Wednesday, June 6, 2018

Is a Recession Around the Corner? We May Need to Look at Social Trends

The economy is growing and it is easier to find jobs now when compared to the last few decades. However, there is a growing risk that economist see who predict that we are likely to have a recession in the next few years.According to the 45 economists with the National Association of Business Economics the majority predicted recession by the 4th quarter of 2020.

These same economist were less optimistic about the near term as well. They were concerned about trade wars and upheavals in the world markets. As countries restrict and put tariffs on each others products a new level of nationalism and protectionism could take hold. 

There could possibly be some truth in what they are saying but even they are not 100% sure. The reason why economists often vary in their opinions is that it is hard to predict and project the future. The models they use are based on antiquated methods and new models have not been adequately developed.

Data will be important in any future models but that data will need to be collected on a new virtual data platform removed in part from physical commodities. Old models never expected to have that much information available to them and are likely to include non-traditional economic indicators not currently considered.

For example, analysis of Twitter, Facebook, Instagram and other social media accounts often determine trends. It is also possible to see who is most influential in changing opinion based on people react, comment and cite afterward. Of course, there are others who influence their smaller networks based on their opinions creating long legs to public opinion.

Thus, it is important to include such social analysis in economic valuations because opinion influences political leadership and in turn legislation. Trade wars won't happen if politicians will be criticized heavily by public opinion and may loose their position and power in the future. Social opinion may be more important than inventory levels or financing capacity because it is a root of decisions and purchasing habits.

Socially based economic adjustments become more apparent when we consider that much of what we think of as "truth" in economics is not actually real but socially acceptable values. Gold doesn't have more intrinsic value than coal unless we all agree that it does. Trust me people who are very cold right now might not agree with the rest of society! As the world globalizes the amount of data will inevitable change and the way we as a global society agree, or disagree, with the value of products based on perceptual trends may change indicating future economic booms or busts.

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