Tuesday, September 22, 2015

A bit more news

Some more stuff:

Reuters - Volkswagen shares plunge on emissions scandal. The company has finally admitted that they were breaking the law and committing fraud: if you read this article between the lines, it seems reasonable to assume the change in tack was demanded by Sigmar Gabriel, or the German government more generally.

WSJ - US faces construction worker shortage because they hate Mexicans. A whopping 570 thousand Mexican construction workers have gone home and aren't interested in returning. I guess Whitey is going to have to learn how to frame and lay brick himself, eh? That's the free market, bitches!

Brad DeLong - another Fed official with his head up his ass: Lacker. DeLong mocks Lacker for being perpetu-wrong about interest rates since the beginning of time. He's therefore one more Fed official whose pronouncements in the gutter press can be ignored from now on, because there's no way in hell Yellen is going to take his idiot opinions into account. Though of course the permahawks in investment banking will always insist Lacker is the true genius.

John Cochrane - is the Fed "suppressing" interest rates? Again with the disproof of the idiot blogosphere idea that the Fed "suppresses" rates: as a matter of fact, they've spent the past several years keeping them artificially high. Quote:
Is the Fed in fact "holding down" interest rates? Is there some sort of natural market equilibrium that features higher rates now, but the Fed is pushing down rates? That's the conventional view, clearly expressed in Mary's questions.

Well, let's think about that. If a central bank were holding down rates, what would it do? Answer, it would lend a lot of money at low rates. Money would be flowing out the discount window (that's where the Fed lends to banks), to banks, and through banks to the rest of the economy, flooding the place with low-rate loans. The interest rate the Fed pays on reserves and banks pay to borrow from the Fed would be low compared to market rates; credit and term spreads would be large, as the Fed would be trying to drag down those market rates.

That is, of course, the exact opposite of what's happening now. Banks are lending the Fed about $3 trillion worth of reserves, reserves the banks could go out and lend elsewhere if the market were producing great opportunities. Spreads of other rates over the rates banks lend to or borrow from the Fed are very low, not very high. Deposits are flooding in to banks, not loans out of banks.
Or you could listen to the clown who learned everything he knows about economics from Russian-funded disinformation agents like Ron Paul and Zerohedge.

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