economonkey

MFI and Woolies gone bust, household spending down to its lowest level in 13 years, more banks facing nationalisation, the government desperately pressuring banks into lowering their lending rates, the Organisation for Economic Cooperation and Development warning that the UK faces a much deeper recession that first expected. And these are just a few of [...]

Things are starting to get pretty ugly in Iceland, protesters have taken to the streets to complain about the government’s handling of the banking crisis which has seen this once prosperous western democracy collapse into the kind of economic disaster you’d expect to see in the third-world. It’s not surprising that they’re angry – just [...]

In one of the most egregious examples of issue hijacking* we’ve ever seen, a report from Cranfield School of Management claims that the economy wouldn’t be in such a terrible condition if more women sat on the boards of banks, and recommends that more women should be given senior positions on the banks that have [...]

The CBI, an independent lobbying organisation which ‘represents the interests of British business’ says that it expects 2009 to be the worst year for the UK economy in three decades. The Confederation now expects the economy to shrink by 1.7% next year, revised down from its earlier prediction of .3% growth.
Dropping a less than subtle [...]

The latest official unemployment figures are out and they’re not pretty: 1.87 million according to the Office of National Statistics, the highest number of people out of work for 11 years, and a lot of pundits seem to think the figure will exceed 2 million before the end of this year. There’s no reason to [...]

The three main political parties in the UK all decided to jump on the tax-cut bandwagon today, keen to tell us all how they plan to get the economy back on track by reducing the tax burden on citizens and businesses so. It’s a simple idea in theory – if businesses pay less tax they [...]

(or “Stop talking us into a recession!”)

In recent months I have read, in newspapers and online forums, and heard, from some genuinely interested people and a few incurable optimists, the proposition that the problems in the financial system are somehow due to ’scare-mongering’ in the press. Depending on your bull/bear persona, it’s easy to agree or disagree with this proposition without actually thinking too much about what it means.

So let’s take a step back and consider the fundamentals. First, the mass media obviously influences public opinion. There can be no doubt about that. If it didn’t, it wouldn’t exist; it would have no political role and no advertisers would be interested in paying to be a part of it. Television and newspapers have finely-honed psychological hooks, and although they’re suffering because of the accessibility of more credible information on the Internet, they know how to drag their readers in with a good, emotional (but seemingly rational) headline and story.

As we know from experience, when every newspaper and television channel is exhorting people to buy into the housing pyramid scam (sorry, market) because ‘house prices only go up’, and using fear and greed to push that message home, it has an effect; first on the psychology of the public and then on the market pricing.

Should we be surprised that the Bank of England took desperate action today, cutting interest rates by an astounding 1.5 percent down to 3 percent, the lowest level in over half a century? OK, so it’s a massive cut and far more than the 1% which even the most dovish of market watchers were calling [...]