A year of fiscal calamity ahead, or will we avoid the axe yet again?

Damien Grant is an Auckland business owner and a regular opinion contributor for Stuff, writing from a libertarian perspective.

OPINION: The genius of a horoscope is ambiguity. As I type this I am sitting at the ferry terminal in Victoria, British Columbia.

Helpfully for an imperial apologist such as myself the local newspaper is the Times Colonist. Like any good paper it has maintained a horoscope. Mine reads; Your powers of persuasion are such that you can get whatever it is your heart desires. But make sure it is your heart that is doing the talking, because your head could mislead you…

Given I am a columnist and seeking to persuade you, patient reader, this is apt, isn’t it? Equally, consider your own life and your mind will wander to some circumstances that fits this advice. Well-written horoscopes are lively, engaging and widely applicable.

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Seeking clues to events on earth from the heavens is an ancient custom. In the Hellenistic world oracles were popular for their ability to grant knowledge and wisdom based on their communion with the divine.

When Croesus, the King of Lydia, sought advice from the Oracle of Delphi on the wisdom on invading the Persian Empire the prophecy seemed unambiguous. If the invasion occurred, a great kingdom would fall. Bolstered, Croesus invaded and suffered a crushing defeat. His realm was lost, and he became a trophy prisoner of the great ruler, Cyrus.

Eventually winning his freedom Croesus returned to the oracle to complain about the divination, but when confronted with the claim that it was his misinterpretation of the reading based on hubris, rather than the advice itself, he understood his error.

A great kingdom had fallen, just as the Oracle predicted. The alternative to giving advice that is an enigma, a ruse deployed by charlatans from Nostradamus to palm readers, is to confidently predict the obvious.

A pundit who backs the favourite will come to be seen as prescient and the occasional failure to spot the outsider coming home will be excused.

This is the strategy used by those whose forecasts will be overwhelming the media this week. The start of a new year sees paid wordsmiths ploughing recklessly into print and pixels with predictions, forecasts and prognostications.

Alas, forecasts by newspaper pundits are as worthless as horoscopes. What we scribes for shillings lack is the ability to see the unseen, so we tell you the obvious.

Nassim Taleb, in his book The Black Swan, wrote about the perspective of a turkey, observing that each day the kind farmer would deliver a handful of grain and each day the turkey would gain a little in weight.

Based on the bird’s perspective, the best prediction would be that tomorrow would bring a little grain and each turkey would gain a few grams.

But what the turkey misses, and what false-prophets of the media fail to comprehend, is the true nature of the farmer. For one day, and only on that one day, the forecast will prove inaccurate.

The turkey who was wondering about the farmer’s benevolence, who had been urging caution about the true nature of what was going on, would be wrong every single time. Until, maybe sometime in November, he’d be right.

For myself, I believe we are on a turkey farm. It is my view that the economic path we have been following since the GFC has been setting us up for a massive economic correction on a scale similar to 1929.

I think that when this happens democratic governments will react in the same heavy-handed way they did then, in the same oppressive way they did in response to the pandemic, and that this will exacerbate the economic calamity into years of disruption and misery.

But for a decade I have been wrong. The grain handed out by the farmer, in the form of fiscal debt, low interest rates and quantitative easing, has seen us gain a little weight each year and the axe remains leaning against the shed.

Maybe I am wrong and the mainstream conservative economists whose understanding of economic theory has not progressed past second year macroeconomics and occasional podcasts downloaded from The Economist have a greater insight.

Or maybe they are wise enough to appreciate that the way to remain relevant is to stick to the safe, the predictable, the most probable, and just say what everyone else is saying; that we should expect a mild recession this year.

I mean. Really? How can you step back and look at the explosion of sovereign debt, unwinding of decades of monetary prudence combined with sustained disruption in the global supply chain and, oh, a massive war in the heart of Europe, and not conclude that there is risk of total economic collapse?

The west has been reduced to an economic model where business is sustained by consumer spending funded by debt and maintained by printed cash. It cannot continue and it will not continue. Something has to give.

Of course, it is possible that we can navigate a path forward that does not involve wiping out the pension savings of two generations and eviscerating the economic fundamentals that sustain those on the margins of economic life; but isn’t at least possible that we can’t?

My gripe with those sanguine members of the pundit class is that they either don’t comprehend the outside risk of a massive economic contraction, or they do and figure that it is easier and safer to stick with the rest of their peers.

Perhaps they are wiser than me for if you scream into the wind about the recklessness of those running affairs from The Terrace and elsewhere, and do so for a decade, as this columnist has, then you will be seen as an angry crank, and you had better hope that your writing contains some other redeeming attributes in order to maintain your position in the commentariat.

Happy New Year, New Zealand. May your horoscopes bring you wisdom, your palm readers have soft hands and the soothing words of the business section provide you comfort.