How Economic Disinformation Works: A Modest Case Study
By Daily Bell Staff - January 21, 2016

Fears grow of repeat of 2008 financial crash as investors run for cover… As leaders gathered in Davos, FTSE 100 was gripped by panic selling and entered bear market with Dow Jones also plunging. – UK Guardian

Dominant Social Theme: Fears are growing as the world’s economic system trembles on the verge. What to do?

Free-Market Analysis: Let us recall how long ago we were misled and what techniques were used. This Guardian article provides us with a proverbial “teachable moment.”

In broadest terms, the article, like others of its type, is written to engage our emotions and excite our fears. Then, toward the end of the article, we are exposed to various solutions and soothing words that seem to indicate that all will be well sooner or later if we just trust the correct authorities. In other words, first the article excites and then it calms.


The Dow Jones Industrial Average slid more than 450 points, or 2.9% in morning trading. The Dow Jones Industrial Average slid more than 450 points, or 2.9% in morning trading … Earlier this week, China recorded the slowest rate of economic growth for 25 years.

You see? The drumbeat begins immediately. The statistics lend credence. Then there is this, the crux paragraph:

Fears that the global economy could be heading for a repeat of the 2008 financial crash have sent shockwaves through financial markets – prompting a rush to safe havens by investors. Oil prices fell to a fresh 12-year low on Wednesday and metal prices tumbled in response to warnings that China’s slowdown could derail the global recovery at a time when central banks, which came to the rescue in the credit crunch, have only limited firepower.

First we are terrified and then, quietly, an oboe sounds – the first tentative notes of salvation couched in skepticism … “Central banks, which came to the rescue in the credit crunch, have only limited firepower …”

Some more:

William White, a former chief economist of the Bank for International Settlements (BIS), the central bankers club, who now chairs the OECD’s review committee warned that central bankers had “used up all their ammunition”… “The situation is worse than it was in 2007.

If central banks cannot help us, what can? Cleverly, the article suggests a sub-meme: the wisdom of the bankers of Davos. First we are reminded that White’s pedigree is derived from the awesome power of the BIS and then this:

The BIS was one of the few organisations to warn during 2006 and 2007 about the unstable levels of bank lending that eventually led to the Lehman Brothers crash.

Okay, maybe the BIS did warn, but we can count on our fingers, toes and teeth, the many alternative media blogs and websites that were sounding the alarm about central bank low-rate profligacy throughout the 2000s. Of course, why let inconvenient facts spoil the music.

The head of the Swiss banking giant UBS, Axel Weber, turned the screw by warning that the world was stuck in an era of low growth … His comments came after the chancellor, George Osborne, warned in a new year speech of a “cocktail of threats” to the UK’s prospects from an increasingly uncertain world economy.

Minor chords are now being presented. Important people at the heart of business and finance are sounding the alarm. (Never mind that the alternative media has been doing the same thing far longer.)

Importantly, none of the imminent catastrophes we face are truly explained. We are apparently in the grip of a disaster that has no face or real explanation.

Toward the end of the article (a fairly long one), the themes repeat and expand as the notion of a solution begins to be presented. There is the always-quotable Nouriel Roubini:

[Roubini said] the crash was overplayed: “It is not going to be like 2008-09. There is not the excessive leverage in the financial system that there was last time.”

Roubini also contributes to the meme of central banker omnipotence, saying that 2016 is going to be a difficult year and that “central banks [should] respond with extra stimulus.”

Now the “finale” … a triumphant one. We learn from Pierre Moscovici, the European economics commissioner, that “central banks retained some firepower to prevent another crisis” after all.

“I don’t feel that the financial crisis is coming back. We don’t feel that we are facing the risk of a breakdown in world growth, but there are downsides that we need to address,” he said.

Maurice Obstfeld, the chief economist at the IMF, adds to the uplift, saying that central banks should be more relaxed about printing money and keeping rates low. Sure, they may “overshoot” inflation targets but he believes they should be more concerned about deflationary pressures.

It sounds like it will be okay after all. In fact, if you haven’t taken the time to learn about alternative (non-mainstream) financial realities, it is easy to come away from an article like this with two main impressions.

First, the world is in a terrible state and second – one way or another – government and banking “experts” will figure out how to combat the multiple, looming catastrophes.

The article succeeds partially by omission because it does not explain fundamental economic truths. We never learn, for instance, that central banking is price-fixing and price-fixing inevitably distorts and then ruins economies.

The article never concerns itself with marginal utility, the idea that the market itself creates prices and that nothing else but the Invisible Hand can do so. It gives us almost no frame of reference (well, there is one brief allusion to overly low interest rates) as to why these market disasters occur over and over again. It maintains that economic growth can be summoned via monetary (Keynesian) debasement.

Somehow, flooding the market with debt-based notes creates prosperity. It’s simply not so. One can argue, of course, as to whether such articles are premeditated. We have long since concluded that they probably are.

The antidote is education and access to credible information. Fortunately, there is the Internet, a miraculous device that like binoculars, allows us to look at the “big picture” and then at the details.

We will still need to learn where to look, of course. But one should keep in mind that information that stresses competitive forces is to be preferred over theories that emphasize a concentration of power among a handful of “chosen” controllers. Austrian economics is perhaps the best theoretical construct in this regard.

Internalize this harsh reality: Government won’t protect you. Central bankers will only make things worse. Internalize, as well, the idea that the market provides us with results … always. Human beings cannot control the Invisible Hand that will write as it wills.

Most everything we read in the mainstream media is propaganda. (Of course, one must be careful about the alternative media as well.)

Conclusion: Don’t be seduced by the mainstream media. Its memes are easy to absorb, which is why they are convenient to swallow. But the problems with the world’s economy are getting worse and will not end well. It behooves us to work hard to learn the truth. There is no other way.

  • Danny B

    Much of the problem gets back to Academia. Richard Eastman writes that there is a “preferred” set of textbooks

    offered to instructors. Academia is locked into circular logic that doesn’t allow them to view other possible worlds. The BIG brains at the Harvard Endowment fund lost $ billions from economic blindness. They instantly turn up their noses at Austrian ideas and screech at the alumni to make good their foolish losses. The liquidity problems that are emerging have emerged before;

    • Dimitri Ledkovsky

      Some in Academia are in total denial that Austrian ideas even exist (“inattentional blindness”).

      • Benjamin Titshaw

        I know these types very well. I studied under the type of professor you described yesterday.

  • Félix David Mejía Mejía

    I wonder if some of these memes are product of perfectly honest ignorance, or if all of them are originated from absolute perversion.

    • Maybe both. But at this point how can people believe in such a system?

      • Danny B

        Don’t knock it. It has gotten them a paycheck so far. 🙂

  • autonomous

    From this article, one might surmise, chicken little has a knot on his head, so the sky must indeed be falling. If the sky is falling, are we to flee to the woods for safety? But, won’t the sky there fall, as well?

    A more realistic point of view would be to point our that the economy is not the sky. The wizards are just silly men hiding behind a curtain, trying to scare people. We need not even prepare to clean up the mess, it will decay on its own. Every kingdom consists of towers and tombs; no real wealth. Those who survive will do what all men do, they plant and harvest, with any surplus start their accumulation anew.

  • robertsgt40

    My biggest fear is WTSHTF, people will turn on each other (not to mention WWIII) and not join forces to confront the real perps.

    • WoodsWoman

      Absolutely they will. Immediate physical needs will be paramount (which is why each of us making preparations for ourselves/families, etc. now is so critical). This is what I find most irritating about those who cling to their brainwashed notions of “separation” between us … right/left, Demo/Repub, race, false notion of class, religion … In spite of genuine differences, people actually have much in common – almost everything, really, on the practical, day-to-day life-affecting level … especially when it comes to a SHTF scenario. Allowing the media to continue to convince us there is an “other” and that other is our neighbor is foolish and, frankly, stupid, and certainly counterproductive to our own wellbeing. Of course, it’s ideal for the PTB… Not sure why this is so hard for people to get. As long as in our minds we’re separate, we can do nothing together. Simple as that.

      • robertsgt40

        Correct. Unfortunately the frogs will be at full boil before enough wake up. I’m a product of the 50s and was confused as to what happened to my country when I returned from Vietnam(drafted). It took another 20yrs to get the particulars. Evidence now, especially with the advent of the internet, is plentiful as to what’s going on. The blowback from friends and family who still prefer ignorant bliss, is huge. No regrets here.

        • WoodsWoman

          Yes. Letting go of trying to “know what’s best” for those friends and family (including one’s own children) who refuse to acknowledge reality, knowing we’ve done what we can, is difficult – and possible. We each make our own choices, given our own path, I reckon. I’ve learned to let the blowback slide off of me, though. They’re not really mad at me; they’re mad at the situation and can’t figure out who to blame. Another interesting quirk of modern human behavior, imho – there’s got to be SOMEbody to blame!

          • robertsgt40

            Damn, not to sound sexist (too old for that) but you’re my kind of woman. Few and far between. I’m sure the same can be said of men. 😉

          • Reverend Galileo

            Being the messenger can get you killed.

    • Benjamin Titshaw

      I have contemplated this myself. The racial tensions have been built up by the media for a reason. White men are portrayed as being guilty of terrible transgressions simply for existing with our so-called “white privilege.” The only cure for which is to give in to white guilt and hand everything over to anyone anywhere…

      • alaska3636

        Typical “whitesplanation” from somebody whose logic is molded by their privilege.

        • Benjamin Titshaw

          HA! “Whitesplanation” that’s a new one on me. Thanks, you made my day. By the way, I’m the evilest kind of white man- a southerner. I guess this is just me throwing out my “microagressions”. Maybe The DB should be turned into a “safe space”.

  • Bruce C.

    That quote from Nouriel Roubini is ridiculous and a complete lie (or maybe he doesn’t understand what he’s saying, so does that still make it a lie? Interesting, but I digress…).

    Here’s an article from just 2012 that explains why. If you don’t want to read it the main concept is this: “The only way to ‘save’ an over-leveraged system is to increase leverage and lower interest rates.”

    Roubini admits that the financial system was over-leveraged in 2007. That the central banks didn’t allow the system to deleverage when the dam broke is common knowledge and considered practically heroic. They stopped it by lowering interest rates (ZIRP) and increasing leverage (debt) in many ways (e.g., QE, decreasing margin and reserve requirements, allowing corporations to borrow money to buy back their own stocks, etc.)

    A RIDICULOUS statement. (That’s almost as ridiculous as Bernanke’s comment yesterday, “Don’t worry. China’s $28 trillion debt is an ‘internal problem’.” By that he means it’s because most of the loans were in yuan. I don’t know whether to laugh or cry.)

    Here’s the article:

    • Thanks.

    • Earn nest

      Under a hard money, fixed reserve state the rate of growth would moderate and apart from disasters and innovations would move along steadily. they simply have to have explosive collapse and rapid growth to facilitate their thieving.

  • Danny B

    I’m going to copy part of a post that i wrote at the Energetic Forum;

    The banks offered us money that we couldn’t afford to pay back. That was the plan all along.
    So, the economy crashes,,,, the bankers come in to buy up everything with a check from the bank. How do you know that this check has any money backing it? You take the check and deposit it in a bank.

    9400 banks went under in great depression one. 3600 banks have gone bust so far in great depression 2. If the big banks can narrow down the
    field, any check that you get from them will be deposited in,,, one of their own. They can write unlimited checks to buy up distressed
    properties and no one will ever know.

    “Will find themselves dispossessed in the land that their forefathers fought for. ”
    The FED is owned by the BIG banks,,,, rescues the BIG banks,,, and they outlast the small banks. Then, it is back to “business as usual.” They buy up everything and force us to rent from them.

  • Earn nest

    The pot has too many cooks. While zero growth may be the best option, they will keep turning up the heat and adding spices when it should be left to simmer.