Profile of Credit Quakes and the 3 Month Libor

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The LIBOR rate is critical to the health of the financial system and to that end the central banks of the world, UK included have pulled out all the stops to unfreeze the credit markets, unfortunately the LIBOR rate as reported by the British bankers association has long since stopped proving a reliable indicator of the credit freeze as the banks are NOT REPORTING THEIR REAL RATES CHARGED to the other banks to the BBA! BECASUE THEY ARE NOT LENDING TO OTHER BANKS. Thus the LIBOR is not as relevant to the state of the credit markets as it once was as I warned of as long ago as April 2008. However it is the only true measure of the interbank markets that we have. Even though effectively the central banks have taken over the roll of providing a market for interbank lending, which includes guarantees that extend to £250 billion. When the Bank of England first announced the £50 billion packages of loans to the banks in April 2008, I speculated that this would mushroom this year to £200 billion, an unheard of figure!, well scrap £200 billion, scrap£300 billion, even £400 billion the tax payer is now funding bank loans and capital on the unheard of scale of more than £600 billion, with more to flow during 2009.