Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

So, my point here is that, aside from everything else, there has been some pretty adventurous hyperbole on this thread.

I think one does not have to be a professional economist to understand that we have some serious economic problems; and that these problems are likely to get worse before they get better. I personally think that eventually things will get sorted out. Although I also suspect that the American economy will never return to its former dominance.

It also seems clear to me that there are a lot of structural economic issues that need to get sorted out. Among other things, we need to get over our uncritical adulation of the free market. There is no doubt that markets are important and that they should have a good deal of freedom. It is also clear that free markets by themselves are insufficient.

There are fundamental issues that need to be rationally discussed. As far as I can see there is limited benefit from wallowing in the latest dire predictions.

Never the less, there has always been a macabre fascination with "the end is near" pronouncements. I suppose it most likely this thread will continue to careen in that direction.

And, not meaning to curtail the inherent pleasure of that adventure... still, I would point out that there is even now some good news.

Consider the TED spread. Some economic cognizanti consider this an interesting number because the TED spread is an indicator of perceived credit risk in the general economy.

In a nutshell... the TED spread is the difference between the interest rate for treasury bills and the interest rate for extremely high quality commercial lending. Ideally you want a small difference indicating that people think commercial lenders are almost as reliable as the US government. A large and expanding difference indicates that people are suspicious of commercial lenders and prefer to stick with government debt.

So with that introduction, here is a link to a chart of the TED spread on Blomberg.
link

And, if you look at the chart, you see that the chart went crazy back in October, and has gradually come back down.

Now, the truth is that this TED spread indicator is still too high. But the current levels indicates that some sanity is returning to the commercial lending market. And that is a good thing.

And, while we most likely consider that the big bail out was an enormous waste of money. The evidence on this chart is that the "bail out" did achieve what was intended to some degree. And while we can expect the credit crunch to have lingering pernicious effects, we may also begin to see that there may be some still faint light at the end of the tunnel.

OK

I am sorry not to have something more inflammatory to post... let get back the "discussion".