On the Expectation of Bad News
by Javier Castillo
Published: 14 July 2008
Is it time to panic?
That’s the sense I get when I scan the headlines, which are replete not with everyday tales of murder and mayhem (you know, the things that we are used to reading in the newspaper) but with stories that you know are foreboding because they deal with economics, proposed government bailouts, recession, etc. In other words, the things that make people far more edgier and nervous because we’re talking about forces way beyond our control; the same mysterious presence that drives up the price of oil because an Iranian boat captain flipped off an American warship in the Persian Gulf.
When the oil barons of OPEC met last month, they declined to ramp up production to offset the rising cost of crude, and instead blamed speculators for the price jump. Just a couple weeks ago the airlines sent a letter to their clients urging them to contact Congress to stop speculators for the exact same thing, as they are all struggling to cope with how much it costs to keep lumbering aircraft in the skies. Everyone says that America is in a recession, even though there was growth last month (breaking the three-month streak that must occur before a recession really arrives) and the overall employment rate stands (as of this writing) at 5.5%, a low.
And yet, the sense of unease stalks us. We hear stories about the two largest guarantors of housing loans, Fannie Mae and Freddie Mac, and the possibility that they’re on the verge of disaster, thus requiring a federal bailout. Fingers are being pointed at who started the speculation, and that sent the market tumbling. And a bank you’ve probably never heard of, IndyMac, is under federal oversight now after earning the distinction of being the costliest bank bailout (so far) in U.S. history.
Our fears are being stoked, although it’s an activity that just about everyone wants to participate in.. When Phil Gramm said that we are in a “mental recession,” the fallout seemed disproportionate to what he actually meant, which got lost in the shuffle. If the expectation is that all news is bad news, it adds to the sense of panic that causes these unnamed speculators to react negatively and create the ripple effect of higher prices for everybody and everything.
The media does not seem to be helping, especially when some reporter starts throwing the phrase “since the Great Depression” into the mix. By most accounts, we are not looking for a repeat of the stock market crash of 1929, but you could be forgiven for thinking the worst since daily newscasts are about gas prices, bailouts and home foreclosures. On that subject, is everyone in the United States about to lose his home? The number of stories about foreclosures seems relentless, almost pathological. The mortgage crisis is catching a lot of people and swallowing them up, but is this every homeowner in the land? I am not suggesting that we only hear happy stories about a couple that can afford their new home, but the unending cycle of disaster stories stokes fear, uneasiness and an unwillingness for people to spend or invest any money.
In this limited instance, we’ve all turned into panicky reactionaries expecting the worst. When Phil Gramm also mentioned that we were a “nation of whiners,” I found it difficult to disagree with him. At the first sign of trouble, people start demanding the government do something—this usually comes after telling the government to stay out of everyone’s business. Politicians of all stripes—the ultimate reactionaries—start shooting their mouths off about saving the American people from almost certain doom that it convinces me that I should stock up on supplies and wait for the apocalypse.
It is foolish to ignore how deeply these economic forces control our very lives; it is understandable the sense of general unease that people voice when they need to make decisions about how much to fill up with gas and make the family budget go farther. At the same time, when you create the expectation of disaster with incessant reports of doom, it becomes a self-fulilling prophecy. (It seems that in the marketplace, rumors are enough to jack up the price of everything.) And the response of a panicked populace isn’t very reassuring, when they begin to demand federal money to cover bad decisions and being overextended in credit card debt. While I tend to blame banks for making it way too easy for bad credit risks to get homes (these people who shoul d never have qualified in the first place) there’s no shortage of greedy individuals who willingly took these offers and now claim ignorance. An impolite thing to say, perhaps, but I wonder about the scores of other people who do pay their mortgages on time but never got a screaming sub-prime loan. No relief for them, I can venture to think.
The expectation of bad news promotes a climate of fear and panic that gets people to clam up, stop spending, worry excessively, and stop making sound economic choices for themselves. Unfortunately, the sheer inertia of this uneasiness promises to give us continued cycles of depressing stories. How long will it last? Well, I’d hate to speculate here, but.....