Did the Definitive Guide to 2022* live up to its name?
For the last post of the year, I will be looking back at the Ipoleco Definitive Guide to 2022* to see just how wrong I was. As expected, I didn’t do very well. Making predictions is fun but the real trick is to evaluate your performance to see of you were wrong and why to be able to make better predictions in the future. This week I’m doing exactly that: evaluating my guesses for what was going to happen in 2022. I wrote in last year’s evaluation that one of my mistakes was wording my predictions too broadly (which is fine if you can’t get it right by any other means), so I did my best to be more specific in my predictions for 2022. I’ll first show what I predicted, and then follow up with the evaluation, starting with:
Prediction 1: Russia will attack Ukraine
Russia has been massing troops at the border with Ukraine recently which has eastern European states nervous about an invasion. The US has come out with an extremely weak counter: sanctions. The US seems to think that sanctions can solve most problems ranging from halting Iranian nuclear ambitions to forcing Maduro’s government from terrorizing Venezuela. And sanctions do work in lower stake conflicts, but a Ukraine friendly to Russia isn’t just nice to have, it’s a core national interest as well as a very important symbolic issue. Russia doesn’t recognize the legitimacy of the Ukrainian state nor of the Ukrainian nation, and it will take more than economic sanctions for Russia to leave Ukraine be. When I’ve read commentators on the current situation between Russia and Ukraine many have argued that Russia doesn’t want a protracted conflict in Ukraine, nor the trouble of annexation and I agree, but that doesn’t preclude other forms of military action. I won’t speculate on the size or exact form of the conflict in Ukraine, but I’m certain something is going to go down.
Evaluation:
I think this one is spot on. It’s not very specific in what the conflict would look like but given how widespread the idea that Russia was just bluffing was at the time I still think I deserve some credit for correctly calling that the attack would happen, and that US sanctions wouldn’t stop the Russians. I also feel like my take on sanctions as an extremely weak foreign policy tool given the stakes of the conflict was spot on. No sanctions or other economic measures have deterred Russia or made it consider discontinuing the conflict, even the ones Western commentators were sure would be cataclysmic for Russia’s economy.
Prediction 2: Taper Tantrum 2 Electric Boogaloo
Inflation has started picking up for real in the US, which I reckon will be a theme for the 2020’s. US public and private debts have ballooned over the last decade and lamentations about student debt in the US are ubiquitous. At the same time modern silicon valley lives and breathes cheap capital. Firms like Uber and Lyft effectively privately subsidise meal delivery and taxi fares which would be absurd were it not for the current ultra low interest rate paradigm. But with interest rates firmly in the liquidity trap and inflation soaring the policy prescription is obvious: start tapering and raising rates. Last time the federal reserve began tapering the infamous taper tantrum took place where stock and bond markets reacted poorly to tapering which made the fed reverse course. Nine years and who knows how many billions of assets purchased later it’s safe to say markets will throw a tantrum like we’ve never seen before when the Fed gets serious about fighting inflation. The Nasdaq will drop like a rock and every financier from San Francisco to Miami will urge the Fed to support markets until it’s forced to step in. Inflation will continue to be a problem for the poor and middle class while being a solution for high public and private debt levels. This will not be official policy but it makes too much sense for the Fed to let inflation run rampant for it to make real efforts to stop inflation.
Evaluation:
This one is kind of half right, half wrong. I was right that the Fed would tank the financial markets by aggressively raising interest rates, and that inflation will continue being a problem. But credit where it’s due, Jerome Powell and the rest of the decision makers at the Federal Reserve have not yet caved in their fight against inflation. I still think that the US is going to be stuck with moderate inflation in the 5-8% range for five years or more. But that wasn’t the prediction, so I’m not giving myself any points on this one.
Prediction 3: Turkey & Greece Sabre Rattling
Speaking of inflation, the Ankaran school founded by Turkish President Erdogan holds that the solution for inflation is lowering interest rates. A strategy which, needless to say, has not paid off. Ordinary Turks are understandably not happy with the situation and will get increasingly angry as their hard earned cash quickly becomes worthless. Erdogan may have hollowed out Turkey's democratic institutions but as Nursultan Nazarbayev and President Tokayev just found out the hard way in Kazakhstan, no one is immune to public opinion. If things are bad at home the premier distraction method is enemies abroad, and Erdogan has a convenient arch nemesis in Greece just next door. It could be a major diplomatic spat, a border crisis, or any number of things but mark my words: Erdogan will try to distract from economic misery at home with a fight with Greece, be that a literal or figurative fight.
Evaluation:
Again, I think there’s an argument for saying that the spirit of this third prediction was correct even when the details weren’t. The idea that Erdogan has plenty of economic problems at home leading to poor approval ratings was correct, and given that Erdogan jailed the mayor of Istanbul who would presumably run against him in the election coming on the summer backs up my point that Erdogan is struggling. The idea that a diplomatic spat with Greece would be a good distraction which could provide a rally around the flag effect in the polls was a pretty good call in my opinion. In reality Sweden took the role I thought Greece would play as a diplomatic distraction from the domestic economy. The war in Ukraine enabled Erdogan to attempt to mediate in the conflict and made Sweden a good punching bag in the NATO accession negotiations, so there were plenty of diplomacy to take the spotlight away from inflation in Turkey. It’s a shame for me that I was so specific. In short, no points here either.
Overall then, I was decently on point in my predictions. I got the biggest story of the year, the war in Ukraine, right. And that affords me some blunders in other areas I think. Still, lots of room for improvement for 2023. Speaking of which, as my first post for 2023 I will share my predictions for next year. Thanks for reading the blog this year! Here’s hoping next year will be more peaceful and prosperous than this one was.
If you liked this post you can read a previous post about what Musk's Twitter acquisition implies for the broader internet here or the rest of my writings here. It would mean a lot to me if you recommended the blog to a friend or coworker. Come back next Monday for a new post!
I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.
Written by Karl Johansson
Cover photo by Alina Kurson from Pexels, edited by Karl Johansson
Comments