Most adults change their behaviour in small ways as the 6 o’clock news starts and interest rates are discussed. Some swallow, shift in their seats and in some cases get up and put the kettle on. A child who has never heard of a basis point will have understood it all correctly.
The child didn't understand the words. They understood the room.
The Noise That Doesn't Need a Dictionary
Financial news runs on abstraction – rates, indices, yields and inflation figures all expressed in words that most people associate with study and struggle. It takes years to get to grips with the language of finance. Many reach a stage where they can recite a list of definitions but fail to connect with their meaning in any practical sense. So while a seven-year-old might get nothing from the statement that the pound has fallen, his or her parent could go on to explain that this means no Tenerife holiday this year. That child has understood something about sterling that many readers of financial columns haven’t: it means something specific to that household.
Children, without knowing it, read financial news backwards. They see the consequence, such as a quieter dinner table, delayed car replacement and changed looks between two adults mid-glance, and work their way back to the cause. They are able to skip the entire translation layer of jargon and read the signal directly. Something has made life more difficult or easier for the people they live with. Stripped of everything else, this is what financial news is trying to say.
What Adults Were Trained to Ignore
Most adults, at some stage during secondary education, internalise the formal model for measuring the economy and more or less trust the various statistics published by the media on a daily basis. Although it makes sense in terms of scale (i.e. the kitchen table of any one individual is not going to reveal a slight fall in north-eastern region unemployment), it also creates a kind of ‘learned blindness’ in that people wait for the official figure to confirm their experiences over the previous months.
In the case of the 2008 crisis, it was at first difficult to make sense of the formal data but then it all suddenly became clear. But the households already affected knew. Their overtime had dried up, and they were using their credit cards for things that they would not normally use them for. The data was in the room but the news caught up with it later.
Houses speak in a similar way. Newsbug has been looking at how damp expresses itself in three different dialects – Damp Has Three Dialects, and They Are Not Saying the Same Thing – and no, they don’t say the same thing. You can read the signals which houses express directly when you have experienced them for yourself, or wait until someone else translates them for you. Either way you get the information, but the longer you wait, the later it reaches you.
The Real Translation Problem
I say financial journalism is written for a specific reader. That person already has knowledge of how a rate hike affects things like mortgages, consumer spending power and overall confidence. I believe this type of reader exists. However, most people catching the headlines are more like children in a family than they care to admit.
This is not a critique of financial news. Rather, it is an attempt to outline how reporting of financial events is used to translate systemic events into household news for the kitchen table. The “mumbo-jumbo” is the middle bit and by the time the news bulletin runs, the kitchen table usually already knows.
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Does financial news change behaviour, or does behaviour change first?
Both, and in that order. Households can feel a downturn before the official numbers confirm it, largely because their own spending is a leading indicator. But they can also be affected by news about interest rates. A forecast of higher interest rates can influence a household to delay remortgaging even though rates have not yet risen. The press headlines and reality are in constant feedback with each other.
Why do most people still find economic language so hard to follow?
Mostly because it was never translated for everyday use. Words like "yield" or "liquidity" are precise within economics but almost meaningless without a scaffolding of other knowledge you'd already have built. Schools rarely build it, and most financial reporting assumes you've got it.
If I ignore the financial news altogether, am I missing something important?
For most decisions, likely less than you think. The factors that truly affect your money (interest rates on mortgages, health of a sector, local employment) eventually reach us directly. The rest of the macro information is context and will influence us only in a general sense. A sudden change in interest rates is relevant. Information on analysts’ expectations for next quarter is of limited relevance.
What do children absorb from growing up around financial stress?
Most parents have no idea how much children are aware of. Children usually pick up on the ‘atmosphere’ of tensed up shoulders, stopped conversations when they enter a room, and the feeling that something is being managed. Giving it a name such as ‘we are being careful with money at the moment’ usually causes less worry for children than them picking up on the atmosphere of tension and then being left in the dark.
