As fun as it is to say fixated on the stock market's daily cliff dives, the real agony these days is in the debt market. I know, it's an arcane section of the economy that rarely gets more than a passing mention, but an economic recovery will be contingent on the state of credit markets, not the daily hullabaloo in the Dow.

Here are a few debt-market gauges and a quick rundown of how they're doing.

Libor is the rate a group of banks lend to each other at, and is used all over the world to determine the interest rates on everything from credit cards to adjustable-rate mortgages ... which is a pretty big deal right now. It's been absurdly high recently because, let's face it, lending money to people who can pay you back hasn't been banks' forte lately.

Three-month Libor currently stands at 4.42%, up from about 3% a month ago, reflecting the panic after WaMu's failout by JPMorgan Chase (NYSE:JPM) and the battle between Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) after Wachovia (NYSE:WB) bit the dust. Overnight Libor has been even more of a basket case, pushing toward an all-time high of nearly 7% last week, only to drop to 1.67% today ... its lowest level in four years. Overnight Libor shouldn't be more than a hair above the fed-funds rate, which currently sits at 1.5%, so last week's move toward 7% was just insanity.

Treasury Rates
When "risk" becomes the dirtiest four-letter word of them all, investors rush to the asset they've long held as risk-free -- short-term Treasury bills. When demand for T-bills goes up, yield goes down. How far down? Investors are so bewildered by the recent mayhem that they're willing to lend money to Uncle Sam for ... free, or close to it. Yields on 3-month T-bills have dropped from about 3% at the start of the year to just 0.55% today, and even got down into negative territory at one point last month!

TED spread
The TED spread -- the interest rate difference between 3-month U.S. Treasury bills and 3-month Libor -- is about as good of a measure as any to witness the sorry state of credit markets. It's just Libor with the risk-free interest rate of T-bills stripped out, giving us a no-bull measure of how scared banks are of each other.

How's ol' TED doing these days? He's having the time of his life ... literally. The reading -- almost always well below 1% -- shot up to a record 4.6% earlier this month, and has since crept down to 3.87% (To see how extraordinary this rise has been, check out this chart).

While a TED spread of 3.87% is, eh, better than it was, it's still ridiculously high. Even after a global effort to steady the banking system, banks think their neighbors are about as unstable as they've ever been. Maybe they know something we don't? Who knows, but as long as Teddy's suffering from altitude sickness, things won't get much better.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. JPMorgan is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.