Wednesday, May 06, 2009
A few days old now, but only just found it. Is this significant?
Telegragh: Interbank lending rate narrows as trust returns
The benchmark interbank lending rate fell to just one basis point above 1pc yesterday as the markets continue to react to low policy rates and government action to free up credit markets. Three-month dollar Libor – the London interbank offered rate – dropped by 0.0094 percentage points to 1.01pc yesterday, a sign that banks are increasingly willing to lend to each other.
Posted by wanderinman @ 08:18 PM (1227 views) Add Comment
16 Comments
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1. hpwatcher said...
I'm not sure it really matters now.....all the damage has been done.
2. devo said...
The banks have been told categorically that they're too big to fail and won't be allowed to fail under any circumstances.
With a guarantee like that, why shouldn't they resume lending to one another?
3. devo said...
From the article:
* The last time Libor was at 1pc was in June 2003
* Libor is taken as an indication of trust between banks – the less they trust each other, the less they are willing to lend and therefore the higher the Libor rate.
Do you trust the banks as much as you did in 2003?
Thought not. Neither do I.
4. inbreda said...
wasn't it highlighted that this represents short term (rather than mortgage type) borrowing/lending and is therefore not *wholly* applicable?
It is secondary to the fact that the downward spiral has begun. Just as estate agents chased the market up, so they will push it down. Just as banks tried to remain competitive by lending more and more, so they will try to remain solvent by lending less and less.
The article is about freeing up lending between banks - but none of them want to use that money to lend as a mortgage with a 90% LTV when they know the house will soon be worth less.
Unemployment is still increasing and as a result so are defaults. The banks haven't started to feel the pain from the domestic market yet.
It is all so, so, so very very far from over. Honestly. Sit back and watch the show.
5. devo said...
Banks led us into this Depression so, presumably, they will lead us out of it.
Anyone fancy hazarding a guess as to how they'll achieve this?
6. devo said...
What would happen if all the Central Banks agreed to print trillions of dollars in a coordinated effort to avert an economic catastrophe?
Would this help?
7. str 2007 said...
If they simply printed money to fill the void of money lost on debt gone bad, that wouldn't be inflationary, would it ?
Therefore patch up the holes and sail on.
Afterall the money that was leant that turned bad wasn't real money so to speak. It was only created out of someone agreeing to repay the mortgage (or someone agreeing to a previous mortgage).
Therefore I guess money can be re-printed.
They must have sat down at the G20 meeting and agreed that all countries banks had been busy purchasing toxic debt from us and America.
Therefore we either all go down together or all agree to print more money together.
Quite simple really, don't know why we're even bothering to have a recession.
8. drewster said...
This story has been discussed recently on HPC. Bellwether found an article on ZeroHedge which explained that Libor is only low because of the Fed's interventions. If the central bank is buying up all the debts then no wonder the interest rate appears to be low. The Fed can fool some of the people some of the time, but sooner or later people will realise that the dollar is being devalued and they will pull out of the currency. When that happens there is a simple choice: higher interest rates or Zimbabwean devaluation. Rates cannot stay low forever.
9. devo said...
"The Fed can fool some of the people some of the time, but sooner or later people will realise that the dollar is being devalued and they will pull out of the currency"
Why would you pull out of a currency if every other major currency is being devalued simultaneously?
10. devo said...
"Therefore we either all go down together or all agree to print more money together.
Quite simple really, don't know why we're even bothering to have a recession."
Even simpler, why not divide everything by 10?
A 10p coin would then be worth a penny; a mortgage of £150,000 would become a mortgage of £15,000 etc.
11. peeping tom said...
"Even simpler, why not divide everything by 10?
A 10p coin would then be worth a penny; a mortgage of £150,000 would become a mortgage of £15,000 etc."
And £150,000 of savings becomes £15,000 of savings. I guess it could work as long as savers don't riot and burn the banks down.
12. alan said...
PT,
A lot of the savers are over 60's who worked all their lives and paid taxes. They are law abiding and hardworking. I can't see a riot. Even the queues of oldies outside the NR were relaxed and unwilling to create a fuss. They came from a generation where people didn't claim for porn films on MP's expenses.
Brown and NuLab are gambling that they will lie down and die quietly. A measure of success for any government is how well the old are cared for and treated. Just watch this pantomime roll out.....
13. str 2007 said...
devo
My point was, would it actually devalue all currencies to effectively print the 'lost' money.
It wouldn't stop the people who owe being chased for money (unless you're American where walking from responsibility is ok).
I can understand the basics of printing too much money devalueing a currency, but my points were it isn't just one currency but most that are subject to large writedowns of 'packaged mortgage products'.
And surely re-producing the sums lost would simply allow everyone to move forward. Which is I guess what is happening with Central Banks exchanging some dodgy stuff for funds.
14. p. doff said...
''Even simpler, why not divide everything by 10? A 10p coin would then be worth a penny; a mortgage of £150,000 would become a mortgage of £15,000 etc''.
And your £30K salary would become £3k so it would still take you ages to pay off that £15K mortgage. 'The pound in your pocket' as Mr H Wilson would say. He also said devaluation would enable Britain to " break out from the straitjacket" of boom and bust economics. Well Labour are still singing from the same useless hymn sheet, but devaluing by stealth this time.
Crikey, £3K - I think that's where I started out in my working career.
15. amjidk said...
Probably a good idea to buy "some" Gold, just in case...
16. mark wadsworth said...
Devo at 2 has half the explanation, the other half is, if banks can only earn 0.5% by depositing with BoE then they are happy to accept that rate plus half a per cent by lending to each other, which I think is the long term spread between LIBOR and base rate.