Anyhoo, Brad DeLong calls the TED spread "the consensus indicator of the depth of the current financial crunch," so I thought I'd toss it up for everyone to see. The chart below shows the TED spread for the past five years: smooth sailing until August 2007 when the subprime crisis hit, another jump in December, and then a third in March. So far, nothing the Fed has done has kept the financial markets calm for long, and after the last intervention the spread didn't even manage to recover as well as it had the during the first two crises. It went down a measly 71 basis points and then started rising again.
What happens next? Who knows? I just thought I'd share this as something to watch if you want to take the current temperature of the financial markets. At the moment, the answer seems to be "not so great, but it could be worse."
(And, in fact, it might be worse. The Wall Street Journal reported the other day about suspicions that banks are lying about their interbank lending rates, making LIBOR seem smaller than it really is. If this is true, then the TED spread is actually larger than it seems. Yuck.)