I remember seeing a chart on UK interbank lending (maybe on the FT's website?) that showed interbank lending in Oct '08 was only ~30% of what it was in July '07, 206 billion pounds vs 635 billion pounds. I know I read back in Oct that China was ordering its banks to stop all interbank lending to US banks. I also seem to remember reading that interbank lending in the US dropped almost 20% but didn't decline until after August of '08 so maybe the 15 October date is too early to capture it? Excess reserves also shot up in November to $560B in November and in October to $270B from $60B in Aug and $2B in July and Sept. which suggests funds which are not being lent doesn't it? I have a hard time imagining all the news about interbank lending dropping precipitously was just made up. What would be the purpose of such a lie and how could you convince so many people to report it if it were easily demonstrated to be false with a simple graph? This is pretty much not my area of expertise but I dislike conspiracy theories enough to make me doubt the interbank credit freeze was falsified.
John Thornton