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Raúl Ilargi Meijer: The Central Libor Question: Do We Want to Save Our Banks or Our Societies?

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Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth, wrote three weeks ago that Libor rigging was a criminal conspiracy from the start. Here he provides an update which summarizes how collusion between large banks and central banks/regulators allowed the rate-rigging scandal to continue unchecked, at the expense of society and the real economy, for decades. This is an edited version of Raúl’s piece.

In the US, the UK and European Union, the actual say a voter gets to exercise from the ballot box has been reduced to something fast approaching the freezing point. The story of Libor is an excellent example of the inner workings of this process, and of the consequences that follow …

There is no segment of private industry that has grabbed more power than the banking industry… Banks will offer up individual traders as lambs for the sacrificial chopping block, and lawmakers will declare that justice has been done. The traders can protest as much as they want that they were not operating in a vacuum, and that their superiors were very much aware of their machinations, if not outright demanding them, but it will make no difference. Bob Diamond was thrown to the wolves so Mervyn King could stay where he is. King himself made sure of it …

The underlying idea for Libor was always: “by the bankers, for the bankers”. And if anyone involved in setting up Libor back in 1985 now wishes to claim that they had no idea that allowing banks to make up the rates at which they borrowed out of thin air created scope for manipulation, that would insult everyone’s intelligence including yours and mine. The problem is that in today’s climate, this doesn’t keep them from making precisely such claims. And that is very much part of a trend. It has increasingly become acceptable for bankers and politicians alike to deny anything flat out and see what happens, knowing their friends have their backs.

I don’t know that US finance secretary Tim Geithner said it in exactly so many words, but he did at least strongly imply that he didn’t know about Libor manipulation until the spring of 2008. And he then proceeded — along with the likes of Hank Paulson and Ben Bernanke — to base the rates for the bailout programs such as Tarp, six months or so later, on that same manipulated rate, saving the banks tens of billions of dollars in the process.

Bank of England Governor Mervyn King did him one better: he stated he didn’t know anything about Libor manipulation until two weeks prior to his parliamentary hearing on July 17, despite receiving correspondence from Geithner telling him about it, over four years ago. Geithner declared he had been very clear, and even went to the unusual step of putting his warnings to King in writing. King claims he never saw any warning signs …

Some — pretty nauseating — quotes by King from that parliamentary hearing: “No-one saw it because the game wasn’t fixed”, and “There were concerns about the accuracy of Libor during the financial crisis but that is not the same as proof that the figures had been manipulated for private gain,” [...] “That is my definition of fraud.”. King then accused bankers involved in Libor rigging of “fraud motivated by personal greed”. Mirror, mirror on the wall…

By the way, in November 2008 King described Libor to the UK parliament like this: “It is in many ways the rate at which banks do not lend to each other, … it is not a rate at which anyone is actually borrowing.”

Let’s be bluntly honest here, why don’t we: both Geithner and King are simply lying. And even if we can’t prove they are lying, we can certainly state that their words lack all plausibility. That is because Libor is arguably the most important number in the financial industry of the past two decades, and people who reach positions such as the ones Geithner and King hold, MUST have known for a long time what was going on with Libor.

Along the same lines that you don’t win a Nobel prize in physics if you don’t know that E = MC squared, you don’t get the world’s top jobs in overseeing banking and finance if you don’t know what and who is involved in Libor. If only because it would make you a potential threat to those profiting from it.

The reason Libor was used as the foundation for Tarp and other bailouts despite the fact that in the fall of 2008 everyone in the field knew it was rigged (well, except for Mervyn King) was not because there were no — potentially more reliable — alternatives that could have been used. No, it was the very fact that Libor was the rate that could most easily be manipulated. And was. Had been for years. The proof is there for all to see. Emails and letters are there to show this, no matter what denials are issued.

Meanwhile the timeline for who knew, or should have known, what about Libor rigging keeps being pushed back.

Whereas Mervyn King, according to his own words, was as innocent as he was ignorant until June 2012, as was Bob Diamond, and Tim Geithner found out in early 2008 (can we hear them both under oath next time, please?!), and other voices mentioned 2005, former Morgan Stanley trader Douglas Keenan wrote in the Financial Times last week (My thwarted attempts to tell of Libor shenanigans) that when he came to the bank in 1991, his colleagues, who had been there longer, found him humorously naive for not knowing that Libor was actively being rigged.

That takes us smoothly back a good part of the way to 1986, Libor’s year of birth. If and when in 1991 it had been manipulated for long enough to have Keenan’s colleagues snicker at his ignorance, it seems safe to say that it has been rigged pretty much ever since its inception.

And how could it not have been? Libor requires no real data, no real rates at which banks lend and borrow. It merely asks banks to state every working day at 11.00 am GMT at what rate they think they can borrow, for a wide range of maturities in a wide range of currencies. Ergo: anything goes. This was done on purpose. Libor was built to be rigged. And here’s what is was built for:

1986 was the time when the derivatives industry was starting to take off for real. An interest rate was needed to “guide” them. But not one that would be neutral or impartial, not if the bankers had any say in the matter. They had all the say they wanted and needed. Still, as I said, I don’t think it was a conspiracy in the sense that in 1986 anybody knew exactly how big it was all going to get (not that it matters; it’s about intent).

Derivatives “languished” for a while around the one times global GDP level. Then they came into their own and rose to ten times that or more. The industry began to clue in on the virtually limitless possibilities.

Graph: Analoguni
Douglas Keenan writes that in his time at Morgan Stanley, the head of interest-rate trading was none other than Bob Diamond, whoyears later was fired as Barclays CEO by Mervyn King, the BoE governor who claims he did not know until mere days before that what to all intents and purposes he should have known for a long long time. The interest-rate trade gave birth to some of the earliest new financial instruments that led to the inception of Libor. By value, the vast majority of derivatives today consists of interest-rate swaps.

The first half of the 1990s brought us credit default swaps. They are often wrongly characterized as instruments with which to hedge investments, an innocuous and benign form of insurance. But they are really instruments to hide (gambling) losses and allow the investor/gambler to circumvent reserve requirements …

The entire mortgage investment based universe — CDOs, MBS etc — was/is based on Libor as well. Banks could go nuts, and do so all the way to the bank; not only could they insure themselves for a pittance against failure on highly leveraged wagers, through Libor they even controlled how much the insurance would cost. AIG stands out as the biggest counterparty; it insured anything under the sun.

From AIG’s point of view, it didn’t matter what it insured, or what the rates were: CDS were never supposed to be triggered. They were — and are — merely a way to hide losses. The AAA ratings that Moody’s and S&P gave them made it all even better: interest rates could be kept that much lower. All for the sake of the next, and preferably larger, wager. We know how this ended for AIG. It was given our money, so it could keep on hiding losses.

There is talk of changing Libor into a better, reality-based, standard. But the plans are being drawn up by the same people who have for years at best maintained a ‘see no evil, hear no evil’ attitude. If we want a real turnaround, we must not let the same old crowd of politicians, regulators and bankers to come within a mile of negotiations for a new standard …

The “resolution” of the Libor scandal (which will probably never be completed) will show us once again that we have a choice to make between either saving the banks or saving our economies and societies.

We can’t do both. But in all honesty, I doubt that the prospect of such a choice is real. It looks to me like the choice has long since been made by a succession of unrepresentative representatives we elected with our empty votes, and who have left us with a runaway crossover between Frankenstein and the Sorcerer’s Apprentice. I wasn’t kidding when I said the other day that if you want your vote to count, you’ll have to get out into the streets to do so.

The Libor affair is one in a series of things laid bare by the ongoing financial crisis that will inevitably, at one point or another, force us to confront the moral bankruptcy at the heart of our societies.

The original version of this piece — LIBOR, Lies and Derivatives — was published at The Automatic Earth on Monday July 30th, 2012. © 2012 Copyright Raul I Meijer – All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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62 comments

  1. Glenn Condell

    Well said Raul.

    ‘Along the same lines that you don’t win a Nobel prize in physics if you don’t know that E = MC squared, you don’t get the world’s top jobs in overseeing banking and finance if you don’t know what and who is involved in Libor. If only because it would make you a potential threat to those profiting from it.’

    And along those same lines, you don’t get a professorship in the ivory towers unless you craft with legal and administrative legedemain wide avenues through which such skulduggery can be driven. And you don’t get the chance to get elected to high office unless you understand that you can have no real agency, even in the event you actually wanted to make a stand.

    The moral bankruptcy at the heart of our societies indeed. Though perhaps not the heart. Maybe the bowel.

    1. stevefraser

      Apparently the Libor criminal enterprise was OK as long as they paid their taxes on their ill-gotten profits.

      1. nonclassical

        …except they DIDN’T “pay their taxes”….they took deferred retirement rates of taxes, around 10%, and wrote of “losses”, which were then $ub$idized by taxpayers…

  2. Jill

    This article poses exactly the right question. “Do we want to save the banks or our societies?” The answer to this question is glaring at us-the power elites want to save the banks. They have done so all along and they will continue to do so. The consequences of their actions are also glaringly obvious.

    The “we” who answers and takes charge of this question and its consequences must change from being the small group of extraordinarily powerful, ignorant, short sighted and criminal power elites to “we the people”.

    Saving the banks has been empirically tried and failed. No one paying attention can doubt this. To save our socities, we must refuse to save the banks. Our resources need to be directed to what needs doing-cleaning up our environomnet, moving to alternative energy, job creation and the restoration of the rule of law.

    I want to commend the writer for also pointing to another problem we face. Elite sociopaths are being allowed to lie with little flak from the people harmed by these liars. This is a dangerous situation. The power we have is the power to call them out for their lies and criminality. Something has gone horribly wrong in this society. People rarely say anything. In fact, they will often cheer and support the very people ripping our social fabric to shreds. I have some ideas as to why this is so but it truly needs to stop.

    1. Mark P.

      ‘The power we have is the power to call them out for their lies and criminality.’

      Which currently appears to amount to almost no power at all, doesn’t it?

      It could be a start, I concede, since _sometimes_ from little acorns big things grow. But those big things have to consist of direct action. Very clearly, only direct action action that puts the fear of God into the relevant actors will change anything.

      1. Mark P.

        It’s not as if clear strategic targets don’t exist.

        “You can play ball and good things can happen to you get a big pot of gold at the end of the Wall Street rainbow or you can do your job be aggressive and face personal ruin…We really need to rethink how we govern and how regulate,” Barofsky said.

        http://www.businessinsider.com/neil-barofsky-2012-8#ixzz22WK3Tuw6

        Former Congressman Billy Tauzin (R-LA) made $19,359,927 as a lobbyist for pharmaceutical companies between 2006 and 2010. Tauzin retired from Congress in 2005, shortly after leading the passage of President Bush’s prescription drug expansion. He was recruited to lead PhRMA, a lobbying association for Pfizer, Bayer, and other top drug companies. During the health reform debate, the former congressman helped his association block a proposal to allow Medicare to negotiate for drug prices, a major concession that extended the policies enacted in Tauzin’s original Medicare drug-purchasing scheme. Tauzin left PhRMA in late 2010. He was paid over $11 million in his last year at the trade group. Comparing Tauzin’s salary during his last year as congressman and his last year as head of PhRMA, his salary went up 7110 percent.

        Former Congressman Cal Dooley (D-CA) has made at least $4,719,093 as a lobbyist for food manufacturers and the chemical industry from 2005 to 2009. Republic Report analyzed disclosures from the Grocery Manufacturers Association (GMA), an industry lobby — for companies like Kellogg — where Dooley worked following his retirement from Congress. We also added in Dooley’s salary from the American Chemistry Council, where Dooley now works as the president. The Chemistry Council represents Dow Chemical, DuPont, and other chemical interests. Dooley’s salary jumped 1357 percent between his last year in the House and his last reported salary for the Chemistry Council in 2009.

        Former Senator Chris Dodd (D-CT) makes approximately $1.5 million a year as the chief lobbyist for the movie industry. Dodd, who retired from the Senate after 2010, was hired by the Motion Picture Association of America, the lobbying association that represents major studios like Warner Bros. and Universal Studios. Although the MPAA would not confirm with Republic Report Dodd’s exact salary, media accounts [7] point to $1.5 million, a slightly higher figure than the previous MPAA head, former Secretary of Agriculture Dan Glickman. Dodd received about a 762 percent raise after moving from public office to lobbying.

        Former Congressman Steve Largent (R-OK) has made at least $8,815,741 over the years as a lobbyist for a coalition of cell phone companies and related wireless industry interests. Republic Report analyzed disclosures from CTIA-The Wireless Association, the trade group Largent leads. CTIA counts [8]wireless companies like AT&T, HTC, and Motorola as members. Largent left Congress in 2002, when his pay was about $150,000 as a public official. His move to the CTIA trade association, where he earns slightly more than $1.5 million a year according to the latest disclosure form, raised his salary by 912 percent.

        Former Senator Tom Daschle (D-SD) makes well over $2.1 million as an unregistered lobbyist in addition to earning several hundred thousand a year in speaking fees and consulting gigs. When Daschle lost his seat in the Senate, he went work for the lobbying/law firm Alston & Bird, while also providing advice to lobbying firms like the Glover Park Group, AHIP, the health insurance lobbying association, and several well-connected private equity and medical device companies. Although Daschle never registered to lobby, his sky-high income became public [9] when President Obama unsuccessfully nominated the former Democratic majority leader to be Secretary of Health and Human Services. Daschle now works at DLA Piper, another major law/lobbying firm, where he likely makes far more than his Alston & Bird salary of $2.1 million given Daschle’s significant role in crafting President Obama’s health reform proposals. Not counting the speaking fees, Daschle achieved a 1228 percent salary increase by moving through the revolving door.

        Former Congressman Richard Baker (R-LA) made $3,219,255 between 2008 and 2009 as head of a hedge fund lobbying association. Republic Report reviewed disclosures from the Managed Funds Association, a group that represents hedge funds including Caxton Associations, Magnetar Capital, and Third Point LLC. In Congress, as a member of the influential House Financial Services Committee, Baker oversaw efforts to relax regulations governing Wall Street. Baker’s salary went up 956 percent after he left office.

        Former Congressman Jim Slattery (D-OK) makes around $585,000 a year as a lobbyist for Wiley Rein. Slattery left Congress in 1994 to run for higher office. He didn’t win. Instead, he went to work for the law/lobbying firm Wiley Rein. When Slattery again ran for statewide office in 2008 against Senator Pat Roberts (R-KS), his mandatory financial disclosure revealed that he earned $585,000 [10]in 2007, representing clients like Verizon Communications and Nucor Corp. Comparing his 1994 House salary with his 2007 income from Wiley Rein,Slattery’s pay jumped 337 percent.

        Former Congressman James Greenwood (R-PA) made $6,679,935 between 2005 and 2010 as the head of the Biotechnology Industry Organization. Greenwood took the job with BIO in 2004, and still leads the association, which lobbies on a wide variety of issues on behalf of industry, including genetically modified foods and biofuels. BIO members include Amgen, MedImmune, Novo Nordisk, Genentech, and Human Genone Sciences.Greenwood’s salary shot up 671 percent between his last year in office and his BIO salary in 2009.

        Former Congressman Glenn English (D-OK) made $9,294,207 between 2004 and 2010 as the head of the National Rural Electric Cooperative Association. English, who represents many coal-dependent electric cooperatives, played a significant role in weakening climate reform legislation in 2009. Although English became head of the NREOA after 1994, Republic Report only had access to disclosures for a six year period. Comparing his congressional salary in 1994 and his last reported lobbying salary in 2009, English’s pay went up 1504 percent.

        Former Congressman Steve Bartlett (R-TX) has made at least $9,192,761 as the chief lobbyist for an association of investment banks, including Goldman Sachs, Citigroup, and JP Morgan Chase. Bartlett has worked as the head of the Financial Services Roundtable, a trade association he joined in 1999. Republic Report could only obtain disclosures from recent years, providing us an incomplete picture of his salary. Bartlett’s salary at the Financial Services Roundtable is 1770 percent higher than his last year in Congress.

        Former Congressman Matt Salmon (R-AZ) makes around $247,523 a year as a registered lobbyist. Salmon, who retired from Congress in 2001, has represented [11] corporate clients like General Motors and Grand Canyon University (a for-profit college) through a lobbying firm he founded, Upstream Consulting Inc. (Although his income boost was lower than most of his fellow Members-turned-lobbyists, Salmon does get props for the witty firm name.) Salmon announced his intention to run again for Congress, so Republic Report reviewed mandatory candidate disclosures filed by the candidate. The forms reveal that Salmon also receives consulting fees from Policy Impact Strategic Communicators, another lobbying company, as well as nearly $50,000 a year from a company called Solid Ground Solutions. At Policy Impact Strategic Communications, Salmon represented the Republic of Kazahkstan. Salmon enjoyed a 75 percent salary boost by moving from Congress to K Street.

        Former Senator Gordon Smith (R-OR) has made at least $1,650,005 as a media broadcasting industry lobbyist since 2009. Smith is president of the National Association of Broadcasters, a trade group for companies like News Corp and Time Warner. Republic Report has not reviewed NAB disclosures from 2011. Smith’s last reported broadcasting lobby salary is 742 percent higher than his Senate salary in 2008.

          1. ohmyheck

            As far as voting for President, the Electoral College has made it easy for anyone NOT living in a Swing State to vote their conscience. If your state is reliably red or blue, then you are free to vote any third party candidate that represents your values, withhold voting for any of them, or write in Mike Check. Your vote doesn’t matter.

        1. Glenn Condell

          A list of employees and the salaries they take home for services rendered. It’s tempting to call them traitors, but they are no more traitors than the bankers caught in Gresham’s Law dynamics, athletes taking nandrolene, journalists taking dictation from above, empty but ambitious black politicians betraying their constituency to serve elites… they are all just mammals obeying their instincts for survival and advantage. It seems unfair to pick on politicians, though their proximity to and criminal exploitation of the mechanism of democratic freedom for undemocratic purposes does make them an obvious target.

          They should just show up to Congress in uniforms supplied by their backers, and when CNN cuts to them droning on, they could put, alongside the (D – Ind) or (R – Tx) the logo of the vehicle they are using to ride up thru the Beltway into if not the 1% then at least into the security of that penumbra of servants around them, those they need to take out the garbage and clean the shithouse.

    2. nonclassical

      Jill,

      LIED into internationally illegal wars, and economic disaster…Naomi Klein’s, “The Shock Doctrine-rise of disaster capitalism” now turned on U.S. citizens, who didn’t give a damn while it was turned on South-Central America, 70′s,80′s…those who don’t know their history…(of Milton Friedman Chicago Boys)..are doomed…

  3. Robinsh

    We should save the Banks and that will automatically save our nations because banks are the lifeline of every nation to help them in running the businesses and a commons life.

    1. Warren Celli

      Yes, we should save the cops also because that will automatically insure that we continue to get our heads bashed in if we protest.

      Deception is the strongest political force on the planet.

    2. Maju

      Uh? How do banks help business (except occasionally)? I come from a century-long line of small-to-middle entrepreneurs (my great-grandfather founded it in the early 20th century) and the rule has always been: try not to get in debt and never ever gamble. That way the business prospered (until this crisis that may totally destroy it for lack of state demand for the first time in more than 80 years).

      Of course, now and then you want a small credit but you don’t want banks and credit to become such an important part of the economy because that is just catastrophic.

  4. Warren Celli

    Good statement of the problem — but it is still eyes glaze over too complex for the general public — and needs to be greatly simplified into something like this…

    Crooked scum bag parasitic Xtrevilist pig bankers are responsible for this;

    http://www.google.com/search?num=10&hl=en&site=imghp&tbm=isch&source=hp&biw=1229&bih=1027&q=tent+cities+iin+america&oq=tent+cities+iin+america&gs_l=img.12…2026.17166.0.21493.38.20.7.11.3.0.145.1375.18j2.20.0…0.0…1ac.uEvwHaO6NMQ#num=10&hl=en&site=imghp&tbm=isch&sa=X&ei=D8UbUMuvKqXy0gHL54H4CA&ved=0CEgQvwUoAQ&q=tent+cities+in+america&spell=1&bav=on.2,or.r_gc.r_pw.r_qf.&fp=c8419b357dd62ab1&biw=1229&bih=1027

    Good statement of the solution also; “I wasn’t kidding when I said the other day that if you want your vote to count, you’ll have to get out into the streets to do so.”

    As much time as has been spent on revealing the fraud, corruption, and hypocrisy, must now be spent on solutions external to the crooked system. Election boycotts and a rewrite of the Constitution should be the focal point of that effort on the streets.

    Deception is the strongest political force on the planet.

      1. Warren Celli

        Truth is a deception created to facilitate the forming of alliances so as to then prey upon others.

        Like your web site Maju — good stuff!

        Deception is the strongest political force on the planet.

        1. Maju

          Thanks for the compliments on my little blog but otherwise I must disagree, Warren: truth is facts, truth is freedom of speech, truth is democracy in action.

          And, as I meant above, truth is a weapon for the people, the grassroots, the underdog… If the oppressors use lies and deception, abused illusionism after all, we must use a weapon they can’t contend with: truth.

          Remember “The Emperor’s Clothes”, the most important story that every child must know by heart. And every adult too.

        2. Maju

          PS – and truth is science; you can’t get satellites out there or nuclear weapons or even the bakery downstairs to work only (or even at all) with lies and deceit. You need truth for things to be known, for things to happen. That’s what dictatorships collapse: because truth is for them something to hide, to ignore, to disdain… I don’t care if it’s the dictatorship of Hitler or the dictatorship of Goldman Sachs… as long as they thrive only on empty bubbles and speculative deceit they are doomed.

          1. Warren Celli

            The truth is that we are cannibalistic creatures by nature, a condition imposed by birth. Other organisms, human and not, must be consumed and exploited in order for us to get our needs met and allow us to sustain ourselves.

            The truth — sincerity in action, character, and utterance — is a construct of humans created to amplify power and get those needs met. It is essential in forming all of our ‘us’ and ‘them’ structures. But in the end, our combined power is still a cannibalistic power that seeks out new sources to exploit and utilize to sustain our ‘us’ group and get our needs met, even all of our science is focused on that effort and as such is deceptive in nature by extension.

            Our current evolutionary problem is that we must get all humans on the same page — in the same ‘us’ group as humans — and end all of the internal, inter human deceptions, deceptions that constantly tear us apart and cause us to misutilize resources. We must end our constant breaking of trust, especially by those few on top. What was once an asset in the evolution of human organisms has now become a hinderance; overaggressiveness, extreme insecurity, and brutality, are no longer necessary for human survival, given our dominant position on the planet, and they are now in fact a sociopathic disease — Evilism mutating into Xtrevilism.

            Until we recognize our ‘true’ cannibalistic human nature, we can never rise above it.

            Deception is the strongest political force on the planet.

          2. Maju

            We are quite cooperative by nature (and certainly not usually cannibalistic). Before you issue such judgments, you should read a bit about hunter-gatherer anthropology and realize which is the real human nature.

            As I often say in communist forums: we are commies because that’s human pre-civilization nature and we want to restore the natural order of things. Otherwise we would not find so difficult to accept extreme competitiveness as proclaimed by the prophets of Capitalism – and even probably succeed at it. But we can’t help it: we have scruples and feelings of compassion, just like bonobos – and most other humans.

            We don’t need to “rise above” anything, we have already risen as high as possible above our natural state without destroying the whole “bubble” in which we live. We need to restore the balance after so extreme growing pains in fact. We need to settle down back into the communism we come from but without renouncing to all the science and civilization (we just can’t).

            Tricky but hopefully feasible. Otherwise “c’est fini”: our kind is doomed.

          3. Warren Celli

            Maju, I believe we are on the same page in terms of end goals — restoring balance after extreme growing pains — but disagree on how we arrived at our present state.

            Hunter gatherer societies make my case, as they still consumed and exploited other organisms, and exploited each other, when conditions of scarcity arose. Yes they had extended periods of relative abundance that allowed them to focus their predations on other species and to cooperate with each other. But cooperation is always easier when there is an abundance to exploit as extreme competition is not necessary. In addition, their deceptive externalized tools of dominance were primitive and developed more slowly, lessening any serious large scale internal exploitation even more for that extended time of slower development. As those tools of dominance increased in their power however, the human cannibalistic nature utilized them to increase exploitation of other organisms and humans increasing the potential for greater conflict. But the technological genie is out of the bottle, populations are far, far beyond hunter gatherer times, and the cannibalistic nature of humans is still with us. This requires even more diligence and transparency in governmental alliances.

            When you say you want to restore the “natural order of things” and use the hunter gatherer period as an example I think you lead people to believe that we can go back to, and stay in, a fantasy state that never really existed and this promotes a lackadaisical end goal attitude towards governance where in reality it requires an every day focused attention by all.

            Deception is the strongest political force on the planet.

          4. Maju

            Consuming plants and animals is not “cannibalism”. It may be vaguely undesirable from some philosophical viewpoint but so far science has not reached the stage in which we would hybridize with plants and live off minerals and sunlight alone. You can still take the most hardcore possible ultra-vegan approach and eat only fruit, which many plants produce (seasonally) as food for animals like us… good luck!

            More importantly, you claim:

            “… cooperation is always easier when there is an abundance to exploit as extreme competition is not necessary”.

            What again shows a complete misunderstanding of human hunter-gatherer nature (which is at least 95% of our pre-/history as fully developed Homo sapiens). We do not cooperate because competition is unnecessary, we cooperate because it is much more efficient and often the only way to stay alive.

            Also it is hard-wired in our brains. Except probably in a minority maybe which are aptly described as sociopaths.

            However our society seems to promote this sociopathy (or antisocial personality disorder) as something good and not the mental illness it is, promoting callousness and disregard for social norms – because in our society certain kind of crime does pay and very well.

            This would be unthinkable in natural communities, where everyone depends on his/her associates for basic survival, and therefore hunter-gatherers tend to punish selfishness (which happens but rarely) and even in some cases to dismiss individual aggrandizing by means of jokes in which the big achievement becomes ridiculously small (Bushmen).

            Healthy natural societies like these need of everybody to pull their weight more or less equally and not big leaders making people work for them in wasteful efforts as happens in our strange civilization. Ironically they tend to enjoy of lots of leisure time.

          5. Warren Celli

            Maju you take me out of context and limit the meaning of the word cannibalism. Here is what I said:

            “Hunter gatherer societies make my case, as they still consumed and exploited other organisms, and exploited each other, when conditions of scarcity arose.”

            Cannibalism has more that one meaning. When you take from one unit for the sake of another you cannibalize. Exploitation is cannibalism as it robs from one organism to sustain the other. When I say…

            “As those tools of dominance increased in their power however, the human cannibalistic nature utilized them to increase exploitation of other organisms and humans increasing the potential for greater conflict.”

            …it should be clear that I am not only talking about consuming other living organisms — although that is a factor in rationalizing cannibalistic behavior in the minds of many. Another point about using hunter gatherers as a foundation for moral arguments that you might want to consider; the further back in time you go the less concrete and more speculative your arguments become. Speculations that fit the bias of those who do the speculating and you can even get into the Adam and Eve zone.

            Cooperation has two general motivations; fear and desire. Abundance lessens fear and promotes desire and cooperation — parasitic bankers know this well, that’s what pumping and expanding credit is all about — scarcity lessens desire and promotes fear and divisiveness — parasitic bankers also know this well, that’s what retracting and dumping credit is all about!

            The motivational stance for cooperation is governed by those who control the government.

            Deception is the strongest political force on the planet.

          6. Maju

            I do not go “back” but rather laterally: we have dozens of relatively well known hunter-gatherer societies through the World in recent times, many still alive with some difficulty. Hunter-gatherers are the present as well, even if less and less allowed to continue with their lifestyles.

            They inform us about our past but in present time.

          7. Warren Celli

            Maju, you said;

            “Before you issue such judgments, you should read a bit about hunter-gatherer anthropology and realize which is the real human nature.

            As I often say in communist forums: we are commies because that’s human pre-civilization nature and we want to restore the natural order of things.”

            “Pre-civilization nature” Sounds like going “back” to me Maju.

            You also said of hunter-gatherers in the present; “They inform us about our past but in present time.”

            In present times they inform us that their deceptions — their deceptive externalized tools of dominance — are inadequate to keep pace with the more powerful deceptions of those few Xtrevilist sociopaths who now control the planet and force our cooperative complicity in their deceptions through fear.

            Deception is the strongest political force on the planet.

  5. F. Beard

    What do we need banks for?

    You get credit and drive up my prices so then I need credit too. Anyone perceive the rat-race here? And what if one is not or less “credit-worthy” say because of the color of their skin as has often been the case? Anyone perceive why racial inequality has persisted? And race aside, the poor pay higher* interest rates than the rich. Is this not one reason why the rich get richer and the poor get poorer?

    Hoarding money is NOT the Biblical ideal (cf. “Parable of the Talents”) which is why our “use it or lose it” money system has SOME wisdom. Yet for some people, until they accumulate enough capital to risk, working and saving is their only option. So why do we punish those savers with negative real interest rates?

    *In the Bible, the poor were not to be charged ANY interest (cf. Exodus 22:25). We have things exactly reversed; the poor pay the highest interest.

    1. Kyrie Eleison

      In the biblical sense, I think it’s fairly obvious who runs things around here. It’s not just in what they preach and say, and it’s not just in what they do or the goals they set. (Titus 1:16)

      It was all spelled out in Matthew 4:8-9.

      So, for those who believe, it should really come as no surprise, and is beyond reform. In practice, it’s probably a good idea to keep religion separate from these worldly kingdoms, unless you want it to pollute and corrupt the religion itself, or give the state unnecessary powers that it ought not to be wielding – a fairly obvious conclusion based on observation.

      Not everyone seems to be in agreement, and it definitely shows in the things that certain groups keep bringing up for “public debate”.

      Salvation needs to come from within, after that one would not need it to be enforced by any outside entity. Our past has shown time and again that using force doesn’t work, it just makes people angry, full of hatred, with a taste for revenge.

      1. F. Beard

        Salvation needs to come from within … Kyrie Eleison

        Oh come on. How saved does one have to be to understand the current money system is crooked?

        And should truth be disallowed because it is in the Bible?

        As for the Church, it is “to be in the world but not of the world.” We are to be light and salt, not hide from the world.

        Christians got slavery abolished; debt slavery can be abolished too, God willing, and we have no reason to suppose He isn’t willing.

        1. Kyrie Eleison

          You are taking what I said completely out of context. Some people seem to think that they can do an end-run around faith by forcing it on others.

          Good luck with that.

          A better idea would be to lead by example, and if other people see the good works being done on their own volition they might want to see what it’s all about.

          But hey, it’s just what I believe, the way things are going seem to be going super-awesome so let’s keep it up.

          1. F. Beard

            Some people seem to think that they can do an end-run around faith by forcing it on others.

            Good luck with that. Kyrie Eleison

            I’m not forcing faith on anyone. The Bible is the TRUTH. It’s like a sword; it cuts whether one believes in it or not. “Faith comes by hearing and hearing by the Word of God” Romans 10:17. But how will people come to faith if they are ignorant of the Bible? Or if they think it’s so lame that it can’t deal with a mere world-wide counterfeiting conspiracy?

            the way things are going seem to be going super-awesome so let’s keep it up. Kyrie Eleison

            Well, the things we need, restitution for theft and not oppressing the poor, are Biblical themes. How can what I’m doing be wrong?

          2. Kyrie Eleison

            I’m making blanket statements which you are taking personally.

            Don’t.

            Unless you have a guilty conscience.

            I’m referring to all the zealots who force their will upon others in the name of religion, all the while refusing to apply it to themselves.

            You know, the ones who profess that they did good works, but don’t realize it was by unrighteous means, and are disowned.

          3. Kyrie Eleison

            Also, if you are wondering why I placed my post as a reply to yours, it is because you are one of the few who are willing and knowledgeable to engage in discussions of such things without outright bashing it. I hope this explanation helps.

          4. nonclassical

            j krishnamurti on religion: “Religion has had thousands of years to cure man’s ills…should we give it thousands more??”

  6. Maju

    On the general matter, I was noticing that today’s World GDP (PPP) is actually half ($78 trillion, as reported by the IMF) of the “World Wealth” reported in the graph illustrating the article for the year 2000.

    Not sure how can that be but in any case the whole graph looks like a bubble to me. When will the derivatives’ bubble burst?

  7. casino implosion

    Why are we acting like we have some choice here?

    The only thing that can stop the predatory grip of the banks is the banks themselves. They’ll bring about some kind of final catastrophe upon themselves and expose the whole rotten scam to the average man once and for all.

    1. Mark P.

      The ‘average man’ may already have a better idea of what’s going on than you presume — may already have been exposed to the truth. Even some of the original Tea Party, before it was suborned by the TPTB via the Republicans, had a clear enough idea of what was going on.

      My point is, ‘exposure’ is insufficient. Financialized capitalism and TPTB can simply maintain their imposture even as the crack-up continues while extracting more and more of what remains from the ‘average man.’ Exposure must lead to direct action; people (whether average or not) must stand up and impose costs on the actors who maintain the current system.

      1. Mark P.

        So, yes, we do have a choice and it requires not expecting the TPTB to drop their facade and fold. Because they won’t.

      2. nonclassical

        ..historical documentation-Geisst’s, “Wall $treet-A History”, shows there was a
        repupLIEcon “tea party” fomented in 30′s also…same same…change the subject from ridiculous NEOCON-ex-John Bircher rightwing madness…

    2. Maju

      We always have a choice. But, besides, the catastrophe, the mega-crisis is already here and it is in crisis when choices are more radical and options that were marginal before become possible or even necessary.

      The banks are like Hitler after Stalingrad: they are walking dead. We should do something to speed up the process and begin the new era.

  8. jal

    “Do we want to save our banks or our society?”

    Instead, you might reflex upon …

    Do you want to change society or not?

    Changing society involves preventing someone from obtaining a monopoly on cash flow for their benefit.

    It involves emphathy for others that are suffering because of the structures of the existing systems and making changes.

    The answers of the past have been proven to work for only a minority. (Capitalism, socialism, dictatorships, democracy)

  9. rafael bolero

    Finally, someone asks the right question simply. Answer still the same. Bankers and their politicians want to save the banks, which deliver their idea of our society. The rest of us want to save our kids’ and grand kids’ chance for a just life.

  10. Jill

    Here one of the power elite’s lackeys saves the banks and military contractors: (Aren’t we lucky!)

    http://www.reuters.com/article/2012/08/02/us-usa-syria-obama-order-idUSBRE8701OK20120802

    “President Barack Obama has signed a secret order authorizing U.S. support for rebels seeking to depose Syrian President Bashar al-Assad and his government, sources familiar with the matter said…”

    These priorities are harming so many people, whether in this nation or others. Love the secrecy with which everything goes down. Maju, I hope you are right about truth.

  11. Paul Tioxon

    The LIBOR scandal is well, standard operating procedure. Like the naive young captain in “Apocalypse Now”, the thought of bringing Col Kurzt to justice by stopping him from committing atrocities outside the pale of acceptable rules of engagement was like handing out speeding tickets at the Indy 500. What is the point? Banks that are TBTF are now cartels. What else did anyone expect? Apparently nothing, it was well known as a practice that may have been problematic by even the NY Fed chief. So, why don’t we just let capitalists be capitalists? Yr precious rule of law? They draft and see to the passage of the law. The rules of the house are their rules and you never bet against the house, unless you are hedging? So, reformist high minded shocking revelations undermining the pixie dust and unicorn rainbow dreams of a free society are now undermined. Do tell!

    http://www.binghamton.edu/fbc/commentaries/

    1. F. Beard

      So, why don’t we just let capitalists be capitalists? Paul Tioxon

      Hey, many (most? nearly all?) on the Left defend the “capitalists’” pet counterfeiting cartel, the banking system, so long as they can “regulate” it.

      Well, they got outmaneuvered. Something about trying to make a deal with the Devil?

      For the crime of holding the economy hostage, we should not only rethink big banks but banking itself.

  12. Susan the other

    I think Meijer’s facts are probably accurate but I don’t agree with his conclusion that we have a moral bankruptcy at the heart of our society. I really think some deep politics are going on here. I don’t think the goal is to crush society or even to skim money. I think the whole plan to save Western political economies back in 1980 – the Thatcher Reagan revolution – got out of control in a way no one ever intended. We have been using monetarist manipulations since WW2 and Libor was just another one, to make it possible (?) to stabilize trades and currencies in a volatile world. But we were, as the military likes to say, overtaken by events. Duh.

    Our manipulations compounded their own consequences and caught up with us with a vengeance. I think that what is now happening between the US and the EZ is a standoff to see who will collapse first.

    If CDSs were never intended to be triggered but just hide losses so that those losses could then embark on a parabolic trajectory, why did this totally synthetic system fail? My feeling is that none of these rogues saw the crash coming. I keep thinking about Dick Fuld – the very image of an evil banker, no? He was reported to have made a comment (can’t remember the cite, sorry) that was so over-the-top-Cold-Warrior about the strategic game of finance which he was involved in, that I immediately thought he was involved in the last stages of a deadly battle for control of western finance, and the outcome would dictate the course of global finance.

    So here we are. The whole damn thing has crashed and we are watching both the Pound and the Euro twist, and we have become totallly reliant on the Fed. There are only socialist solutions to this mess and the US would rather commit suicide it seems. So maybe I do agree with Meijer’s conclusions.

    1. F. Beard

      There are only socialist solutions to this mess Susan the other

      Not really. A universal bailout requires no increase in the size of government so conservatives should not complain. Credit creation is a form of counterfeiting that has cheated everyone so the Religious Right should not complain either. And ethical money creation is something we should all be for.

      1. Susan the other

        I think I put these (your) solutions in the socialist category, Beard. The capitalism category, in my opinion, is the blood from a stone austerity option.

        1. F. Beard

          What we have now and have had since 1913 at the latest is banker fascism. 99% of the population has a common enemy; we shouldn’t use divisive labels like “socialism” or “capitalism” to split us.

    2. nonclassical

      well said, Susan…

      living in Europe, 90′s, we saw “Euro” as challenge to dollar=international monetary system…and it was burying dollar by 2000…my own question has long been the degree to which what we are seeing is competition=survival of international monetary systems…is this all about U.S. (and perhaps British) banks burying other economic systems, as they lose control of resource exploitation-such as that exposed by Perkins-”Confessions of Economic Hit Man”?

  13. Glen

    Do we want to save our banks or our society?

    A somewhat cynical rhetorical question since nobody in their right mind want to save banks if it essentially means the end of civilization as we know it. Obviously anybody in their right mind wants to write off the debts and BK the banks. We can always make more banks, we cannot so easily recreate a civil society.

    The real question is why we haven’t already done so. The answer is because we’re talking about impacting a small elite of very rich, very powerful people who have managed through their wealth to gain control of our political discourse and governance. This has not been an overnight process, and will probably only be undone much work after by a truly earth shaking crisis. One had hoped that the 2008 financial collapse was enough, but it still looks as if we have about a 50/50 chance of deciding it’s better to blow up society.

    Which leaves one mind boggling conclusion: The guys who are calling the shots are very stupid.

    1. Maju

      They are not exactly stupid, they know what they have been taught and what has worked for them so far (otherwise they would not be calling the shots). The key is not stupidity but selfishness and short-sightedness.

      Otherwise some are not too bright anyhow but most are smart enough, just that egoist and deceitful. While they are not sent to jail (or guillotine, Maoist reeducation camp…) in troves they will keep doing the same: they only care about having lots of money for their lifestyle and we the people can die by the millions while they get their share.

      And the banks, ultimately pay those lifestyles – be it by means of direct salaries or bribes, or by more subtle means like payments for political parties, etc. So they are doing the right think in their values’ scale, which begins with “me” and ends with “me” as well.

      1. Kyrie Eleison

        We have a lot of data to show how reactionary the system is.

        From what I know about systems in general, if you are familiar with how it responds to input one could inject a signal sufficient enough to cause it to do very strange things indeed.

        I suppose, depending on one’s intent, you could either steer it towards a desired outcome to illustrate a point or personally gain from it, or if you were perhaps a bit more malevolent, to overcome any damping action and cause it to fly apart. I think that’s happened in the past, causing the system to fly apart, and the actors who orchestrated it came out with the upper hand after the dust settled. It seems likely that it can and will happen again, if we sit around and wait for it.

        Yves just recently posted about how stability is the primary consideration in systems design, something that I learned studying control systems. Some people, such as hackers, can attack an information system to expose its weaknesses in an effort to improve it. Or, they could be quite destructive, again, depending on their motives.

    2. nonclassical

      U.S. has world’s dominant military…Europe has world’s dominant financial system (till now-is it under attack?)…Asia has world’s dominant labor-manufacturing sector…

      Orwellian…

  14. Crazy Horse

    The real central question does not derive from LIBOR, and is not whether or not “we” want to save “our” banks or “our” societies.

    LIBOR manipulation is but another of the tools that monetarist policy makers have used to manage the world financial system for the benefit of their masters. Central, yes. Different in kind from MERS, the normal operations of the FED private central bank, Goldman Sachs fraudulent cooking the accounts of Greece to enable them to qualify for entry into the EURO—- hardly. It would take a thousand pages to begin to list the normal operations of the world financial system that involve fraud, theft, and deception.

    I believe that as a species we have passed the point where ideas or ideologies are in control. Events that are expressed in the physical world and in the social/evolutionary development of the species will determine the future, not the ideas that we intellectuals love to debate.

    “Our” banks and the debt money system that they represent have evolved over the course of centuries as mechanisms that facilitate trade and globalization of production. The frantic acceleration of shadow derivatives banking in the last decade is a logical (but not necessary) climax to their life span, just as a junkie mainlines his largest fix before collapsing in the gutter and freezing to death. Simple exponential mathematics demonstrates that a monetary system wherein money only enters the system through issuance of debt and debt repayment requires interest plus principal invariably requires infinite growth, which is impossible in a finite world.

    So “our” banks are not saveable, even if we so desired. The existing world financial system will/is in the process of collapse. What will replace it is uncertain. The only certainty is that the collapse will be chaotic. We only need look at the early stages playing out in Europe and the US to see that.

    Sustained exponential growth in a finite world is mathematically impossible. Grow anything from cars to I-pods at 3% for a few centuries and it will cover every square inch of the surface of the earth. Increase personal debt at 3% yearly for a few generations and every citizen on the planet will owe his entire annual income in interest payments alone.

    Are “our” societies saveable? If by that we mean societies that are fueled by fossil fuels on the US, Mexico, Canada, European and Chinese model and look something like we are accustomed too, the answer is certainly no. If we mean societies that continue to grow economically at any rate you might choose, the answer is certainly no. If we mean societies or a world that continues to add population at any rate you might choose, the answer is no.

    In just the past century we have set an irreversible course for a planet that will be dramatically different from the one we have evolved in. The Arctic ocean will be ice free within a few years or decades. No policy actions– even complete cessation of burning carbon fuels can change the physical factors already locked into the system. Whether a new sustainable equilibrium state results or feedback mechanisms drive change into a runaway condition that renders the planet uninhabitable is unknowable.

    For all our individual brilliance, socially we are a primitive, tribal species. One need to look no further than the latest actions of the “leftist, progressive” president of Brazil to verify that fact. The Amazon rain forest is truly the “lungs of the planet”, yet the tribe that is in power has just decided to rip them out for the short term benefit of corporate profit and cheap hydro power. It is as it always has been. As a species our time horizon rarely extends beyond the years necessary for our children to leave the nest and fly away on their own. So we will over run our environment (which happens to be the entire world)and population will collapse back into whatever is left to support us.

    1. Maju

      You make good points, Crazy Horse, but I must emphasize that societies are not merely economies but peoples. We want to save the people, not the economic system. We, at least I, say that any economic system should only exist for the people and by the people and that means economic democracy and surely a very radical overhaul of the economy: sacrificing the economy as we know it (Capitalism) for the people and not the people for the Moloch of “markets” (euphemism for Capitalist dictatorship).

      I agree that the Brazilian Workers’ Party (PT) has evolved into a developist ideology that is not anymore truly leftist and, sincerely, would I have got the right to vote in Brazil last year I would have voted for Marina da Silva (ex-PT herself) and the Greens, even if some dub them “bourgeois”.

      Similarly the PT has abandoned the landless and homeless workers’ movements and has not really developed much of an agrarian reform or housing projects.

      But that only emphasizes the need for a much more radical and ecologist left: one that unifies People and Earth and not confronts them in false terms. In some cases like Cuba, forced by needs but also by choice, they are developing alternative energies like solar power and also ecological sustainable farming. For good or bad Cuba is still much more of a referent than Brazil, the PT and Brazil overall lost their chance.

      1. nonclassical

        ..when was the last historical period when economics were less important to governments than people…?

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