"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK
- The Wall Street Journal reports that small businesses are still having a terrible time getting credit. Banks blame overzealous regulators that are trying to introduce some caution. Regulators claim that banks just use them as an excuse for loans they don't want to make anyway. Either way, that credit crunch is still happening for certain businesses (A question to my Austrian friends - wouldn't overzealous regulators accelerate the liquidation of malinvestments? We always talk as if any government action extends the crisis - but certainly some should extend the crisis and some should bring it to a speedier end, right? Shouldn't this bring it to a speedier end?).
- Matt Yglesias has a post up on why credit might still be tighter than we think. We always look at the effective federal funds rate, but the LIBOR suggests that money may still be tight (I checked the Euribor and it shows essentially the same thing). They're measuring slightly different things - LIBOR and Euribor look at money market rates, while the federal funds rate is the rate that reserves are lent at overnight. So this may be some sort of risk premium. But the point is, they're still departing from the fed funds rate when they had previously tracked it - and this is true even at the zero bound, where you would expect them to be able to track it even more closely.
- Daniel Indiviglio offers a credit-based theory of the business cycle and then suggests criminalizing credit. Pretty crazy stuff.
- Finally, I've been doing research on alternative financial services (payday loans, auto title loans, etc.), and some of the empirical results are harkening back to work by Stiglitz and Weiss (1981) on credit rationing in markets with imperfect information. We're still working with results, but it's neat to see that pop up. I'm not sure the primary investigators I'm working with entirely bought my Stiglitz and Weiss interpretation of what we're seeing, but hopefully it will get in the analysis.
Liveblogging World War II: May 23, 1943
4 hours ago