By now, most readers are aware that Barclays and probably many other banks have been caught red-handed gaming the London Inter-Bank Offer Rate (LIBOR).
No, I am not going to analyze the “cause”, call for more regulation, propose lawsuits, or lament that “banksters” today are “greedy”. I have a simpler and subtler point.
In the regime of irredeemable paper money, the interest rate is always a manipulation!
The very purpose of a central bank is to be the “bidder of last resort” (on the bond), which means to drive down the rate of interest. A quick look at the rate of interest on the 10-year Treasury bond shows that they have been succeeding for the last 31 years.
What difference does it make whether a thief at the government / central bank robs the saver of his savings, or whether a liar at a nominally private bank robs the saver of his savings? Why is the former considered legitimate? If the latter does it, why do people demand to give more power to the government to “regulate” the nominally private banks?
The fact is that under irredeemable paper, the saver cannot get a yield worthy of his time commitment, much less risk. Governments and central banks have deliberately pursued a policy of trying to “stimulate” demand by creating artificial disincentives to saving. If you have cash, the government wants to push you to either spend it or invest it in risky assets.
Instead of jerking our knees at the LIBOR manipulation, isn’t it time that we started to demand a repeal of the legal tender laws and taxes on the “gains” of gold and silver? These are the primary means by which savers and creditors are forced to use the Fed’s paper scrip. Without these bad laws, savers would be re-enfranchised and a whole host of changes would occur in the monetary system. It would be about time.