{"id":32120,"date":"2018-03-09T09:07:07","date_gmt":"2018-03-09T14:07:07","guid":{"rendered":"http:\/\/olduvai.ca\/?p=32120"},"modified":"2018-03-09T09:11:43","modified_gmt":"2018-03-09T14:11:43","slug":"interbank-market-collapsing","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=32120","title":{"rendered":"Interbank Market Collapsing"},"content":{"rendered":"
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Interbank Market Collapsing<\/a><\/h3>\n<\/div>\n
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QUESTION:<\/strong> Mr. Armstrong; Has interbank lending collapse due to a lack of confidence concerning counter-party risk?<\/p>\n

Thank you for being a rare source with\u00a0experience<\/p>\n

ER<\/p>\n

ANSWER:<\/strong> Yes that is a correct statement. The failure of Lehman and Bear Sterns was the result of interbank lending when they could not make good on the collateral they posted the day before in the REPO market. Then we had the collapse of MF Global, which was also a loss linked to the overnight markets. Now mix in the LIBOR scandal and banks were scrutinized\u00a0for manipulating LIBOR rates in the interbank market.<\/p>\n

The\u00a0interbank lending<\/b>\u00a0market is a market in which banks extend\u00a0loans<\/b>\u00a0to one another for a specified term, typically 24 hrs. Most\u00a0interbank loans<\/b>\u00a0are for maturities of one week or less, the majority being overnight. Such\u00a0loans<\/b>\u00a0are made at the\u00a0interbank<\/b>\u00a0rate (also called the overnight rate if the term of the\u00a0loan<\/b>\u00a0is overnight).<\/p>\n

The collapse of this market is a clear warning that liquidity is extremely vulnerable. When crisis strikes, liquidity will simply vanish entirely. This warns that volatility will rise sharply and it appears to be predominantly\u00a0focused in on the debt market.<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Interbank Market Collapsing QUESTION: Mr. Armstrong; Has interbank lending collapse due to a lack of confidence concerning counter-party risk? Thank you for being a rare source with\u00a0experience ER ANSWER: Yes that is a correct statement. The failure of Lehman and Bear Sterns was the result of interbank lending when they could not make good on […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5496,63,18529,1421,5479,6934],"class_list":["post-32120","post","type-post","status-publish","format-standard","hentry","category-economics","tag-armstrong-economics","tag-banks","tag-interbank-lending","tag-libor","tag-martin-armstrong","tag-repo-market"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32120","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=32120"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32120\/revisions"}],"predecessor-version":[{"id":32122,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32120\/revisions\/32122"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32120"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32120"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32120"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}