LIBOR3 Libor Interbank Rate 12/8/11

Banks continue, and are increasing, their weariness in lending to each other. The Libor continues upwards, now at levels not seen since the 2009 debt crisis in the States. The U.S. announced QE1 in March 2009 to save the equities markets. Note how Libor was dropping but then as 2009 began, the Libor started to creep up again indicating that stress in the banking system was growing again.  The QE1 bazooka fired and note how Libor dropped steadily into 2010 fueling a strong U.S. equities rally.

In April 2010, U.S. equities crashed again and note the perfect agreement with Libor rates moving up. Here in December 2011, we are now overtaking the 2010 levels, placing Libor at heights not seen in almost three years.  Stress and worry is ratcheting upwards in the banking system which flies in the face of an anticipated end-of-year U.S. equity rally.