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Why markets should fear Biden’s Ministry of Truth

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Earlier this week the United States’ Department of Homeland Security announced the establishment of the Disinformation Governance Board. Commentators have been quick to notice the organisation’s frightening resemblance to a “Ministry of Truth.” It should go without saying that a government-led organisation seeking to influence or control public discourse is a terrifying threat to the right to individual expression, a liberty long enshrined in the Constitution of the United States. The potential impact on media organisations perceived by the government to be spreading disinformation – however the state decides to define that – is chilling.

Scarier still is the people that have been put in to run the K – sorry, D – GB. Nina Jankowicz is the person Biden has entrusted to keep a watchful eye over American discourse (no, we’ve never heard of her either). This obscure academic has been parachuted in to a position of potentially enormous significance. Quite apart from her bizarre singing antics in which she rails against a “world filled with filth and lies,” it seems that she has been guilty of spreading disinformation herself. Just some of her more outrageous lies are that a Trump presidency would embolden ISIS, and that the Hunter Biden laptop story constituted Russian disinformation. When government bodies are headed by such partisan individuals, it is time to start getting worried:

Global markets should be particularly concerned. As we have previously explored , sentiment expressed in the media is often a key indicator of where markets are heading. As Simon Rodda of Dow Jones told us:

“News includes not just information, but sentiment. Part of the writing process is the selection of what you write about. There is an inference in the topic selection, and in the language itself. Through textual analysis, we can pick up on the language journalists are using and look for positive and negative words and phrases associated with certain economic topics.”

In other words, there is a strong interplay between consumer sentiment as expressed in the media, and financial markets. Inferring this sentiment from what is written and published can give investors a sense of what markets are likely to do and how consumers are likely to react to certain developments. Such sentiment can themselves affect market prices.

But what if our friend Jankowicz doesn’t like a certain story, company or product? There would be little to stop her from branding something “disinformation” and therefore suppressing this sentiment. This could in turn be seen as a kind of market manipulation. What does that say about the integrity of US financial markets, which underpin the entire global economy?

Moreover, what recourse would companies and CEOs have if Jankowicz suddenly decides they are guilty of “disinformation?” We already know she is not a fan of Elon Musk: the prospect of him taking over Twitter apparently makes her “shudder” (perhaps because he would challenge her control of the discourse). What does Musk do if she officially condemns him as a perpetrator of disinformation, which would presumably have a knock-on effect on Tesla share prices? Could we be seeing the largest libel case in history? The US Constitution makes no allowance for this kind of situation because, apart from at very specific times, it sees the right to freedom of expression as absolute. An American “Ministry of Truth” is a very new development and one that financial markets will have to work out how to grapple with.

If Jankowicz is to yield such power over American media sentiment, she will also be (indirectly) influencing global markets. The monetary policy of the Federal Reserve – which impacts global foreign exchange markets hugely –  is driven by domestic economic concerns. Jankowicz, through overseeing media sentiment, could have the power to colour these concerns in a light preferable to the incumbent administration. In turn, this could have significant repercussions on the strength of the dollar, American bond markets, and global capital markets. It sounds extraordinary, but the power she has been given – if left unchecked – could truly escalate to this extent.

Such interference in markets is not uncommon in countries which already have their own “Ministries of Truth.” Downbeat commentaries on the Chinese markets have been supressed by the authorities in an attempt to keep domestic markets buoyant. Could Biden’s “Ministry of Truth” try to do the same for reasons of political or economic convenience?

With these developments, we are in uncharted territory. It will be some time before we fully understand the extent of the DGB’s power and what impact this could have on financial markets. But we are on the cusp of a strange, obscure academic having massive and unchecked power over media sentiment and, indirectlly, global markets. That is a prospect which should frighten us all.

Author: Harry Clynch

#Biden #DGB #Fed #GlobalMarkets #MarketSentiment

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