The Future: Even the Wise Can Pull a Gigantic Blooper

Mr "Stocks for the Long Run" Jeremy Siegel peered into the future in the CFA webcast The Impact of an Aging Population on the World Economy recorded on May 1, 2007.

The talk presents some fascinating projections of how the world is likely to look based on demographics and possible economic growth in the USA (and by extension other western countries with similar characteristics) and developing countries, especially China.

The future according to Siegel includes such dramatic possibilities as:

• people in the west will have to work substantially longer - over 11 years more than today - in their lifetime assuming even healthy 4% p.a. world economic growth
  
• the US, Europe and Japan will see their share of economic output fall by 2050 from 46% today to 19%, to be equalled by China alone
• globalisation is a good, necessary process to allow the transfer of capital from western countries to developing countries, i.e. to enable the Chinese and others to buy up our assets (and we use the money to fund retirement)

However, Siegel utters one monumental blooper in the webcast, which I am sure he regrets and was probably more a quick comment than the result of deep analysis. It does show the hazards of forecasting and estimating. Caveat lector and auditor, always!

Around the 50 minute mark, he says: "I don't believe we're over leveraged. I don't believe there's too much debt."

Maybe he (and we) can laugh a bit at our fallible attempts to forecast in these witticisms.