Returning to the issue of LIBOR manipulation, the current picture painted is one that shows banks benefiting from borrowing at low rates through interest rate manipulation. But our guest, former assistant Treasury secretary, Paul Craig Roberts, argues that this is too simplistic and that it functions as a diversion from the deeper, darker scandal.
The dirty little secret (well, not so secret if you can do basic math) is that banks have been living off borrowed time since the onset of the 2008 financial crisis. They have assets on their books that they refuse to mark to market, and are dependent on cheap financing and easy liquidity to keep their insolvency from officially bankrupting their institutions. This is what characterizes a zombie bank, and zombie banks no longer speak only Japanese. This is a western phenomenon now, with the zombie virus having crossed the pacific, and then again the Atlantic.
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If I get this video, the Euro banks have over $45 trillion in assets and the US Banks have 1/3 of that. The Fed, by this measure, is rather puny compared to the British and Euro banking system. When a bank, or central bank for that matter, is much smaller than its peers this smaller bank is at the beck and call of their larger cousins; in this case the Euro banks and the B of E. LIBOR is both the dog and the tail wagging in the wind. The Fed seems to represent something resembling that small appliance directly below the tail. It’s the things the dog likes to lick regularly. With all due respect to Bernanke, of course.
I watched many zombie movies. You need a big long SILVER spike striking at its heart.
While it’s encouraging to see spreading acknowledgement of
the banknote scheme’s ‘money machine’ aspect of currency-debt co-generation garnering
intermittant mention in the media, it sadly doesn’t seem to have ‘sunk in’ with very many
analysts yet, that the system absolutely necessitates control of interest to
moderate currency inflation (at least that was the presumed effect envisioned by
its architects), so their habitual resort to explanation of ‘interest
manipulation’ is the ‘human action’ scenario of classical economics, yet …
these appearances are deceiving without fuller reflection on the banknote
scheme’s ‘mechanics’.
The inevitable arrival of global debt saturation has resulted in the exponentially
complex compounding of interest exceeding even negative interest rate ‘leverage’
and is now well beyond ‘control’. Whatever ‘benefits’ to government bond
markets that can be seen as co-ordinate; they’re rather an ancillary effect. By
the design constraints of the scheme, control of current interest rates is the
only ‘tool’ that could possibly avoid the ‘thing’ from quickly ramping up to a
hyper-inflation of BOTH currency AND debt. This ‘windfall’ to government bonds
is fleeting. Not because the ‘bond bubble’ will deflate, but because the sheer
size of the banknote scheme ‘Maw’ has grown so ponderously huge that it’s on
the verge of collapsing in on itself.
This is NOT ‘manipulation’ … at this juncture, it’s frantic, helter-skelter desperation.
Pat Your points are well spoken and are one additional set of notes that this fiscal mania is not going well. It’s like drowning man flailing about, appearing to be ‘manipulating’ the water, giving the appearance of swimming when he is only desperately, frantically, trying to keep his head above water. Ineffective flailing does occasionally have the appearance of manipulation.
There were a couple of editors who made note of the Bernanke Put, writing that Ben will not print into another QE due to the harm it would pose to Obama’s election chances, even if it mean Europe would not receive another QE/LTRO lifeline. That may be true. We will try to read into his words today any plans that he might have.
Walayat at Market Oracle said that the British banks are awash in liquidity but won’t lend for fear ( of the government) that this flood of cash would be hyper inflationary. They simple churn their funds to strip small profits in government bonds to produce taxable profits. Any release of funds to the outside is frowned upon. I see this pattern repeated in the US.
Our banks sit on trillions as does the business community, partly to be sure that they have funds if the financial system shuts down like it did in 2008-2009. The movie Too Big to Fail is a reasonable outline of that occurence. If I read your essay in its full meaning, these financial institutions and central banks feed off each other with extraordinarily low rates, weapons of mass financial destruction at ZIRP and NIRP, while destroying everything in their path. They consume their paltry returns and call it sound policy and anti-inflationary as well. UK inflation is about 6% so clearly that fraud is working well. I expect that food inflation due to drought and shortages will force the inflation issue into the low double digits soon. This will rip the bandage off the wound for expose these policies for all too see. Thank you for succinctly outline these problems. I don’t see any solution to this except hyper inflation coming our way and quite soon.