On 9/11, the Boring and the Scary

Yesterday afternoon Planet Money deemed the widespread comment these days that "Sovereign credit spreads in Europe are widening" "the scariest boring phrase" in finance. A credit spread is the difference between the interest rate on credit for the best economies and worst.  A widening credit spread indicates that a number of the economies of Europe (particularly Ireland, Italy, Greece and Portugal) are still tanking.  Reports blogger Jacob Goldstein,

There is a growing fear that Europe has not gotten its financial act together and is in even more serious financial trouble. If credit spreads widen more, we could see an already sick global economy get much worse. 


And if that's not unsettling enough for you, today is the 9th anniversary of the September 11th attacks on the World Trade Center, and barring any other major news, the media likely will be focused on whether or not the solemnity of the day is marred by further inflammatory rhetoric or action related to Park51, the 13-story Muslim community center and mosque proposed for two blocks away. Given that a Gainesville pastor with a flock of a whopping 50 members was able to generate world attention (and probably almost cause an international incident) by threatening to burn copies of the Quran, it seems all too likely that the comments of just about any nut or bigot will be quickly seized upon for the news cycle.  

Which is why I propose that for the time being we have the financial reporters cover politics instead.


Jim McDermott, SJ

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8 years 4 months ago
A couple things:

First, I subscribe to the Planet Money Podcast and download 2-3 podcasts every week from it.  Most are entertaining and often informative and educational.  When I started out to try to understand what had happened to cause the financial crisis, this was one of the first places I found.  This site at NPR was started in response to the financial crisis.  There was an hour long NPR show in early 2008 that preceded the crisis that was one of the key explanations for the subsequent financial turmoil.  

Another site that I get podcasts from is the CATO institute which is a libertarian organization.  It frequently has things on the economy as well as a host of other topics.  I often disagree with the speakers since I am not a libertarian but have sympathy with a lot of their views.

Second, and this goes toward the post above.  I believe the same editor would have overseen both stories and directed the tone of both articles.  Why, because I have seen financial articles that are highly inflammatory beyond their import.   It depends on the politics of the situation.  The European debt crisis is not political favorable to certain positions held by people so it is down played.  It indicates that sovereign debt could be cataclysmic.  The antics of a pastor in Florida is seen as embarrassing to certain people, so it is inflamed.  It is seen as representing certain elements of our society that we do not like and which must be emphasized.

So what Father McDermott may be witnessing is nothing more than editors directing their coverage for political purposes. 
Tom Maher
8 years 4 months ago
The irony of journalism is that if you do not report all the facts, events can seem much better than they really are or much worse than they really are.

Actually the "soveign credit spreads are widening"  conveys a lot of important information to the technical audience receiving it.  The audiience would be investors who are very alert to even potential marekt codnition changes.    So you do not need to say too much. Investors get it.  They already are paying close attention and know that this fact needs to be collated with previous facts about credit payment defaults or near defaults of entire nations such as Greece, Portugal and others. 

Investors already know that things are really bad in Europe.  Greece and other nations have been bailed out reluctantly by other European nations.  But reading between the lines there are numerous stories from Greece of a politcal backlash against  the severe impact of bailout austerity measure are having on Greece.   The full picture is Greece and other countries saturated with debt up to and including the United States could still go into default and cause a new European or even worldwide  financial meltdowns as had happened in 2008 where all credit becomes frozen due to the system wide risk of default.  So you probably do not want to hear the full story and actually this is only potential.

The political reporting  on the mosque have reclkelssly jumped to conclusion by simplification saying all protestrs are bigots.  The story is becoming the simple minded:  We are a nation of bigots bent on destruction and hate.  No details to the contrary are allowed and we have all kinds of elites to certify this kind of nonsense .  All the protest which have been peaceful and minimual are about to explode into violence and political mayhem.   The actual facts of the protest are not reported.  So a hughly out-of-control one-sidee moralizing rivelling the witch trials of Salem reporting all kinds of potential evils that do not in fact exist.  Reporting only one side of a controversy makes possible very wild and dire conclusions that are not justified if more facts were known. 

Loss of information causes loss of prospective.
ed gleason
8 years 4 months ago
Maher and Cosgrove; The mosque protests and legitimate and the Obama administration will bring another financial meltdown? Thanks for the right wing talking points as if we hadn't been saturated with them enough.
Tom Maher
8 years 4 months ago
The author performs a great service to the readers of America for  reporting on "the scariest boring phrase" in finance and then explaining  the meaning of the boring phrase and its significance and potential great harm to the world economy which incldues the United States. 

Greece, Spain, Ireland, Italy and Portugal and other European countires have earlier this year experienced very big problems in financing their public debt.  These countries are together called the "PIIGS" where each letter is the first inital of a country.   The PIIGS are financing their governhment spending with a very high percentage of debt relative to their total budget and to ther total economic activity of their country.  Earlier this years these countries could not get enough credit from banks or investors to finance  their soveriegn debt.   The PIIGS were bailed out by other European nations.  In return for the bailout the PIIGS  had to cut the high level of government spending.   Sadly they are having trouble cutting back goiverment spending.  As a result they are still seen as risky with a potential for default.  Increase risk causes  increases in the interest they have to pay to finance their debt.   These countries are struggling to be able to pay for their hugh soveign debt..  Hopefully the PIIGS will be able to win this difficult struggle with their national debt and its heavy interest burdens. 

If the PIIGS lose their struggle the world economy would be impacted.

Their struggle with national debt is of course relevant ot the United States.  The U.S. must be careful that its debt does not become too large to finance,  Banks and investors do not buy debt of countries that are precieved as too risky becasue they haveing too much debt.   The PIIGS show us that too much national debt is a heavy burden to deal with and has very bad impacts on a country's economy.  

This is "boring" financial information very worthwhile knowing about.  


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