The Credit Crisis Isn’t Over
Jul 1st, 2008 | By Doug Casey | Category: Politics & EconomicsCommercial paper was considered a safe market before the crisis, and is often held by money market funds.
This measurement, called the Discount Rate Spread by the U.S. Federal Reserve, shows the difference between high-quality (AA) and low-quality (A2/P2) commercial paper lending rates. When the credit crisis first broke, in August 2007, the Discount Rate Spread jumped dramatically, as fears of defaults led investors to believe credit vehicles from the less pristine issuers were less trustworthy than commonly thought.
Commercial paper was considered a safe market before the crisis, and is often held by money market funds. Ever since the credit crisis, such lenders are demanding a premium for taking on low-quality commerical paper, proving that we have elevated levels of mistrust in the commercial paper market.
In other words, fears of another credit meltdown are still affecting the financial system, and the credit crisis is not over.
Source: The Credit Crisis Isn’t Over
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.