What credit crisis? That's the question being asked by the antibailout crowd in the blogosphere. These folks point to an analysis written by economist Robert Higgs where he points to various measures of lending activity and finds them fairly robust. Here is the problem: Those measures are from August. How do the credit markets look right now?
First, this from economist Mike Darda at MKM Partners, who is checking his Bloomberg today rather than looking at moldy data from last month:
Despite only a minor decline for stocks yesterday, the credit markets have continued to crash. The TED spread (3-month Libor to 3-month T-bills) mushroomed to 316 bps this morning after rising back to 300 bps yesterday, record highs. The Libor/OIS spread also is at record highs. Two-and-five-year swap spreads also exploded, with two-year swap spreads now above 160 bps, an occurrence not seen in the two decades that we have data.
And this from market strategist Ed Yardeni:
In the money markets, they are bowing down to King Cash according to this morning's FT: "Bankers estimate that 90 per cent of lending in the commercial paper market is being pushed through on a day-to-day basis, rather than on a monthly or longer basis, as tensions show no sign of easing. Money market funds are also selling existing commercial paper in favor of Treasury bills. That is preventing lower-rated companies from being able to roll into new paper, leading to concerns that they will be forced to fall back on pre-agreed lines of credit with their banks. While injections of liquidity from central banks have helped lower overnight rates, longer dated rates have been rising."