Is the Media Trying to Trigger a Recession?
I’m sure you’ve seen the headlines talking about a recession on the horizon, with some promises of a recession in 2019 or 2020. It’s been going on for a while now, especially with recent the 10-year yield curve inversion. Pair that with reports of the Dow being down and this is what you get from the average American watching the news: “Gee, I don’t know a lot about this stuff. But they do have pictures of government and fancy charts with their lingo. Plus, it’s the news! They ought to know their stuff, right?” Not always.
Since graduating from the University of Oregon, I’ve kept close tabs on my former professor’s blog, Tim Duy’s Fed Watch, in order to keep my monetary policy knowledge sharp. He might tell you that he’s not the end-all-be-all in macroeconomic forecasting, but he does know his stuff and he diversifies the indicators he looks at. That said, it’s pretty safe to say that most people wouldn’t know how to understand every little aspect of his blog or even what the media is reporting.
What writers and contributors often know
When I was looking for jobs after college, I applied for jobs in economic journalism. Unfortunately, quite a few publications want someone with a degree in journalism that has experience writing about economics rather than someone who has a degree in economics and can write. Therefore, these journalists and contributors often know about as much as they’ve looked into it as a hobby. Robert Smith from NPR’s Planet Money comes to mind. He knows how to make economic reporting understandable, but I would be skeptical if he started making his own economic forecasts despite my deep respect for him.
Another great example are articles put out by Forbes. Forbes was known to be a great magazine for business and finance. Then they started moving their online articles towards a contributor-based platform. Because of the magazine, people see headlines like ‘The Yield Curve Just Inverted, Putting the Chance of a Recession at 30%.’ No disrespect towards the contributor, Simon Moore, but I took the liberty of looking at his alma mater’s varying degrees that include economics — his didn’t nearly match the American equivalent of a regular Bachelor’s degree in economics.
Anyone will tell you that a degree in economics is heavy in math. Politics, Philosophy and Economics (PPE) requires the least amount of math. In other words, he essentially got a degree in political science that had an emphasis in a more qualitative form of economics. Most American economics degrees typically require a term or two of calculus (usually allowing for business calculus). I took all three terms of calculus and mathematical proofs.
The closest thing to an American equivalent I saw at Oxford was Economics and Management, where math was listed as essential for the degree. Moore is largely using the fact that he’s the Chief Investment Officer of Moola for credibility. He is also an MBA and a CFA charterholder. These are impressive credentials for investments, but it doesn’t make him an expert in economics compared to those with a firm background in it. For example, I call myself the Libertarian Economist. I actually hold a degree in economics, which is where I get most of my credibility. Legal blog writers typically do the same with their law degree.
What a recession is and what the media are saying
For those who don’t know what exactly a recession is, a recession is a period of time where GDP is declining or trending downward. GDP is measured by the Bureau of Economic Analysis (BEA) and the National Bureau of Economic Research (NBER) are the ones who officially announce whether we’re in or out of a recession. The opposite of a recession is called an expansion, with low points called troughs and high points called peaks.
As mentioned earlier, the media seems to have been recession crazy for months. Business Insider recently published a scary headline about one of Wall Street’s biggest bulls warning us. CNBC published a headline with the words, “Biggest recession sign since before financial crisis” in it. Another CNBC headline contained “Huge recession signal” in it. NPR’s headline contained “Bond market flashes recession warning.” Even the Washington Post got in on the doomsday headline containing “key economic indicator raises recession fears.”
What about Fox Business (the Fox News version of CNBC)? Their headline had no doomsday crisis in it and the article mentioned the potential for a recession. Don’t like Fox? Then what about MarketWatch or Barron’s, two respected publications among investors? CNBC is known as a market publication, but many investors also view it more like entertainment. The same is often true for Fox Business.
MarketWatch’s headline had no doomsday either and the article mentioned that a recession was possible, but investors may be prematurely panicking. Barron’s has a headline that flat out says that an inverted yield curve is “not as scary as you might think.”
Why the media is pushing this narrative
Remember how I said that a recession was basically a prolonged decline in GDP? Well, you might have figured there’s a lot of factors that go into GDP. For example, it’s a measure of spending that consists of consumption, investment, government expenditures, and net exports. However, most economists add an “error” term to the end of the equation once you get past econometrics.
An error term is a statistical way of saying “unknown factor.” It’s important because other factors can influence GDP as well. One of these many other factors includes consumer expectations. In other words, if people think a recession is just around the corner, they might start saving money in preparation. If that were to happen on a large scale, we would eventually experience a recession due to a lack of consumption. Consumer expectations can also influence inflation, which have fallen flat, by the way.
Therefore, the fact that the media keep putting the idea in front of us is wildly disturbing. What does CNBC (subdivision of NBC), NPR, and the Washington Post have in common? They all either lean quite left or they’re connected to leftist sources.
The reason why this is all so disturbing is that if feels like they’re willing to trigger a recession just to stick it to someone they don’t like.
Due to the lack of economics in public education, it’s not farfetched to assume that most Americans wouldn’t know beyond supply and demand. That leaves a huge responsibility up to the media to report accurately. It also leaves the American public vulnerable to media manipulation, such as expecting a recession rather than an economic slowdown.
What experts are saying
New York Federal Reserve Bank President John Williams said early this month that slower economic growth is the “new normal,” calling for patience as economic data was released. He stated, “From the perspective of monetary policy, the overall picture of the economy is about as good as it gets: very low unemployment, sustainable growth, and inflation just about at our 2% goal.”
My former economics professor has set his criticism more on Fed Chair Powell than some looming recession. In fact, just last week, he urged that several indicators indicate “softening, not recession.” His criticism of Powell was more about the December interest rate increase being “more model-driven than reality-based.”
Most recently, Duy has said that the probability of a recession has reached levels that requires the Fed’s attention. Notice the difference? He says that the Fed should cut interest rates, offering the possibility of continuing this economic boom we’re in and potentially avoid a recession. To my knowledge, he’s not a fan of the president nor is he super Libertarian. I respect him because he sticks to the data and uses it to back up his opinions, not the other way around.
Something to consider
I’m not usually one to say to distrust the media. But when the media is “reporting” on something they don’t know much about while experts with PhDs in economics are saying it’s not the end of the world yet, perhaps the PhDs have a little more clout in their field. After all, the media are just participating in freedom of speech and press — even if they’re reporting inaccuracies or trying to trigger a recession.
So who should we trust? Should we trust the media that consistently tries to make Trump look bad or should we trust economic experts who may not like Trump but aren’t sacrificing the economy to advance their opinions? If Democrats want to have power again, they need to win elections again. The solution isn’t to attack the economy.
