LIBOR Distraction

Reading time: 1,600 words, 4 to 6 minutes

The so-called LIBOR scandal is just a distraction from more critical issues. The story is making its way from the financial blogosphere to the ass media. The insidious decline of global economies has so rattled the rich and powerful oligarchs that they’re throwing their own henchmen under the bus. Barclays’ chairman has been forced to resign and he’s not going quietly. In a British Parliamentary hearing on Wednesday he claimed to be doing the Bank of England’s bidding. This does not exactly build confidence and is threatening central banks on both sides of the Atlantic.

Background: LIBOR is an acronym for London Inter-Bank Offered Rate. It’s a “reference rate” or benchmark interest rate based on what banks supposedly lend to one another and forms the basis upon which global interest rates are based. The LIBOR is open to manipulation because it is based on self-reporting.

Here is an Al Jazeera video explanation that you can cut & paste into you internet explorer (this hyperlink isn’t working on my blog – Big Brother doesn’t like Al Jazeera perhaps?)

LIBOR is a barometer for measuring global financial anxiety. More specifically, it measures the supposed health of individual banks; the lower the rate that they can supposedly borrow, the healthier the bank. Conversely, a higher rate indicates a bank is in trouble. In fact, most large banks are insolvent and kept on life-support by various forms of government bailouts. The Globe and Mail reports that, “Barclays admitted that it regularly lied when it submitted its interbank borrowing rates… it would present a lower rate to create the impression that it was healthier than it was.”

The Globe and Mail also reported that, “Barclays would also base its Libor submissions on requests from individual traders in London who stood to gain from higher or lower settings.” Anyone watching the unfolding crisis in confidence over the last five years will not be surprised by this blatant manipulation. Nor is this fraud anything new. Various renegade financial commentators have been warning about LIBOR manipulation since 2006 and 2007. Heck, even I wrote about it in a very brief article, LIBOR a joke – Nov. 11, 2008

Since this is nothing new, why the all the fuss? There are several reasons.

1) The rich and powerful oligarchs are losing control as global economies continue to deteriorate. Europe is in recession. The U.S. will be in another recession by the end of the year although, being an election year, they’ll do their best to hide it. China’s soft landing is turning into a crash along with their housing bubble.

2) Last Thursday half a dozen central banks world-wide lowered interest rates to near zero (again) in a blatant admission we are in for another recession. The UK has started QE – Quantitative Easing (printing yet more money out of thin air.) The U.S Fed is holding off further QE as long as possible whike the U.S economy continues its downhill slide.

See 80K more Jobs, 85K more Disability payments U.N.U. #18 for July 5, 2012

3) More important, it’s to divert attention from the fact that the ENTIRE global financial system is manipulated and not just interest rates. So are stock and bond markets with banksters’ front-running and high frequency trading. Inflation rates are fudged as are unemployment numbers and the list goes on and on. We live in a world governed by finance systems that are based 100% on confidence where money and financial instruments are created out of thin air. The rich and powerful oligarchs understand this all too well. They know how fragile these systems have become because they see them from the inside. Don’t forget they have a helluva lot more money than you do so they have a helluva lot more to lose.

4) The greatest manipulation on earth that you aren’t supposed to know about is orchestrated by central banks. They set the price and volume of money. Interest rates are the price of money. Volume is manipulated by fiddling with bank reserves. Simply put; our entire global financial system is ‘price controlled’. If you think command economies work then you have to explain why the Soviet Union collapsed. Better yet, watch what happens to China over the next few years. With dozens of ‘Ghost Cities’ devoid of people, highways to nowhere and warehouses stacked with unsold goods artificially inflating their GDP, China will collapse like the Soviet Union. The difference is the Soviet Union died when the rest of the global economy was still healthy whereas China will drag the deteriorating and greatly weakened global economy down with it.

So the financial pundits and the ass media have been given their marching orders and they’re screaming headlines.

The New York Times calls it Libor’s Dirty Laundry

The Motley Fool calls it The Biggest Banking Scam Ever

The Daily Bell calls it Barclays Scandal, Worse and Worse … Whatever It Is!

Matt Taibbi of Rolling Stone asks Why is Nobody Freaking Out About the LIBOR Banking Scandal?

It’s amazing how many news services and blogs are headlining it “The Biggest Financial Scandal In History?”

The Economic Collapse Blog

Alex Jones Infowars.com

Digg.com

The Daily Paul (dedicated to Ron Paul

Live Journal

Shengzhais

And the list goes on with some variation like “The Biggest Financial Scam in History

Washington’s Blog

Information Clearing House

And so on ad finitum.

The Culprits are Caught, Aren’t They?

But, hasn’t Barclays been fined $453 BILLION? Aren’t there about 20 banks world-wide under investigation including Canada’s own Royal Bank of Canada (RBC) and they’re facing billions more in fines?

Yes they are. So what? Consider the following:

1) These fines are chump change. They amount to a fraction of a percent of their ill-gotten gains.

2) It’s a ‘circle jerk’. Governments are bailing out banks in various forms; the banks are bailing out the bailing-out government by buying their bonds so all they’re doing is passing paper back and forth. These so-called fines are simply part of this ‘circle jerk’. These institutions are legless swimmers trying to rescue each other.

3) No banksters are going to jail. Martha Stewart did jail time for so-called insider trading that amounted to a few dollars. And the Bernie Madoff’s of the world will die in jail for running smaller Ponzi schemes but they aren’t in bed with the government. But, the worst the banksters will face is an early retirement with a golden parachute.

But, aren’t these artificially low interest rates helping consumers with their high debts and government with their debts? Superficially, yes but the damage is behind the scenes. One back-of-the-envelope calculation came up with $45 billion per quarter in the U.S. alone. That’s $180 billion a year. What does that do?

1) That’s money that’s being robbed from savers and pensioners on fixed-incomes. That’s interest they are NOT earning because of artificially low interest rates.

2) Easy money (low interest rates) is what got us into so much trouble in the first place because it created too much debt. Now, like debt junkies we need ever lower rates to feed our addiction to ever-increasing debt.

3) In the end we will all pay with higher interest rates on credit cards, loans and mortgages as the banksters run out of scams and search for new victims.

So is this distraction a conspiracy? Regular readers know I don’t believe in conspiracies. People are too stupid to conspire effectively. You don’t get to be filthy rich by being smart. You become filthy rich by being a sociopathic thief. Bill Gates and Microsoft’s long history of imitation and intimidation comes to mind. Remember, given a choice between explaining something as either conspiracy or incompetence, the correct answer is usually stupidity.

What are the consequences?

This so-called scandal is certainly not welcome news and it couldn’t have come at a worse time. Lawsuits will proliferate and hamstring financial systems for decades. And, it’ll get worse as new culprits come to light.

It destroys what little is left of confidence and confidence is all that’s holding the system together. Hold a $20 bill in your hand and you’re holding 3¢ worth of paper and ink backed by nothing other than the full faith and credit of politicians. The house of cards gets shakier and shakier.

Foreign investors, having already reduced their exposure to U.S. debt will further abandon government debt auctions forcing the U.S. government to buy its own debt with the Treasury and the Federal Reserve swapping trillion dollar IOUs back and forth in the Greatest Ponzi scheme in world history; two more legless swimmers trying to rescue each other.

Municipal borrowers were enticed into ‘interest rate swaps’ to protect them against rising interest rates. Instead rates were manipulated lower and often with the government’s blessing because that artificially lowered governments interest payments and further encouraged higher government debt. Meanwhile, municipal borrowers are stuck paying the difference and they’re going bankrupt with increasing frequency.

We have all become debt slaves and, as explained above, we will pay more for our ‘fix’.

Worse, it is an admission of government’s outright failure to reign in the fraud that caused the financial crisis in the first place. The too big-to-fail banks have been allowed to become even bigger. More and more people are realizing that governments are in the pockets of the banksters and the banksters are the henchmen of the rich and powerful oligarchs. We are witnessing events that have never before been seen in history as we circle the drain faster and faster.

Conclusion

LIBOR is the tip of the iceberg. You aren’t supposed to see the rest. Guess where the Global Economic Titanic is headed?

Are you prepared?

Gerold
July 7, 2012

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About gerold

I have a bit of financial experience having invested in stocks in the 1960s & 70s, commodities in the 80s & commercial real estate in the 90s (I sold in 2005.) I am appalled at our rapidly deteriorating global condition so I've written articles for family, friends & colleagues since 2007; warning them and doing my best to explain what's happening, what we can expect in the future and what you can do to prepare and mitigate the worst of the economic, social, political and nuclear fallout. As a public service in 2010 I decided to create a blog accessible to a larger number of people because I believe that knowledge not shared is wasted.
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