this idea.

Odds are, one will hit the windscreen. It could all collapse in a day, or stumble on another year or so.

I don't believe 30.

rahtidmon's picture

I am somewhat suprised we have gone this long! The illegal Fed did have a few tricks up their sleeve, never thought they'd use what they did...TARP, QE, ETC...

Here we are, all zombies, like Japan. This could go on for some time, however, there will be events taking place soon, that will trigger a panic.

It's comin' folks, count on it.

RU4Au's picture

The Japanese saver is a curious creature. The currency already has lots of zeros. The stated goal of the central bank is to add more zeros. The data above shows decades of central bank cluelessness.  What is the rationalized outcome the citizen saves for? If the central bank has the good fortune of succeeding in their designs the currency will continue to die slowly. If there comes a strategically misplaced banana peel then the currency dies rapidly. 

It just seems that the average citizen would figure out that stashing ¥50K notes, even the physical ones, is a really bad idea. Digital currency will only speed the slash attack on buying power. 

I sincerely feel for these people. They are trapped on a crowded island with few resources, a leaky nuclear facility, and a doomed currency. I hope they have the foresight to prepare for what is coming. The day is not far away that imports will not be able to be purchased in all those saved bank notes. Without imports it all stops.

1033eruth's picture

They are trapped on a "crowded island".  The propaganda has been non-stop about how their population is going to disappear shortly if they don't start breeding or open up their borders.  

Every month we get an article about their "demographic catastrophy" and that the way to salvation is to double their population.  Plus most of the people here on ZH agree with that "analysis".  I put analysis in quotes because what it really is, is propaganda.   

Japan was/is being mismanaged.  Its not strictly about fiat currency.  IF they had a balanced budget and stuck to it - fiat currency would not be the issue.   

Marco's picture

Uncorrected for inflation GDP ...

A graph only relevant to morons was mispredicted by morons ... wooo lad. Tell me how someone mispredicted EPS and how important that misprediction was next.

falak pema's picture

The cumulative effects of the Plaza accord and subsequent Louvre accord readjustment put Japan into a huge asset bubble in 1988/1989, all due to America's export weakness and also due to Japan's closed economy.

Japan died right there as king exporter during that decade and became the role model for what awaited the USA : FIRE financialized implosion.

Japan's lost two decades and now its America's and Eurozone's turn.

And the whole world with it as its all bankster interconnected.

rahtidmon's picture

Nice call on that one falak! See I can agree with you at times!

Last of the Middle Class's picture

First of all, there are 2 economic forecasts, the one for those who benefited from QE and such, then of course the one for the rest of the country. Not too hard to guess which forecast goes where.

yogibear's picture


Collapse Already! 

The US Federal Reserve's huge Keynesian printing experiment has failed. 

SofaPapa's picture

This has been posted on here thousands of times already, but here we go one more time:

As long as "money" is made equivalent with debt, this is the natural evolution of any economy.  A=B.  It's not complicated.  No economy will ever (cosmic scale time here) match up to the delusions of the men and women who control the issuance of debt.  Under fiat money there will always be a runaway debt (easily described using the mathematical concept of exponential growth) which will eventually crush economic activity entirely.  This is hardwired into the design.  There's no escaping it any more than there is escape from the gravity of a black hole.

Money tightly bound to a naturally limited commodity (causing people to produce and trade within predictable and rational growth rates) will have the longest shelf-life, but of course, because of the above-mentioned delusions, eventually the AIC (assholes in charge) will feel constrained by such "arbitrary" limitations and will insist that they can do a better job of controlling money supply themselves rather than living within the naturally limited system, and once again we are off to the races.

Human delusion is a natural law as immutable as gravity.  All we can do, really, is to sit back and enjoy the show.  In the meantime, the less seriously we each take ourselves and the shitshow going on around us, the more enjoyable our mysterious and magical time on this rock spinning and rotating through space will be.

the grateful unemployed's picture

what C = collateral. at least in the early stages of debt creation there is a link to C. C limits A. in theory there is never more credit than is needed to create economic growth. the excess credit never comes to fruition, but as we see in QE it does allow asset prices to maintain their value or even rise, even when the assets are non producing E = earnings, when E no longer provides a return on C, then A loses value. then investors seek their own G = gold G=C when C is losing its E power relative to A. its not hardwired, the natural inclination is to protect and nourish C. the AIC then try to outlaw A figuring in the first instance they could create C out of thin air, then assuming that the problems with C are really A (people lose confidence in worthless paper money) they outlaw A which leaves only B which is credit, (not enough letters). now just imagine a world there is no W = wealth

SofaPapa's picture

Your illustration is perfect.  This is exactly the way to communicate this stuff so as to demonstrate the absurdity of the thinking.  My hat is off to you.

"in theory there is never more credit than is needed to create economic growth."

This is where the delusion comes in.  Who decides which extension of credit will create growth?  I can loan my deadbeat cousin $100 on a can't lose investment to double my money, because I look at that investment and am already imagining the $200 in my pocket.  Although my cousin has had some trouble in the past... well... I trust him.  He's family, right?  Take this dynamic and adjust it a bit and you have the T=trust for the entire system, the variable which truly determines how long it will remain standing.  The AIC are creating credit (=debt), trying to create growth.  But a large enough proportion of the growth they dream of will always be delusional (=exists only in their mind, not in reality) that the system is doomed from inception. Also note that in the example of my cousin, I denote the value of the investment in the unit of the fiat money.  As long as we think/plan/dream/prepare using an impaired unit, we will most certainly yield impaired results.

As to the letters problem, greek symbols?  It always looks so impressive...

We are all delusional to one extent or another.  It's built into our DNA.  That's why we need to avoid taking ourselves seriously (including most especially the AIC, who truly are just "the man behind the curtain").

Can you live without W?  That's an extremely serious question, and worth the largest portion of any person's energy to solve during this lifetime we share.


buzzsaw99's picture

They always forecast higher rates in the future on purpose so gullible people will borrow more now. If economists had credibility they would have laid out and taken credit for buzzsaw's 99th law which goes like this:

In countries which issue their own currency as gubbermint debt approaches infinity interest rates tend toward zirp and beyond.

it is an immutable fact. logic doesn't enter into it.

ArtOfLife's picture

Worst economic forecast? 
Harry Dent predicting the DOW would hit 36k in 2000 and Harry Dent predicting the DOW would crash 80% in 2015. 

rahtidmon's picture

The moneychangers weren't wrong, they extracted all the money they needed!!!

All your money is now belong to us!

Charts are for treads! Fundamentals went out the window long ago, people are so gullible.

I'll order up some green eggs and ham!