Have you looked behind the couch?

January 22nd, 2008

A particularly annoying species of headline writer has been out and about lately. That’s the one who likes to write headlines like:

Stock market loses $10 billion.

Grrr!

It’s silly, lazy journalism. The economy hasn’t ‘lost’ any money. Any losses are either purely theoretical (gains that were never realised), or are offset by the gains of some other party. Sure, some people may have a share portfolio worth a bit less today, but it still owns the same share of the same companies, with the same capital and assets. The market has just decided it’s worth a little bit less now.

No money has gone missing – bank accounts are just the same, other than the people who had to cover their margin calls. But all that money just went straight back into someone else’s bank account.

The reason this is bad journalism is that it distracts us from the real story. People think ‘oh no, a lot of money has been lost’. But really there’s nothing bad about that in itself. The real question is why the stock market went down.

And because the answer for that is mainly ‘fears of a US recession’, that’s bad news for everyone. Telling a story about the massive losses on the stock market creates an illusion that it’s just a problem for ‘rich people’. But the underlying causes of the fall might be a problem for everyone.