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Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

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Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#81

Post by coliveira »

bboreham wrote: post #69
coliveira wrote: post #47

Earlier quoted context omitted.

Does it matter? Central banks are creating money, so of course they can pay the interest rates they made up from whole cloth.

My point was, if you can act on the number quoted, then market forces will eventually move it back into line with reality. And history teaches that there is eventually an end to governments' ability to print unrealistic amounts of money. See Zimbabwe, the Weimar Republic, etc.

In this case the market forces act only when the projections are too unrealistic compared to the size of the economy. Small variations in rates of less than a percentage point will not doom an economy in the medium term, but certainly can make a huge fortune for people involved in the manipulation. This is the case in all western economies.

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#82

Post by dogruck »

MichaelBurge wrote: post #73
dogruck wrote: post #56

Earlier quoted context omitted.

Thanks for the insult. Matt Taibbi has an unabashed, heavily liberal bias. He sells by appealing to readers like you. I would argue that Michael Lewis is a superior popular finance writer.

What stops your criticism from being a fully general counterargument against any community with an opinion? The EFF is biased in favor of free speech and encryption, and markets to cyber-punk programmers. So all arguments in favor of free speech made by any EFF member in any EFF-related article can be immediately discarded. "dogruck on HN" is biased against rollingstone.com; and gathers upvotes by appealing to people…

What is wrong with being skeptical of a publisher or source? Surely you don't claim that every source is equally valid.

In fact, my original post, which expressed dismay that we celebrate Rolling Stone for reporting about LIBOR, has been downvoted 4 times.

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#83

Post by bboreham »

coliveira wrote: post #81
bboreham wrote: post #69

Earlier quoted context omitted.

My point was, if you can act on the number quoted, then market forces will eventually move it back into line with reality. And history teaches that there is eventually an end to governments' ability to print unrealistic amounts of money. See Zimbabwe, the Weimar Republic, etc.

In this case the market forces act only when the projections are too unrealistic compared to the size of the economy. Small variations in rates of less than a percentage point will not doom an economy in the medium term, but certainly can make a huge fortune for people involved in the manipulation. This is the case in all western economies.

I'm not sure what you're talking about now. There are no market forces acting on projections: that's my point.

EDIT: and LIBOR isn't much of a projection, it is "I believe I could borrow at this rate, today, if I needed to"

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#84

Post by too_optimistic »

Yeah, this is common knowledge at this point. The book, "The Spider Network" details how global bank traders worked with each other to move the LIBOR up and down a few points to favor their own positions. They tried to use one guy as a scapegoat for what was really an endemic problem that still goes on today. The only thing preventing collusion are officials pinky swearing among each other that they won't do it; nothing more.

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#85

Post by jmanderley »

dogruck wrote: post #82
MichaelBurge wrote: post #73

Earlier quoted context omitted.

What stops your criticism from being a fully general counterargument against any community with an opinion? The EFF is biased in favor of free speech and encryption, and markets to cyber-punk programmers. So all arguments in favor of free speech made by any EFF member in any EFF-related article can be immediately discarded. "dogruck on HN" is biased against rollingstone.com; and gathers upvotes by appealing to people…

What is wrong with being skeptical of a publisher or source? Surely you don't claim that every source is equally valid. In fact, my original post, which expressed dismay that we celebrate Rolling Stone for reporting about LIBOR, has been downvoted 4 times.

If you want to be lauded for "being skeptical", maybe include some kind of interesting or informed commentary or critique instead of posting a meaningless drive-by attack on the source.

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#86

Post by freeflight »

jpttsn wrote: post #64
lomnakkus wrote: post #50

Earlier quoted context omitted.

Just by your terminology, I trust that you know (at least somewhat) what you're talking about, so... is there an ELI5 for this stuff? I'm completely lost in these types of discussions. They seem absurdly complicated for (good|bad) reasons? Are we looking at another complexity bubble that's going to burst in 5-10 years... to the detriment of everyone but the "top execs" who'll be bailed out? My impression after readin…

Good reasons, imho. The complexity is not (purely) a smoke screen thrown by conspiratorial insiders. Most of the harder tech HN articles would seem just as impenetrable to regular Bloomberg Terminal users.

The difference being that in tech the complexity just happens as a byproduct.

With the "finance industry" the complexity is not a bug, it's a feature, to keep ahead of regulators. Every time some immensely profitable "market" gets regulated the "finance industry" does it best to create a new "financial vehicle" to feed that unhinged greed for the fictional perpetual economic and financial growth.

It's an endless cat&mouse game that has been going on way too long and got us into this current messy situation where the "finance industry" might just as well be considered a fantasy football league, completely decoupled from the actual day to day realities of the vast majority of human beings, yet still holding massive influence over their futures.

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#87

Post by jpttsn »

freeflight wrote: post #86
jpttsn wrote: post #64

Earlier quoted context omitted.

Good reasons, imho. The complexity is not (purely) a smoke screen thrown by conspiratorial insiders. Most of the harder tech HN articles would seem just as impenetrable to regular Bloomberg Terminal users.

The difference being that in tech the complexity just happens as a byproduct. With the "finance industry" the complexity is not a bug, it's a feature, to keep ahead of regulators. Every time some immensely profitable "market" gets regulated the "finance industry" does it best to create a new "financial vehicle" to feed that unhinged greed for the fictional perpetual economic and financial growth. It's an endless cat&…

I disagree; I think that's just a lazy way to look at an unfamiliar field.

Likewise, plenty of clueless non-techies suspect techies are intentionally making tech seem complicated. Why can't Apple make a back door for the FBI and nobody else?

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#88

Post by totalZero »

lordnacho wrote: post #2

Pretty much everything that has derivatives tied to it is manipulated. Option expiries, FX fixes as well. Or it was when I was looking at it. The thing is there are derivatives that are sometimes non-linear, things with triggers and barriers. When some large enough fish has one of these (eg by taking the other side vs a customer) they have an incentive to move the rate in whatever way they can. Whether it's getting s…

How were option expiries manipulated when you were looking at them? Or do you just mean that stocks tend to trade differently when a large position is expiring? Sometimes it's just innocuous things like a market maker trading out of his delta from gamma.

Re: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?

#89

Post by coliveira »

bboreham wrote: post #83
coliveira wrote: post #81

Earlier quoted context omitted.

In this case the market forces act only when the projections are too unrealistic compared to the size of the economy. Small variations in rates of less than a percentage point will not doom an economy in the medium term, but certainly can make a huge fortune for people involved in the manipulation. This is the case in all western economies.

I'm not sure what you're talking about now. There are no market forces acting on projections : that's my point. EDIT: and LIBOR isn't much of a projection, it is "I believe I could borrow at this rate, today, if I needed to"

I am talking about projections of growth and their relationship to interest rates. Interest rates have to be paid based on future earnings, but projections for future earnings have always a big variance. Therefore, small changes in interest rate have little meaning in terms of capacity of repayment, but have great meaning in term of money made by banks (or in terms of policy, by central banks). That's why it is so easy to manipulate interest rates within certain limits, contrary to what you said about resulting inflation.
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