Lowest Libor Hides Bank Turmoil

Lowest Libor Hides Bank Turmoil. I don't have a lot of time for this post or to explain Libor-OIS spreads but you can look it up if you wish. A favorite data point the bulls love to cite as proof this crisis has passed is Libor and the Libor-OIS spread. This is very foolish. Neither Libor nor Libor-OIS reflected the crisis building beneath the markets before this crisis so why would one expect them to reflect future crises?

My perspective is the Libor and the Libor-OIS spread are returning to the same ridiculousness we saw when spreads were so tight before the credit crunch. And, because of that, expect more liquidity shocks and credit crises. I'm sorry but the world has permanently changed and I don't know how often I can say that. I guess until I go insane or until economic policy acknowledges it. The only question at this point is if I will go insane before policy changes. The countdown begins.