Some good economic news

To bouy your spirits, there is some evidence that the financial sector is recovering.  The following link shows you the TED spread, which is roughly the premium that banks have to pay to borrow money on the open market.  Historically, this number is pretty low, meaning that banks lend to each other at about the rate they lend to the government (which is considered the safest borrower in the market). 

When the mortgage securities collapsed, banks became fearful of each other, and demanded huge premiums to lend money to each other.  You can see that in the graph around October last year when the TED spread jumps from 1% to nearly 5% (i.e. banks went from charging each other the Fed Funds rate +1% to charging each other the Fed Funds rate +5%).   This was due to acute uncertainty about whether other banks would pay the money back.

Now, the TED spread has dropped nearly back to the 1% level, meaning that banks are willing fund each other again. This is important because banks need to borrow from each other in the short run (and by the short run I mean overnight or for a week) to manage their cash flow (meaning that they sometimes borrow from each other so that they can lend money to "real" businesses).

So this is welcome news, and hopefully it means that credit to "real" businesses will pick up and allow firms to buy new equipment and make payroll payments, helping out the recovery.