But I am not so sure it is fair to only blame the Greeks.

From February to May, credit prices were as benign as a well-fed newborn. In fact, in March, credit spreads plummeted to the point of absurdity. They are absurd no longer. The TED spread, which measures the difference between three-month Treasurys and the three-month Libor rate, closed at 32.8876 yesterday, a far cry from the low of 10.5644 on March 16. Meanwhile, the Libor-OIS measurement of the difference between the three-month Libor rate and the anticipated average of the federal funds rate dropped to just 5.96 basis points on March 15. Yesterday, it closed at 25.21, its greatest spread in nine months.

LIBOR-OIS SPREAD

So what is going on here? Again, we can blame the global economic machinations, but I don’t think that’s the whole of it. Earlier this year, it was clear that spreads were being contained by active government involvement, arguably the most public of which was the Treasury’s support of the mortgage-backed securities market. That ended at the close of the first quarter — and that end corresponds to the steady march higher of credit spreads.

To be sure, I am not suggesting that the news of the most recent days have nothing to do with the higher credit costs — of course they do. But we should not forget just how remarkable and profound has been the artificial tamping down of credit costs by the federal government in the exit from the credit crisis. In an odd way, these gyrating credit costs are a good sign. They show that the markets are now on their own to function in a natural manner. That such a natural course includes greater spreads is an unfortunate consequence. Eleanor Roosevelt once said, “With freedom comes responsibility.” I’d change that: “With freedom comes less predictable spreads.”