The LIBOR Scandal

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.


5 thoughts on “The LIBOR Scandal

  1. slothrop

    If this isn’t news to you, why do you mock the idea of manipulation in the metals?And, per your gold manipulation piece, a reason given for the open interest falling is that the bullion banks cover their shorts before the end of the day. This is possible, yes?I would love to see you elaborate more on your oil/gold arbitration scenario. It’s fascinating.

  2. Keith Weiner

    If massive short-selling causes the price to fall, then wouldn’t massive short-covering cause the price to rise? In any case, and I’ve posted a few articles about this as well, the gold basis would show shorting if it occurred. And this is simply not occurring.

  3. slothrop

    I don’t know what you mean by "gold basis" but I would like to get to the bottom of this myself. The shorts could cover enough to prevent further declines after they’ve blown out the stops, no? The price doesn’t have to move up. According to Ted Butler this is how the commercials involved make a killing. I don’t know either way. Just trying to put this together.More generally to the conspiracy point, are you actually suggesting that silver in particular is at its market price? This is absurd on the industrial fundamentals alone. And investors are gobbling up half of annual mining. The bullish case for silver is mind boggling. And the banks/gov’t, unlike 1980, don’t have any to dump. At least tell me you see the manipulation to the downside in silver.

  4. sachin

    Amazing statements ! You have no idea the joy it gave to me while reading !!Now , would it be possible for you to make your blog a weekly feaure and also make them availble for email subscription .Thanks ,Sachin .

  5. Keith Weiner

    Sachin: thanks for your kind words! I am working on increasing the frequency of my writing. I write more frequently (and less formally) on Facebook, you can subscribe to me there. Posterous does have a feature where you can sign up to receive my posts as emails…


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