Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Alan Greenspan Says Economic Forecasting Can't Predict Economic Futures . . .

Posted by Tom Foremski - September 19, 2007

Alan_Greenspan.jpgI got home late Tuesday and watched my Tivo recording of Alan Greenspan on "The Daily Show."

I was shocked: He said if he was able to measure how fearful or hopeful people are about the future, then he would not need any mathematical models of the economy, he would be able to predict our economic future.

But he said no one can measure people's sentiments accurately. Mr Greenspan added that in his more than fifty years of making economic predictions, he is no better at it now than when he started.

I couldn't believe what I was hearing. During his time at the helm of the economy, he and his colleagues at the Federal Reserve raised and lowered interest rates implying that they could cool or heat up the near-future economy at will. Now he is saying that he knows of no metric that can forecast the economy except consumer sentiment, which apparently cannot be quantified.

This is interesting since Mr Greenspan has founded a consulting group advising on financial markets. But maybe this makes sense since he is selling his new book: "The Age of Turbulence."

What better way to inject some turbulence into markets than for Mr Greenspan to undermine the accepted notion that the Federal Reserve knows what it is doing?!

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