Bias in Bernanke Coverage: Does it Matter?
There is a lot of biased news coverage these days. Some of it its intentional, and some of it is not.
Today's example is the coverage of the Bernanke reappointment hearings.
From the perspective of those whose opinion matters, this is a foregone conclusion. Chairman Bernanke showed real leadership when it was most required. Under his guidance, the Fed took many creative steps to avoid an economic collapse.
If one looks to objective sources from both parties, the conclusion seems obvious. Bernanke was appointed by President Bush and reappointed by President Obama. His support is broad-based and extensive among professional economists. He will be confirmed.
As is often the case these days Bob McTeer has the strongest analysis. He provides a good case for the Bernanke reappointment. Anyone wanting a reality check should watch the video here and read the article here. Since I know that many readers will not click through to the links (although they should) the following captures the gist:
What I don’t understand is why politicians think their deviant
behavior is so appealing back home. They apparently don’t have a very
high regard for the home folks, especially those in Kentucky and
Vermont. My guess is that those folks are better than their Senators
give them credit for. Surely blue grass and autumn leaves have some
To my way of thinking, Chairman Bernanke
(and Secretary Paulson) deserve the highest praise for saving our
financial system and avoiding another great depression. I’ve defended
Bernanke in blogs, speeches and TV appearances (see previous post). So
have wise people like Warren Buffett. But our way of thinking,
apparently, is not making any headway.
I heard yesterday that a major poll showed a majority against
Bernanke’s reappointment. I guess that shows the power of financial TV
and its guests who compete with each other in outrageousness hoping to
be invited back.
We got to watch Congress in action. Hearings provide a platform for those with eccentric views to spout off and get publicity. Even the most lightweight of Senators gets to have his moment in the sun.
The practical result? Some Senators have made an issue of the reappointment, placing a "hold" on it. This means that there will be a real vote, not approval by voice vote. It is quite possible that the vote for approval will be lower than in past instances, as noted in this WSJ article.
Internet readers got a totally different picture. At Seeking Alpha, where I am a contributor, the big story was the "Bruising of Bernanke." (I want to make it clear that Seeking Alpha tries to present a balanced view of stories. Most likely the articles showing some balance did not come through in time to provide this balance. Mea culpa –– I could have written about this yesterday, but other duties impinged. The editors react to the flow of stories. Perhaps they will square it up a bit in the future.)
But let us look at the result of the Bernanke bashers, including the writers of the featured stories and a few others.
When you get criticism of an appointment, it is news, but we need to look at the sources and the biases. For investors, I recommend looking beyond the salacious stories and focusing on what is really going to happen. The attack stories get headlines, similar to the media frenzy about Tiger Woods. It is good for page views, but not really helpful in understanding the reality. The critics include the following:
Those running for office. Some commentators have a clear political agenda. They think that it would have been a wonderful cleansing experience if the Fed were not to have fought the onset of a depression. It will be interesting to see how this platform plays in front of the electorate.
Those who have a book to push. Some pundits lay all of our troubles on past Fed mistakes. Everything they write is colored by support for this viewpoint. While their followers accept the premise, the verdict of history will be rendered by those with a more objective stance.
Those who have a blog based upon attacking the Fed. Most of these arguments include rather simplistic and often inaccurate accounts of the Greenspan Fed, now extending to the Bernanke Fed. There is little effort to distinguish between the actual tools available, and what was needed when confronted with the collapse of Lehman.
Those citing public opinion. This is very interesting. The public can name the Three Stooges, but not the three branches of government. Any time an issue is technical, we expect true leaders to look beyond polls. Many of those citing public opinion take the other side of the argument when politicians react to polls. They call it "pandering." In fact, most officials make some careful distinctions.
The amateur political scientists. This includes the commentator who has no known experience in actually making public policy decisions who declared Bernanke to be "politically naive." He is swinging out of his "happy zone" as the Splendid Splinter called it.
And others with a hobby horse. This includes the "live blogging" on Bernanke at TheStreet.com's Real Money site (usually helpful when focusing on stocks) where some commentators thought that their own personal viewpoints about public policy should be accepted by all. The assertion that Bernanke was telling lies was particularly offensive. One should never substitute personal opinion for fact. The Bernanke testimony is available to all — subject to objective analysis.
A Credibility Test
When I read those commenting on economics, I employ a simple test which I recommend for readers. I call it the "Chalk Test." Economic analysis can be controversial. The "big minds" can and do differ, but they share certain basic skills. If you gave them a piece of chalk and asked them to do a simple problem — a supply and demand curve, and analyze the effect of an excise tax — they could all do it. Most of the popular blog writers cannot pass this test. They write about economics, but they do not know the basic skills. Their real skill is in dishing out pop concepts to a group of readers who already agree with their conclusions.
This is dangerous for the average investor — very dangerous.
The bashers of the Fed have been wrong for a long time. Essentially, they argued that the Fed was in a box, and would be ineffective in staving off a depression. They were wrong.
Instead of recognizing the error, they now want to vote out the leadership and change policy to suit their own viewpoint. They are wrong again, since this will not happen in the case of Bernanke.
Since the Internet audience is not a representative sample (think about the Dewey defeats Truman headline, where the polls had an unrepresentative sample), the flow of stories, augmented by thumbs up, thumbs down, conveys a false impression to the average investor/reader.
Most of the same sources now suggest that the Fed will soon make many other mistakes (beyond my current scope, but more later).
Repeating an important recurring theme at "A Dash", I suggest that investors should be politically agnostic. It is better to make money regardless of who is in power, than to lose money, or miss opportunity, while complaining about politics.