What are the big economic unknowns for 2015?

Justin Wolfers considers that topic here.  I don’t disagree with his points, but I’ll offer a separate (but somewhat overlapping) set of picks:

1. The major economic and indeed geopolitical question of 2015 will be whether the Russian economy can manage a graceful decline.  I’ll say no, they can’t, but it is hard to see what lies around the corner or even to outline scenarios.

2. U.S. gdp is now growing at a five percent clip.  Will that finally translate into significant real wage growth?  Again, I’ll say no, see this recent piece by Barry Bosworth.  Either way, this question will shape our entire future looking forward.

3. Can India continue and indeed extend its recent momentum?  They are one of the bright spots in the global economy right now, in terms of rates of growth that is.  I say yes they can, they “enjoy” the odd liberty of not having been very successful exporting in the past and thus they have a relatively insulated position where they can rely on internally generated catch-up growth.

4. Will Canada and Australia turn out to have been bubbles of a kind, due to falling resource prices?  Will the global economy enter a new forty year period where Julian Simon is right once again about resource prices?  I say the word “bubble” is misleading here, but they will see a further growth slowdown in 2015 in those two nations.

5. Will anyone still be pretending that Abenomics has a chance of succeeding?  I say no, not really.

6. Will Greece vote itself out of the eurozone?  (Technically speaking, that could start in very late 2014).  I say yes.

7. How slowly/rapidly will the Chinese government allow the growth rate to fall?  How much excess capacity will be wracked up in the meantime? Does there exist a scenario in which the growth rate decline is so slow that the excess capacity can be worked off in a relatively orderly manner?  I say no.

8. Will Brazil and Mexico turn around the fading economic fortunes of Latin America?  I say no, not this coming year at least.  Not next year either.

9. Will the economies of Italy and France continue to fester?  I say sadly so.  The risk is that Germany joins them.

What are the “unknown unknowns”?  (Can that concept still make sense these days, with so much on-line commentary?)  North Korea was always one, but it can’t fit into the total surprise slot any more.  In any case, the Sony hack and its aftermath will continue to be a big story.  What else might count as speculative guesses?  (NB: not all of these are maximum likelihood estimates, rather they are undervalued possibilities.)  U.S. equities could turn out to be a bubble, even with continuing superior American economic performance.  So we may have a 1987-style crash.  The traditional relationships between macro variables such as currencies, interest rates, growth rates, stock prices and the like will not hold up.  No one’s macro theory will look very good (now that’s a daring prediction).  Each year the chance of a nuclear weapon going off is larger than we think.  Maybe not in 2015, but the chance of France having another “constitutional revision”/peaceful revolution is larger than most people realize.  Private space travel will prove ever more dangerousAvian flu will reemerge.  The Supreme Court will rule against the current version of Obamacare subsidies.  Haiti will reenter political chaos.  An American terrorist will operate in the Middle East and pull off one surprise attack, not huge in terms of casualties but it will create a lot of attention.  The new Star Wars movie will be good.


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