It’s really bad out there right now. If you took a snapshot of financial conditions,
especially in London, you’d have to conclude it’s now much worse than during
the worst days of the summer – the only thing missing is the sense of
But how’s
this for a datapoint:
The sterling interbank market has collapsed at the fastest rate in modern
history.
Office for National Statistics data sourced to the Bank of England shows the
volume of market loans in the banking system plunged from £640bn at
the onset of the credit crunch in August to £249bn by the end of September.
The LSE’s Tim Congdon is quoted
thusly:
“A market that has taken 30 years to build has completely imploded
in a matter of months. Lenders have been squeezed savagely. We’ve moved
into a different era,” he said.
You know there’s more. Banks, foremost among them Citigroup, are asking their
corporate clients not
to draw on lending facilities to which they are entitled. Here’s the quote:
A Citigroup spokesman said: "Citigroup honors its commitments to its
clients but, as part of our normal business, we discuss with clients the potential
use of our balance sheet. This is standard industry practice."
Giving clients credit lines and then asking them not to use them is now standard
industry practice? And it’s been standard for how long? As Yves
Smith says,
There appears to be an element of window dressing, of banks trying to avoid
having audited year end balance sheets that spook regulators and investors.
Not a pretty picture at all.
Oh, and did I mention? Sterling
Libor is now at a nine-year high, and the ABCP market, says
Sam Jones, "has been all but wiped out".
And all this is happening before the inevitable collapse in UK property
prices, where the bubble was literally twice the magnitude of that in the US.
Someone, give me some good news, please!