Credit Freeze Hits Warm Spot
October 18, 2008
LIBOR
As I’ve mentioned before, the real economic problem isn’t on Wall Street, it’s in the credit market. Basically, confidence that loans will be paid back has disappeared and banks are now resisting lending to other banks. For the first time since July, the Libor Rate (London Interbank Offered Rate) has dropped slightly. (Read Article)
This is good news but I expect it will be short-lived. Central Banks everywhere have been injecting large amounts of printed currency into their economies in order to bailout failing banks. All of this new money is going to give the illusion that the economy is beginning to prosper again but once the market adjusts to the buying power of this newly inflated money things will become very expensive. There is no easy way out of this, we have to start changing how we spend and save now.
