Everything is priced off Libor, directly or indirectly: it's one of the key rates in finance: the only others as important are the Fed's discount rate and the 'risk free rate' derived from US Treasuries.
The mainstream media are neither willing nor able to report what this means; it's just another market manipulation and gosh, we take a lot of advertising from their retail division.
But manipulating Libor... It's like an aviation fuel cartel manipulating the density of air.
The lawsuits will never end.
Which is just as well, because the UK authorities have fined Barclays less than a hundred Million. It's small change, for a crime that's saved them billions and distorted every transaction, everywhere, that defers a payment or a liability.
The enormity of the direct fraud is astonishing. But it's as nothing compared to the possibility that this caused the depression - or even delayed the attempt to respond to it for a few months. Do you think that is possible?
Nothing so direct: I don't think this caused the depression - although if the fiction had failed, a sudden reversion of rates to real values would've caused simultaneous 'Lehman' events in a quarter of the world's major banks - or all of them - and a credit crunch far worse than the one we actually had.
Enough hypotheticals: it's certain that this fraud *partially* concealed the severity of the banks' financial distress, and distorted the calculations of the costs - and the viability - of the bailouts.
That's hundreds of billions of pounds - and the decision to refloat, rather than wipe out the shareholders and the bondholders and restart the banks under public ownership.
Also: Barclay's oil-prince owners were deceived as to the value of their purchase.
I can't even begin to figure out the consequences of that...
Basically all the banks would have had to be nationalised a la Northern Rock? My god, what would the political situation look like now if that had happened...
Cascading failure was a real possibility in 2007/2008. It is less likely now.
I do not doubt that a contingency plan exists, never admitted and never discussed, for the maintenance of civil order and a nationalised payments-and-savings system administered by the staff of former banks.
I have no idea how such a regime would deal with institutional creditors and large-scale bondholders: in many ways, a 'year zero' nationalisation without compensation would be better than taking on a liability to this class of investors which exceeds the national income by orders of magnitude.
The question ought to be: "Where do we draw the line?" and a brutal cost-benefit analysis.
In reality - or realpolitik - it is necessary to *say* that we, as a nation, will always support our banks, always honour our debts, and always remain a member of 'the club' - and if that requires us to sell off every nut and bolt and brick and every acre of our country, and to sacrifice half our citizens for the sale of their internal organs, and to consign the remainder to a lingering death by starvation and disease, then "So be it".
I worry that some politicians - and most one-percenters - actually believe this fiscally-necessary fiction, or are prepared to go a very long way towards implementing it; presumably, they expect to escape the consequences by flying out to Switzerland in their private jets with their money.
The reality is that there is no 'Switzerland' if a G7 economy falls into an irrecoverable cascade of failing banks; and a successor state will impose a year-zero national-banking regime on a cascading collapse... Sometime after the hospitals run out of hard cash for pharmaceuticals - as they have in Greece - and petrol rationing is introduced, and well before the point at which we start questioning the army's willingness to take the necessary measures to restore civil order.
If Barclays (and their fellow-fraudsters) had failed in their fictions and precipitated a cascading collapse, we might well be in that very situation now. I don't believe that any of our elected leaders would've had the nerve to nationalise immediately and impose order on the retail banking system, while letting the bondholders - and, eventually, our creditors for the national debt - take the necessary 'haircut'.
As it is, the halfway-house of bleeding out the real economy to keep the banks 'afloat' may well fail, and slowly slide us into something that resembles a disorderly collapse - or the sado-monetarist dystopia, organ donors and all. It *probably* won't fail: but Barclays' are finished and I'd rather see them seized by the state, keeping the assets in use in the domestic economy, than swallowed up in litigation in America.
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branchandroot
no subject
Date: 2012-06-28 09:24 am (UTC)The mainstream media are neither willing nor able to report what this means; it's just another market manipulation and gosh, we take a lot of advertising from their retail division.
But manipulating Libor... It's like an aviation fuel cartel manipulating the density of air.
The lawsuits will never end.
Which is just as well, because the UK authorities have fined Barclays less than a hundred Million. It's small change, for a crime that's saved them billions and distorted every transaction, everywhere, that defers a payment or a liability.
no subject
Date: 2012-06-28 09:44 am (UTC)no subject
Date: 2012-06-28 10:02 am (UTC)Enough hypotheticals: it's certain that this fraud *partially* concealed the severity of the banks' financial distress, and distorted the calculations of the costs - and the viability - of the bailouts.
That's hundreds of billions of pounds - and the decision to refloat, rather than wipe out the shareholders and the bondholders and restart the banks under public ownership.
Also: Barclay's oil-prince owners were deceived as to the value of their purchase.
no subject
Date: 2012-06-28 10:25 am (UTC)Basically all the banks would have had to be nationalised a la Northern Rock? My god, what would the political situation look like now if that had happened...
no subject
Date: 2012-06-28 07:34 pm (UTC)I do not doubt that a contingency plan exists, never admitted and never discussed, for the maintenance of civil order and a nationalised payments-and-savings system administered by the staff of former banks.
I have no idea how such a regime would deal with institutional creditors and large-scale bondholders: in many ways, a 'year zero' nationalisation without compensation would be better than taking on a liability to this class of investors which exceeds the national income by orders of magnitude.
The question ought to be: "Where do we draw the line?" and a brutal cost-benefit analysis.
In reality - or realpolitik - it is necessary to *say* that we, as a nation, will always support our banks, always honour our debts, and always remain a member of 'the club' - and if that requires us to sell off every nut and bolt and brick and every acre of our country, and to sacrifice half our citizens for the sale of their internal organs, and to consign the remainder to a lingering death by starvation and disease, then "So be it".
I worry that some politicians - and most one-percenters - actually believe this fiscally-necessary fiction, or are prepared to go a very long way towards implementing it; presumably, they expect to escape the consequences by flying out to Switzerland in their private jets with their money.
The reality is that there is no 'Switzerland' if a G7 economy falls into an irrecoverable cascade of failing banks; and a successor state will impose a year-zero national-banking regime on a cascading collapse... Sometime after the hospitals run out of hard cash for pharmaceuticals - as they have in Greece - and petrol rationing is introduced, and well before the point at which we start questioning the army's willingness to take the necessary measures to restore civil order.
If Barclays (and their fellow-fraudsters) had failed in their fictions and precipitated a cascading collapse, we might well be in that very situation now. I don't believe that any of our elected leaders would've had the nerve to nationalise immediately and impose order on the retail banking system, while letting the bondholders - and, eventually, our creditors for the national debt - take the necessary 'haircut'.
As it is, the halfway-house of bleeding out the real economy to keep the banks 'afloat' may well fail, and slowly slide us into something that resembles a disorderly collapse - or the sado-monetarist dystopia, organ donors and all. It *probably* won't fail: but Barclays' are finished and I'd rather see them seized by the state, keeping the assets in use in the domestic economy, than swallowed up in litigation in America.