Saturday, 17 May 2008

It is all over

This morning, the Daily Express claimed that the credit crunch was over. The FTSE was recovering, while house prices were again rising. The newspaper proclaimed that "the long overdue rally signalled good news for savers and borrowers".and that the housing market "is defying pessimistic forecasts."

The article was short on facts, and heavy with optimism. The claim that the credit crunch had ended rested on two flimsy observations. First, that the FTSE had hit a four-month high; which could hardly be described as boom time for shareholders. Second, Rightmove's house price index had shown a 1.2 percent increase in home seller asking prices.

When it comes to this kind of tat, the Daily Express is a repeat offender. It ran a version of this story back in January. Again, relying on asking price data from Rightmove, the newspaper claimed that the market had begun to recover. In the three months that followed, house prices fell rapidly, mortgage lenders increased rates, while loan approvals fell to levels not seen since records began.

Why does the editor of the Daily Express feel the need to put out such delusional articles? The answer is, of course, sales. It is the kind of article that shifts newspapers from newsagent shelves. In such circumstances, it is hard to blame the editor. After all, editors are in the business of selling newspapers, and happy stories about the housing market work wonderfully for the Daily Express.

The more troubling question is why people want to buy this kind of nonsense. Obviously, these stories fulfil a need. For some people, it is better to read a highly distorted article, infused with wishful thinking and optimism, rather than take a cold hard look at reality.

The people that need these stories the most are those that depend upon their homes to secure their long-term financial future. When your home is your pension, it is enormously comforting to hear that its value is rising. Homeowners would be better off if they read articles that honestly told them that the home values in the long run were likely to decline; that high levels of debt reduced long-term consumption, and that homeowners would be better off if they saved more and spend less.

Those kinds of articles imply difficult short-term lifestyle changes that few people want to consider. That explains why, on a Saturday morning, it is much easier to buy the Daily Express, which will give you stories telling you that everything is all right. It will set you up for the rest of the afternoon, when you can go shopping, with a credit card and pretend that you are wealthier than your salary might suggest.

20 comments:

SACKERSON said...

How amusing. Any bets on how long before the papers get around to using the phrase "bear market rally"? It took long enough for "credit crunch" to be imported from the internet.

RenterGirl said...

Investors don't want to hear the Mail's bete noir 'The Nanny State' say they would have been better off buying shares, or saving in a high interest account. Or that they have to spend less and save more. or that salt is apparently bad for you...

Anonymous said...

Housing,housing housing, that is all I ever hear. 40 years ago, we didn't obsess about housing like now. What happened? How did we become so boring?

Oldftb said...

Anymous:

Blame it on Maggie Thatcher and the right to buy. Thats what kicked it all off.

Son of Callaghan said...

I liked the 1970s. They were better times. The music was better, there were council houses, trade unions that protected workers rights, a real labour government, and the 1st Division was full of English players. Where did it all go wrong. When the Tories were elected 1979.

The=Haunted said...

With all these housing stories there is no room for the Princess Diana stories. A silver lining perhaps.

VADO said...

Didn't one of those minor parasitic royals get hitched today.

JD said...

Does anyone actually read the express anymore. A tedious rag.

Oldftb said...

"When the Tories were elected 1979"

I think the worst period has been since Nu Labour came to power in 1997.

Josh said...

nu labour are bad, but thatcher was worse

aSteve said...

The elephant in the room, I think, is that the Express cares little for the accuracy or honesty of what it publishes. I don't think that the housing market is anything special... it just wants to make sensationalist claims to sell papers to people who don't want to think very much.

ratfink said...

The Daily Express writes to please its advertisers--inctontinence pad makers and stair-lift manufacturers. The paper's ideal reader is "Sir" Oswald Mosley.

SACKERSON said...

"... a real labour government... Where did it all go wrong. When the Tories were elected 1979."

You've got to be kidding, SoC - but I shared that belief at the time, a delusion heavily fostered by a politically biased TV oligarchy. E.g. "Boys from the Blackstuff" was written during and about the final years of the Labour government and its failures, it's only the fact it it got screened after Thatcher came in that we mistakenly thought it was about the recession of the early 80s. She was the nasty medicine, not the sickness. But of course, the Tories got it wrong, too, and industry continued to decline as it had under Labour. Perhaps in a global economy, no-one could have turned it around.

Son of callaghan said...

The 1970s were a great time to be around. Forget about the economy for a sec, what about the music? Bowie was at his best, Mott the Hoople, Led Zep, Purple, then after 1977, the Pistols, the Clash and the Jam. There was no housing madness and plenty of jobs. Sure, there was some inflation but we had unions to sort it out.

Today, everything has turned to sh-t. All lies and spin. I want a time machine and I want to go back.

Son of callaghan said...

And football, what about Bremner, Moore and Best?

Then we had Don Revie running the show nationally. OK, the last point isn't my strongest one, but I want things like they were.

SACKERSON said...

I only watched Match of the Day (boy was I startled to see the length of Jimmy Hill's chin!) in order to finish off a night's drinking, but yes, the music was great. Did you use to watch Whispering Bob Harris on TOGWT?

Son of Callaghan said...

Oh yes, Whispering Bob, da-da-da, daa-daa-da-da-da

....and TOTP

CWS said...

Son of callaghan you are a sad old man.

Anonymous said...

"the long overdue rally signalled good news for savers and borrowers".

Is it just me or is this a pretty obvious contradiction?

The Daily Express readership is above UK-median for income and age. Therefore well above median for home-ownership rate.

It's also a paper for stupid people. Put the two together and you have your answer:

Readership far more likely to have bought into the bubble and have their entire future depending upon it's continued blowing.

Nick

Anonymous said...

Express=Excess