In this comprehensive interview that Neil Howe – author of the must-read book The Fourth Turning The Fourth Turning – did with
his firm, Saeculum Research, he wastes no time in telling
us that he thinks expectations of several more Fed rate raises this year are
“delusional,” because
“The
global economy is in no condition to take this medicine. My very safe
prediction is that the Fed will either stall or back down.”
As John Mauldin annotates, Neil doesn’t
stop there. He reminds us that the world geopolitical
situation is deteriorating, particularly in the Middle East, and that the US
presidential race is a complete crapshoot. At this point,
the interviewer chirps in with “You sound a bit more downbeat than most.” Well,
says Neil,
If I’m
coming in beneath the consensus forecast, it’s because – over the last decade –reality has been coming in beneath the consensus forecast…
[T]here do
arise periods lasting ten years or more when the consensus forecast can veer
consistently too high or too low. And over the last decade, it has veered too
high. Each year since about 2005, forecasters have been predicting a rise in
corporate earnings, in GDP, in inflation, in interest rates—in basically all of
the vital growth metrics – that is substantially higher than what subsequently
occurred. And I’m talking about every forecaster: the IMF, World Bank,
Fed, ECB, OECD, and CBO, along with surveys of business economists…
Systematic
overshooting by international institutions is leading some observers to talk
about “an in-built ‘optimism bias.’”
Which leads the interviewer to quip, “I guess we can’t call it
the dismal science anymore,” and to wonder at the reasons for the chronic
boosterism. “Oh, I know why it’s happening, says Neil,
The world
has fundamentally shifted over the last decade, especially since we’ve emerged
from the Great Recession.We are seeing slower demographic growth,
overleveraging, a productivity slowdown, institutional distrust, policy
gridlock, and geopolitical drift. But the professional class has been very slow
to understand what is going on, not just quantitatively but qualitatively in a
new generational configuration that I call the Fourth Turning. They don’t
accept the new normal. They keep insisting, just two
or three years out there on the horizon, that the old normal will return – in
GDP growth, in housing starts, in global trade.
But it
doesn’t return.
January 2016 Report
All signs
point to 2016 being a momentous year on every front, from the shuddering global
economy to the stormy upcoming election season. How will the world look by
year’s end? BP interviewed Saeculum Research Founder and President Neil Howe to
get his take on what’s ahead. (This is an expanded version of the interview we
published as a Social Intelligence report on January 6, 2016.)
