With all the things going on in the financials market, and international monetary crises (what is the plural of apocalypse again?) there are a lot of terms being introduced to the average American that was not in their vocabulary yesterday.

One of these “New Terms” is The TED Spread.

First off, TED Spread is not an actual person named Ted. It is a comparison between the three month T-Bill interest rate and the three month LIBOR.  That is a lot of fancy jargon for simply stating that the TED Spread is a measurement of the willingness of banks to lend money to one another. As the spread increases, the more unstable the lending process becomes, and the more the spread decreases the less likely banks are to default on those loans.

That maybe a bit of an over simplification, but it is accurate none the less.

Of course due to current conditions the TED Spread is at just about an all time high.

T-Bills are short for Treasury Bills, and they are loans to the Treasury department that mature in one year or less. They are considered a very low risk investment.

The LIBOR is the London Interbank Offered Rate, which is the daily rate of leanding between banks.