Thursday, December 13, 2007

Programmed failure

Usually whenever terrible things happen as the inevitable result of business and press collusion the media comes through with some fake "mea culpa" that tries to absolve both institutions. Today that job belongs to the Washington Post, with a story on the housing finance fiasco headlined "Analysts late to the alarm."

The story starts out with an anecdote about an analyst who did get the story right, but then goes on to show what an anomaly that person was, and makes it sound like the financing of housing is such a complex system that, really, no one could figure it out. Sounds a lot like Enron, right? However, this time, lots of smart people did figure out that the alphabet soup of SIVs, CDOs and the like were a house of cards that could not stand. Nouriel Roubini, one of the top economists in the world, has been sounding the alarm on sub-prime mortgages for more than four years; almost the same for Paul Krugman, columnist for the New York Times, yet neither of these top economists are even mentioned in the Post story. This story from the Post, then, is really just another cover up for the corrupt business press.

All of this should be yet another warning to the average citizen to at all costs avoid listening to, reading or watching any popular business press or news, including, especially, public radio and television, which are themselves captives of the financial industries. So how is that so-called average investor to know what to invest in? This is a very difficult question, but here are a few suggestions. 1) Don't ever invest in something you don't understand. See Enron. 2) When everyone in the financial press is looking one way way, be sure to look the other way. 3) Understand that financial analysts have a stake in bamboozling rubes like us out of our hard earned money, and ethics do not stand in their way. 4) Invest conservatively such as limiting your holdings to government backed bonds; this might not make you the most money possible, but on the other hand you won't lose your money. 5) Try SRI - Socially Responsible Investing. Usually companies that clear SRI screens are more transparent about their operations, so it's easier to understand how and why they make money.

Just to be clear: The real story about the housing meltdown and the press mirrors just about every other sorry tale of media failure on important issues going back for some time. In that sense it is similar to the tale of media failure on the runup to war on Iraq or the current drumbeat to make war on Iran, or the business press' abject failure in covering Enron. As Norman Mineta testified at the 911 hearings, one odd thing happening is an anomaly; two is a pattern and three is a program. As painful as it is to consider, on the most important issues of our day the traditional media has a program of failure, and that should alarm us all.

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