NPR gave us classic financial markets as sports event reporting this morning, pointing out how the markets moved on the words spoken by Federal Reserve Board chairman Ben Bernanke. The correct response to these moment by moment movements should be: "who gives a damn?" There are a small number of rich speculators who stand to make or lose large amounts of money on these movements, just as people at racing tracks stand to make or lose money depending on the outcome of horse races. For the vast majority of people in the country (including the vast majority of NPR's relatively affluent listeners), the hour to hour or even day to day movement of the financial markets have no consequence. Even over the longer-term the consequences are ambiguous. Financial markets first and foremost involve redistribution. If the stock market rises relative to GDP, then it means that people who own stock gain at the expense of people who don't. One aspect of this piece that is especially striking was the flat out assertion by Adam Davidson, NPR's reporter on the story, that the statements of the Fed chairman can move financial markets. This assertion is striking because NPR has never once raised the possibility that the Fed could have deflated the housing bubble by simply documenting the evidence of the bubble and using the platform of the Fed chairman and the institution more generally to publicize this information widely. If one sentence from the Fed chairman has the power to move financial markets, it is absurd to believe that a persistent onslaught of information from the Fed and the Fed chairman would not have an impact on financial markets. In other words, Bernanke and Greenspan almost certainly could have deflated the housing bubble before it reached dangerous levels just by talking about it -- or least this is the implication of what NPR told listeners this morning.
--Dean Baker
