The IMF about World Economy

It seems to be a trend to make readers of financial newspapers believe that the deepest recession since the second world war, the current economic crisis, is over and markets are upwards-sloping. Optimistic titles can be found everywhere in the media and the word 'economy' is mostly accompanied by positive adjectives like 'strong', 'expanding' or 'recovering'. The newspaper articles in the Financial Times, Reuters and on BBC News are just some examples. Unfortunately the good news are rather limited and can be expressed in a few words in the first paragraphs, just like I expected.

The FT, after saying in the title that the world economy is recovering, states that the forecasts for 2009 and 2010 of world economic output have been revised higher. Then though, it refers to the IMF's World Economic Outlook and the challenges that are to be resolved: the weaknesses in the global banking system and the 'persistent unwillingness of countries with large trade surpluses to boost domestic demand'. Recovery is expected to be weak by historical standards and the IMF is no more optimistic about the medium-term outlook since global trade imbalances will be created. Furthermore the unemployment forecasts keep rising across developed economies. Towards the end of the article Axel Weber, the Bundesbank president, says that recommendations for Germany to 'reduce its surplus have no place on international discussions' and is thus confirming the unlikely realisation of a best case scenario.

Reuters is the most optimistic article of these examples and describes the 'stronger global economic rebound next year' with some positive, easy-and-quickly-to-read bullet points just under the title, followed by strong phrases from IMF's chief economist like 'recovery has started' and 'financial markets is healing'. This tranquilises the reader before reaching the paragraph that introduces the little problem of 'rebalancing the global growth' on which the 'strength of the world economy' depends. For this more domestic consumption in export driven counties like China and less spending in heavily importing countries like the United States would be needed. This obviously very difficult project is mentioned only briefly at the end of the article.

.

Also BBC News is proudly telling the reader that the IMF forecasts the economy to be expanding and says that financial conditions have improved significantly already. It is the only article that published the words of somebody else than the IMF itself: the head of the ECB, Jean-Claude Trichet, talks about recovery strategies and stimulus packages. Furthermore it is also the only newspaper that dedicated half of the article to various recovery risks, talking about government intervention and the fact that banks are being forced to hold more cash in reserve.

After more than one year of continuing disasters, everybody with a direct or even indirect interest in finance is now looking out for positive things and big, optimistic headlines that give some kind of foothold in this chaotic environment. And this is exactly what several newspapers want to offer the reader. They do it by making a big thing out of a rather small but positive fact and put the bad bits in the very end, where the reader is probably not even concentrating anymore or not even reading anymore at all. In general I do not really trust any kind of forecasts, especially nowadays. I am being objective when saying that incomes keep decreasing, unemployment is going up and foreclosures and bankruptcies are soaring. And yet every foreign and domestic forecast is predicting better times. The disconnect is obvious. People need good jobs, higher income, real prospects. Instead they are fed one ludicrous forecast after another. Lost your job? Don't worry....eat this yummy forecast!!!!!

sources:

http://www.ft.com/cms/s/0/ceeff158-ade6-11de-87e7-00144feabdc0.html
http://www.reuters.com/article/europeanCurrencyNews/idUSSGN00219520091001
http://news.bbc.co.uk/1/hi/business/8284217.stm

Introduction

Dear Reader,

Fall 2009. More than a year has gone by since the start of the largest crisis in economic history and we are still witnessing a period of unseen financial turbulence. When trying to stay up to date the reader can easily access a jungle of financial news with numerous dates, numbers, statements and forecasts that are published every day. The information in the different sources is similar, no matter from where it is taken, but the "packaging" of these news changes vastly. This is influencing the reader's opinion and his way of thinking and arguing about the current situation in the market. Why are there to be found different ways of putting the same news? How is the population being affected and manipulated? Who wants to be targeted with theses different methods?

On this blog some examples of information taken from different financial sources will be commented and the growing importance of financial media and communications in today's situation of insecurity and doubt will be discussed.

Enjoy!