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Apr 07, 2008


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Glenn Reynolds

"Snickers"? Ed, do you really think that's the point of the post?

Though, on the other hand, do you really think financial journalism doesn't deserve some snickers?

Ed Cone

There's a lot going on in the post, Glenn, including some commentary that is in line with my own post.

The snickering part would be this: "And it's hard to argue with this: 'If They Could Do Math, They Wouldn't Have Been Journalism Majors.'"

And this: "I guess I have tuned out a lot of the media econo-doomsaying because they've been predicting massive economic collapse for pretty much my entire sensate life and so far it hasn't come. Plus, at the moment they're playing their usual pre-election gloom-and-doom game in the hopes of helping the Democrats."

Maybe I'm taking it personally, but then again I was not a journalism major. I learned whatever financial journalism skills I might have at Forbes, which was highly business-friendly but even more investor-friendly, and I don't recognize the portrait you paint of journalism with such a broad brush.

I've seen a lot of excellent reporting on the nature and details of the credit crunch, and on the relationship of problems in financial markets to the broader economy. The people at the Wall Street Journal and Bloomberg and many other outlets seem quite capable of doing math (and hey, we all have calculators now anyway).

I'd be interested in seeing specific citations of the alleged chicken littlism sweeping the media, as opposed to news reporting. Not saying it doesn't happen, or that the mass media doesn't generalize from specialized reporting, but so far anyone who has written "uh oh, housing bubble, with repercussions likely" has just been doing their job.

I do see spin in financial reporting, but it's not all on one side. I'd include the Power Line post on employment numbers to which you link.

Fred Gregory

I am numb with awe , being in such celebrious company. I'll try not to embarrass myself. I haven't forgotten the exaggerations that took place in the 1992 campaign. Clinton spinners kept repeating that the economy was the worst since the great depression yet the recovery had already begun during Bush 41. The media played along. So what's different in 2008? Yes there should be some snickering like this
Brotther Can You Spare A Dime

Ed Cone

Again, Fred, a broad swipe with no specifics. The financial press didn't do a great job predicting the credit crunch, but I can point you to dozens of in-depth stories about the nature and causes of the problem, and the likely fallout in the broader economy as the housing market continues to struggle. What examples of financial journalism do you have in mind? If they exist, what is their frequency and weight as compared to the body of work to which I refer?

Fred Gregory

OK, Ed, .. You asked for it.

Jobs Hysteria Reporting

Ed Cone

Thanks, Fred, for providing a link to some specific criticism. Alan Reynolds, writing for an unapologetically ideological publication, points to a particular area -- reporting on employment figures by the NYT. There's some opinioneering sleight-of-hand in his analysis, as he divorces jobs data from other factors and tries to paint employment numbers as a simple predictive test for the larger economy, but at least he's naming names.

It seems worth noting that since his article, the dismal March employment numbers were reported; also, the January and February numbers were revised downward (i.e., they are worse than they originally appeared). I don't think you will find many economists who would say serious concerns about employment data is equal to what he calls "hysteria."

Fred Gregory

Puleese Ed..

Unapologetically idelogigal. Like the NY Times or the 3 major networks aren't.

Well judge for yourselves readers

The Worst-Case Economy Reporting Handbook

Ed Cone

Fred, rather than stale reports from advocacy groups, can you provide links to specific stories in the financial press that show a pattern of overstating problems with the economy?

I see financial journalists quoting Bernanke and Paulson, citing government statistics, delving into the opaque practices of Wall Street, and reporting on the housing glut. I see tens of billions in writedowns and losses, and a huge inventory of houses, and now the very sort of employment stats one would expect to follow those things. I see an economy that is well into a rough patch, with no clear end in sight.

Are you saying those quotes, statistics, and articles are factually inaccurate, or exaggerated? If so, can you point to examples that substantiate your claim?

Dave Ribar


At least part of the problem is that the economy has defied expectations on the upside for such long periods of time over the last decade that people have been lulled into complacency.

Under the current circumstances, the best that you can do is to point out the big negative shocks that have occurred. It does seem that we are headed into a recession. The loss of jobs over this last quarter has already been significant. Unfortunately, unemployment tends to be a lagging rather than a leading indicator. If the behavior from the last two recessions is any indicator, unemployment will continue to increase for at least another year or two (note to Fred: although the 90-91 recession ended in March 91, unemployment continued to increase into the middle of 1992).

Unlike the last recession, we aren't in a position to cut taxes; we're already deeply in debt. Also, the Fed isn't going to be able to wave its magic credit wand and create a new bubble like the earlier stock and housing bubbles.

More worrisome is the tremendous private debt load that Americans are carrying. This is another area where economists' predictions have been way off. For years, we have said that the private debt levels are unsustainable, yet they kept growing. At some point, too much will be too much.

I hope that the current recession will be relatively shallow. My best guess is that it will be. However, there are still some tremendous downside risks to the economy. As you say, there is "no clear end in sight."

Fred Gregory


News for you.. What makes Wall Street tick ?


Ed Cone

Another problem is that a lot of people are not very informed about business cycles and economics.

A good example: the cries of "we're not in a recession!" as the situation darkened last fall.

Formally-identified recessions are the ultimate trailing indicator of economic conditions, since by the most common definition they mean consecutive quarters of negative growth. Which is to say, you have to be six months into a particularly rotten time to say you are in a recession -- making the bluster of last fall meaningless, and making the formal term itself a different thing than many people believe.

The complexity and opacity of financial markets also elude a lot of folks (including, unfortunately, regulators and some bankers...) The misunderstanding of leverage was clear every time someone said "but suprime is only a small part of the economy." And so on. People seem to think the economy is driven by the talking heads on TV.

Fred Gregory

What Pain ?

Ged Maheux

I saw a news story on Carolina 14 last week that so far in 2008, home foreclosures in Guilford county are up 25% over last year. The lone police officer who's duty it is to serve these sad notices and kick families out of their homes hates his job and is swamped from all the paperwork.

But don't worry, the economy is just peachy.

Dave Ribar


You should read your own sources. The article you linked acknowledged all sorts of pain. About the only thing that wasn't painful was that the median length of jobless spells had gone down (easily explained: if you've got a lot of people who have just become unemployed, their short but on-going spells shift the median).

The points of the article were that things haven't gotten too bad (but of course we're in the opening months of the turndown) and that recessions are necessary.

BTW, your source said 3 months ago that there was no sign of a recession, stating that "there is no evidence of a recessionary collapse in jobs" and Bernanke's rate cuts "will continue the Bush boom for years to come." If you go back a month earlier, he was forecasting three more years of "Goldilocks-type economic growth."

Fred Gregory


I was hoping that you would read it also.

"In fact, liberal economists should look at a new Rasmussen poll in which 48 percent of voters say the best thing government can do is get out of the way by reducing taxes and regulations. Only 36 percent disagree. What's more, 59 percent of voters believe it's more important to create economic growth than to reduce the income gap between rich and poor. Finally, 49 percent say the best government policy is to reduce spending."

Ed Cone

So Kudlow, the pollyanna-in-chief, says it looks like we're headed into a recession -- which if true means the financial press wasn't overstating the problems facing the economy.

OK, then. Glad we cleared that up.

The good news is that if Kudlow (June: no subprime contagion!; July: bull market has a long way to run!) is saying it, there's a reasonable chance it's not true. Best news I've heard in months.

Fred Gregory

Depite this arcane system it still reads $3.22 at the pump. Just thought I'd throw this in as comic relief. You go Instapundit !

Mysteries of the Exchage Floor

Dave Ribar


The poll results are odd because a few nights later, the same organization (Rasmussen) polled again and found that just under two-thirds of Americans thought that the government was not doing enough to help the economy. In that poll (again by the same organization), 45% the respondents said that more regulation of the mortgage industry was needed.

BTW, Rasmussen reports that consumer confidence is the lowest it's been since the organization started tracking shortly after the 9/11 attacks.

It sounds like Kudlow has cherry-picked the polling data the same way that he has cherry-picked the economic data.

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