Recessions are not only bad for an economy but they are also appear to create an environment where some of the worst financial reporting and commentary thrives. Suddenly journalists actually start to believe they know how the recession will unfold and many self titled market experts toss up the most bizarre predictions that cover everything from the end of the global financial system, to cunning plans being secretly developed by bankers to control the world.
As I mentioned in The recession, economic stimulus and the stock market nobody knows with any certainty how severe any economic downturn will be until it is over and the data is analysed. But this does not stop some people from setting themselves up as recessions experts and lecturing we plebs about how the recession will play out.
We are also bombarded daily with a barrage of stories and articles from financial journalists which vary from the very good to the unbelievably poor. What strikes me the most about much of the reporting during recessions is that many journalists simply link any business or economic event to the economic downturn. If a company fails or business is down it must be because of the recession they reason, but this sometimes simply not true and such reporting is misleading.
Let me give you an example of the sort of trash churned out during recessions.
The picture above was taken (by me) at a beach house in Kyushu, Japan, just a week or so ago. It is summer now in Japan and normally the beach houses are quite crowded, but as you can see this one appears almost empty. So I could write something catchy like “economic woes in Japan hits the beaches” and then rattle on about how beach side businesses in this part of Kyushu are experiencing tough times and link this to the recession. But would that be entirely correct?
Firstly the day I took this picture was cloudy, windy and was on a weekday so understandably there were fewer people at the beach than normal. Secondly the wet season in this part of Japan had been unusually long and this had kept people away from the beaches. Finally there were actually around 20 or so customers present, I just took the picture at an angle where you cannot see them. Yes a picture is worth a thousands words, but pictures themselves do not always tell the full story.
So business was down mainly because of the weather, not because the Japanese are suddenly so improvised that they cannot find enough money for a day at the beach. This may seem like an extreme example but believe me, I see this sort of reporting by western journalists in Japan often.
Here is another picture I took in Fukuoka, Japan, on the same day. (on the way to the beach)
I could link this new highway construction to current events by simply saying “government economic measures in Japan spur construction”. That would be the easy (and lazy) way to put together a quick report from Japan but once again looks are deceiving.
Yes the picture is indeed of a new stretch of highway being constructed, but the work has actually been going on for years and is not a new project related to any new government stimulus measures.
What it does show is that work continues in Japan and the economy is ticking over. There are plenty of stories of doom being reported in the western media about the Japanese economy but unemployment is currently at 5.4%…that is lower than Australia even though exports from Japan have fallen by double digits.
Life goes on, the world is not spiralling into economic chaos and there is no need to stock up with supplies in the fallout shelter. The global economy seems to be slowly recovering and although there will be challenges ahead (as there always is) this does not means the end is nigh.
It is important for all of us to focus on facts and dismiss hype. Sensational headlines may attract our attention, but the articles that accompany them are often light on analysis and best treated as works of fiction.