A year of balancing economic truth-telling and panic

Fear and panic are what have triggered nearly all the economic crises seen all over the world in the past centuries. This is precisely why leaders, particularly those in charge of public finances, make great efforts to manage the narrative and optics around the economy, in order to manage fear and quell panic. Even if there is good reason to be concerned, nothing is to be gained from panic, except pandemonium and chaos. When dark clouds hang over the economy, the wrong statements, incorrect optics and even poor reporting by journalists can trigger investor panic, capital flight, bank runs and massive job losses.

The Northern Rock Bank Run of 2007 in the United Kingdom is cited as a classic example. Critics say when Northern Rock Bank faced liquidity challenges and had to ask for help from the Bank of England, media reported this as a bank failure, mistaking illiquidity for insolvency and failing to clarify that depositors’ funds were, in fact, secure.