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The Lending Standards Canary
The consensus narrative around the latest vintage of the Fed's senior loan officer survey is a "could've been worse" story.
Although banks continued to tighten standards over the last three months, the situation isn't as acute as many feared considering "recent developments" (as the March FOMC minutes euphemistically described the fallout from SVB's collapse) in the banking sector.
I'm not sure what, precisely, market participants expected. The survey wasn't encouraging by any stretch, and 202
I think econometrics should be paired with humility.
For example, recession probability models seldom get higher than 50-60% right before recessions start, which implies that those models are at best 50% predictive.
I took econometrics as part of my MBA. The prof was awful. When I arrived at class the first day I was regaled with 100 green-bar paper charts taped to every square inch of wall space in the room. No humility there. Of course, 50% right is what we would get from guessing. The next semester I spent the summer in a private seminar with the full prof who was responsible for running the bus college intro stat course. Nine of us met at the boss prof’s house, two hours daily, three days a week, spending the summer immersed in the useful task of really understanding the subject we were all going to be teaching for the coming year. Eight of us would be assigned four sections each of the course for all working sessions. One other guy was also involved. He already had a PhD in Metallurgical Engineering and managed quality in the headquarters of Timkin Roller Bearings. He was an operations PhD student and was to do the once weekly stat lectures. If I had been through this summer exposure earlier I would have had full knowledge of the futility of those hundred stupid econ charts. My late wife was a statistician for the Ohio Department of Labor and helped me when I needed it. There ought to be rules for economists playing with this stuff. It can be dangerous. Interestingly, the best stat at Ohio State was not taught in the math department or in econ. Rather, it was taught in graduate level Psych courses. Courses over there prepared me for my dissertation.