by Laura Conaway

We've been telling everyone to look at the TED Spread, which gives a sense of how willing banks are to lend each other money. The TED Spread measure the difference between three-month LIBOR (the London Interbank Offered Rate) and the yield on a three-month Treasury bill.

In happy times, the TED Spread is below 1. Lately, it's been higher than 4. That's frightening.

Today, the TED Spread has ticked down by some 3 percent, leaving it at 4.2. But don't be fooled, says Meg Browne of the Brown Brothers Harriman currency group. "It's still quite elevated."

 

Let's say the TED Spread stays north of 4 and the stock market continues its routine plunges. What does that mean?

"It means, 'Aaaaah!' '" Browne says, and laughs a not very happy laugh. "It's exactly what central bankers do not want. The longer we have this tightness in the money market, the more risk there is to the global economy."

Browne's team sent a bulletin today headlined "Now What?" The gist: Nations, including the U.S., have enacted huge measures to ease the crisis. Those measures may not be enough:

"Throughout this crisis and even since Lehman went under, officials had to be pushed kicking and screaming to take the incredible steps they have already taken. And yet as in the S&L crisis, and the Great Depression itself, policy makers are arguably still thinking on too small of a scale."