Monday, September 7, 2009

Eats, Shoots and Leaves - the evolution of the 'green shoots' cliche

There is a lot to be said for studying the entrails of the financial media.  Sentiment drives markets and there is no doubting that the media has a role to play in nurturing sentiment.  (Whether it is a contrarian indicator is an argument for another day.)

Take for example, the phrase 'green shoots'.  Following is a chart from Google Trends that maps the search volume for the term over time.

i) The evolution of the phrase into a fine upstanding cliche began way back in 1991 when the then Chancellor Lamont heralded the 'green shoots of economic spring' (see the relevant snippet on BBC).  On this basis, we should give proper credit to Lord Lamont - well done - even if it cost you your job.

ii) In January 2009, the phrase was picked up by ITV and thrown into a question put to a UK minister, Baroness Vadera (see the snippet here).  She took the bait, hook-line-and-sinker, and soon found herself the subject of much criticism.  (You must really marvel at the evil intelligence of the UK's media machine.)  No surprise then that politicians were not seeing anything remotely green from then on.

iii) It took a non-elected government official to resurrect the phrase in March 2009.  Ben Bernanke saw some green shoots in an interview on 60 Minutes (get the whole CBS experience here).  It speaks volumes for the nature of the crisis that it is a central banker that is defining the popular mood (not that it is a new thing in the US - think 'irrational exuberance' - just its not really 'democracy' is it?).

After that things rapidly gained momentum.  What the US media machine lacks in Machiavellian smarts it makes up for in raw enthusiasm.  It hammered the green shoots line without mercy.

iv) By June, 'green shoots' had reached cliche nirvana.  Everyone in the english speaking world had said the phrase at least once.  In Paris, university students joined with government think-tanks to develop strategies to defend their borders.  Typically, Warren Buffett had the pithiest comment (June 24):

“We’re not seeing them,” Buffett said on CNBC. “I had a cataract operation in my left eye about a month ago and I thought, maybe now I’ll be able to see some green shoots.”

Enough already - you get the point.  All the while the credit and equity markets have been rallying, the media has been plugging the green shoots line.  I'm not arguing cause and effect here - it's probably mutually reinforcing.

Anyway...what got me going on all this was the thought that there has been a subtle shift in media and broker speak about what the world expects from China and emerging markets generally.  The 'decoupling' theory that was popular around the middle of 2008 - that suggested that these markets would not be affected by the recession in the US and Europe - has been replaced with the 'yet-to-be-labelled' theory that has China at the very centre of the world economic recovery.  

The new theory started to emerge around the time that 'green shoots' grabbed for its 15 minutes in the sun.  (For example see Decoupling 2.0 from the Economist in May 2009).  While it may never gain the traction of 'green shoots', I have the sense that this 'China will lead out us all out of recession' meme is important to the overall stability of this rally.  More on this later...

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