That chart make me wonder what the panic is all about.
The panic is that liquidity dried up last week in the secondary market for debt notes. Foreign funds are heavily invested in these markets, and Europe essentially ran out of cash last night.
That triggered the ECB, Canada, and Fed to make large emergency injections of cash into Europe this morning.
...and all of the above is happening not because of sub-prime notes (a minority of the market), but rather, happened because the Fed and ECB raised interest rates to banks too high and kept them too high for far too long.
By keeping rates too high, private liquidity has dried up. This means that the world is staring deflation in the face.
Deflation is a far worse problem than inflation. Deflation eats actual wealth. Housing prices decline, for instance. Prices for existing debt notes decline, for another.
When deflation appears, large masses of people would rather hang onto their money (because everything will be cheaper tomorrow). This in turn slows down the speed of money, which makes economies less efficient and less prosperous.
In short, people want cash when they see deflation. They sell their homes. They sell their stocks. They don’t buy as much. Consumerism disappears.
Jobs disappear. Wealth disappears. Problems abound.
Control.