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.