Welcome to the 2008 recession, brought to you by me and my ilk in the national media.
“Recent cover stories of Newsweek and Business Week illustrate the incredibly negative nature of national media reports,” Vectra Bank Colorado economist Jeff Thredgold wrote in his newsletter. “Newsweek (Feb. 4) … features a cover story entitled ‘Road to Recession.’ The February 11, 2008 … Business Week is entitled ‘Meltdown. For Housing, the Worst is Yet to Come.’
“These cover stories, along with constant negative reporting by The New York Times, The Washington Post, and many other publications, clearly illustrates the adage that ‘bad news sells,’ ” he continued. “Why consider buying a home now when the national media says it will be cheaper in six or 12 months?”
Thredgold, whom I respect and frequently quote, is hardly alone in championing the theory of a media-induced recession.
In January, I watched Tom Hoenig, president of the Federal Reserve Bank of Kansas City, blame the media in a speech for Colorado legislators. I asked him to explain his position afterward.
“If everyone becomes scared … if they read the paper and say, ‘Oh, my God. I can’t do it.’ And they pull back. It has that effect upon the consumer . . . causing inventories to build, manufacturing to pull back and business to pull back,” he said. “It becomes a self- fulfilling prophecy.”
Lawrence Yun, economist for the National Association of Realtors, recently passed through Denver with similar talk.
The national media keep trotting out national statistics that don’t necessarily portend anything for Denver, he said. “It’s nonsensical to concentrate on the national figure,” Yun said. “Local information is far more relevant.”
Last year, nationwide housing prices declined 2 percent, which hadn’t happened since the Great Depression. But Yun points out that prices rose slightly in Denver during this time.
That may be so. But in my neighborhood, which is as local a figure as I can find, declines are in the double digits.
So do the media reflect the economy? Or do they drive it? Do economists confuse cause and effect? I, for one, do not decide monetary policy or fiscal policy. I do not tell giant investment banks to make gazillions in loans to deadbeat subprime borrowers.
I don’t tell builders to overbuild. I don’t tell retailers to overstock. Yet somehow, my national media pals and I are contributing to the recession?
I had no idea our work was this powerful. I went back and found that last year, I indeed wrote several columns offering a sour outlook for the economy.
When I wrote these things, I usually quoted economists. And the smartest economist I quoted last year turned out to be University of Chicago professor emeritus Robert Z. Aliber, a colleague of the renowned Milton Friedman.
Despite Aliber’s credentials, I made him out to be just another crackpot. Stay in cash, he warned. The housing bubble will pop and take down the economy and the stock market too. I gave Aliber only a few paragraphs. I also noted that he’d given this forecast the previous year and was wrong.
So all of this leaves me with a complex question: Did I help cause the recession, or did Aliber? I wish some economist would write a dissertation on this.
Respond to Al Lewis at or alewis@denverpost.com.
