A correspondent reminds me of this from a couple of years ago, that I now hoist from the archives:
Hoisted from the Archives:
Why oh why can't we have a better press corps?
This is really embarrassing, New York Times: really, really embarrassing:
The first joke comes in Casey Mulligan's first paragraph: the Fed does not lend money to banks on an overnight basis at the Federal Funds Rate. The Fed lends money to banks at an interest rate called the Discount Rate. The Federal Funds rate is the rate at which banks lend their Federal Funds--the deposits they have at the Federal Reserve--to each other. That's why it is called the Federal Funds rate.
The second joke comes in the second paragraph. Hansen and Singleton (1983) is 'new research'?
The third joke is the entire third paragraph: since the long government bond rate is made up of the sum of (a) an average of present and future short-term rates and (b) term and risk premia, if Federal Reserve policy affects short rates then--unless you want to throw every single vestige of efficient markets overboard and argue that there are huge profit opportunities left on the table by financiers in the bond market--Federal Reserve policy affects long rates as well. Note the use of the weasel word 'largely'.
The New York Times badly needs to clean house here.
There are lots of economists who would love to write for the New York Times for free, and who know the difference between the Federal Funds Rate and the Discount Rate: