Some good news on inter-bank lending rates over the last couple of days -they seem to be gradually trending down. But is this the end of the banking crisis, or just a breathing space?
For the pessimists among us, an interesting article by Ambrose Evans-Pritchard in the Telegraph a couple of days ago. "Almost every corner of the world is now being drawn into the vortex of debt deflation". Debt deflation is a theory originally invented by the economist Irving Fisher in the 1930s - the basic idea is that a crash in asset prices precipitates forced selling to cover debts, which reduces prices further, leading to more debt and more selling... etc. The details of the theory are described very clearly by Professor Steve Keen of the University of Western Sydney in his excellent book Debunking Economics. Professor Keen also has a blog looking at the specifics of the debt situation in Australia, which is a recommended read.
More big falls on the Asian stock markets last night - of course the general effect over the last month has been a rollercoaster rather than a straight downward path, but nonetheless the general trend is sharply down.
There's also a scary story from Eastern Europe: Hungary has raised interest rates 3 percent to maintain its currency peg against the Euro. A lot of Hungary's private sector borrowing (e.g. mortgage and car loans) is in foreign currencies (why?) and in these circumstances, a currency collapse of the Hungarian forint will raise the levels of Hungarian debt, exacerbating debt deflation. Other central and eastern European countries may be following suit soon.
Some good news when I manage to find it...