1/31/2005

Is the media telling us the truth?

In a recent article "Iraq election helps the dollar" the media tells us how the dollar gained strength compared to the yen going from ¥103.37 to ¥103.43 early Monday. They assume such a jump is due the recent elections in Iraq. My question is the dollar really “firmer today”?

So I went to another website x-rates.com to inquire about this sudden strengthening of the U.S. dollar. From January 28 to January 31 three out of five major currencies actually gained against the dollar including the European Euro, Canadian dollar, and Austrian dollar. Another currency the British pound stayed the same. According to x-rates.com only one out of five major currencies the Japanese yen gained favor to the U.S. dollar.

So my mind is left with questions like? Is the media out for consumers’ best interests? Do they feed us information that might be tampered with? And how much does our economy depend on the media?

4 comments:

heat said...

It is just what you would expect from the media these days. It is interesting to see that if you just look a little deeper into a story like this you find that key facts were ignored. The media is obsessed with Iraq and loves to make broad assumptions just to be able to tie in that country somehow.

Dr. Tufte said...

This is a common problem for students to have difficulty understanding.

As near as I can figure, financial reporters feel compelled somehow to attribute all movements in asset prices (like exchange rates) to some arbitrary event that occurred that day. Students who are earnest and inexperienced at this think these pronouncements are worthwhile. My experience is that they're not.

On the other hand, what the media is engaging in is cheap talk. They can say just about anything they want linking events to financial news without being right - or wrong. So, they can use this cheap talk to differentiate themselves from their competitors without doing themselves any potential harm. For example, a pro-Iraq station could associate events in Iraq with positive economic outcomes, and become known and watched for that perspective (even if it isn't worth much).

P.S. Jane's story should get extra credit for making me LOL!

Isaac said...

Dr. Tufte stated that the media in this post is engaging in cheap talk. I agree with what he said. The number one objective of the media is to attract people to watch their shows. In order for them to accomplish this objective, they sometimes need to report things that people want to hear. For example, the post suggests that the media covered the gain of the dollar vs. the yen but failed to mention the other four currencies which are getting stronger against the dollar. They pick and chose their stories and the way they want to tell them.

Dr. Tufte said...

Isaac has taken this in a different direction.

Here goes: I think an underappreciated problem with the legacy media is that we don't see how long it took them to put together a story. If the producer/reporter wants to present an unusual viewpoint, they can always find someone to espouse it, it just might take longer to find them. I'd like to know how much leg work they had to go through to find those people.