Edito - November 2023


Temps de lecture : min

An unpredictable economy

Some of us may remember our economics lessons in which we learned the “rules of economics”? 

Names such as Keynes, Milton Friedman and, later on, Ricardo and Jean Baptiste Say are familiar to students.

What underpinned the thinking of these economists was the idea that mechanisms were at work to regulate the economy. Either automation (Adam Smith’s invisible hand) or “mathematical” determinism (Milton Friedman’s quantity theory of money).

John Maynard Keynes, for his part, considered that aggregate demand was the main driver of the economy and that the State, through its intervention, could achieve full employment and price stability.

« But John Kenneth Galbraith also said: “There are two sorts of forecasters. Those who don't know, and those who don't know they don't know.” This sentence should be given careful consideration because the behaviour of the economy and the markets clearly make us realise that we don’t know and that economic theory is powerless to predict economic reality. »


Let’s consider inflation. The rise in interest rates, which, incidentally, was very brutal, should have caused inflation to fall. This has not been the case, even though it has slowed to a degree. But how can the rise in interest rates be sufficiently effective when we live in a wartime economy, both in economic and military terms, which is driving states to spend more and more?

A recession in the United States has been expected for the last 18 months, which, once again, is expected to be caused by the fall in consumption following the rise in interest rates. It may happen, but with such a delay that the bond managers who bet on the flattening or even inversion of the yield curves were left disappointed, with the proof being provided by the example of Société Générale.

In fact, what we have forgotten, at a time when we have reduced the economy to equations, is that it is not a science, or if it is a science, it is a social science, i.e. the result of a multitude of behaviours. The system, between central banks that have distorted the functioning of the markets, governments that want to regain power and opposing geopolitical interests, is now blurred. The aggregate demand that Keynes holds dear is becoming increasingly difficult to understand.    

Director of the International Actions division

November 16, 2023

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