Natural Born Crisis Killers? TED Spread Down To 13.29 While Gold Soars To $1,900

There is no doubt that The Federal Reserve panicked over Covid-19 by setting interest rates near zero and printed money like there is no tomorrow. The TED spread is now at 13.92, about where it was pre-Covid breakout.

(Wikipedia) The TED spread is an indicator of perceived credit risk in the general economy, since T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. An increase in the TED spread is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing. Interbank lenders, therefore, demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases. Boudt, Paulus, and Rosenthal show that a TED spread above 48 basis points is indicative of economic crisis.

Well, the TED 3-month spread is only 13.29 which is far below the 48 basis point spread indicative of an economic crisis.

But The Fed hasn’t killed gold speculation. In fact, The Fed is likely scaring everyone into buying gold and silver.

Happy TED day!

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