The Mediation of Financial Crises

Watchdogs, Lapdogs or Canaries in the Coal Mine?

by Sophie Knowles (Author)
©2020 Textbook XVI, 186 Pages
Series: Global Crises and the Media, Volume 25


In 2007-8 the world economy started its heady journey to recession. The Queen herself asked "why didn’t we see this coming," but it’s a question that remains unanswered. A decade later and it is still not clear exactly who is responsible for the crisis. The world has experienced the long-term impact of austerity policies on its welfare system and the political landscape is completely changed.
This analysis of the media that reported on this crisis and where it came from is long overdue. The media were responsible for warning the public—a role they failed in. This book provides evidence that journalists, like bankers and regulators, need to be held accountable. The Global Financial Crisis is a starting point, but it deserves a much wider context and explanation, one this book provides for the first time.
Looking at three global and pivotal financial crises, this book assesses the degree to which financial and economics journalists have played a watchdog role for society. It takes a long glance back from the Global Financial Crisis of 2007-8 to look at the (as it shows, gradually narrowing) content we have been reading in mainstream publications, and speaks to journalists in three countries to gauge the reality of the situation from the perspective of the newsroom.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author
  • About the book
  • This eBook can be cited
  • Contents
  • List of Figures
  • Foreword
  • Chapter One Financial Journalism Then and Now: Why Should We Care?
  • Chapter Two Challenges and Pressures in Financial Journalism
  • Chapter Three Case Study I: The Recession of the Early 1990s; the Recession We “Had to Have”?
  • Chapter Four Case Study II: The “Irrationally Exuberant” Dot Com Boom of 2000–1
  • Chapter Five The Global Financial Crisis: “Why Did Nobody See It Coming?”
  • Chapter Six Financial Journalism in the Digital Age – Does Alternative News Provide Alternatives?
  • Chapter Seven Beyond the Crisis
  • Appendix: Methodology for Assessing the Financial Press
  • Index
  • Series index

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List of Figures

Figure 1. Number of times “fake news” has been searched on Google worldwide

Figure 2. 1990 Recession: Number of articles pre-and post-Minsky moment

Figure 3. 1990 Recession: Tone Trend, November 1988 to January 1992

Figure 4. 1990 Recession: Number and type of directly quoted sources, as a percentage of publication’s total quoted sources

Figure 5. 1990 Recession: Sources quoted after the Minsky moment, November 1990 to March 1991

Figure 6. 1990 Recession: Distribution of articles on interest rates

Figure 7. 1990 Recession: Distribution of articles on the topic of recession

Figure 8. 1990 Recession: Distribution of articles for the “general public”

Figure 9. 1990 Recession: Distribution of articles on the blame game topic

Figure 10. 1990 Recession: Distribution of articles on deregulation

Figure 11. Dot Com Boom: Number of articles pre- and post-Minsky moment

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Figure 12. Dot Com Boom: Tone Trend, March 1998 to May 2001

Figure 13. Dot Com Boom: Number and type of directly quoted sources, as a percentage of publication’s total quoted sources

Figure 14. Dot Com Boom: Sources quoted after the Minsky moment, March 2000 to July 2000

Figure 15. Dot Com Boom: Distribution of articles on the bursting of the Dot Com Bubble

Figure 16. Dot Com Boom: Distribution of articles that refer to the “new economy”

Figure 17. Dot Com Boom: Distribution of articles on the “old versus new” topic

Figure 18. Dot Com Boom: Distribution of articles that provide a warning relevant for the Dot Com Bubble

Figure 19. Dot Com Boom: Distribution of articles for the “general public”

Figure 20. GFC: Number of articles pre- and post-Minsky moment

Figure 21. GFC: Tone Trend, August 2005 to October 2008

Figure 22. GFC: Number and type of directly quoted sources, as a percentage of publication’s total quoted sources

Figure 23. GFC: Sources quoted after the Minsky moment, August 2007 to December 2007

Figure 24. GFC: Distribution of articles that provide clear explanations

Figure 25. GFC: Distribution of articles that refer to a “crisis”

Figure 26. GFC: Distribution of articles that assign blame

Figure 27. GFC: Distribution of articles that discuss a bailout

Figure 28. GFC: Distribution of articles for the “general public”

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Steve Schifferes

Professor of Financial Journalism (retired), City University of London

The scale, scope and extent of the global financial crisis of 2007–8 was unprecedented. It was also a moment of truth for the financial press, whose role is effectively evaluated in the comparative and historical perspective in this book.

Not since the Great Depression of the 1930s had a financial crisis had such a wide-ranging and long-lasting effect on the economy, on living standards and on the banking system. The strain on public finances, due to the costs of a government rescue, led directly to the austerity policies were introduced in many countries.

The speed at which the crisis spread around the world, shaking the economies not just of the developed world of the US and Europe, but also developing countries from Zambia to China who depended for economic growth on exports, was a demonstration of the power of globalisation. With interest rates at all-time lows, public finances still stretched, and a growing burden of private debt, it is unclear how the world would be able to cope with the next financial crisis.

Underlying the global financial crisis was 30 years of globalisation. A liberalized world trading system, underpinned by the creation of the World Trade Organisation (which strengthened and extended existing trade rules), led to huge increase in international trade, with the creation of global supply chains linking developing and developed countries in the production of goods from smartphones to T-shirts. Even more important was financial globalisation, which led to an ←xi | xii→unprecedented flow of capital across national borders, encouraged by the IMF and World Bank, which urged countries to abandon exchange controls and integrate in to the world financial system.

The result was the huge increase in the power, scale and reach of the large banking groups, whose interests and influence soon spanned the globe. Although these global banks were largely American – such as Citigroup, JP Morgan, and Bank of America – UK and European banks such as Barclays, RBS, and Deutschebank joined in the quest for international acquisitions and revenue streams. The close integration of the global financial system, as well as its size and scale, was a major reason that the financial crisis spread with lightning speed across the world.

These developments were broadly applauded and indeed aided by the policies of most Western governments. The banking sector was deregulated and encouraged to expand, for example, by the opening up of the City of London to global investment in the 1980s, and the ending of the division between retail and investment banking in the USA. The introduction of ‘light touch’ regulation in the UK under Labour, and the belief in the self-correcting nature of financial markets by the head of the US Federal Reserve, Alan Greenspan, led to a relaxed attitude towards the continued expansion of the financial sector at the expense of the real economy, and indeed the domination of short-term financial gains rather than long-term investment in the corporate sector.

The failure to regulate the exotic financial instruments, such as CDOs (collateralized debt obligations) and CDSs (credit default swaps), created by the banks to boost profits led directly to the highly leveraged and increasingly unstable architecture of the financial system. And outside the official banking sector, unregulated “shadow banks” were able to take even greater risks and become an ever bigger part of the global financial system.

For most of this period, the benefits of globalisation were largely uncontested, both by politicians and the financial press. The benefits of globalisation – increasing prosperity and economic stability, growing government revenues to fund tax cuts or further spending, and the integration of all countries into a global economic system – seemed obvious and overwhelmingly positive. The downsides of globalisation – the growing disparity of wealth and income, as a global elite gained the most economic benefits, while workers in developed countries suffered job losses and reduced wages; the overweighting of finance against manufacturing in the real economy; the instability of the financial system, and the inability of national governments to manage their economies in a global economic system – were overlooked. The idea that there were going to be losers as well as winners from globalisation, both between and within countries and regions, was not on the radar.

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This embrace of globalisation has been generally subsumed in the broader term “neo-liberalism” or “market fundamentalism,” which seeks to embed this policy change in a general shift away from state intervention in the economy (such as Keynesianism), which arose after the Great Depression in the 1930s, to the laissez-faire policies embraced by the Thatcher and Reagan governments in the 1980s and continued by their successors.

The financial press, which itself had greatly expanded during this period, was predominantly a cheerleader for this process, embracing and covering the emergence of global finance on terms that sometimes bordered on adulation. It rarely questioned the consensus between policy-makers, politicians and businessmen. The specialist financial press, in particular, whose audience was precisely these business and finance professionals who were benefitting from globalisation, saw its role as an enabler rather than a critic of the rapidly changing financial landscape.

This book provides vital evidence and a deeper understanding of this process and in particular, the reasons why the Press was unable to play the watchdog role that might have warned the public about the inherent dangers in the path the global economy was taking.


XVI, 186
ISBN (Hardcover)
ISBN (Softcover)
Publication date
2020 (October)
New York, Bern, Berlin, Bruxelles, Oxford, Wien, 2020. XVI, 186 pp., 28 b/w ill.

Biographical notes

Sophie Knowles (Author)

Sophie Knowles is a Senior Lecturer in the Media Department at Middlesex University, London. Knowles received her PhD from Murdoch University, Australia. She is co-editor of Media and Austerity: Comparative Perspectives and Media and Economic Inequality and numerous other publications on the media's representation of finance and the economy.


Title: The Mediation of Financial Crises