Greg Mankiw shows that real interest rates are rising on inflation-adjusted government bonds. Paul Krugman shows that short-term Treasury yields are down. The state of California cannot get short-term financing. There is simply no one willing to lend. Yet I would have no trouble buying a second home and getting another mortgage at a reasonable rate of interest and I am hardly a rich man.
Credit market segmentation is always there but it doesn’t usually matter this much. The parts of the credit market that are paralyzed by fear are the major problem right now. And until that problem is cleared up, we will witness a step-by-step disembowelment of the American economy.
The clock is ticking. We need very rapidly to get to the point where natural lenders are willing to lend and "cross-market arbitrage" is no longer a dirty word.