The science of foretelling was apparently revered by the ancients. Examples abound of oracles divining the fates of wise men and kings. Mighty warriors, Odysseus and Agamemnon would not dare sally forth less the portents augured in their favor. The balance of chances measured in scattered bones, animal entrails or the position of the firmament still live on in today’s folklore. But in most of the Western world, fortune telling has lost its potency – that is unless the fortune teller happens to be a scientist, pollster, or economist.
The invention of science and statistics has replaced old-school fortune telling in very insidious ways. Now, while careful to disclaim – past performance is no guarantee of future results – hucksters of all sorts try to sell us stuff by pointing to long term trends. In fact, America’s current state of economic recession was caused by a confidence born of scientific analysis. Supposedly, we all believed, housing prices would never fall. After all, they had risen steadily for over eighty years. Very few people alive and relevant today remembered the last time when the U.S. housing market went bust. Those people who lost their homes in 1933 are no longer around to delivery any cautionary tales.
So today’s fortune tellers – the economists and statisticians – delivered cryptic pronouncements from their isolated Ivy League lairs, declaring it mathematically impossible that we could experience a complete meltdown in the housing markets. Hindsight would reveal that they were all wrong. Everyone, from the oracle at Phila-Delphi, former Fed Chairman Alan Greenspan to today’s Fed Chairman Ben Bernanke not only disavowed the likelihood of a housing market crash, but actually dismissed the possibility that a downturn in housing would spill over to the broader economy. America bet the house, quite literally, on this turning out to be true. As history would have it, even Oracles can be wrong.