Friday, October 01, 2010

Financial Times Alphaville....Where Comment Is Not Free

Yesterday the Alphaville blog at the Financial Times kicked off its day with a potentially explosive story. They printed a summary of a report alleging that Spain had hugely manipulated statistics on the decline of its Gross Domestic Product (GDP) during the crisis. The central allegation was that it was impossible for there to be such a high increase in unemployment together with a relatively small fall in GDP. The implication of the report was that Spain had maybe "done a Greece" by hiding the reality of its economic situation. The source of the report printed by the FT was anonymous and apparently it had been sent from a gmail account created only for the purpose of circulating the document. The FT claimed that the general strike had prevented them from getting a response before publication from Spain's national statistics institute (the INE).

The publication was enthusiastically received by many of those who follow this blog. However, as the day progressed it seems that others did the basic analysis on the report that the FT itself had failed to do. In the best traditions of classical economics the report had ignored factors - such as international trade - which have an important impact on the performance of the economy. Then came suggestions that perhaps the origin of the report had a political motivation as it had also apparently been sent to the extreme right wing Libertad Digital site. We don't know whether this is the case or not, although it wouldn't surprise me at all if sections of the Spanish right tried to provoke a Greek style crisis for Spain; regardless of the potentially disastrous consequences for their fellow citizens.

Nor, it has to be said, would it be any surprise if Alphaville and their keen followers in the markets also hoped for a bit of action following the publication of the report - nicely timed for the same day as the revision of Spain's credit rating by Moody's. Instead the FT ended up pulling the original article (if anyone has a copy please send it to me) and replacing it with a fairly lame piece telling us what a stressful day they'd had and how much they needed a drink! Now we are often given the impression that the markets take their decisions assisted by a legion of highly paid expert analysts and the professionalism of the journalists who cover economic issues. The sadder reality is what happened yesterday with Alphaville. Forget professionalism, the reason this story got published is because those publishing and many of those reading badly wanted it to be true, such stories help the roulette wheel to spin. You can feel the disappointment as the game ended on a whimper. One comment I read this morning lamented the possibility that Spain's economy might start to recover before the "truth" is revealed. Yes, that would be terrible wouldn't it? We don't want recovery to start anywhere until the takings have been counted!

I left a comment on the FT's revised post. It wasn't an abusive or insulting comment. I simply made the point that the FT's publish rumours without checking and accept no responsibility for the consequences line, combined with the evident enthusiasm of their readers for such stories, made an excellent case for curtailing the power of the markets. The comment was published on the site, but then about 5 minutes later someone inside the FT removed it. No criticism please, we're British.


Rab said...

Well put Graeme. They don’t take criticism very well, as I have found out myself too.
Someone said that we had reached “the end of history”, which is nonsense but I think the end of serious, fact-based journalism is clearly upon us. A number of titles live off their reputation more than their current output: The Economist and the FT are prime examples in the business press.

Something to bear in mind is the strategy the FT is pursuing for the AV blog. Albeit it is currently free to access, it is only a matter of time before it is only available behind the pay-wall. This cock-up does nothing for their reputation and marketing strategy so the plug was pulled quickly and dissenting posters removed in the best Stalinist tradition.

In the meantime some smart fucker probably tried to make a few bob shortening Spanish bonds/indices during the strike, circulating the pseudo-analysis to FT and thanking his/her lucky starts they were so stupid to give it any credibility whatsoever. As far as I know after checking with some of my contacts in the City, nobody had heard of this “report” before it appeared in FT AV. Their line that “it was doing the rounds” does not tie up with what I am being told.

Another story is whether we believe official statistics are an accurate representation of economic conditions and how the data is put together, etc, but that’s another debate.

Colin said...

Believe you can get what you want from CB at IBEX Salad.

Lavengro said...

Well said. I don't know if it's laziness, stupidity or malevolence, with no shortage of the last-named, but there's quite a lot of it about.

Graeme said...


Yes, I remember the 'end of history' moment - it didn't last long. I wonder, if they're going to put Alphaville behind a paywall, whether they will offer discounts to those readers who do their fact checking and analysis for them? It's not just the business press who are planning to offer a poorer quality product at a price, I've read about people already jumping off the ship at The Times. Why pay money for what is little more than "cut and paste" journalism? The least we can hope for is that if people choose to pay for it they can have the right to make critical comments of what they are getting.

Having seen again the original text (via Ibex Salad - thanks Colin) they are, to say the least, ambiguous about whether this was really circulating before it reached them. After all, they say it started on Wednesday, the day before they published. So perhaps "doing the rounds" is just their standard excuse for printing rumours. Point taken on official statistics, but the fact they don't represent reality is still a long way from the claim that they are being manipulated specifically to deal with the crisis.


I think in the case of the business press it's a bit different because of their target market and the 'interested' nature of their reporting, but the root cause is the same. Poor quality shit hiding behind a respected name. Poor Ireland, they did everything that was demanded and they get punished for it anyway. A lesson to be learnt from that.

Lavengro said...

Have you noticed that the UK, which has a more than dodgy economy, is immune from this market pressure? And that a lot of bankers and other financial whizzes rather like living in London? Funny that!

Graeme said...

It's because they are followers of the 'don't piss on your own doorstep' school of economic thought. The US also gets off lightly.

Lavengro said...

Exactly. If they'd done their job properly in the USA in the first place, we wouldn't be in this mess now. And London is conveniently outside the eurozone.

Graeme said...

Well of course the 'don't piss on your own doorstep' school is heavily influenced by the renowned US based Looking After Number One Institute - famous for its groundbreaking work demonstrating that the poor use up too much of the world's resources.

ejh said...

If you think you might get deleted...always take a screenshot.

Graeme said...

Sound advice, but not being familiar with the policies of the site - I'd never commented there before - it didn't occur to me that they would not be able to accept criticism.