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Is the money market rescue starting to kick in?

News that the central libor rate (i.e. the rate charged when banks lend money between each other) has fallen and spreads have reduced is just the news that the stock market needs after a very rocky few days. Rates have actually fallen to the levels they were when Lehmans went under although there is a suggestion that until the economy picks up we may not see substantial further falls.

However, the news that the banks are now lending between each other and companies have access to liquid funds is a massive relief. There had been signs towards the middle of last week that the plan was not working but if, and it is a big if, the credit freeze up has been cleared then we may soon see clear skies again.

The only downside is the fact that now the credit crunch seems to be calming down, investment markets will now be able to concentrate on the economies or the world which are not in good shape by any stretch of the imagination. More companies will go under, unemployment will rise around the world and we may not even be at the bottom of the cycle yet.

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