Headlines herald a US prime-time, subprime mortgage implosion leading to an upcoming credit-crunch crisis – destined to sink shares, raise interest rates and impale economies. But this is demonstrable nonsense. Yes, there have been media autopsies of the few notable subprime lenders who have gone belly up. More are certainly in the wings. But what makes this a systemic problem?

If subprime is to ripple systemically into a crisis, it is a take-it-to-the-bank certainty that we will see vast credit-spread widening. Yet spreads between high quality and low quality debt of the same maturity – by any measure – are at near record lows, in spite of six months of subprime hand-wringing. And the biggest single days of upside volatility have been historically very subdued – about 10 to 20 basis points. Every true credit crisis in history had huge spikes in credit spreads early on and – while not always – usually well before equities implode. By contrast, wrong-headed credit fear babble blows through history like the wind without a ripple in credit spreads.