PrintNovember 23, 2008
Is all the economic doom and gloom justified?
If you've been reading a lot about the economic situation here and around the world, you can't help but be struck by how terrible the future looks to a lot of "experts."
Is this a function of the media realizing that apocalyptic news sells and less dire forecasts are given short shrift? Or is there really a consensus that we are in for horrible times?
I honestly don't know enough to say one way or another. Here at home, the massive trouble that CITI is in promises to give us the biggest bailout yet. And there are some "experts" saying that the entire financial industry of the United States will soon be nationalized:
It's not preferable, but all major U.S. financial companies will eventually be under government control because the alternative is so much worse, Hugh Hendry, chief investment officer at hedge fund Eclectica Asset Management, said Friday.
"All financials will be owned by the U.S. government in a year," Hendry said. "I bet you."
Nationalizations take dramatic losses from the private sector and places them on the larger balance sheet of the public sector, he said.
"It's not good," but society is vulnerable and society is going to have to intervene, Hendry said.
I don't know Mr. Hendry from Adam but CNBC thinks enough of him to quote his prediction and include a video of his remarks. Does that make him an expert? Got me.
And its even worse overseas - if you believe the foreign press. Iceland is all but bankrupt, the product of their state bank going belly up. But what about Great Britain?
The scale of our problems has still not been understood. In essence the domestic banks are largely bust. The Government's £500 billion bailout plan is primarily designed not to keep banks lending to small firms and to homebuyers but to prevent an unimaginable financial calamity.
Banks provide the very foundations and plumbing of the entire economy. A failure of confidence in them could still bring the entire capitalist edifice tumbling down.
It suits ministers, however, to maintain the bogus claim that the bailout is about sustaining bank lending. True, that would be a helpful side-effect, but is not the main purpose. Indeed, a gentle and gradual reduction in the indebtedness of individuals and companies is still needed.
At the risk of hyperbole, we should not be worrying about whether this is going to be a thin Christmas for retailers (it is), but whether Britain and the West are about to plunge into a years-long economic Dark Age - complete with mass unemployment and social unrest.
I don't think you can get more depressing than that. But how true is it? The Times is a respected publication and all we have to go on if we want to glean the truth out of all this is the reputation of the media outlet from which we are getting this information.
No one denies that there is a crisis. No one is underestimating the potential for catastrophe. My problem - our problem - is that in this, a time when honest appraisals of the situation are needed, we have little or no confidence that our newspapers, radio programs, or the cable newsnets are delivering what they are supposed to be giving us; the facts of the situation and not trying to scare us into buying their product or watching their programs by hyping the bad news.
I think things are as bad as many are saying. But then we get a piece like this from Daniel Gross at Slate.com:
All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.'s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o'clock shadows asking, "Brother, can you spare a dime?" we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today's woes look like a flesh wound.
"By the afternoon of March 3, scarcely a bank in the country was open to do business," FDR said in his March 12, 1933, fireside chat (now available on a very cool podcast at the Federal Deposit Insurance Corp.'s Web site). In 1933, some 4,000 commercial banks failed, causing depositors to take huge losses. (There was no FDIC back then.) The recession that started in August 1929 lasted for a grinding 43 months, during which unemployment soared to 25 percent and national income was cut in half. By contrast, through mid-November 2008, only 19 banks had failed. The Federal Reserve last week said it expects unemployment to top out at 7.6 percent in 2009. Economists surveyed by the Philadelphia Federal Reserve Bank believe the recession, which started in April 2008, will be over by next summer. (Of course, back in January the same guys forecast that the economy would grow nicely in 2008 and 2009.) But don't take it from me. Take it from this year's Nobel laureate in economics. "The world economy is not in depression," Paul Krugman writes in his just-reissued book The Return of Depression Economics. "It probably won't fall into depression, despite the magnitude of the current crisis (although I wish I was completely sure about that)."
Is Gross just more levelheaded than the others? He makes a convincing case but so do some of those predicting Armageddon.
I believe this is a crisis of confidence in our media - a result of many years of being conditioned by their biases, by their laziness to remove those biases, and by the nature of the news business itself and what it has become. The left likes to talk about the "corporate media" but it's actually worse than that. Over the last 30 years, there has been a consolidation of media outlets into gigantic conglomerates while the actual number of independent media channels has dropped precipitously.
It isn't that they're "corporate" that makes them suspect, or more accurately, not trustworthy. It is that there are so few alternatives out there. I have no doubt that most publications and TV networks actually make an effort to deliver the news as accurately as they are able - given constraints about needing to turn a profit and stand out from the crowd. But that doesn't change some basic facts. An empire like Rupert Murdochs' was unthinkable 30 years ago. Every town over 50,000 or so used to have 2 or even 3 newspapers published daily. (50 years ago it was 4 or 5 dailies). If you want to listen to the radio today, you have 3 or 4 huge companies that own the overwhelming majority of popular local stations. Television has a handful of owners despite hundreds of stations.
No wonder the news sounds so much the same.
That doesn't solve our problem of knowing who to believe, who to trust in this crisis. I suppose we have to make an effort to get as much information as we can and use our own best judgment as to what we should take away from each news or opinion article we read. This is probably good advice as it relates to any news we choose to digest be it on the internet or through some other media outlet.
But somehow, I can't escape the feeling that our media is letting us down in this crisis and that I am probably not the only one disappointed in their performance so far.
