Portuguese Debt Crisis - Flawed Media Coverage

April 16, 2010 - PRLog -- It was with definite mixed feelings that we saw this article in the New York Times about the rolling Euro-zone debt crisis that is now, as predicted, moving to Portugal.


On the one hand, we were glad to see our reluctance to call the Greece situation settled confirmed -

not that we're happy for either the Greeks OR the Portuguese, both peoples who have a rocky future ahead -

just that our analysis of the Hellenic scene is, unfortunately, being borne out by events.

On the other hand, it was infuriating to see the way both the Portuguese and Greek situations were being analyzed in what is supposed to be the most authoritative media outlet in the world,

specifically the way in which conventional academic economic "thinking" about these situations leads not to clarity about them, but, rather, as Jimi Hendrix would say, "just, uh, confusion."

Now regular readers will not find any surprise in this attitude on our part.

We've already made clear in several Features on China -

one having to do with the irrelevance of the Western, especially American, obsession with China's allegedly "undervalued" currency,

and, just two days ago, discussing how China's March trade DEFICIT needs to be seen as a potentially fatal anomaly in the dominant US paradigm about China -

how destructive conventional academic economic "thinking" is for any real understanding of what's going on in this ever-crisis-ridden world.

But it was really annoying to see this same sort of flawed "thinking" once again organizing media coverage of events that need to be understood.

To be nice, though, let's start with the parts of this piece that actually make sense -

all with due apologies to Landon Thomas of the Times, towards whom we have no animus at all ;-) -

namely, how the supposed "solution" of the Greek crisis is already coming apart at the seams.

   


The rescue package agreed on last weekend — aimed at calming fears of a European country defaulting — has not yet had its desired effect.

The yield on Greek 10-year bonds briefly spiked to more than 7.3 percent Thursday, not far from the 7.5 percent level before the rescue package was announced.

Interest rates on 10-year government bonds for Portugal have also been jumpy, hitting a high of 4.5 percent on Thursday.

All of which raises the prospect that last weekend’s package for Greece, the result of months of political haggling,

may well have been nothing more than a bandage on a wound that shows little sign of healing.

In fact, a view is taking hold that the Greek bailout may even have an opposite, more deleterious long-term effect.

Instead of ushering in a period of lower rates and market calm, it could prompt investors to test Europe’s — and in particular Germany’s — stomach for a Portuguese rescue.



Now the basic point here is correct, and, worrisome.

But even here, we can see how unexamined assumptions - and unconscious word use - can radically distort the representation of ANY situation.

In this case, it's the use of the term "investors".

Now, usually when you think of an investor, you think of someone who has a commitment to the success of whatever project is at hand.

However, as the Greek situation had made amply clear - and as the Portuguese scene seems about to repeat -

the people referred to here are NOT involving themselves so either Greece or Portugal can solve their problems, ie, SUCCEED.

Rather these people are betting on the FAILURE of the governments and peoples here to be able to overcome their difficulties,

and are hoping - with all due respect to George Soros - to make a huge bundle of money betting AGAINST the success of these efforts.

Now wouldn't a more accurate term for such folks be SPECULATORS, and NOT investors ???

But if this were the only problem, while it would still be significant, it wouldn't necessarily be damning.

There are, however, some even more serious examples of how UNEXAMINED use of key terms leads to a distorted understanding of what's going on here.

And the sad thing is, as you'll note, what's being touted as a "novel approach" to the analysis of these situations,

is shown IN THE VERY NEXT SENTENCE to be exactly the same as what it's supposedly replacing as an explanation for what's "really" happening.

To read the rest of this story at http://www.economywatch.com/, go to:

http://www.economywatch.com/economy-business-and-finance-...

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