Australian Lefty on Politics, Governance, Science and Info Management

Economics MSM lags blogosphere by 2 years or more?

Posted by Dave Bath on 2008-11-23

("Prescient" bloggers are invited to add links as comments to prove or disprove the assertion of this piece.  I’d like to know which blogs I should be reading.)

John Kehoe’s Oz Fin Review (2008-11-22) "Economic heroes beware: Revisionism is nigh" is welcome, but far too late: a bit like sending wedding congratulations after a divorce.  Behind (not even between) the lines is a massive indictment of the Australian press coverage of economic matters for the last decade.

Some of the international press (particularly The Economist) had done much better, as I detailed in my (very positive) deconstruction of an Economist article in "The Economist damns Howard with faint praise".

I wish Kehoe had taken to task most of the economics commentators in the Oz mainstream press for leading the public up the garden path of "good economic management by Howard/Costello" – a bit more intelligence or honesty might have saved us much pain we will now be forced to endure.

Apart from Ken Davidson (Oz) and The Economist (International), the chorus sheet followed by the press was how economic conditions were stable and strengthening.  I wonder if this had anything to do with one of the following:

  • The dependence of the press on revenue from advertisements for those seeking to attract mug punters new players into the market;
  • The analytical capabilities of the commentators;
  • The need for most of the media to be "newsworthy" every day/week rather than focus on fundamentals and the non-immediate future.

Long-time readers will recall me talking about the possibility that the Liberals wanted to lose the last election, handing a poisoned chalice to the ALP ("Might the Libs want the ALP to win" 2007-05-08, "Chickens coming home, roosting above the fan" 2007-11-19) and my relief at Ross Gittens starting to publish some truths about the economy and the credulity of the population ("Winning the election and the poisoned chalice" 2007-11-27).  Gittens was near the front of the pack of commentators, but well behind the data available for analysis: too little, too late.

So, and somewhat indulgently, I’ll give newer readers a taste of what I’ve been saying for some time (mind you, other non-mainstream commentators had been issuing similar warnings, perhaps indicating the independent blogosphere can be a better source of intelligence than the MSM):

2006-11-12 : "Not all GDP growth is good"

Economic growth as measured by an increasing GDP is like measuring the growth of a child in kilograms: sometimes increases are bad, falls are good.  All political parties are guilty of not informing the public about this, despite the political advantages to anti-government forces of explaining this, and more importantly, providing plans to improve Australia’s economic fitness.

Any growth in Australia’s economy under Howard has been of flab, “super-sized” by debt, rather than by developing muscle.

Most of Australia’s growth has been due to consumer over-confidence in increasing house values leading to increased consumer spending through overseas borrowing.

The increase in activity can be seen as running in ever-decreasing circles, as 5% of the economy has been leaving the country every year.  Looking at 12 years of Howard’s current account deficit, rather than constant economic growth, it is more accurate to say that half of the economic strength of the country has been bled away.

And where is the stock market now?  About 50% of it’s high.  Personally, I reckon it has between another 10% and 15% to fall.

2007-03-03 : "Wargamer’s view of Shanghai market jitters"

US consumer spending (preferably on credit) is needed by China only for two to five years, until Asian consumer spending becomes the largest market, and trans-Himalayan trade reaches 30%-40% of trade for both China and India. After that, China can pull the plug on America whenever it likes.

With China constraining resource prices, together with the blow-out on our national credit card, Australia will be caught betwen increasing interest rates to support the dollar, or rising prices of imported goods if the dollar drops.  Either way, Australians will have to tighten belts, with a crash in retail spending, and implosion of the services sector.

Australia could easily move into recession by early 2008, particularly the eastern states, with little chance of recovery, regardless of who wins the Federal election – the only difference to Australians being whether they have a government liable to keep the safety net, or decrease benefits to an increasing number of poor and allow employers to be even more rapacious.

2007-04-27 : "Rise of the Dark Board"

The original stock markets in the coffee houses of London had some justification from their ability to make it easy for idle wealth and cash-strapped producers to meet, to the benefit of both. The advent of derivatives turned stock markets into mere tax-subsidized gambling dens…

Some economists look at this as an “upside-down pyramid” and inherently unstable.

This notional money is not used to stimulate production by the purchase of goods and services – it merely inflates asset prices, increasing the relative advantage of the already-wealthy over the poor, and risks higher interest rates.

As The Economist (2007-04-21) says in the article that alerted me to the dramatic rise of the CDS: “But it is in the nature of capitalism to test new ideas to destruction and to use new instruments as the basis of speculative excess.”

2007-05-08 : "Might the Libs want the ALP to win?"

  • Australia’s economy is riddled with debt, domestic activity relies on a vulnerable service sector, value-added production is invisible, minerals prices may be peaking, and the capital investment commonsense required at this stage of the business cycle has not occurred. These conditions presage a fall within the next federal term, and reconstruction (starting with education concentrating on science and engineering) will take at least ten years.
  • The gathering storm cannot be prevented, and whoever is in office when it unleashes itself will be economically odious, and unelectable for a decade or two.

2007-09-19 : "What battlers should ask"

Given that more and more of the commentariat, and even the tabloid readers are recognizing that the economic bears have not been paranoid, and that the only way of really addressing housing affordability in an environment with constrained liquidity is to lower housing prices or increase income, the “Howard’s Battlers” should keep the following question in mind for the coming election:

When the s**t hits the fan, which party is more likely to leave my family high-and-dry so we end up suffering depression and ability to work (earn income) drops, versus which party is likely to be more supportive during periods of widespread financial stress on households?

2008-03-10 : "Missing in action: credible economics commentators"

I’ve kept an eye out, but there have been no shame-shame-shame articles listing the economics and/or financial advisors and journalists who so badly got it wrong (through incompetence and/or malice), kept the mugs buying when the fundamentals didn’t support it, and led to massive losses by people who cannot afford it – if only through superannuation losses.

Do any readers care to nominate the worst offenders?

Let me think about those who deserve to be put up against the wall…

  • Every journalist who was saying through 2007 how wonderful our economy was wonderful
  • Every financial advisor who cannot produce generic “warning” notices to clients about the inevitable downturn
  • Every general-audience TV show who puts on an “expert” that has a vested interest in people buying unless an explicit caveat is given.
  • All the politicians who encouraged buyers into bubble markets – and that includes both Liberal and Labor parties.

Anyone care to nominate either blogposts or mainstream articles that deserve praise for telling it like it was?  Anyone care to nominate the worst offenders among the MSM?


One Response to “Economics MSM lags blogosphere by 2 years or more?”

  1. […] of the Dark Board" 2007-04-27), even back as far as the 1990s.  You can also see this post of mine which has links to a few relevant things.  The Economist put it bluntly in […]

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