And I Invented The Paper Clip

If Krugman is kidding when he claims he led the way in using the TED spread as a measure of financial confidence, his sense of humor is drier than salt.  On the other hand, if he is serious, he is delusional, or thinks his readers will believe anything (Possible!).  Hazardous waters, but full speed ahead:

It’s my TED! Mine!

Brad DeLong posts a graph of the TED spread, which he says “has become the consensus indicator of the depth of the current financial crunch”.

I think I did that. So it’s mine! You can’t have it!

Seriously (very, very wonkish), I started looking at the TED spread last fall, out of frustration with news reports that compared 3-month LIBOR with the Fed funds rate

...

So I’ve focused on the TED spread for a while, and I think other people have picked it up from me.

And that spread is telling us that the crisis is far from being over.

OK, he's obviously kidding in saying other people can't use it.  He does seem pretty straight-faced to me in writing that "I think other people have picked it up from me", but I am not a psychologist.  And maybe he is now noticing that folks he chats with are mentioning the TED spread, and thinks he was there first, in his circle anyway.

But what circle is that?  Oh, well.  Folks interested in background on the TED spread as a guide to financial panic can check this not-too-obscure IHT story from 1991, this investor's blurb from 1991 (which notes that Barrons has followed the TED spread for years), or, for more detail, this Derivatives Quarterly article from 1997.  Personally, I was well aware of the TED spread in the 80's, but who am I?

Do feel free with those paper clips; I've been thanked many times over already.

Comments

[Walter]

Even more odd than his, shall we say, inventive approach to authorship is that he actually wrote something coherent about an economic issue. I had for some time the thought in the back of my head that he had been hired to opine on the subject, but I long ago concluded that I had been mistaken, as he never seems to cover the subject.

Either that or my teachers really let me down by giving me the impression that I was supposed to have learnt about scarcity rather than the errors of GW Bush.

Still more oddly, Robert Reich has been relatively coherent with his economic analysis over the last couple years. (He's down to less than 50% class warfare content these days.) I thought people went to Berkeley to become more radicalized, not less.

[Steve]

I remember when I was an economist for a Chicago futures exchange in the mid-1980s; the TED spread was a popular market to trade.

[M. Simon]

The TED spread sounds like some kind of novel sexual position.

I'd like to try it if I knew what it was. Got a link to an image or video?

[M. Simon]

The mortgage problem is much worse in the Euro countries. In fact the melt down there has just started. Especially in the Brit areas it has just gotten going. Ireland and the Netherlands may be next. Spain is also due for a whack.

Greenspan didn't do it (mostly).

So what is the cause? Either there is too much money chasing to few goods - bad monetary policy world wide. Or unaccounted profits have been chasing too few investment opportunities. Of course that says the Central Banks didn't tighten the money supply enough to account for the unexpected profits.

Another possibility is that with Africa going downhill there is a lot of hot money coming out of that continent. Or perhaps the Arabians/Persians are packing their ermines.

I'm with the movie guys on this.

"Nobody knows nutin"

[M. Simon]

More on the Brit Meltdown

[M. Simon]

From the above link:

According to the International Monetary Fund’s latest World Economic Outlook UK house prices are more overvalued, relative to economic fundamentals, than those of almost any other high-income country. At long last, investors in mortgage-backed securities, all too aware of what has happened in the US, have realised the dangers in the UK.