THE SPICE MUST FLOW
The spice is flowing (see pic). There has been a reduction in the amount that businesses can place directly, but it is in line with recent dips and the slack has been picked up by dealer placements.
The price of this unsecured lending has gone up, but the spice is flowing.
How much and why the price has gone up requires more data. A few data points and a survey summary statistic ... are insufficient.
Whatever the case, the oft-repeated line about companies not meeting payroll appears to be, as I mentioned, urban legend, repeated to the highest levels of government, even. Is that Orwellian, or just par for the course?
To the extent that it is simply balance-sheet capacity that is driving up the cost of CP or investor skittishness (money market funds getting spooked?), then the Fed has done a very smart thing to insulate the non-financial sector, the real-economy, if you will, from the ongoing vagaries of Wall Street banks and mutual fund complexes...
source: Fed's weekly CP release (h/t to CalcRisk) The "Currency" (in the chart title) is USD - it got cut off the chart, sorry.
Saturday, October 11, 2008
The End of Unsecured Lending?
