[lbo-talk] TED Spread: Still Dead

[dredmond at efn.org]

Bloomberg has a handy-dandy chart, tracking the so-called "TED spread", or
difference between the 3-month T-bill and the 3-month LIBOR (dollars
bought in London by banks). It's one of the best measures of credit stress
around - for most of the 2000s, the spread was 0.3. Since August 2007 it's
been in the worrisome 1.5 range, and spiked to a cataclysmic 4.6 in early
October -- meaning, interbank lending had simply shut down. Since then,
central banks flooded the system with liquidity, and the spread eased to
2.5 (i.e. moved from cataclysmic to horrible). Crisis over? Nope, the
spread has been moving back up again:

http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND

To make a long story short - more credit carnage is ahead, and even bigger
bailouts will be needed.

-- DRR