Thursday, November 27, 2008

 

The credit crunch is over

Remember what I said about being early? Well I might have been right on time. I think the credit crunch portion of this economic downturn is very nearly done. The credit crunch was just a symptom of the deflationary spiral in which we find ourselves. The prices of certain oddly configured debt instruments like CDOs and CDSs were unattainable in a market without buyers. Lending froze and panic set on the credit markets.

But interest rates like LIBOR, an interbank offer rate, have come down to a level in which business can be done and the world's gov't. have seen fit to backstop the bigger banks. Confidence that these banks will not go under has risen and so the credit crunch is not as crunchy.

Now we have to deal with a fairly severe recession. More later.

Happy Thanksgiving!

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