LIBOR and Financial Stress

(click to enlarge)

Adjustable rate mortgages, credit cards, and student loans are linked to LIBOR, as this graph from Bloomberg shows. By shooting up over 400 basis points during the October crisis (click for updates), it made all of those much more expensive. The price of credit is going up sharply. In conjunction with the "resets" in adjustable rate mortgages, it will force a large number to pack it in. So there's tremendous hardship in those "400 basis points."

The following
chart from the St. Louis Fed looks at the LIBOR/OIS spread as a summary indicator of financial stress, and shows the significant worsening in September/October 2008.