Originally posted by: chess9
First of all, half of all liability (debt) is not in default or going to be in default unless we have a depression. Secondly, this discussion was about the relative importance of LIBOR for an understanding of the economy, and specifically indexed debt, and whether LIBOR has been affected by the stimulus or bailout package. Although GDP is affected by debt, GDP does nothing as a figure to explicate the merits of LIBOR. Excepting possibly the extent to which GDP in the future will be affected by current rates of LIBOR.
Anyway, the current stimulus package may have had a psychological effect on the market, but it has had no other effect because it hasn't gotten that far. I don't discount the importance of psychology here, so your initial argument carries some weight, perhaps, when looked at in terms of market psychology. How long that will last is anyone's guess....I don't think it's worth much in the long run. Reality has set in, I believe. Check out the markets today....
-Robert