The situation in Syria continues to deteriorate, but the latest news about the defections from the Syrian military suggests that the violence will escalate significantly. It suggests that Assad has literally no option other than to hang tough. His final window would be to accept the terms of the Arab League to step down (presumably there is an implicit promise of asylum someplace). But the offer only has a three-day opening. The clock is ticking.
US Defense Secretary Leon Panetta raised concerns about the unintended consequences of an Israeli strike against Iran. The timing of the speech suggests that the US is pushing back hard against those parts of the Israeli government pushing for an attack. Significantly, President Obama did not make the speech–he obviously prefers to stay out of this particular discussion for political reasons. If Obama does make a statement, it is time to get worried about the likelihood of an attack.
Spain is the next domino to get hit by the European debt crisis contagion. Spain is the penultimate domino: all eyes will now turn to France. If French bond yields rise, then the situation cannot be contained. For those who have a deep interest in this particular topic, there is an index that gives us an insight into the “fear factor” about banks. It is called the LIBOR–London Interbank Offer Rate. The LIBOR is the interest rate that banks pay to each other for short-term loans (some as short as overnight loans). Since banks generally trust each other, the rate is usually very low (around 0.25%). Recently the LIBOR has crept up to 0.49%, almost double the usual rate. At the height of the credit crisis in 2008, the LIBOR actually got up to around 4%, a rate that essentially signals total hysteria within the banking center. So if you want to check the “mental” state of the markets, keep an eye on the LIBOR.
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