Wednesday, July 4, 2012



This is the biggest financial scandal that has ever existed and the implications for politicians and bankers alike, in the US and UK in particular will be colossal.

Very simplistically, banks finance themselves on a daily basis, by borrowing from other banks. Some sixteen Global Too Big to Fail banks provide information about their cost of borrowing from other banks daily, to the British Bank Association,(“BBA”). The BBA then “fixes “ independently the rate, which is known as LIBOR (London Interbank Offered Rate).  This rate is the foundation for virtually all international financial transactions globally.

These interest rates are used on USD 10 Trillions of LIBOR based bank loans, and on some USD 350 Trillions of derivatives contracts. Thus if the rate is suppressed by even 0.1% (10 Bips), this has an impact of transferring USD 350 Billion per annum from the lender to the borrower.

The lenders can be pension funds, insurance companies, private savers, and the borrowers and beneficiaries frequently the banks, who use  these rates  to calculate the cost of financing their own high risk bets in the derivatives markets etc.

Thus by fixing a much lower rate, the banks favor their own books to the detriment of every saver on the planet. Think of the possible implications for J P Morgan with a derivatives book exceeding USD 70 Trillion.

It is not possible for a bank to fix anomalous rates  in isolation, as they all are in constant touch, and there is a clear paper trail of actual rates,  and only the all too familiar wilful blindness of the banks concerned, the BBA and the regulators can make this possible.

The smoking gun in this matter has been in existence at least since 2008 and despite many appeals from aggrieved parties no investigation has been made.

Now, with the departure of Mr Diamond at Barclays, and his lamentably unconvincing  performance on TV,  we have the tip of a gigantic iceberg appearing. It will very soon engulf the Global banks, The Bank of England, the Federal Reserve, the Treasury and of course the politicians who went along with or encouraged this global economic rape.

They are all running for cover and trying to line up scapegoats. but it is hard to imagine that they will escape the wrath of the general public. They may understand little about financial matters, but  can all understand that the banks robbed their savings account by cheating on the interest rate paid.

I attach a link to a very powerful interview on the subject:

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