LIBOR? The Real Scandal Is The Fed.
The latest brouhaha in the financial world is the “scandal” that the banks that set the LIBOR (“London Inter Bank Offer Rate”) have been “manipulating” interest rates. The LIBOR is important because it sets the benchmark interest rate for many of the top lending institutions in the world and directly affects the rates at which financial instruments such as student loans, mortgages, and bonds are set throughout the world, including here in the U.S.As with all such “scandals”, the U.S Justice Department is leaping to the rescue to score some political points. As a recent NY Times articles entails:
The criminal investigations come at a time when the public is still simmering over the dearth of prosecutions of prominent executives involved in the mortgage crisis. The continued trouble in the financial sector, including the multibillion-dollar trading losses at JPMorgan Chase, have only further fueled the anger of consumers and investors.But the Libor case presents a potential opportunity for prosecutors. Given the scope of the problems and the number of institutions involved, the rate-rigging investigation could provide a signature moment to hold big banks accountable for their activities during the financial crisis.“It’s hard to imagine a bigger case than Libor,” said one of the government officials involved in the case.”
It would seem that this anonymous “government official involved in the case” doesn’t have much of an imagination, because I can imagine a bigger case in about 2 seconds. While I have no doubt there may be legitimate corruption to investigate in this current case involving LIBOR, it’s nothing compared to the Federal Reserve system and central banking as a whole.The 16 banks that “set” the LIBOR do not have the power to create and drain money from the system, as The Federal Reserve does. In fact, as Peter Tchir of TF Market Advisors, (via ZeroHedge) explains:
The Fed does everything it can to keep the LIBOR low. The chart says it all.
The Fed cannot affect LIBOR directly, but in general LIBOR trades in line with Fed Funds. You can see that historically as Fed Funds was changed, LIBOR responded appropriately.
In reality the entire premise of central banking is the manipulation of interest rates. Politicos and prosecutors alike will use the LIBOR case to score points with the public and look like they are going after the “big bad banksters”, all while ignoring the biggest manipulator of all.Speaking of which, Mr. Bernanke recently stated that the LIBOR system is “Structurally flawed”. No, not because they manipulate interest rates, but “because proposals to improve it were not adopted by the UK body which compiles it”.This is akin to Jeffrey Dahmer accusing John Wayne Gacy of using a “flawed” system to commit his murders. The Federal Reserve manipulates rates in the same way that LIBOR is accused of doing, only it has vastly more power to do so as the monopolized creator of the world’s reserve currency.
What’s flawed is the idea that central banks can manipulate markets and interest rates by creating money out of thin air and directing it in ways it deems “best”. But only a true free market can determine appropriate interest rates and allocation of capital.I’m sure some do-gooders in the Justice Department will have a field day trying to advance their careers and score some brownie points by finding some lackeys to prosecute in the LIBOR scandal. Meanwhile, in the bowels of the Federal Reserve bank, Mr. Bernanke and his cohorts will pat each other on the banks as they manipulate the entirety of the world’s markets.Now that’s a scandal.Receive access to ALL of our EXCLUSIVE bonus audio content – including “Conspiracy Corner”, “Degenerate Gamblers” and the “League of Liberty Podcast” by joining the Lions of Liberty Pride and supporting us on Patreon!
