Beat the Press blogger Dean Baker (10/23/08) finds an instance of economic reporting so egregious it “calls for an extra long arghhhhhhhhhhhhhhhhh!!!!!!!!!!!!!!!!” The offending occurrence: “NPR just reported on Morning Edition that the markets are plummeting because investors are realizing the seriousness of the damage caused by the credit crunch.” Baker sets ’em straight:
The economy is not in a recession because of the credit crunch. The economy is going into a recession because of the crash of the housing bubble. Homeowners are losing on the order of $8 trillion in housing bubble wealth, $110,000 per homeowner. For most families, this is most of their wealth.
It was this housing-bubble wealth that drove consumption and pushed the savings rate to near zero over the last four years. Now this wealth is disappearing and people are cutting back their consumption. In many cases, they no longer have the ability to consume, since many households were borrowing directly against their home equity to finance their consumption. In other cases, they now realize the need to save, since they are approaching retirement and have nothing to rely upon other than their Social Security.
Reminding us that “NPR completely missed the housing bubble on the way up” since “they relied almost exclusively on economists that did not know what they were talking about,” Baker pleads: “Can’t they find an economist who at least now can recognize the impact of the collapse of the housing bubble? The horror, the horror.”
Listen to FAIR’s weekly radio program CounterSpin: Dean Baker on the Financial Crisis (3/28/08)