Just Checking In: Phone Calls to Avert (Expedite?) Alarm

Jan Zilinsky
3 min readDec 24, 2018


Treasury secretary made phone calls to bank CEOs, and these chats are proving difficult to frame as a confirmation that markets couldn’t be any healthier. “Even after recent market losses, a liquidity squeeze or fresh financial crisis hadn’t been on the market’s mind. Mnuchin’s assertion of ample liquidity risked raising doubts,” according to Bloomberg.

The Committee to Calm Everyone Down has a name that’s perhaps less than ideal if an economic downturn was not your baseline scenario: Reuters reports Mnuchin “made plans to convene a group of officials known as the “Plunge Protection Team.””

And a Slate headline was — guess what — not the most unfair or click-baity item around: Mnuchin Calls Banks to Make Sure Everything Is OK. Now Everyone Is Worried.

Do we overestimate the power of words?

The problem with all of the above is obviously that people can start asking: do they know something we don’t know? Words can shift expectations about the future. Obviously, changes in beliefs can bring down entire economies.

But let’s also try not to treat words like dark magic.

I am sometimes taken aback how powerful, experienced people end up sounding less than wise when talking about psychology. Central bankers openly say things like: “we must never use the D-word” as if communication wizardry could make traders forget for a moment that asset prices are falling. These statements partly reflect, I think, a hope that we’ll give public servants some credit for “prudent communication” during the last financial crisis. (I’m more than ready to commend any action that tempered the Great Recession, by the way, but I find not saying the word “depression” not particularly impressive.)

Diligently avoiding any mention of scary words — staying away from phrases like “economic Depression” — will not lull markets into a state of calm oblivion. Want to make traders take a deep breath before they panic? I really don’t think anyone has figured that one out.

Folk psychology

I’ve never understood why operating with axiomatic psychological assumptions (“word X is off limits!”) was supposed to be befitting any and all circumstances. Central banks and others involved in financial oversight do not recruit experts on human cognition, marketing, story-telling, or related fields. And as far as I know they are not testing a menu of communication strategies….

Still, there is something almost comical about the news today. Although we should be suspicious of anyone’s self-proclaimed ability to tranquilize jittery merchants of stocks, currencies and other colorful papers, I reckon that doing the oppose it not too hard.

Notes (because I realize not everyone hangs out with economists every day)

The Committee to Calm Everyone Down is a reference to this cover.

The new book mentioned above is A Crisis of Beliefs
Investor Psychology and Financial Fragility by Nicola Gennaioli and Andrei Shleifer.

Photo credit: https://unsplash.com/photos/71CjSSB83Wo



Jan Zilinsky

political science & economics (sometimes with 19th century methods)