"The worst case scenario is that we have an extremely scary day"

[koganbot]

Dean Baker opposes the bailout, thinks we're better without it than with it.

Paul Krugman thinks the bailout is necessary, and that this relatively poor bill is nonetheless likely the best the Dems could get.

I think Setser and DeLong think, like Krugman but unlike Baker, that something must be done, though I don't know their opinion on the specific bill that was unveiled this morning.

Meanwhile, four major bailouts/takeovers/nationalizations in Europe and one in the U.S. in the last 24 hours.

And the 1-month t-bill is at 0.04%, TED spread at 3.5. I have little idea what that means, but people who do are gaping in astonishment.

Comments

[koganbot]

OK, after a brief look at Wiki, I think this is the significance of the t-bill rate. 1-month at 0.04% means that people who are parking their money for a month in Treasury bills are earning virtually no interest whatsoever, but are willing to do so because they consider the alternatives that pay any interest to be too risky.

The TED spread is the difference between the interest rates on inter-bank loans and short-term U.S. government debt, i.e. 3-month T-bills. A high number (3.5 is extremely high for a TED spread; it looks like it's dropped to 3.2 in the last couple of hours) indicates that banks think that lending to each other is much riskier than parking their money in T-bills, hence they demand a relatively high rate of interest. (Last March, Krugman explained it like this: "The TED spread is an indication of lack of trust in financial markets; its widening was a sign that things were going bad.")

And if banks aren't lending to each other, the financial system freezes.

Is that right?

[petronia.livejournal.com]

That's right. (Same reason precious metals have been spiking etc. etc.)