MAKE YOUR OWN ECONOMIC PREDICTIONS FOR 2008. Kids, this would be a good time to try your hand at economic predictions. It’s good to take a position because it makes you pay attention to what’s happening—like picking your horse when you watch the Kentucky Derby, only we all have a lot more at stake. Flip a coin and decide whether there is going to be a recession this year. A coin flip will work because economists a little while ago seemed to think there was about a fifty per cent chance of recession. (There was some inconsistency in the predictions because the average predictions by a typical group of economists had GDP growth for the year at about 2% and if they really thought the chance of a recession is fifty per cent, the average prediction for GDP growth should be about zero). Just yesterday the Federal Reserve Bank cut the federal funds rate dramatically by three quarters of per cent. The Fed apparently thinks the risk of a recession has increased dramatically. Perhaps you’d like to follow the Fed rather than flipping the coin?
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To be fair, coin flip or not, I know so little about macro economics that I’d feel foolish even trying to make a prediction. Although every time I buy anything or see a price here I’m reminded of how weak the dollar is, so sure, there’ll be a recession.