A Thaw In Frozen Credit?

On the other side of the economic spectrum, I’ve become addicted to the Credit Crisis Indicators of Calculated Risk’s blog. It’s their weekly dashboard of leading credit indices designed to gauge the progress of the Fed and other financial entities efforts to stabilize credit markets. Since October, there has been a slow improvement. But considering some of these measures are off from their October highs (for instance, the three month LIBOR is down to 1.42% from a peak rate of 4.81%, and the TED spread is at 1.34 from 4.63), I’d say things have improved considerably.

Are we out of the woods yet? Not likely; but it appears without the dramatic intervention of the Fed last Fall, things could have gotten a heck of a lot worse.

And now that the patient appears to be on a course toward stabilizing, it’s time to consider long-term therapy. The recent news of inclusion of individual and corporate tax cuts in Obama’s proposed stimulus package is a good start. Once consumers are convinced their short- and long-term job prospects are secure, they’ll begin to spend again. But this is going to take time – which is why I will sit on the gloomy side of the tracks in the short term, but invest for the longer term.