The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future - Softcover

Poloz, Stephen

Softcover

ISBN 10: 0735243921 ISBN 13: 9780735243927

Verlag: Penguin Books Canada, 2024

Inhaltsangabe

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“The Next Age of Uncertainty combines invaluable historical insights with provocative reflections on the economy of the future—a must read.” —Thomas d’Aquino C.M., LL.D., founding CEO of the Business Council of Canada, and author of Private Power Public Purpose

From the former Governor of the Bank of Canada, a far-seeing guide to the powerful economic forces that will shape the decades ahead.

The economic ground is shifting beneath our feet. The world is becoming more volatile, and people are understandably worried about their financial futures. In this urgent and accessible guide to the crises and opportunities that lie ahead, economist and former Governor of the Bank of Canada Stephen Poloz maps out the powerful tectonic forces that are shaping our future and the ideas that will allow us to master them.

These forces include an aging workforce, mounting debt, and rising income inequality. Technological advances, too, are adding to the pressure, putting people out of work, and climate change is forcing a transition to a lower-carbon economy. It is no surprise that people are feeling uncertain. The implications of these tectonic tensions will cascade throughout every dimension of our lives—the job market, the housing market, the investment climate, as well as government and central bank policy, and the role of the corporation within society. The pandemic has added momentum to many of them. 

Poloz skillfully argues that past crises, from the Victorian Depression in the late 1800s to the more recent downturn in 2008, give a hint of what is in store for us in the decades ahead. Unlike the purely destructive power of earthquakes, the upheaval that is sure to come in the decades ahead will offer unexpected opportunities for renewal and growth.

Filled with takeaways for employers, investors, and policymakers, as well as families discussing jobs and mortgage renewals around the kitchen table, The Next Age of Uncertainty is an indispensable guide for those navigating the fault lines of the risky world ahead.

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Über die Autorin bzw. den Autor

STEPHEN POLOZ is one of the world’s foremost economists with over 40 years of experience in economic and investment research, forecasting, banking, and policymaking, including seven years as Governor of the Bank of Canada. Today, he is a Special Advisor for Osler, Hoskin & Harcourt LLP, a corporate director, and Chair of the Advisory Board of the Lawrence National Centre, Ivey School of Business, Western University. Previously, he was with Export Development Canada for 14 years, first as Chief Economist, then Senior Vice-President of Lending, and finally as President and CEO. Stephen is a sought-after speaker for business and investor audiences and is quoted frequently in the news media.

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INTRODUCTION

Uncertainty is everywhere, but especially when it comes to the economy. Concerned that the weather might disrupt weekend plans? There’s an app for that. But there’s no app for the uncertainty that really counts. Is my job secure? Will I earn more next year? Can I afford to purchase a home? Will I ever be able to afford one? Is now the right time to buy? Is the money I have set aside for a down payment growing? Is the stock market about to collapse? What will the interest rate be when I renew my mortgage? Should I renew for a short or long term? How long will I live—will I have enough savings for my retirement? And why is the price of gasoline so high this week, by the way? These questions pertain to important personal life decisions that have long-term consequences. We all live in the economy.
 
These everyday questions are difficult enough for individuals, but they are even harder for companies, which have more factors in play. Indeed, the quality of their decisions will determine not only their future but also whether you do still have a job tomorrow. To maintain a viable business that offers secure employment and ongoing profitability, companies must make forecasts about future economic trends such as sales, prices, interest rates, and exchange rates. They translate those estimates into a business plan that covers hiring, orders for raw materials, equipment purchases, expansion plans, and so on. They also must develop a corresponding financial plan, supported by a bank and perhaps public equity or bond markets.
 
In short, employers and employees face the same economic uncertainties together. Economic growth versus recession, the rate of inflation, the level of interest rates, the exchange rate, the stock market, job creation or cutbacks, salary levels, the state of the housing market, prospects for government spending and taxes, and so on—it matters to us all. From the street level, some macroeconomic concepts may seem abstract, but they are ingredients in all of our major economic decisions: whether to work and where, where to live and how, what to buy and when, when to borrow and how much, when to hire and when to fire, and when to take a chance and expand the business. Economics is the air we all breathe and the water we all swim in.
 
You don’t need an economist to tell you that economic instability has risen in recent years. That means it is becoming a lot harder to make plans for the future. The question often posed is whether things will ever return to normal. The book-long answer to that question is that “normal” is not what most of us think it is. The short answer is we should expect even more volatility in the years ahead, not less.
 
A future with greater economic volatility means that things could turn out either worse or better than we expect and that the range of possible outcomes will expand. We all instinctively loathe uncertainty, even when we understand that it is two-sided, meaning that it can bring not just bad luck but sometimes good. Uncertainty is stressful. We make fresh economic decisions every day based on our expectations about the future. And the wrong decision is only going to get easier to make.
 
When economic uncertainty increases, so do the risks associated with making the wrong decision. The forces acting on the economy will produce more frequent and larger fluctuations in employment, inflation, house prices, interest rates, and stock markets in the future. For example, when buying a house, we will need to consider that the risk of losing our job, and therefore possibly losing the house, will be greater than it has been in the past.
 
In short, the more uncertain our future becomes, the more risk we take on when we make everyday decisions. How do people make decisions in the face of uncertainty? We base our decisions on our own average past experience, expecting the future to follow course. In other words, if things seem unusual right now, most of us expect that things will return to normal. But how confident can we be of that? The more uncertain we are, the more stressful that decision becomes. We may seek advice from family, friends, or experts to relieve the stress of the unknown.
 
Experts are a special breed. They don’t form expectations like the rest of us do; they make forecasts based on a much wider information base, including an understanding of economics, reams of data, and computer-driven models to predict outcomes. They spend all day trying to understand these things, while the rest of us do our regular jobs and try to understand the world on evenings and weekends. We read newspapers, books, search the web, or watch business news shows to access a wide array of experts to help us understand how the world works. There are many experts on the economy, and even more opinions than there are experts. There is too much information available to us on the economy, much of it loud, excessively confident, and contradictory besides. Experts aren’t always right. And there are things experts just can’t know.
 
During my time as governor of the Bank of Canada, I made a habit of being honest about uncertainty in our economic outlook. This is especially important after the economy is hit by a significant disturbance, as economic models can easily lead us astray. A good example was the Global Financial Crisis of 2008 and the Great Recession that followed. Canadian exports fell dramatically and the situation was made even more difficult by a rising Canadian dollar, which eventually broke above parity in 2011, forcing many Canadian export companies out of business. As the dollar moved steadily lower in the next few years, economists expected Canadian exports to recover. This forecast was wrong because so many of the export companies no longer existed. Economists’ models were simply not equipped to account for company destruction on such a scale. This experience illustrated perfectly that economic forecasts should always be interpreted as the midpoint of a range of possible outcomes—sometimes a wide range of possible outcomes. A forecast is only an expert’s guess, usually supported by models based on historical data. Economists are a lot like scientists in that we take in a lot of information and come up with an hypothesis for how the economy works. But while a scientist can test an hypothesis in the lab, economists and central bankers can only develop models based on past behaviour. As a consequence, those models work best when the future resembles the past.
 
This book was written in the wake of the COVID-19 pandemic, a case study in extreme economic uncertainty. From my vantage point, the situation looked and felt like chaos. For several weeks in spring 2020, my life consisted of an erratic and relentless sequence of virtual meetings, at all hours of the day, all taken from my rarely used home office using an internet connection of questionable reliability. Financial market programs and monetary policy tools were deployed on the fly, with most of us guided by instincts rather than actual data.
 
Whenever something extreme happens to the economy like that, economists are immediately called upon to opine on what it may mean for the future. Personally, I had very little confidence in our ability to predict how the pandemic would affect the global economy, and yet, as usual, confident forecasts about the future were not in short supply. The vast majority were predicting a major economic convulsion, one that would last for a long time. I was skeptical. Perhaps it was my sunny disposition rising to the surface, but I had the sense that economies would show some resilience. The situation reminded me of September 11, 2001, and the confident pronouncements in...

Details zur Ausgabe

• Verlag: Penguin Books Canada
• Erscheinungsdatum: 2024
• Sprache: Englisch
• ISBN 10: 0735243921
• ISBN 13: 9780735243927
• Einband: Taschenbuch
• Anzahl der Seiten: 304
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar