Mystery of the Awful Economists (Part III)

Last week, we observed that the WSJ was also wondering about the Dismal set (The Mystery of the Awful Economists, part 2).

The Journal asked the Economists who had previously expected $50 oil to dampen economic growth what their thoughts were: “None feel that $50 oil will trigger a recession. Thirty-one percent said they feel oil would have
to be sustained at $80-89 a barrel to snuff out growth, while 48% believe crude would have to top $90.”

At the time, the Big Picture observed:

“To be fair, the economists may have been right this time — only a contraction may be more likely to take place in 2006 than in 2005.

No, I am not suggesting its guaranteed to occur, either then or now — its just that the percentages go up the more: 1) stimulus fades; 2) higher rates slow the real estate complex; 3) oil maintains increased prices for a longer time; and 4) the U.S. current account deficits continue.

Perhaps time will proven the Economists right. It would be ironic if they snatch defeat from the jaws of forecasting victory due to a bit of impatience . . .”

Which leads to today’s 1pm IMF release on World Economic Outlook (which may be what’s pressuring the markets this afternoon).

“The global economy will grow at a slower but solid pace in 2005, with higher energy prices paring expansion, the International Monetary Fund said Wednesday.

The IMF once again predicted uneven growth, with strong results by the U.S. and China, but sluggish performances in Europe and Japan.

In its latest World Economic Outlook, the IMF forecast overall growth at 4.3% this year, down from 5.1% in 2004. It projected the U.S. economy would grow 3.6%, down from 4.4% in 2004, but a bit better than the 3.5% rate it forecast in September. The IMF said it “welcomed the continued strong performance of the U.S. economy. With most forward-looking indicators remaining solid, the expansion is set to continue in 2005.”

Gee, that didn’t take too long to come true, did it? Turns out they were right after all.



UPDATE April 14, 2005 11:43a

Front page story of the WSJ today:

Economy Shows Signs of Soft Patch As Oil, Rates Weigh on Consumers

You had to see that one coming from miles away . . .



Global Growth to Slow Amid High Oil Prices
THE WALL STREET JOURNAL, April 13, 2005 12:59 p.m.,,SB111339918149605783,00.html

Economy Shows Signs of Soft Patch As Oil, Rates Weigh on Consumers
Greg Ip and Jon E. Hilsenrath
The Wall Street Journal, April 14, 2005; Page A1,,SB111339918149605783,00.html

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  1. david zaitzeff commented on Apr 14

    what do you know about or think about peak oil?

    basically, the “theory” is as follows:
    1) that the increasing supplies of cheap coal and later cheap oil has fueled our economic expansion in the last several hundred years;
    2) that in every system, oil production must peak at some point as happened in the USA in 1970;
    3) that world oil production is likely to peak during the years 2005-2010;
    4) that unless a genius invents a new way to make use of solar and wind or something else, that the declining oil production will put the world economy into a series of recessions, becoming a depression;
    4a) that basically, in the absence of new major technological advances for new energy resources, that oil prices must rise until they have put a stop to world economic growth. Either oil prices will put a stop to world economic growth, or the Fed’s actions will do it first;
    5) that the US is in great financial danger if such should occur because it is in far worse shape that it was in the last great depression, when we measure such things as mortgage debt, reserve requirements, etc.
    6) because the peak oil phenomenon is underappreciated in the general public, the market is strongly overvalued at this time.

    for more details from the pessimistic point of view, see

  2. Mark T commented on Apr 18

    Point 4) the genius has already invented nuclear power

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