Spero Consulting

That’s a title we never thought that we would write, but before we chase away our reg­u­lar read­ers who share our polit­i­cal and eco­nomic world-​view, please let us explain: it’s not as bad as it looks.

In Kim­berly Strassel’s WSJ col­umn, Hillary of State, Ms. Strassel describes how the main­stream media have now returned to pro­vid­ing a favor­able opin­ion of Hillary Clinton’s for­eign affairs qual­i­fi­ca­tions (to be Sec­re­tary of State). 

We must admit that that this is the first time in our life that we viewed overly-​favorable cov­er­age of any Clin­ton to be a good thing, or even the pos­si­ble indi­ca­tion of a good thing.

But, again, we cau­tion reg­u­lar read­ers: it’s not as bad as it looks. 

Take that excla­ma­tion both ways: first, we’ve not changed, and sec­ond, we spec­u­late that the econ­omy isn’t as bad as the recent losses in the stock mar­ket sug­gest. Although, we have no doubt that cur­rent gov­ern­ment offi­cials could turn that neg­a­tive per­cep­tion into real­ity, and may have already done so with their extant actions.

So here’s our short argument:

1. Prior to the col­lapse of the stock mar­ket, losses were highly con­cen­trated among finan­cial intermediaries. 
2. Now, words can hurt…the econ­omy. The hyper­bole and/​or out­right pan­icky speech (or some com­bi­na­tion of both) by elected offi­cials and appointees, pri­mar­ily Messrs. Paul­son and Bernanke, helps cre­ate the recent collapse. 
3. Mis­guided actions can be dam­ag­ing, too. The government’s effort to stem the crises, which we believe that they still con­sider to be a sin­gu­lar cri­sis, has been very dam­ag­ing, too.
4. So, equity val­ues have decreased sub­stan­tially and the econ­omy is less sound than it was. There maybe be some­thing close to a depres­sion or not.
5. For­tu­nately, the media’s gen­eral high regard for Mr. Obama, and their desire to help him suc­ceed dur­ing the new administration’s hon­ey­moon period, may gen­er­ate suf­fi­cient good­will to pos­i­tively influ­ence the atti­tudes and per­cep­tions of con­sumers and investors to pre­vent the poten­tial dis­as­ter that we have been talked and erred into by said offi­cials. Ergo, in this instance, media bias may be a good thing if it influ­ences the zeit­geist towards opti­mism and away from eco­nomic devastation.

Now here’s the longer argument.

Con­cen­trated Losses

We very much enjoyed Peggy Noonan’s col­umn this week, Tur­bu­lence Ahead. Much of it deals with the lack of evi­dence for what she abbre­vi­ates as GDII, or Great Depres­sion II.

Despite the eco­nomic slow-​down this autumn and the stock mar­ket crash, we’ll take her obser­va­tions as evi­dence of a phe­nom­e­non that we have writ­ten about exten­sively: the high con­cen­tra­tion of losses in this mort­gage and finan­cial cri­sis com­pared to ear­lier ones. Please con­tinue to ignore the “domes­tic” auto man­u­fac­turer (as most of you have through the many years of buy­ing “for­eign” cars that were made in other coun­tries and in our coun­try). The out­sized pub­lic­ity that the indus­try receives about its prob­lems far over­state its value to the econ­omy. More­over, bank­ruptcy does not imply liq­ui­da­tion; so, there is no rea­son to think that at least two of the three will not survive.[1. Smart Japan­ese or Ger­man man­u­fac­tur­ers might wish to con­sider mov­ing their head­quar­ters to the U.S.A., and becom­ing a lead­ing domes­tic man­u­fac­turer. Think of the good­will such an act would engen­der, includ­ing the invalu­able free publicity.]

While not directly related to this post, Ms. Noo­nan spec­u­lates about the nature of GDII, and her com­ments are wise and con­sis­tent with our obser­va­tions liv­ing in a rel­a­tively depressed region of the coun­try: West­ern Penn­syl­va­nia, dur­ing and after the col­lapse of the steel indus­try. She talks about the grad­ual, almost imper­cep­ti­ble changes that may take years to real­ize. Those who spent their lives here were/​are much less sen­si­tive to the change, whereas hav­ing spent a decade away, we noticed the gen­eral unkempt shab­bi­ness imme­di­ately upon return; one can con­tinue to see it in the peel­ing paint and dirty facades of many small businesses.

Epic Gov­ern­men­tal Mismanagement

See most of what we wrote about the cri­sis since Sep­tem­ber although we might have crit­i­cized Mr. Paul­son before that. This morn­ing, in More Evi­dence of the Lack of Fore­thought that is TARP we sum­ma­rized our crit­i­cism of cer­tain aspects of the government’s response: the words and actions of elected and appointed offi­cials have been extremely dam­ag­ing and their efforts often coun­ter­pro­duc­tive at best.

As we wrote sev­eral months ago, no sin­gle firm could destroy our econ­omy. Such an out­come can only be achieved through gov­ern­ment action.

Like Ms. Noo­nan, we’ve really not seen any panic among con­sumer – whether they are fam­ily, friends, acquain­tances or strangers at the mall. How­ever, the government’s response to the cri­sis has the con­tin­ued poten­tial to (con­tinue to) harm the nation’s eco­nomic psy­che and make bad times worse.

When Will We See the Bottom?

We had a con­ver­sa­tion with friend ear­lier in the week who was much con­cerned about the future (who’s not?). He won­dered if equity mar­kets had reached their nadir and had cited some anec­do­tal evi­dence sug­gest­ing that his acquain­tances were inter­nal­iz­ing their sub­stan­tial loss of wealth. They were not par­a­lyzed with fear but had sur­veyed the eco­nomic envi­ron­ment and their own weak­ened finan­cial con­di­tion and were get­ting on with life.

The Poten­tial Ben­e­fit of Media Bias

Clearly, words do mat­ter, and the media can frame and empha­size issues and perspectives. Directly and indi­rectly those words affect the behav­ior of cit­i­zens, con­sumers, investors, and entrepreneurs. 

If the mass-media’s desires to aid Mr. Obama pos­i­tively affect per­cep­tions and improves the gen­eral eco­nomic out­look of the nation (and there­fore the world), then the prob­a­bil­ity of escap­ing truly dev­as­tat­ing eco­nomic con­di­tions improves.

In that and many other respects, we cer­tainly hope the best for Mr. Obama.¹

So, start­ing today and con­tin­u­ing for a few months, we’re all for left-​wing media bias.

Of course, we ask Obama? BWAMA?

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