Europe, again... plus LIBOR
No update would be complete without discussing Europe. We found an interesting chart that compares credit creation (bank lending to consumers) in the Unites States to credit creation in Europe. In the past year banks in Europe have stopped lending, while lending has increased in the U.S. This is one reason why Europe is in a recession and the U.S. still is growing (albeit at a slow pace). We anticipate lending in Europe will continue to deteriorate, driving them into a deeper recession.
For more on Europe vs United States click here:
Stock markets around the world soared after the latest European Summit and plans to stem the European debt crisis. Spanish bond yields initially fell sharply however in recent days the bond market has realized that once again nothing was solved in Europe. Spanish yields have rocketed back above 7%, signaling further trouble ahead.
Spanish 10-Year Bond Yield
Source: Bloomberg.com
A parting shot, for those who are interested: Cullen Roche, one of our favorite bloggers, points out that their is way too much media coverage on the LIBOR-fixing scandal:
http://pragcap.com/why-is-no-one-freaking-out-about-the-libor-scandal