[lbo-talk] TED Spread

[dredmond at efn.org]

If you're wondering why stock markets continue to swoon, here's a chart of
the so-called "TED spread", the difference between 3-month interbank
lending rate in London (LIBOR) and 3-month central bank lending, a measure
of financial stress -- the higher the red line, the closer we are to a
meltdown:

http://en.wikipedia.org/wiki/Image:Ted-Spread.png

Overnight money flows are finally loosening, a good sign, but 3-month
flows are still in cardiac arrest. The world economy is still breathing --
barely  -- but banks need to be recapitalized/nationalized as quickly as
possible. Also, Roubini is calling for a massive US stimulus package --
$300 billion in infrastructure and green jobs for 2009 -- to counteract
the rapidly worsening recession. My guess is the EU and East Asia will
need to do something similar -- i.e. compensate for falling US demand
through Euro/Asiakeynesianism. Fasten your seatbelts, it's going to be a
bumpy ride...

-- DRR