What to predict when you’re predicting a recession

This is Bloomberg Opinion Today, a Boxing Day gift of Bloomberg Opinion’s opinions. Sign up here. Why macroeconomists are wrong. Surprising [Bloomberg]( This is Bloomberg Opinion Today, a Boxing Day gift of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Must-Reads - Why macroeconomists [are wrong](. - Surprising climate [power brokers](. - [Don’t rob]( Russia’s central bank. - Spotify’s [profit problem](. Don’t Let Your Babies Grow Up to Be Macroeconomists Why did so many economists wrongly predict that there would be a recession in 2023? Tyler Cowen (an economist who had thought there was a [reasonable chance]( of a recession) [offers two main reasons]( (free read!): - Macroeconomics is hard. - When the Federal Reserve raises rates as sharply as it did over the past 20 months, it’s pretty reasonable to expect a recession. “There is a reason that so many economists had been predicting a recession — and it is not because they are out of touch, or repeating talking points from Donald Trump’s presidential campaign,” Tyler writes. “They predicted a recession because that is what experts such as [Janet] Yellen, [Paul] Krugman, [Christina] Romer and many others had been teaching for decades.” It’s not that those teachings are necessarily wrong, either. They were just wrong … this time. Tyler puts in a plug for the currently out-of-fashion rational expectations school of macroeconomics, which teaches that a central bank with [enough credibility]( can effectively convince market participants to make inflation go away. But don’t expect that to work every time, either. “Macroeconomists very often [don’t know what is going on](,” he warns, “and that holds true for all the different styles and flavors of macro.” If 750 words on this topic isn’t enough for you, Tyler discusses macroeconomics for 56 minutes and 41 seconds on a [new edition]( of David Beckworth’s Macro Musings podcast. Meanwhile Anna Wong, chief US economist for Bloomberg Economics, talks to Tracy Alloway and Joe Weisenthal on the [latest Odd Lots podcast]( about her [100%-chance-of-recession forecast]( from last year. 2023 Was Hot, Hot, Hot This past year will probably be the first in which the global average temperature is 1.5 degrees Celsius above pre-industrial averages, a threshold beyond which climate scientists have predicted more extreme and irreversible effects. That “[gobsmackingly bananas](” heat is No. 1 on Mark Gongloff’s [“2023 Climate Power Rankings” list](, which is not a big surprise. You’ll have to read the column to find out why Taylor Swift is No. 9 and Mia Mottley No. 7, though. Meanwhile, David Fickling has a roundup of “[The Year’s Worst Climate News You Haven’t Heard About](,” which was actually published yesterday — but given that yesterday was Christmas, I’m not going to be super-strict about the third word in the title of this Bloomberg Opinion Today newsletter. One notable point David makes is that the world’s oceans are getting so saturated with carbon dioxide that some scientists are worried they may start spitting it back into the atmosphere. For today — that would be tomorrow in Australia, where he is based — David is promising a good-climate-news follow-up. Look for it in tomorrow’s Bloomberg Opinion Today. I would put it in the Bloomberg Opinion Tomorrow newsletter, but it doesn’t exist. Yet. The Case Against Robbing Russia’s Central Bank Confiscating Russian central bank assets and handing the money over to Ukraine, as proposed in a new bill before Congress, seems an appealing way both to punish Russia for its invasion and to help pay for the Ukrainian war effort. The [only problems](, writes Andreas Kluth, are that this would likely (1) violate international law and (2) generate very little money. Russian central bank assets held in the US amount to only “a mere handful of billions” out of roughly $300 billion in total, and it is only those that the legislation would affect. Most of the bank’s assets are in Europe, and European countries may be wary of an approach that seems at odds with Western pleas to maintain a “rules-based international order.” Telltale Charts “Yes, there’s been growth, with Spotify’s revenue twice what it was in 2018, but at the cost of perennial losses and new headaches like content moderation — such as when Joe Rogan’s podcast [sparked outrage]( over Covid misinformation. In a world of higher interest rates, investors are impatient for change; Spotify has underperformed the S&P 500 by more than 50 percentage points on a total return basis since going public.” — Lionel Laurent, “[Spotify’s Billionaire CEO Has a Broken Profit Record to Fix](.” “The crises that have brought supply chains to their breaking point have highlighted an urgent need for change. This will result in a far more robust and balanced framework for global trade and manufacturing.” — Tim Culpan, “[Supply Chains Are Breaking. They’ll Rebuild Stronger](.” Further Reading [Protecting the country]( from Trump 2. — Noah Feldman What [election interference]( looks like. — The Editorial Board Time is speeding up and [slowing down](. — Adrian Wooldridge AI is [remaking shopping](. — Leticia Miranda [Management secrets]( of Orthodox monks. — Howard Chua-Eoan ICMYI Holiday spending [rose at a slower pace](. [Apple watch ban]( still stands. Los Angeles office building [sells at]( 52% off its 2018 price. Kickers Bob Dylan’s Christmas lights: [a scholarly treatise](. There are a lot of [millionaire households](. Instant noodle soup [is dangerous](. Notes:  Please send probably-wrong economic forecasts and feedback to Justin Fox at [justinfox@bloomberg.net](mailto:hchuaeoan@bloomberg.net). [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Follow Us Like getting this newsletter? 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