Thursday, September 18, 2008

Credit crisis is more perilous than a market fall

A credit crisis can be more perilous than a market fall. The whole global financial system depends on banks lending each other money. Cash flow is the grease that keeps the financial system functioning, and without it, like a car engine without oil, the system seizes up. Proof of that "ongoing pressure" was the spike in the cost of borrowing money: London's intrabank lending rate, or LIBOR, rose to 3.02 percent. Banks have not had to pay this much to borrow dollars since 1999.

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