The LIBOR fixing "scandal" was just a normal day at work

It is surprising that anybody is surprised about any of this, here's a good list of some of the financial scandals of the past two decades, I'm sure there are plenty more. It never seems to dawn on people that this is all part of the plan, it's just that every now and then they either cross the line or get found out.

What doesn't raise any eyebrows at all, is that when The Powers That Be became aware that Barclays et al were deliberately pushing down LIBOR to make the banks look more credit worthy than they were, instead of The Powers That Be doing something to stop it, they just turned it into official government policy - bailing out banks via Credit Guarantee Scheme and Special Liquidity Scheme, investing £66 billion in the most bankrupt two, reducing the base rate to 0.5% (well below inflation) etc etc.

The stuff going on at EU level is even more insane, the banks and the governments have merged into one huge cartel sloshing money back and forth at each other with absolutely no plan of how any of it is ever going to be repaid.

Even ignoring all these "scandals", there is a view that the whole nature of banking - being allowed to split the zero into a loan and a deposit and to earn money from the interest margin - is fraudulent, as this enables them to take a slice of output ("rent") without actually producing anything.

This is just how bankers work, they will never stop doing it, because they - and the landowners - are the people for whose benefit the whole country is being run. They are the main beneficiaries of and probably the main drivers behind Home-Owner-Ism; most of the business tax changes introduced by the current lot favour banks in particular and make things even worse for productive businesses. And what it all boils down to is the get-rich-quick culture, which is human nature I suppose, but in this country the get-rich-quick people are those who are worshipped and celebrated most, starting with people who boast about how much money they've made on their house.

Diamond Geezer

How LIBOR works... (2)

Back in 2008, I posted up the following comment by Lola:

Boss of Bank A is looking at its balance sheet and saying: "Bloody Hell! If ours is that bad his (Bank B) must be even worse. So sod that for a game of soldiers, I am not lending to him at any price, well unless I can get a silly rate. Fred? Jack up the LIBOR rate by 500 bps."

Fred: "OK Boss."

Turns out we were wrong, the conversation actually goes something more like this:

Boss of Bank BARC.L is looking at its balance sheet and saying: "Bloody Hell! If ours is that bad his (Bank X) must be even worse. But we know that he knows that we know. If it gets out, we can sod this for a game of soldiers and nobody will lend to any of us at any price, well unless I can get a silly rate. Fred? Knock down the LIBOR rate by 500 bps. Right now, we don't care what it costs us."

Fred: "OK Boss."

Boss: "Oh, and find out if the fixed interest guys have offloaded some of the stuff they bought last month, there's got to be a few quid in it by now."

Fred: "They're already on it, Boss."

I've learned something new today

VMR left this comment on my Fun Online Poll: "The MPC never set interest rates, they just followed 3 month Libor with a 1-2 month delay. As soon as they tried to control it, Libor went its own way. The MPC has no clothes."

Cutting and pasting the relevant data from The Bank of England's Statistical Interactive Database into a spreadsheet gives us the following chart comparing monthly averages of Three month LIBOR and the Official Base Rate since January 2000 (click to enlarge):The data on monthly average Three month LIBOR goes back to January 1978, the relationship seems to have held ever since then, having only broken down in the last year or so (click to enlarge):All the more reason to disband the Monetary Policy Committee, I suppose (currently slightly ahead on 40% of the votes).