Media and the Economy

This post is solely my opinion, however as time goes by I believe it more and more. Is the United States economy directly impacted by the major news stations such as CNN, Fox News, MSNBC? In my opinion they are a major catalyst in both economic downturns and recoveries.

The other day I saw a blog post at Dailykos mentioning that the Dow has fallen over 50% since Fox Business News Channel went live on October 15, 2007. That day, the DOW was at 14,093. Sine then it has plunged all the way down to 6,450. Of course there are major underlying problems with the US economy, and by no means am I blaming it mostly on the major news stations. What I am trying to say is that the major outlets help to invigorate these market swings as well as the economy in general.

The Media Problem
Ok, so you hear on CNN that the Market is down more then any other time since the great depression. They then run online polls suggesting that 45% of Americans believe we are headed towards a situation comparable to the Great Depression. The funny thing is, if you had asked 10 of the top economic scholars in the country the same question, I would guess that not even one of them would agree with the 45% taking that poll. CNN then runs show after show about the economy and how almost half of all Americans think we are headed for the worst economic situation, ever int he history of the US. Such a story can easily scare the crap out of any of us. Small Business's begin cutting costs, banks tighten up credit, ordinary people start spending less, as well as taking their money out of the stock market and into cash, and the economy shrinks even more. It's a seemingly never ending downward spiral propelled by the media which feeds on bad news. So what will get us out of this cycle? Likely it will be a small piece of good news, that the media runs with and blows out of proportion like they did with all the bad news. This will get people optimistic, have them spend more, invest more, and create more good news for the media to report on.

Conclusion On The Media and The Economy
Like I said, the media isn't to blame for the cyclical downturns every economy has. What they are responsible for is possibly making an ordinary economic downturn into something the recession from hell. Over reporting on the wrong stories often lead to irrational market behavior as well as economic and business behavior.