Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Libor Manipulation Scandal Real Villain is the One Behind the Curtain

Interest-Rates / Banksters Jul 20, 2012 - 06:30 AM GMT

By: Money_Morning

Interest-Rates

Best Financial Markets Analysis ArticleShah Gilani writes: There's nothing like pulling back the curtain on the fraud that's center stage in the Libor manipulation scandal and finding the levers are really being pulled by central banks.

It's not about the banks doing what they did. The revelation is this: Central banks are the biggest impediment to free markets and the reason capital markets have become casinos.


And until the tyranny of their grip is broken, the majority of public investors are going to rightfully sit on the sidelines and long-term economic growth will be impossible.

The Libor scandal is just a sideshow. There's nothing new there.

Banks manipulated Libor (the London Interbank Offered Rate), the benchmark for over 800 trillion dollars in interest rate-sensitive loans and financial instruments, to jack up profits on trading positions they held.

Bankers scheming, lying and cheating for bigger bonuses at the expense of anyone in their way...that's news?

No, but here's the real inside scoop...

They were told to do it -- both implicitly and explicitly -- by the central banks that are supposed to regulate them (as is the case with the U.S. Federal Reserve Bank) and provide a safety net that facilitates capital formation and commerce on a global scale.

The Birth of the Housing Bubble
Let's not get overly technical here.

Suffice it to say that global credit expansion due to artificially low interest rates caused the build up of leverage in a yield-starved investment environment and led to the housing bubbles that burst from sea to shining sea.

Who orchestrated the low interest rate environment? That would be the Federal Reserve Bank and central banks across the globe.

If there was no manipulation by central banks, the free market for credit would have walled off a lot of speculators from access to credit they didn't deserve.

Central banks, especially the Federal Reserve Bank as a regulator, knew the health of the banks, knew they were leveraging themselves, knew they were piling up under-collateralized, securitized "assets" in off-balance sheet special-purpose vehicles.

They also knew they were forcing banks to lend at low rates. They themselves manipulated the rates to be that low and wanted the banks to extend their articulated policy throughout the economy, like a pox on the population.

And when we ended up in a financial crisis and found out the banks were all insolvent, what did the central banks do?...

They winked and nodded to the banks to manipulate Libor to prove to the world that there was no crisis and the system was still functioning as reflected in the low cost of interbank lending.

In fact, central banks were lying to the public and more than tacitly acknowledging that bank CEOs were also lying to the public's face, saying they were in good shape when in fact they were borrowing hundreds of billions (trillions globally) from central banks.

Because the truth is if Libor wasn't manipulated it would have gone through the roof and the whole world would have come to a standstill, which it did anyway.

And now to fix the mess they created by manipulating banks to keep interest rates low, central banks are adding "stimulus" (which is nothing more than giving banks more money) to keep interest rates low.

It never ends.

Breaking the Grip of Central Banks
The tyranny of central bank manipulation and the suffocation of free markets has to stop.

There's only one way to do it. Dismantle all the big banks and limit the size of banking institutions so that any one or two or five or six that fail won't implode the global financial system. Let them fail and resolve ring-fenced fiascoes under existing bankruptcy laws.

If we get banks down to a sensible size, we won't need central banks. Sure, we can still have them, but they should be run by academics (not bankers) with a singular mandate, price stability, that's articulated in advance and achieved with total transparency.

The truth is that central banks are shills for the banking behemoths.

They manipulate politicians, overrun fiscal discipline at times (not that there's much of that anywhere in the world these days) and use their limitless powers to feed profitability pools at banks.

The Libor scandal is a window into the workings of central banks and how they've aided and abetted the casino capital markets that serve the banks at the expense of long-term capital investment and sustainable economic growth.

It has to stop.

Source :http://moneymorning.com/2012/07/20/real-villain-is-one-behind-curtain-in-libor-scandal/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in