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Lies, Damn Lies and LIBOR

londonbanker.blogspot.co.uk

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Re: Lies, Damn Lies and LIBOR

#71

Post by Tycho »

intended wrote: post #66
Tycho wrote: post #43

Earlier quoted context omitted.

This angle seems a bit overplayed to me. The main victims of the fraud are just the counter parties on these large derivative trades that investment banks make between each other. One side was tilting the scales. At least that's what I make of it.

Considering that libor affects mortgage rates, I'd say that's a lot of people affected. that's like saying the only people affected by oil speculation are the counter parties.

I've not been able to find any analyses about mortgage borrowers being adversely affected. Regardless, they are not the targets of the fraud, so the idea about libor rate fixers robbing the public is disingenuous.

Re: Lies, Damn Lies and LIBOR

#72

Post by runawaybottle »

Tycho wrote: post #23

The trouble with articles like this is that they focus entirely on the problems created by 'relaxation' of regulation, but the benefits are not discussed. What we need to know is the net outcome (if it's knowable... But it's definitely worth discussing).

The benefits would be worth discussing, if only things weren't so far gone. Just in the last 15 years we've had two bubbles, rampant commodity speculation, tax-payer bailouts, more reckless investing by too-big-to-fail banks (Chase), and then there's LIBOR. All of this has had global consequences.

It's not a matter of discussing the merits of regulation anymore, it's a matter of dealing with the notion that these institutions just don't care. They've successfully infiltrated our government, and that's pretty much where we're at. We're going to sit here and discuss what?

Re: Lies, Damn Lies and LIBOR

#73

Post by SwellJoe »

Variance wrote: post #62
SwellJoe wrote: post #36

Earlier quoted context omitted.

Google organizes the worlds information. Facebook does something that lots of people like (I guess). There is a vast difference between those and the banks in question. Banks should be run by accountants, doing boring accounting things, and being paid a fair wage for it. It should not be a license to extract trillions of dollars from taxpayers, without their consent or knowledge. "Regardless, if banks are "concentrat…

Sounds like you're arguing for the elimination of the Federal Reserve and bailouts--which is what moving from $ to Bitcoins would essentially do. The money supply of currencies like that is fixed.

I'm not strongly arguing for or against any particular solution. I'm an amateur on monetary policy and alternative currencies and the Federal Reserve system. I merely know what fraud looks like, and I'm confident it's happened in the past, and continues to happen to this day because no one has been held accountable for past fraud, on a massive scale. So, I don't know what the optimal solution looks like, exactly, but I know it's not what we have today. It may just be that upholding the law, rigorously and blind to wealth (i.e. billionaires can go to jail), would be sufficient to keep fraud in check.

But, I'm highly suspicious of any system that allows the people who loan money to governments to also be the people determining the rates at which they borrow money (usually indirectly, as there is a very high bandwidth revolving door between the Fed and the big banks in the US, but some of the biggest banks actually had people working directly for the Fed while working for the bank, which is an SEC violation; likewise, the banks themselves are determining LIBOR, which determines the rates at which they get and loan money to governments). This is obviously inviting the fox into the hen house and expecting them to help keep the hens warm at night. Turns out that foxes, when invited into hen houses, tend to eat the hens. There's also been bid-rigging on a massive scale in the US, including JP Morgan Chase and Bank of America in their bids for municipal accounts, which studies indicate has cost taxpayers billions.

At one point I might have argued, on principle, that regulation was the cause of all of life's problems, and that market solutions should be sought. I still lean very far libertarian (or market anarchist), but I'm not convinced our society is quite enlightened enough to get there yet--and when politicians do use libertarian rhetoric it's usually a corporatist agenda masquerading as freedom. In the meantime, the bleeding has to be stopped. We can't keep pumping trillions of dollars out of the middle class all over the world and into the hands of a select few billionaire bankers and expect anything good to happen. Freedom for a few to rob the masses is not libertarian.

Re: Lies, Damn Lies and LIBOR

#74

Post by philh »

scarmig wrote: post #61
olalonde wrote: post #26

> We need to rethink as a society what banks are for, what exchanges are for, and what clearing houses are for. If they are for the profit of the few at the expense of the many now, that is because it is the business model we have permitted. Is that really true compared to Silicon Valley? Do banks concentrate wealth a lot more than a Google or a Facebook? If not, how would you feel about some random dude commenting o…

"the ultimate purpose of a business is to make money" No. The proximate purpose of a business is to make money. It's a means to the end: the ultimate purpose of businesses are to improve human well being.

It may be useful to distinguish between:

* The purpose of a business, i.e. what organisations like Google want to do; and

* The purpose of businesses, i.e. why organisations like Google are permitted/encouraged to exist.

Re: Lies, Damn Lies and LIBOR

#75

Post by [deleted] »

kitsune_ wrote: post #14
danboarder wrote: post #7

Earlier quoted context omitted.

One reason is that the London Interbank Offered Rates (LIBOR) are just not as relevant as they used to be: "...the scandal has shed light on an inconvenient truth about these interbank rates which are used to determine the price of so many hundreds of trillions of dollars worth of global financial contracts. That inconvenient truth is that even when London Interbank Offered Rates are not "fixed", they may still not b…

There are hundreds of trillions of dollars of derivates tied to the LIBOR. If the LIBOR moves 0.01% it translates to shifts in billions of dollars around the globe. Fixing the LIBOR is one of the (if not the) biggest thefts in history. Free-market capitalism is a joke. Deregulation and corporate socialism has led to a dysfunctional society ruled by a kleptocratic elite.

[deleted]

Re: Lies, Damn Lies and LIBOR

#76

Post by DanBC »

nradov wrote: post #63
olalonde wrote: post #40

Earlier quoted context omitted.

I agree with you on most points. Perhaps legalizing the creation and use of alternative currencies would be a step in the right direction.

Alternative currencies are already legal in the US. If I print up a zillion Foobucks and you agree to take them in exchange for goods and services there's nothing illegal about that. But if it's a taxable transaction then taxes will be due in real money.

So long as they don't look anything like dollars and you don't ever claim them to be legal tender. (Which has a different meaning in the UK.)

http://en.wikipedia.org/wiki/Liberty_Dollar

Re: Lies, Damn Lies and LIBOR

#77

Post by pyoung »

Variance wrote: post #64
scarmig wrote: post #61

Earlier quoted context omitted.

"the ultimate purpose of a business is to make money" No. The proximate purpose of a business is to make money. It's a means to the end: the ultimate purpose of businesses are to improve human well being.

That's your opinion of it. I can have a contrary opinion that's just as valid, and so opinions of the "ultimate" purpose of business are moot. Legally, the ultimate purpose of a business is to make money as well as legally possible; specifically, maximize shareholders' stake NPVs.

First of all, if I am the sole owner of a business, and I want to run it into the ground, that is my prerogative, and it is completely legal. Secondly, the 'maximize shareholder value' idea is a management principle, and it is not, and never has been, a legally binding requirement for corporations, public or not. Public corporations can be sued for purposefully or negligently destroying shareholder value, but not for failing to 'maximize shareholder value', which would be an absurd and difficult thing to argue in court anyways.

Re: Lies, Damn Lies and LIBOR

#78

Post by recoil »

Tycho wrote: post #70
intended wrote: post #67

Earlier quoted context omitted.

We have the net outcome in front of us? Did you mean to say something other than wealth concentration to financiers, the meltdown of the world economy, the euro crisis... Sorry, are you saying what the net benefit would be once you remove the calamities it has caused?

The major problem facing the world economy is excessive sovereign debt, and you cant blame the banks for that. Nor for the many other structural problems in the economy, or for shortage of natural resources, or AIDS, or wars, etc. What people do is focus on one visible failing of the financial system, then assume everything would be rosy if not for that problem, ergo the banks are a drag on society. And then just dev…

> The major problem facing the world economy is excessive sovereign debt, and you cant blame the banks for that.

In a country like Greece this may be true, but in Spain - for instance - the country's sovereign debt before the financial crisis was low: it's the possibility of Spain having to bail out its over-indebted banks that is driving government bond yields higher there.

In the UK, the government was forced to nationalise the imprudent RBS and as such increase its own debt burden.

And in the US, the government has been motivated to issue more and more debt partly to help re-capitalise insolvent banks...

The banks are definitely to blame.

Re: Lies, Damn Lies and LIBOR

#80

Post by b1daly »

olalonde wrote: post #26

> We need to rethink as a society what banks are for, what exchanges are for, and what clearing houses are for. If they are for the profit of the few at the expense of the many now, that is because it is the business model we have permitted. Is that really true compared to Silicon Valley? Do banks concentrate wealth a lot more than a Google or a Facebook? If not, how would you feel about some random dude commenting o…

Banks have a primary role in money creation, which is essential for society. This is the justification for regulation. Because left to their own devices, banks and financial entities are very likely to be the locus of various scams, ponzi schemes, and bank runs. When they collapse their is a huge public cost. Therefor, they are providing a "public good." Basic economic theory (not to say I totally believe it) says the "optimal" level of public goods is not provided by a free market mechanism.

So banks are a quasi public institution, and there is tension between their public and private roles. Arguments that banking should just be a totally regulated public "utility" are not uncommon.

On a practical level, it seems obvious to me that the To Big To Fail banks have a major mismatch between the risk/reward trade off. The incentives to take risks when you're managing a company that you know will be bailed out is just too huge to ignore.

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