WSJ Factual Error

From the top story in today’s Wall Street Journal:

At one point during the day, investors were willing to pay more for one-month Treasurys than they could expect to get back when the bonds matured....That’s never happened before.

Actually it has happened before, not in the easily available data, but it has happened – in 1938 (and apparently several other times between 1935 and 1941).

My only source is a talk by Paul Samuelson, for which I cannot even point to a transcript, but I’m confident that primary sources will bear me out. I’m too lazy to go check old copies of The Wall Street Journal on microfilm, but take my word for it.

It’s actually pretty obvious if you look at the monthly data from the Fed. For example, in February 1941, the average yield on 3-month T-bills was 0.03 percent. Considering how the yield fluctuates from day to day and from hour to hour, it’s impossible to believe that it was not negative at certain points during that month. (Technically the Journal was referring to one-month bills, but it’s a safe assumption that, if 3-month bills were selling above maturity value, so were one-month bills for at least part of the time.)


UPDATE: Paul Krugman makes the same claim (hat tip: anonymous commenter)....and I continue to believe it is wrong. I'm not sure his claim is independent: he may have gotten his information from the Journal, or they may have gotten it from the same source, which I hope they will cite so we can follow it up and judge its reliability.

UPDATE2: Reuters and the AP, both citing Los Angeles-based Global Financial Data, report that the last time the 3-month T-bill was at or below zero was January 1940. (Could it merely have been "at" zero? It seems unlikely that the bid would have stopped at exactly zero.) Another AP report says that demand sent "the yield on the 3-month Treasury bill briefly into negative territory for the first time since 1940." Friedman and Jacobson, in A Monetary History of the United States, 1867-1960, say in a footnote that "yields on Treasury bills were occasionally negative in 1940." (Apparently my "obvious" conclusion about 1941 was not correct, buy my main point stands.)

Guess I’ll keep reading Barron’s and the Journal, Murdoch notwithstanding....

As we often do, my wife and I took the Boston Sunday Globe along to read during our late brunch at the Deluxe Town Diner. I figured, “I’ll read what they have to say about the credit crisis, market volatility, and what the Fed did this week.”

So what did they have to say? Basically nothing. I grabbed the business section first, assuming there would be a relevant article on the front page. Instead I found an article about the personal jet service business, an advice piece on how to negotiate with liars, and an article about a corrupt building contractor. Inside the business section? Still nothing. OK, how about the front section? Nothing. Umm…the real estate section? Nothing. Finally, in desperation, I picked up the “Ideas” section and found a commentary by Robert Kuttner on the roots of the mortgage crisis. Interesting, but only tangentially topical.

Does the Globe live in a completely different world than I do? I mean…Hello? The Fed cut the discount rate this week (!!) – the first explicit easing of Fed policy this business cycle, and an unprecedented mode of easing (cutting the discount rate spread over the federal funds target, increasing the maturity of discount window loans, and verbally encouraging banks to borrow from the discount window). To a macro geek like me, the very fact of a first easing makes it the biggest news story of the year. Considering the unprecedented methods, it should be the biggest story of the decade. (Although…OK…I do recall something about a big war in one of those “Ira” countries in the middle east…that might be important, too…and something about a huge hurricane a couple years back…had something to do with jazz musicians, I think…or was it a tidal wave??)

Granted, I don’t expect the Globe to cater to the interests of macro geeks, but…you’d think the business section at least would take some interest in gargantuan pieces of news from the financial markets. After all, Boston is home to one of the world’s largest mutual fund companies, among other important financial services businesses, and it sits a few short hours’ train ride away from the world’s financial center. Surely many of the Globe’s readers care about these things. Don’t they?

The Economics of Journalism of Economics

In a post that uncharacteristically portrays a (former) member of the Bush administration in a positive light, Brad DeLong continues his criticism of the mainstream media:

The world is a complex and intricate place. How is anyone to understand it--even a particular piece of it, for example the United States government in Washington DC and its economic policies? It is a big problem, for the standard sources that I was taught (perhaps wrongly) as a child to rely on--the Washington Post, the New York Times, Walter Cronkhite on the evening news--are breaking down.

I will suggest that he was in fact taught wrongly. But first I note that he later makes some important exceptions:

If you want to understand Washington DC, the American government, and American economic policy, then: trust the news pages of the Wall Street Journal, trust the Financial Times, trust the political and lobbying coverage of the National Journal. Trust Bloomberg and Knight-Ridder to try as best they can to get the story straight under immense time pressure.

I know very little about the National Journal, so I won’t comment on that, but the other four media outlets mentioned here have something obvious in common: they are all business and financial media. That orientation stands in contrast to those mentioned disparagingly in the earlier citation.

I am regular reader of the Wall Street Journal myself. (To be honest, I usually only make it through column 2 of the front page, and perhaps column 3, depending on how much fiber I ate the previous day.) The Journal’s coverage is far from perfect, but since it is the only paper that I read (even one column of) regularly, revealed preference would suggest that I tend to agree with Brad.

But even if I had never read the New York Times, it wouldn’t surprise me that the Journal has more reliable coverage. Business media are designed to provide news as useful information; general media are designed to provide news as a form of entertainment. Times readers want to find out what’s happening in the world because they enjoy finding out what’s happening in the world. In principle it doesn’t make much difference whether what they find out is what’s actually happening or some contrived alternate reality. In practice the distinction matters only to the extent that readers are likely to check the information against other sources.

Journal readers want to find out what’s happening in the world because they are going to make practical decisions based on that information – not just ineffectual decisions (from the individual perspective) like who to vote for, but decisions – like what investments to choose, how many widgets to produce, or whether to accept a merger offer – that will have noticeable effects on their lives. If the Journal gets a story wrong, it makes a practical difference to readers. Unlike the case of the Times, whether a story is substantively accurate makes more difference than whether the story is enjoyable to read. Naturally it is in the Journal’s interest to allocate more of its resources toward getting the stories right.

Complaining about the MSM

Why are the media giving so much attention to this story about the guys who wanted to attack the Sears Tower? The fact that we have a few terrorist wannabes in this country, no matter how lofty their ambitions might be, doesn’t strike me as deserving the top spot on network news two days in a row. This is a bit like “Franco is still dead,” but it’s really more like “Franco’s third cousin is still dead.” Can we have some real news, please?

J. Bradford DeLete

One of the privileges of having my own blog is that I get to re-post the comments that Brad DeLong deletes. As everyone knows, he is quite trigger-happy with that delete button. Well, I can kind of understand: his threads would go on for miles of drivel if he let every Tom, Dick, and Harry post comments. But moi...? For my latest, first some background:

1. Brad attacks a political reporter for making light of Hillary Clinton’s “wonkish” energy proposals. The media should cater instead to careful and concerned readers who really care about her speech.

2. Brad attacks another reporter for not stating prominently enough that global warming skeptics are liars, lunatics, and charlatans. The media should cater to careless and sloppy readers, who will be more influenced by the skeptics’ statements than by the author’s unambiguous but subtle challenges.

3. More of the above: the post on which I commented.

So…

Will the real Brad DeLong please stand up? Is it the one who believes readers are dumb and casual and need to be spoon-fed the truth about global warming? Or is it the one who believes readers are subtle and sophisticated and need to be given more substantive details about Hillary Clinton’s energy proposals?

Oops, I forgot: It’s the one who deletes posts from those who find problems with what he says. I suppose one might be able to avoid this fate by stating the criticisms in unusually diplomatic language, instead of trying to be witty. But isn’t Brad himself the one who is always attacking reporters for being too diplomatic in their criticisms?

My latest comment agrees with something he said, though, so I’m guessing it won’t be deleted. (To be fair, I did make some mildly hostile comments on the first post cited above, and Brad didn’t delete them either. I guess it’s hard to predict.)