I'm not saying it is wrong because Taibbi wrote it. It's wrong because he got basic facts about interbank lending wrong, i.e. that it exists. I'm then passing along my observation that, whenever I've fact checked Taibbi, his facts have tended to be wrong.
> Matt Levine...said the exact same thing
Taibbi said there is no interbank lending. Libor is totally made up. Levine said that there is less interbank lending and so some of the numbers had to be made up some of the time. He concludes the paragraph you quote with this sentence:
"[Libor] was all more or less good enough as a casual system for resetting the rates on a few billion dollars worth of syndicated loans, but it was not accurate down to the hundredth of a basis point as a foundation for the financial system, or as the source for pricing hundreds of trillions of dollars of derivatives."
That's important context. Libor was a good enough number for a market where precision didn't matter (syndicated loans). It proceeded to be used, and abused, improperly. It's not a totally made up number like Taibbi makes it out to be. It's a totally inappropriately-used number.
TL; DR You'll walk away better informed about almost any financial topic reading Levine over Taibbi.
> there isn't sufficient market activity to build a real value for Libor so it's basically made up from whole cloth
The least active currency-tenor, since deprecated, traded once a month. Most currency-tenors trade many, many, many times a day. There's plenty of market activity to build Libor-esque metrics.
> It's a distinction without a material difference
It's a world of material difference. The Fed Funds rate in the United States is based on the same kind of wholesale unsecured interbank lending as Libor is supposed to be. The metric, and the market it's based on, work.
We can have something like Libor based on market activity. It just won't be published every day for every tenor and currency.
If you just read Taibbi, the answer would seem to be to scrap any attempt at measuring the market because you cannot measure something that does not exist. If you understand the nuance, you walk away better appreciating what (a) went wrong, (b) we should do to improve future metrics and (c) one should look for when evaluating other metrics purporting to do similar things. You also gain an understanding for the kinds of scaling problems financial markets run into, which are quite unlike scaling problems in other contexts.
I'm not saying it is wrong because Taibbi wrote it. It's wrong because he got basic facts about interbank lending wrong, i.e. that it exists. I'm then passing along my observation that, whenever I've fact checked Taibbi, his facts have tended to be wrong.
> Matt Levine...said the exact same thing
Taibbi said there is no interbank lending. Libor is totally made up. Levine said that there is less interbank lending and so some of the numbers had to be made up some of the time. He concludes the paragraph you quote with this sentence:
"[Libor] was all more or less good enough as a casual system for resetting the rates on a few billion dollars worth of syndicated loans, but it was not accurate down to the hundredth of a basis point as a foundation for the financial system, or as the source for pricing hundreds of trillions of dollars of derivatives."
That's important context. Libor was a good enough number for a market where precision didn't matter (syndicated loans). It proceeded to be used, and abused, improperly. It's not a totally made up number like Taibbi makes it out to be. It's a totally inappropriately-used number.
TL; DR You'll walk away better informed about almost any financial topic reading Levine over Taibbi.