Vice draws entirely wrong conclusion from Fed report

November 10, 2021

By Tim Worstall

In a new piece, Vice wrongly interprets a Federal Reserve report, making claims that meme investing, “stonks” and all, “Fed: Meme Stocks Might Blow Up U.S. Economy One Day.”

The Federal Reserve actually says the opposite. As with anything else, there are risks with meme investing – but there are not risks to the wider economy from it.

Even if we’re to be charitable and note that anyone can miss a message getting it the wrong way around is impressive.

The report is on the Federal Reserve’s “Financial Stability Report” which looks at the risks to good order within the American economy. Concentrating, as might be imagined, on the financial markets. Given what happened with GameStop, RobinHood and so on, there’s a section on meme investing (Page 18).

Vice summarises that section as: “That’s Fed-speak for We might have to do something before wallstreetbets blows up the economy.” Which is exactly the opposite of what the section says. RobinHood and other such brokers have minor problems with deposits they must make to other sectors of the financial markets. The investors are largely young (in their 30s say) first timers and they’re taking on significant risk to their own finances. Which options trading on the back of Tweets is obviously going to be, risky. But the conclusion from the Fed is that there are no systemic issues here, as far as the wider economy is concerned it’s a nothingburger.

Vice is a significant news source for millennials, exactly that group partaking in the meme investing. The TV channel reaches 60 million homes, the magazine has a 900,000 distribution. The website gains near 30 million visits a month.

A major source of news for millennials really should manage to accurately report on millennials investing. There are risks to those doing the investing but the Federal Reserve, entirely contrary to how Vice interprets it, says there is no risk to the economy as a whole.


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