Did media coverage contribute to financial crisis?
In the November/December issue of Atlantic Business, editor Dawn Chafe takes a jab at the media, and its coverage of the global financial crisis.
"Don't get me wrong," she writes. "No one was inventing news. Everything reported was, to the best of my knowledge, factually correct. The error was not so much of inaccuracy as of imbalanced omission."
It's a decent editorial and the producers of the CBC Radio Morning Show would seem to agree. Chafe was a guest commentator on the program Tuesday morning, delivering a condensed version of the editorial.
I asked if she would allow me to post the text here, on the blog, and Chafe agreed. I do so to provoke discussion among readers, as well as media people. Do you agree that coverage of the meltdown' has been sensational, to the point of exacerbating the situation, and causing even more panic selling? Or has it been balanced and restrained?
Please leave your comments below.
Here is Dawn Chafe's Morning Show commentary:
Press corps laid low by Chicken Littleitis
Shoddy, one-sided, naysaying twaddle.
That's what I think of most recent coverage of the global economy and that's being nice.
It's as if the business press became intoxicated after suddenly finding themselves on the front page.
That one-time binge turned into a two-month addiction as each new and grimmer announcement made for bigger and juicier headlines.
Yes, bad news sells. And early fall 2008? That was a 70-per-cent-off pre-Christmas blow-out.
From housing foreclosures and bank bailouts to the dreaded D-word, pundits everywhere delighted in wondering just how much worse things could get.
One American television program even told its viewers to go out and sell their stocks immediately, as in RIGHT NOW, if they thought they might need that money in the next five to 10 years.
At the same time, they all but ignored Warren Buffett's $10 billion vote of stock market confidence. No one can afford to just throw away one-sixth of his total worth, even if he is one of the richest people on the planet. But, his investment had less impact than a red tag sale at Macy's.
Even less attention was paid to the fact that less than three per cent of all mortgages in the U.S. were in default. And that an even smaller percentage actually foreclosed.
Here in Canada, global gloom overshadowed reports of increasing Canadian job numbers. And, that Canadian banks were ranked as the safest, most solid financial institutions in the world. Not to mention the fact that only one-tenth of one per cent of all mortgages in Canada default.
But none of that mattered. Mob economics overthrew the market and panic was its rule of law.
Sadly, this autumn's economic crisis was not the result of an unforeseen catastrophe. Failure, thy name is credit.
Our society functions on the ability to borrow money based on someone else's assessment of your ability to repay. Much of the current problem that we find ourselves in is due to the fact that there were too many lenders willing to overextend credit limits at interest rates which virtually guarantee the original loan can never be repaid.
Without dwelling on the evils of maxed-out credit cards, open-ended mortgages, or excessive lines of credit, let me ask you this: how sound are your fundamentals? Think about it, could missing even one pay cheque, just one, bring you to the brink of personal bankruptcy?
I do not, and never will, condone sensationalist coverage that scares vulnerable investors into panicked selling. Still, if this recent shock gives us a much-needed kick in the balance sheet, grudging thanks may also be in order.
After all, we can't live on borrowed time forever.
For the Morning Show, I'm Dawn Chafe.