The financial market action in Europe is raising concerns of another financial crisis. Interbank lending spreads are getting wider. European sovereigns and banks are being downgraded. The currency is plunging.
What will banks do this time? Freeze lending? Raise spreads and rates? Pass capital market funding costs through to businesses? Create instruments to pass risk to naive investors? Be vultures looking to feed? Lay off more workers?
In 2008 the divergence of Libor rates to Treasuries crashed the funding markets. The Fed cut rates to zero. They can’t cut rates anymore. Structural deficits will not allow much stimulus.
This time people will be watching much more closely. It is a time for citizenship. Some commenters have spoken about the self interested nature of corporations. They were not originally conceived to be so. It is time to take the name “Corporate Citizen”