The Credit Crisis is Over!

So says Agora Financial - one of the best-performing investment newsletters:

Rejoice! The credit crisis is over.

Sort of… maybe.

Most of the complicated lending spreads that define a crisis in credit have returned to normal levels. For starters today, the mighty “TED spread”

Kind of a mouthful of a chart, eh? In simple terms, the TED spread is the difference, in percentage points, between how much it costs the banks to borrow dollars and how much it costs the U.S. government to do the same. The lower the spread, the more freely money is being lent around the country.

The spread is now at its lowest level since August 2007.

Alan Greenspan’s favored Libor-OIS spread is back to pre-crisis levels, too. This complicated affair of interbank lending compared to overnight index swaps was at 87 when Lehman died, peaked at 364 on Oct. 10 and this morning is barely 52.

Our point? While the crises in employment, housing, banks, stocks and life in general still seem as pertinent as ever, the numbers claim that the credit crisis is a thing of the past… for now, at least.

Of course, the end of the so-called "credit crisis" was brought about by the U.S. and other governments throwing trillions of dollars of our taxpayer money at the banks. The public was totally against most of this, and much of it was done illegally, circumventing Congress and other governing bodies.

And before you get too excited, remember that this was never really a liquidity crisis, but an insolvency crisis (see this and this). And the fundamentals for the real economy are still in the toilet, the big banks still aren't lending because they are hoarding cash to pay off credit default swap debts and to weather the coming Alt-A mortgage and commercial real estate meltdowns, and there are so many gigantic remaining problems that I still think - after this brief period of springtime "green shoots" euphoria - this could end up being worse than . . . you know what (see this).

And of course, most independent economists think that the American government's actions are 180 degrees wrong, and will only make the fundamentals worse. (In fact, some have speculated that the whole "credit crisis" was a scam to redistribute wealth.)

But hey, at least one supposed aspect of the financial crisis is under control . . . at least temporarily.