ContraryInvestor.com had a good chart and comment. I won't post it because it is in their private members section. But it cast major doubt that lenders have "seized up."



It showed lending *growth* has fallen but lending is still going on. Bigtime.


Now that chart may be true up until a few weeks ago and maybe lending just dived off a cliff.


But there are several premises that are taken as gospel in this "crisis"


1. Lenders won't lend to each other cuz they don't know if the other lender is solvent.


2. "Injecting liquidity" must be done. That will "restore confidence".


3. What the hell does that mean? Are the banks patients who need an injection of liquidity so their blood doesn't dry up? As the solution is tried, it doesn't work, it makes the problem worse. So they go back and try it again, double this time,


4. And that makes thing worse.


There is an all too typical story below on Bloomberg right now.


"Libor for Three-Month Dollars Rises as Cash Injections Misfire"




http://www.bloomberg.com/apps/news?p...d=a4r3HnlEV2jo




``Central banks are trying to supply liquidity, and in many cases it just comes back to them,'' said Robin Marshall, director of international fixed income in London at NCL Smith & Williamson, which oversees about $20 billion in assets. ``There's a real problem in getting people to put their money to work. The fear of counterparty risk is so intense that the only bank prepared to lend at the moment is the central bank.''



Seized Up


Lending between financial institutions has seized up since the collapse of Lehman Brothers Holdings Inc. on Sept. 15, stymieing attempts by governments and central banks to stave off a global recession. The Bank of Japan added 3 trillion yen ($30.3 billion) to the banking system and the Reserve Bank of Australia pumped in A$2.63 billion ($1.8 billion). The European Central Bank today loaned banks $94 billion for four days.



The MSCI World Index lost 3.6 percent today, extending this week's drop to 19 percent, the most since at least 1970. Gold rose to a 10-week high in London as investors sought a haven for their cash. The Libor-OIS spread, a gauge of cash scarcity, climbed to a record 366 basis points.


``You just don't know whether the person you're lending to is going to be the guy that has the weak balance sheet and is going to fall over,'' said Sally Auld, an interest-rate strategist at JPMorgan Securities Australia Ltd. in Sydney. ``What markets are telling you is that it doesn't matter what central banks and governments do.''