consequences of fake news

‘Fake News’ has become one of the defining terms of the last couple of years and a major part of public discourse. While the use of these two words has been widespread in recent years, its definition has been somewhat elastic. There are, in effect, three forms of ‘fake news,’ which depends on the way the user deploys it. It can be:

  • A political polemic purely designed to undermine someone with a slur.
  • A poorly researched article which can be disproven by facts.
  • A cheap jibe used by someone to try to discredit a fair article for which they have no retort.

While you’ll mostly find this at the heart of petty political squabbles, could there be wider consequences from the fake news? Might there be a way in which this poisonous atmosphere stains the economy?

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Misinformation can cause panic

Let’s first deal with the top two definitions of ‘fake news.’ Information that is false – either intentionally or unintentionally – can be very damaging, especially in an age in which that information can be disseminated to a huge audience in next to no time.

Politics and economics are very closely linked, and, events in the Westminster bubble are even more pertinent to the economic well-being of the nation at a time in which the UK is negotiating its exit from the European Union. After every announcement, speech, policy paper and TV interview, analysts turn to charts showing the value of the pound to judge its success.

In this febrile environment, the right piece of fake news can easily spark a bit of panic on trading floors – affecting the value of the pound and wider confidence in the stock market, with the potential to influence trading decisions.

Let’s not pretend this is a new phenomenon. While the term fake news has become popular – aided and abetted by the tweeter-in-chief in the White House – gossip and rumor have long influenced the markets. It’s always been tough for traders to separate what’s real and what’s fake.

That’s certainly the view of equity analyst Anton Gordon, who told Forbes: “For investors, it’s information not based on a conversation with management or ideas coming from a financial news blog that allows people to post whatever they want. You don’t hear about how it impacts market prices because it doesn’t always work, but I am sure someone is trying to do it somewhere right now,” he says.

fake news effects on economy

Political stability.

While panic can spread through markets as the result of fake news, such information can also chip away at the trust in which politics is held. Widely read articles which aim to undermine the reputation of a particular party or individual can create an unfair reputation. As the old saying goes ‘mud sticks.’

While the career of any political leader might not be of too much concern, constant chopping and changing at the top of politics and perpetual leadership crises undermines confidence in the whole system. If the markets lose faith in the ability of political leaders to run a fully functioning government – let alone deliver a favorable Brexit deal –  then the nation’s reputation will be tainted. That’s especially bad for a country so desperately linked to the financial services industry.

Fake news chips away at faith in politics and that’s something politicians need to be aware of for economic reasons as well as for their career chances.

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Undermine trust in the news media

Finally, there’s that last definition of ‘fake news.’ The definition that is used by people to try to discredit the media, in particular, traditional broadcasters and newspapers.

While there might well be only outlets that have ‘had it coming’ about a challenge to their authority and standing – it’s not good news if trained journalists lose their jobs in droves and the quality of coverage is diluted.

An active media holds those in power to account and delivers trustworthy updates about the economy. If that is undermined, traders will lose an unbiased source of information and will suffer as a result.

Whether it’s the spread of false information or the undermining of politics and the news media – the issues around fake news have the potential to have a wider economic impact.