Wall Street Journal is the latest media to engage in wish fulfillment speculation regarding the euro.

We’re witnessing a perfect example of how unsubstantiated myths gain credence among the news media, the general public and, unfortunately, our leaders as well.

I think you know the kind of myth I’m talking about, but here are some examples of concepts that the news media, elected officials and other leaders promoted as factually correct that turned out to be all wrong, and in many cases were clearly known to be wrong by at least some of the people in the forefront of spreading the untruth:

• Saddam Hussein had something to do with 9/11.
• Iraq had weapons of mass destruction.
• An attack on a U.S. ship in the Gulf of Tonkin justified escalation of a bloody war in Southeast Asia.
• Capital punishment serves as a deterrent to crime.
• Women who don’t marry by the time they turn 30 probably never will.
• Abstinence training leads to fewer teen pregnancies.

How do these myths take hold? 

Usually, it’s with the complicity of the news media, and that’s what we’re seeing with the small campaign by the New York Times and Wall Street Journal to tout the absurd idea that the some or all the nations of the European Community (EU) will walk away from its single currency, the euro.

On February 11, I analyzed the Times story by Nicholas Kulish which stated that many Germans want out of the euro.  Most of the story was factual, but the assertions about the euro were sheer speculation. 

In the Thursday, February 25, 2010, Stephen Fidler of the Wall Street Journal grabs the baton from Kulish in a story that analyzes Spain’s economic problems.  The headline is “The Euro’s Next Battleground: Spain” but it’s in the secondary headline that Fidler introduces his big lie:

“Greece set off the crisis rattling the euro zone.
Spain could determine whether the 16-nation currency stands or falls.”

But the story begins by ignoring the false premise, instead giving us a lot of very useful facts about the economic crisis in Spain.  It then proceeds to discuss why sharing a currency with other nations complicates some traditional means that national governments have used to fight past recessions.

Then out of the blue, after a no-brainer statement that buyers of Spanish bonds are demanding higher interest rates, we get the opinion of an expert: “’Spain is the real test case for the euro,’” says Desmond Lachman of the American Enterprise Institute in Washington. ‘If Spain is in deep trouble, it will be difficult to hold the euro together…and my own view is that Spain is in deep trouble.’”Later, after discussing other options for Spain, Fidler returns to his expert, using indirect discourse: ”Mr. Lachman of the American Enterprise Institute is among the pessimists who doubt the government will take this course. He thinks Spain’s chronic inability to restart growth will lead it to contemplate a third option: splitting the euro zone asunder by withdrawing from the common currency.”The article finishes with another 30 or so paragraphs about the Spanish economic crisis, all fairly factual in nature.

Thus, Fidler sneaks assertions of one expert into a 2,000-word factual article about a different, but vaguely related topic.  It’s the very technique the Times reporter used, but in Fidler’s case at least he gets an expert to say the myth he wants to spread. 

One expert and one expert only.

And, of course, the expert is from the notoriously right-wing American Enterprise Institute, which has as its stated mission “to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and responsibility, vigilant and effective defense and foreign policies, political accountability, and open debate.”  The expert provides no facts, no studies, just his opinion.  The reporter provides nothing to substantiate the expert’s expertise.  

Fidler has tried to sneak the myth that the euro is dangerously close to failing into a factual article, just as Kulish tried to in his Times article on Germany’s attitude towards bailing out Greece earlier this month.  Someone is plying these journalists into being accomplices in spreading what at this point is almost a lie.  Who could it be?

Of course it would be very convenient for the U.S. economy if many people believed that the euro was going under.  It would forestall thoughts of replacing the dollar as the bedrock currency of the world economy.  It would likely send many investors running to the dollar for safety.  If the euro really went under, it would turn one of our principal economic competitors into a bunch of smaller, far weaker competitors, none with the power to challenge the U.S. that the EU has.  Yes, many people in the U.S. would love to see the euro break apart.  But it’s not going to happen.  It’s just wishful thinking, a jingoistic pipedream.

It will be interesting to see if this false notion of the failing euro takes root in the media and the public.  If it does, it will certainly lead to regrettable business and economic decisions.  Unfortunately, wishing does not make it so, and when you make business  or political decisions based on fallacious information, you usually fail.