"The Ted Spread is Not Yet Dead "

Ah, here's something. From Paul Krugman:

Mission not accomplished — not yet, anyway, by Paul Krugman: Is it fair to judge the Fed’s plan yet? No, not in either direction. The big stock rally yesterday reflected investors’ belief that it might work — or maybe investors’ belief that other investors would believe that it would work — rather than an actual demonstration of effectiveness.

  TED spread not yet dead

This chart shows a less favorable indicator — the TED spread, the difference between the interest rate on three-month Treasury bills and three-month LIBOR, the rate banks charge on loans to each other. The TED spread is an indication of lack of trust in financial markets; its widening was a sign that things were going bad. And the spread has only narrowed a bit since the Fed’s action. Now, for the most part the Fed hasn’t actually done anything yet — just announced its intention to do stuff — so this is an unfair indicator too.

So we’re still up in the air. But I have to say that I wanted to see more action in the chart above.

If it doesn't work (but hope it will), what should the Fed do next? My answer is here.