Forecasting today is an enormous business. We are accustomed to hearing so-called experts opine on the future virtually every day. It is an accepted part of our culture. We hardly think twice about it, being accustomed to what in many cases is fortune-telling and omens. In that sense, the world is as pagan as it has ever been.

Readers may be surprised by that statement. Surely, forecasting isn’t on the same level as enchanting, sorcery, divining, astrology, or the interpretation of omens. Isn’t forecasting much more advanced and scientific than it was a century or several millennia ago?

Not necessarily. There are different types of forecasts. For example, weather forecasting is more advanced today than ever before. With weather satellites proliferating, there have been tremendous improvements in global data collection over the last decade or so. Computing power has also moved forward rapidly.

As such, short-term forecasts (two days in advance or so) of precipitation or temperature have become more useful. All the same, weather forecasting still attracts quite a bit of derision because it is not 100% accurate. Indeed, long-term weather forecasts are still very unreliable. Nonetheless, they are accurate enough over the short-term to be generally helpful.

We can agree that forecasts applying to the physical realm (things subject to physical laws) have improved, though are still very poor in many of these fields—for example, volcanology or seismology. The prediction of an earthquake event has not been mastered yet.

But what about human factors—future events and trends pertaining to human culture, fashion, financial markets, economies, geopolitics, peace and human advancement?

Here we discover that predictions are extremely unreliable. In fact, we find that forecasts are even less accurate than simple probability would suggest. Why? Human beings as a whole have certain biases. They love to hear what they want to hear. They all prefer what pleases the flesh. Observing human nature, we all understand this to be the case.

An article by Tim Harford (“How to See into the Future”) documents the unreliability of human forecasts. A short excerpt follows:

Billions of dollars are spent on experts who claim they can forecast what’s around the corner, in business, finance and economics. Most of them get it wrong. […] Former consultant William Sherden reckoned in 1998 that forecasting was a $200bn industry—$300bn in today’s terms—and the bulk of the money was being made in business, economic and financial forecasting.

It is true that forecasting now seems ubiquitous. Data analysts forecast demand for new products, or the impact of a discount or special offer; scenario planners produce broad-based narratives with the aim of provoking fresh thinking; nowcasters look at Twitter or Google to track epidemics, actual or metaphorical, in real time; intelligence agencies look for clues about where the next geopolitical crisis will emerge; and banks, finance ministries, consultants and international agencies release regular prophecies covering dozens, even hundreds, of macroeconomic variables.

Real breakthroughs have been achieved in certain areas, especially where rich datasets have become available—for example, weather forecasting, online retailing and supply-chain management. Yet when it comes to the headline-grabbing business of geopolitical or macroeconomic forecasting, it is not clear that we are any better at the fundamental task that the industry claims to fulfill—seeing into the future.

Mr. Harford comes to a similar conclusion: Human beings are not good at predicting human behavior. Financial markets, politics, peace, economies … etc. are all connected to human behavior.

Futurists, experts of any kind, and politicians (to name only some) all like to make positive predictions. In no field is there greater bias than in economic and financial forecasting. I have experienced this firsthand many times. We all know that financial crises occur from time to time and that massive declines in stock and bond markets can occur. Yet, one dare not predict any such likelihood. You will be severely scorned.

I remember one occasion years ago where I observed this tendency in almost cartoon fashion. I was being interviewed by a large group of journalists in Hong Kong. Every time I answered their questions in a manner that they liked and would be eagerly received by their readers, they wrote vigorously on their memo pads (this was more than two decades ago … no tablets and iPhones as of yet). However, when I made a tentative comment or pointed to an unsustainable development that could lead to a financial market decline, they became sullen and stopped writing. They would only publish auspicious statements. It was bizarrely hilarious.

It is a bias that certainly infuses the financial forecasting business. Consider the bias of stock market analysts who grossly favor “buy” recommendations rather than sells. A purchase recommendation is more readily received than a “negative” sell.

Just why is it that human beings are poor at forecasting their own behavior and that of societies overall? The Creator of mankind has the answer, and it is found in the Bible that He has inspired for our benefit.

Predictions of Sin Are Profitable

Humans as a whole have certain biases in their behavior. As mentioned, they love to hear what they want to hear. They all naturally prefer that which pleases the flesh. Apostle Paul states that “Those who live according to the flesh have their minds set on what the flesh desires” (Romans 8:5). It is this “fleshly” receptivity that drives Madison Avenue and much of commerce.

The fact of the matter is that human beings are all sinners and they generally take pleasure in their sin—unless, of course, they have been justified through Jesus Christ. Even so, people all have the same “hard-wiring” in the human brain (the flesh), according to the Bible. The Bible points to key vulnerabilities of the human: “For everything in the world—the lust of the flesh, the lust of the eyes, and the pride of life—comes not from the Father but from the world” (1 John 2:16).

It is these same vulnerabilities or natural tendencies that the new scientific field of neural programming (also called neuroeconomics or neurofinance, when applied to economics and markets) seeks to understand. As such, these studies are quite revealing. As with many things, knowledge can have both good and bad applications and can be used for advantage.

Neurofinance is one application that seeks to understand how human behavioral biases can be predicted and better harnessed for predicting investment behaviors. This can afford great advantages to Wall Street marketers and perhaps specialized investment managers.

Neural programming studies are also applied to achieve more effective and response-generating marketing. The “hard-wiring” of the human brain—what some scientists call the reptilian part of our brain—reflects our instinctive preferences … the things that we will want without conscious thinking. In effect, these marketers are trying to use science to better circumvent our critical thinking, by appealing more directly to the “flesh” so as to be successful in selling us more services and merchandise.

Neuroeconomics is one area of prediction that is likely to prove useful to its practitioners. Why? Because it seeks to take advantage of the natural lustful proclivities of natural man. After all, sin is not going out of style. If anything, as godliness declines during these last days (See Jude’s description of these last-day trends. The terms “ungodly” and “ungodliness” are mentioned 6 times.), neuroeconomics will likely prove to be very profitable for its practitioners.

The Christian (the new person born of the Spirit) in principle should not be a victim of the world’s prevailing invitations to respond to fleshly lusts. According to Paul: “[…] but those who live in accordance with the Spirit have their minds set on what the Spirit desires” (Romans 8:5).

Neuroeconomics should find no advantage with their new marketing techniques to such a person. Says Apostle Paul, “It is God’s will that you should be sanctified: that you should avoid sexual immorality; that each of you should learn to control your own body in a way that is holy and honorable, not in passionate lust like the pagans, who do not know God” (1 Thessalonians 4:3-5).

Paul reemphasizes this point: “Put to death, therefore, whatever belongs to your earthly nature: sexual immorality, impurity, lust, evil desires and greed, which is idolatry” (Colossians 3:5).

In fact, Paul goes one step further, stating that it is also wrong to take advantage of sinful human nature: “[…] and that in this matter no one should wrong or take advantage of a brother or sister. The Lord will punish all those who commit such sins, as we told you and warned you before” (1 Thessalonians 4:6).

As bizarre and woolly as monetary policies are around the world at this point in history, we may have seen nothing yet. The Guardians of the Mammon Temple (central bankers) have engineered negative interest rates (both in real and nominal terms). Presently as much as two-thirds of the European sovereign bond markets have negative yields.

Why is this happening and what does it mean? While virtually no one had predicted that the world would fall into a state of negative interest rates, this state of affairs could well continue for some time.

To begin, the global monetary wars continue to rage. Given the continuing (and still rising) high indebtedness and low economic growth, policymakers are prone to attempt currency devaluation. To do so, they slash administered rates and embark on aggressive monetary programs (quantitative easing and “money finance”).

Over the past two years, the four major central banks (all taken together) bought more government bonds than were issued. In other words, total government bond issuance has been monetized over this period. This commonly believed “central banker impunity” is not factual even based on recent evidence. Past monetary programs (post the Global Financial Crisis) did not pump-prime economic growth. Yet, the “faith” remains firm.

Lately, Europe has launched its reply to the expansive monetary policies applying to both the US dollar (see graph of unprecedented M1 expansion on front page) and the yen. As such, the euro has plummeted in recent months against the US dollar. This can only continue for a short while longer. Before long, a disappointing US economy (relative to current optimistic expectations) and booming European exports will create a new global imbalance. And so the wheels keep turning.

In the meantime, a high level of faith and confidence is given to central bankers. For example, according to a recent Citibank survey, fully two-thirds of participants agreed that central banks are now fully in control.

They are the modern day “court wizards”…the equivalent to the “shamans” of old. A Biblical parallel might be Jannes and Jambres who were magicians of the Pharaoh during Moses’ time.

Recently, there have been a number of weighty research reports issued focusing on the topic of debt. McKinsey Global Institute (MGI) released an update of its 2010 and 2012 reports on global debt trends, titled Debt and (Not Much) Deleveraging. It confirms that now, 7 years after the start of the Global Financial Crisis, debt continues to rise around the world in aggregate. Deleveraging as a whole has technically not yet occurred overall. Debt continues to rise around the globe and is predicted to continue to rise (measured as a ratio to GDP, see graph on page 4).

Also, the Bank of International Settlements issued a report titled Secular Stagnations, Debt Overhang and Other Rationales for Sluggish Growth Six Years on. It argues that large debt overhangs (external, private and public) have been a major reason why economic recoveries have been so sluggish to date. This institution points out that an important marker for the completion of a crisis is a significant unwinding of debt. Darkly, they conclude that “[…] figures indicate that high leverage remains a headwind some 6 years after the initial crisis.”

So there we have it. Debt (and leverage) is still increasing overall according to MGI and the B.I.S. says that this is opposite of what is required to signal an end to sluggish economic growth and crisis.

How do policymakers get around this apparent impasse? According to “new economic thinking” there is an easy answer, this being that one should only focus on net government debt (not gross).

Specifically, one should only focus on government debt netted out for central bank bond holdings. To illustrate, McKinsey points out that overall government debt levels in the US would fall to 67% of GDP as opposed to a gross total of 89% of GDP. Voila. This debt virtually disappears to absolutely nothing. After all, the interest income received on these bond holdings get paid back to the US Treasury in any case.

Consider the transformation of Japan’s debt levels when viewed net of central bank holdings: Net government debt falls an equivalent of 141% of GDP!

This could be a free lunch, according to the “new economic thinkers.” Central banks can continue to buy government bonds (whether in secondary or primary markets) and not worry about any holes in their balance sheets. It doesn’t matter for an institution that can create money. In this way, then, rising gross debt levels will be seen to be benign — actually, highly stimulative — while not raising net government debt.

Of course, this is smoke and mirrors and can provide no free lunch. Ultimately, a price will be paid … with interest.

As we have often mentioned in these updates, we fully expect a decline into rampant “money finance” policies by all of the major central banks. How soon? We can’t exactly say. However, we are less doubtful about the outcome that will follow.

It will be a whirlwind of deceptive trends and developments, underneath of which will lie a desperate and immoral redistribution of wealth. We expect little opposition to these last ditch attempts because financial asset values will be sure to keep climbing. This is the surest way to divert attention from the real underlying destruction. All of this may take a number of years to play out.

However, the ultimate fall-out of these unwise policies will be quite terrible, capturing an even larger percentage of societies as economically oppressed. There is only so long that “Ponzi” type policies can continue.