Wednesday, May 21, 2008

EU Banks want your deposits

The graph to the left shows that long term rates are above short term rates in the US (normal); but below short term rates in EU (unusual). Banks typically borrow short (from depositors) and lend long (to home owners). The EU "inverted yield curve" means that EU banks have to pay so much for deposits that it is difficult for them to earn profit.
--from the Economist

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