Off Message March 2005

Gas Bubble

Like economics itself, economic journalism is a dismal, foggy realm where the hapless news consumer is constantly bumping into weird conditionals and subjunctives.

A lot of what we do in the news business is glorified busywork. This is not always obvious. In fact, some journalists spend their days digging for actual facts and reporting them in stories that advance the march of civilization. Thanks to those heroic souls, the rest of us get to hold on to a few shreds of dignity.

But when the economy is in the news, and particularly when Federal Reserve Board Chairman Alan Greenspan is jiggering interest rates, the shocking busywork reality becomes painfully clear. As this week began, the Fed was widely expected to raise interest rates. With millions of homeowners fretting about whether there's a housing bubble, and whether the Fed might pop it by taking rates upward, this story has a gigantic natural audience.

Shortly before the Fed's decision was announced, I checked online to see how it was being framed. Many Web sites were offering an Associated Press wire story, headlined "Fed Likely to Raise Rate a Quarter-Point," that began:

While mortgage rates and other interest rates are expected to keep rising this year, those increases are likely to continue at a gradual pace unless inflation becomes a threat. But with oil prices surging to record highs, the worry about out-of-control inflation remains very real. Analysts said if policy makers at the Federal Reserve grow concerned that inflation is becoming a problem, they are likely to start pushing up interest rates at a much more rapid clip.

Got that? Like economics itself, economic journalism is a dismal, foggy realm where the hapless news consumer is constantly bumping into weird conditionals and subjunctives. Even when there's authentic news to report—the rate hike—the fog barely lifts. After the Fed's decision was announced, the first story I saw on Google News reported it this way:

A nod to rising inflation pressures from the Federal Reserve sent U.S. rate futures tumbling on Tuesday as dealers looked for the Fed's program of U.S. interest-rate hikes to continue unabated. Although the Federal Open Market Committee, which raised official benchmark rates a quarter percentage point as expected, maintained its pledge for 'measured' rate increases, it also noted potential for rising prices and appeared ready to get more aggressive if necessary.

This was a Reuters story, and based on the insider language (what are "rate futures," anyway?), one can guess it was written for an elite minority of market professionals who understand such things. The second story I saw, on the MarketWatch.com Web site, delivered a much cleaner version: "The Federal Reserve raised interest rates as expected Tuesday and said it is getting more worried about inflation."

The real problem is the nonstop stream of gassy speculation that predominates in economic coverage and does little except fill empty space and airtime. This is especially true in coverage of the hot housing market, now such a popular topic it's hard to avoid. Barely a week goes by when some major news outlet isn't playing around with the numbers, placing odds on which cities will have a bubble and which won't.

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