Yes, the Credit Markets Are That Bad

Ugh. Some depressing commentary from former bulls. First, economist Mike Darda:

Corporate bond spreads have risen to their widest level since 1933, an astonishing ascent that should put a quick end to the idea that credit problems are being exaggerated. Other measures of the price of risk have blown out as well: junk bond spreads reached 1100 bps last week, the highest level seen in the 22 years over which we have data. Treasury bill yields remain 140 bps below the Fed funds target, another sign of panic and risk aversion. In other words, despite the Fed's extraordinary liquidity efforts thus far, the economy likely will weaken substantially further in the quarters ahead.

And here are Brian Wesbury and Bob Stein, guys who only recently threw in the towel:

The combination of bad loans and prevailing accounting practices has caused fear and panic in the financial system, in turn causing a huge decline in the velocity of money—how quickly money turns over in the economy. We believe the Federal Reserve will respond to the current situation by cutting rates by 100 basis points, back down to the 1% level that prevailed in 2003-04. A slowdown in velocity will not only suppress real economic growth but also slow inflation. However, the credit crunch will not last forever. We expect the lack of confidence now permeating the financial system to dissipate in the next few months, leading to a return to healthy real GDP growth and rising inflation in the second half of 2009.

Me: The Fed's move to buy corporate paper probably stopped another 500-point down day for the Dow.