Banking is a cartel where prices are fixed twice
By ABC's Alan Kohler
Posted July 05, 2012 12:38:32
The Reserve Bank of Australia decided this week not to manipulate the overnight cash interest rate. Last month, though, it did engage in price-fixing.
In London, the head of Barclays Bank, Bob Diamond, has been forced to resign because his bank has been manipulating another interest rate, LIBOR. In fact, the LIBOR-fixing scandal has shaken the whole of banking to its core, again.
Is there a difference between these two things? Of course: central banks are government bodies that manipulate interest rates for the purest of motives, aren't they? [Ron: No they do not. They manipulate interest rates for the benefit of banksters.].
They control inflation and maintain full employment by artificially fixing prices in the cash market, which is supposed to send a signal to the banks to adjust their lending and deposit rates. We don't mind that, because ... well, we've just gotten used to it.
The banks then go off and fix another rate for their loans, which may or may not be done strictly in accordance with the officially fixed cash rate.
As we know only too well, the home mortgage and small business rate is set according to the various banks' cost of funds, which is not transparent, so heaven knows what they're up to.
In the US, housing and business rates are set by the long-term bond rate, not the officially manipulated cash rate, so the Federal Reserve has to do a second manipulation – what it calls "Operation Twist". That's where it operates in the bond market, selling short and buying long to get the long rate down, since fixing the cash rate is relatively futile.
The big business rate around the world is set to LIBOR, which stands for the London Interbank Offered Rate. In Australia, it's the Bank Bill Swap Rate (BBSW).
LIBOR is calculated at 11am each day by Thomson Reuters on behalf of the British Bankers Association (BBA). Groups of banks on 10 currency panels are asked: "At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11am?" I kid you not.
Thomson Reuters then takes off the highest and lowest and averages the rest. Bingo – LIBOR. In Australia, the BBSW is the rate at which the banks are actually lending that morning, with a calculation done at 10.08am; with LIBOR, it's what the banks say they are lending at.
I know you'll find this hard to believe, but it seems that some banks have been fibbing. The Wall Street Journal published an investigation into this in 2008, and then in February this year – only four years later, it had a few things going on you'll understand I'm sure – the Securities and Exchange Commission launched an investigation into LIBOR-rigging.
Barclays Bank CEO Bob Diamond has now been marched out and placed in the stocks. Overpaid bankers in general are once again in the firing line. Confidence in LIBOR is in tatters and the BBA is scrambling to restore it before bank customers try something, and someone, else.
Oh, that's right – they can't. Banking is a licensed cartel operated by rich executives, in which prices are fixed twice: first through market manipulation by government-owned banks and then again by the privately owned banks themselves.
Are we surprised that a bit of corruption sometimes sneaks into a system that is manipulated from top to bottom, rather than set by market forces alone?
Central banks are subject to political pressure and in some cases pressure from their mates among the banks, and second, the banks themselves have been manipulating LIBOR to improve their profits.
Here I can't help inserting a little national pride, because neither of our interest rate setting mechanisms has been corrupted, yet.[Ron: IF interest rates are SET by anyone at anytime THAT MECHANISM IS CORRUPT. Money should be FREE. That is, money should be created and supplied BY the community FOR use as a mechanism that facilitates trade and the exchange of goods and services. There is no need or justification for money to be provided AS DEBT ie with a requirement that interest be paid on it. Consequently, ANY interest rate setting mechanism is a scam. IF you want money lending to be at interest (usury) you must accept that the process will be exploited and corrupted by banksters and others.].
The Reserve Bank of Australia has been a beacon of independence over the years, and in particular, when Alan Greenspan's Fed was holding interest rates too low for 25 years to keep both Washington and Wall Street happy, the RBA kept them high. That is the reason Australia ended up having a relatively good GFC. [Ron: WRONG! The RBA is NOT independent. It is part of the Rothschilds' global Central Banking matrix and as such it is controlled by that matrix. The RBA is merely "independent" of ANY political or societal control by the Australian people. THAT is scandalous and inherently corrupt since there is NO proper audit, oversight or control of the RBA's operations by the Australian nation. ALSO, by holding interest rates high the RBA not only caused the recession Australia "HAD TO HAVE" in 1990-92 but also it thereby steals money from all Australians for the benefits of domestic and foreign banksters. Moreover, the reason "Australia ended up having a relatively good GFC" was because China has kept buying large quantities of Australian resources during the last few years. Also, Australians kept paying 7% or more in interest on money borrowed from banks who created it out of thin air so banks kept lending to them. ].
And the BBSW, on which institutional rates are set here, is not what the banks say they are going to lend at each day, but what they are actually doing. So they can't lie about it. [Ron: This may be true but it doesn't prevent collusion and it IS usury.].
So anyway, LIBOR is a mess. But like the credit ratings business that was entirely discredited in 2008, they will have an inquiry, chop off some heads, and then promise faithfully never to do it again, cross my heart and hope to be poor, and then get on with life again.
As for the other interest rate manipulation, the one that central banks solemnly do once a month, nobody is questioning whether that is a good idea. [Ron: Really? No one? This is typical global matrix presstitute speak. What possible moral, lawful or legal right has the Rothschilds' global Central Banking matrix got to set interest rates and to debase Australia's (or the world's) money creation and supply by so doing.].
Let me give it a try.
Since central banks started running the monetary system in the 20th century there has been a succession of financial disasters – depressions, inflation, hyper-inflation, and lately the biggest credit bubble and bust in the history of the world. It hasn't gone well, you'd have to admit.
Why is this? Because central banks come under intense pressure from their owners to keep interest rates low. We see it in Australia, where Government politicians constantly play to the mortgage belt by hoping that rates are not raised. [Ron: This is bankster presstitute speak! Usury is a scam. Governments should NOT give monopoly licences to banksters to issue fictional fiat money at interest but should issue it themselves, free of interest, as the National Socialists did in Germany in the 1930s. The reason that most governments don't do that is because the banksters organise the Anglo-US, and since WWII, NATO, to make war on those who do. That happened to Germany and Japan resulting in WWII. See eg: Hitler and the Banksters: The Abolition of Interest-Servitude. See: http://abundanthope.net/pages/Political_Information_43/Hitler-and-the-Banksters-The-Abolition-of-Interest-Servitude.shtml
Behind the Holocaust: What was Hitler’s unforgivable sin? See: http://abundanthope.net/pages/Political_Information_43/Behind-the-Holocaust-What-was-Hitler-s-unforgivable-sin.shtml
Hitler’s freedom from International Debt Slavery. See: http://abundanthope.net/pages/Ron_71/Hitler_s_freedom_from_International_Debt_Slavery_3039.shtml
WORLD WAR II The JEWS Declared War - AGAINST Germany! NOT the Other Way Around! See: http://abundanthope.net/pages/Political_Information_43/WORLD-WAR-II-The-JEWS-Declared-War---AGAINST-Germany-NOT-the-Other-Way-Around.shtml
Japan in WWII: A Casualty of Usury? Was WWII Fought to make the World Safe for the Bankers? See: http://abundanthope.net/pages/True_US_History_108/Japan-in-WWII-A-Casualty-of-Usury-Was-WWII-Fought-to-make-the-World-Safe-for-the-Bankers.shtml AND it also caused the invasion and occupation of Iraq and Libya.].
Imagine if it was another basic price that was being manipulated by a government agency to raise and lower aggregate demand – say, rent. There would be constant baying for rents to be lowered; the "rent policy agency" would be in fear of their jobs every time they raised them.[Ron: Sooo, it's OK to give a MONOPOLY LICENCE to a cabal of private banksters to issue debt money is it? Why? At least politicians ostensibly represent the general population and are, at least in theory, answerable to them. Banksters do not and ARE NOT.]
The capitalist system works through investment creating production and productivity. Investment is created by deferred consumption, otherwise known as saving. The financial system exists to collect the savings and direct them to the most productive purpose. [Ron: Really? Do tell. The bullshit never stops does it?!].
Interest is what borrowers pay to persuade other people to defer their consumption, in the belief that they will be able to consume more later on. The natural interest rate changes all the time according to society's propensity to save or consume – it's the rate, taking account of risk, which balances the desire to consume with the desire to save. [Ron: I give up. These presstitutes just go on and on...].
If interest rates are artificially manipulated, as they have been by central banks for a hundred years, imbalances inevitably occur because the market clearing mechanism is not allowed to work. The recessions will be deeper and longer and the booms will become bubbles. [Ron: Well that is true, as far as it goes.].
It would be fine if all central banks were perfect, like the Reserve Bank of Australia, but unfortunately they are not. [Ron: Bullshit! The RBA is just one of the more efficient Rothschilds' collection agencies.].After all, they are managed by human beings.
Alan Kohler is Editor in Chief of Business Spectator and Eureka Report, as well as host of Inside Business and finance presenter on ABC News. View his full profile here.
[Colour fonts, bolding and comments in suare brackets added.].
It's Not Libor Stupid, Central Banks Are The Problem. See: http://abundanthope.net/pages/Political_Information_43/It-s-Not-Libor-Stupid-Central-Banks-Are-The-Problem.shtml
Another Domino Falls in the LIBOR Banking Scam: Royal Bank of Scotland. See: http://abundanthope.net/pages/Political_Information_43/Another-Domino-Falls-in-the-LIBOR-Banking-Scam-Royal-Bank-of-Scotland.shtml
LIBOR: the 'mega-scandal of all mega-scandals' is upon us. See: http://abundanthope.net/pages/Political_Information_43/LIBOR-the-mega-scandal-of-all-mega-scandals-is-upon-us.shtml
Exposure of Banker Corruption. See: http://abundanthope.net/pages/Political_Information_43/Exposure-of-Banker-Corruption.shtml
It's over for the banking cabal. 4.jul.2012. See: http://abundanthope.net/pages/Political_Information_43/it-s-over-for-the-banking-cabal-4-jul-2012.shtml
'The mob learned from Wall Street': Eliot Spitzer on the 'cartel-style corruption' behind Libor scam. See: http://abundanthope.net/pages/Political_Information_43/The-mob-learned-from-Wall-Street-Eliot-Spitzer-on-the-cartel-style-corruption-behind-Libor-scam.shtml
Barclays blames 'senior Whitehall figures' for Libor scandal as Bob Diamond resigns - live. See: http://abundanthope.net/pages/Political_Information_43/Barclays-blames-senior-Whitehall-figures-for-Libor-scandal-as-Bob-Diamond-resigns---live.shtml
A new nightmare on Wall Street? U.S. banks face criminal probe into global interest rate-fixing scheme as Barclays blows the whistle on America's financial giants. See: http://abundanthope.net/pages/True_US_History_108/A-new-nightmare-on-Wall-Street-U-S-banks-face-criminal-probe-into-global-interest-rate-fixing-scheme-as-Barclays-blows-the-whistle-on-America-s-financial-giants.shtml
Latest banking scandal arrests expected to total 0. See: http://abundanthope.net/pages/Political_Information_43/Latest-banking-scandal-arrests-expected-to-total-0.shtml
The Scam Wall Street Learned From the Mafia. See: http://abundanthope.net/pages/True_US_History_108/The-Scam-Wall-Street-Learned-From-the-Mafia.shtml
Inside Job, Narrated by Matt Damon (Full Length HD). See: http://abundanthope.net/pages/True_US_History_108/Inside-Job-Narrated-by-Matt-Damon-Full-Length-HD.shtml
Ed Miliband demands CRIMINAL probe into Barclays interest rate rigging scandal as £3.2bn is wiped off bank in share plunge. See: http://abundanthope.net/pages/Political_Information_43/Ed-Miliband-demands-CRIMINAL-probe-into-Barclays-interest-rate-rigging-scandal-as-3-2bn-is-wiped-off-bank-in-share-plunge.shtml
Europe & America's central banks destroying the world now. See: http://abundanthope.net/pages/Political_Information_43/Europe-America-s-central-banks-destroying-the-world-now.shtml
Bank for International Settlements on Big Banks. See: http://abundanthope.net/pages/Political_Information_43/Bank-for-International-Settlements-on-Big-Banks.shtml
Juicy Financial News. See: http://abundanthope.net/pages/True_US_History_108/Juicy-Financial-News.shtml
Constitutional Court Desecrates Our Rights And Undermines The Will Of The People. See: http://abundanthope.net/pages/Political_Information_43/Constitutional-Court-Desecrates-Our-Rights-And-Undermines-The-Will-Of-The-People.shtml