Lynn Parramore: Your Retirement for a Bottle of Champagne – How Wall Street Fraudsters Ripped You Off, Again

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By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet

The LIBOR price-fixing scam has cost at least $110 million — in the state of Oregon alone!

Just as you’re struggling to finance a summer vacation, or simply to pay the freaking rent, how would you like to open your wallet and hand over a wad of cash to a gang of international con artists who commit fraud as casually as they order a five-course dinner?

Really? That’s how you feel about it? Well, tell it to the U.S. Department of Justice, because that’s just what’s going down as a result of the LIBOR scandal.

To recap: Bank hustlers manipulated the world’s most important set of benchmark interest rates and thereby impacted the prices of upward of $500 trillion worth of financial instruments. The LIBOR scam devastated state and municipal budgets, squeezed pension yields and ripped off bank shareholders. In a case of jaw-dropping fraud, greedy traders rigged up the benchmark so that they could cash in on bets on derivatives, while banks submitted fake numbers to make themselves look financially healthier. One Barclays official was fond of fudging numbers in exchange for champagne. “Dude…I owe you big time!” gushed a trader in an email to Barclays’ Mr. Fix-It. “Come over one day after work and I’m opening a bottle of Bollinger.”

That’s right. A bottle of bubbly for a scam that screwed your grandma on her retirement savings. Retail bank certificates of deposit, you see, are very popular with senior citizens, and they are priced based on LIBOR benchmarks. As Alexander Arapoglou and Jerri-Lynn Scofield have explained on AlterNet, that alone could cause Grandma’s income to drop by as much as 2 percent. It ain’t like she didn’t need the money! That’s not even counting what happened to her pension — or yours.

LIBOR was, in the opinion of many, the con of the century. But is it a crime without punishment?

About a month ago, the Wall Street Journal reported that a federal court judge had let several banks off the hook, dismissing claims that 16 banks targeted by lawsuits had broken federal antitrust laws by rigging LIBOR. As Matt Taibbi explained in his must-read article on the banking scandal, the federal judge bought the banks’ ridiculous blame-the-victim story that if cities and towns and other investors lost money over LIBOR rigging, it was their own fault. Why would they think the banks were competing, rather than, um, “collaborating”? A collaborative cheer sounded in bank boardrooms around the world, because unless the plaintiffs can win on appeal, the ruling significantly reduces what banks would potentially have to pay for wrongdoing.

Some people in the state of Oregon are feeling just a bit riled by this state of affairs.

New research shows that the state of Oregon alone lost at least $110 million as a result of the LIBOR scam. The research on Oregon is based on an analysis of monthly investment data provided by State Street Bank, the custodian bank for the State of Oregon. On Friday, the Oregon Working Families Party joined a coalition of labor and community leaders to call on Governor John Kitzhaber to sue the Wall Street banks responsible for the costly fraud. According to a statement from the WFP, Oregon has not filed a single lawsuit in connected to LIBOR. The governor remains mute on the issue.

“Wall Street just robbed us again. When are our leaders going to stand up for Oregonians to bring some of our money back home?” said Steve Hughes, state director of the Oregon Working Families Party. “This ain’t chump change either—with $110 million Oregon could literally double its contribution to the Oregon Opportunity Grant to help more Oregon students get a college education.”

Joe Dinkin of WFP told me in an email that despite the recent federal ruling, “other legal avenues for recovery remain open under both federal Securities Act and state law.” He adds that “nearly all of Oregon’s losses were in securities investments, so fraud claims pursuant to the federal Securities Act could allow state to recover losses.”

Oregon is hardly alone in its troubles with LIBOR. Last year, political economist Thomas Ferguson traced out how cities and states around the country had lost billions over the years on swaps, many of which also are tied to LIBOR in one way or another.

According to Bloomberg, U.S. prosecutors are pursuing guilty pleas, criminal convictions and fines from banks in a global investigation of the fraud. That might be reassuring, if it weren’t for that small matter of Attorney General Eric Holder recently telling Congress that the size of financial institutions has had “an inhibiting impact” on prosecutions against them. In other words, too-big-to-fail is too-big-to-jail. In a recent article, Pam Martens asked a burning question: Is the DOJ deliberately stalling on bringing charges against U.S. banks connected to LIBOR, namely JPMorgan Chase and Citigroup?

Meanwhile, the riggers continue to rig, and the regulators sit around scratching their heads. And as for you and me? That part is easy: We get fleeced.

Perhaps you’d like to ask officials in your own state what they are doing about LIBOR. But also ask how many banks and financial companies contributed to their most recent election campaigns, and how much they accepted from national party oriented groups that help raise money from banks and their executives for state officials’ campaigns, like the Democratic Governors Association, the Democratic Attorneys General Association, and their Republican counterparts.

Interestingly, Oregon Governor John Kitzhaber received large contributions from the DGA when he ran in 2010. Perhaps that has something to do with his silence on LIBOR.

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  1. mmckinl

    Exactly why we need Public banking … Banking that will profit the Common Weal not the current criminal class that runs it …

    Public Banking would allow states to greatly reduce state taxes on the public. In fact it has been estimated that it could eliminate taxes in some states!

    “A 5% interest charge for California’s ~12 million households (mortgages, debt) would generate ~$150 billion each year. California’s state budget is ~$100 billion/year.”

    To learn more visit The Public Banking Institute:

    PS: Obama’s trade deals The Trans Pacific Partnership and the US-EU Free Trade deal will outlaw Public Banking among other atrocities! … These deals must be killed.

    1. Teejay

      mmckinl said: “Obama’s trade deals The Trans Pacific Partnership and the US-EU Free Trade deal will outlaw Public Banking among other atrocities! … These deals must be killed.”
      How did you find this out that public banking would be outlawed? I’d like to know more about this so I ca email both the White House and my house and senate reps.

        1. Paul Tioxon

          Elizabeth Warren: Trade talks could weaken bank oversight

          Read more:

          Sen. Elizabeth Warren raised concerns Tuesday that negotiations over new trade agreements could be used as a backdoor way to water down financial regulations.

          Speaking at a Senate confirmation hearing for Export-Import Bank President Fred Hochberg, Warren (D-Mass.) said there are “troubling indications” that negotiations over trade deals with Asia and Europe could be seen as an opportunity for banks to quietly weaken oversight of the financial services industry.
          Continue Reading

          The agreements are “a chance for these banks to get something done quietly out of sight that they could not accomplish in a public place with the cameras rolling and the lights on,” Warren said.

  2. jake chase

    Nobody has mentioned that ‘pensions’ are the biggest scam of all. Instead of paying decent wages and letting workers make their own retirement arrangements, the ‘pension contributions’ disappear in giant pools managed by charlatans and cretins to provide rakeoffs off the top and endless opportunities for scam artists peddling all kinds of securitized dreck.

    I recall years ago a book of twaddle peddled by guru Peter Drucker about America’s movement into ‘pension fund socialism’. Wonder what Peter has to say about all this now?

    Of course, the pensions were required to avoid having all the wages disappear in taxes, because you can’t tax land values or corporate profits or rentier dividends and capital gains, and what else is left to tax?

  3. i_love_swapping

    this 110,000,000 $ figure is Bullsh!t. please detail the calculation please. the Libor traders despite their tremendous efforts fought hard trying to push those rates down by 0.25bp, often without success not 25%, not 0.25%, 0.0025%.
    to get to a 110,000,000$ loss what would be the notional of swaps that the Oregon state would be playing with ??? yes, thats 4.4 TRILLION $ of 1Y equivalent…or 440 billion of 10 years… who would be the crazy trader then ?? the Oregon state.

    This Libor story has been willingfully magnified and distorted by the media and the politics. There was manipulation and attempt to manipulate, but hey, I hope an end user doesnt decide to enter or not enter a complex derivative trade for fear of being cheated 0.25bp on some fixings. in the great scheme of things it should be absolutely peanuts for the rationale and motive of this transaction.

    Lets talk about the politicians whose disastrous Keynasian and deficit policies are today taking their toll and impoverishing millions of Americans.

    1. ScottW

      Only in the financial industry can you raise the defense of trying to steal a lot of money, but only getting away with a little. Try that argument the next time you boost some clothing on sale at the H&M. “Your honor, my client could have taken full price items, but instead had the decency of taking garments only one step away from being thrown away.”

      1. McMike

        If you commit a crime without any intent of hurting someone, say robbery, and someone on the scene ends up having a heart attack and dying, you can be charged with capital murder.

        The banks commited the crime of robbery and fraud, so they ought to be responsible for all downstream harm, including indirect and contributory events.

    2. banger

      The LIBOR scam may have been minor or major–I don’t know–but it is a scam and it is one of many that the financial industry has used to make ridiculous profits.

      More important is the clear fraud perpetrated by the financial industry in the bubble that crashed in 08. I believe from what I’ve rad and what I was told by insiders that the principals knew the bubble would pop and fed it, as they usually do, until they had inside information that indicated it might drop. Also, I know that a certain portion of the RE industry did deliberately and knowingly create liars loans to defraud investors with the assistance of ratings agencies, big banks, Fannie and Freddy. There should be tens of thousands of prosecutions going on now if there was such a thing as justice in this society. LIBOR is just one more thing to get a slight edge that these criminal elite use.

      If the feds say that there are actors in this drama that are too big to convict then the whole reason for the federal government to exist may be over.

    3. lolcar

      Since US banks do in fact hold around $200 trillion in interest rate contracts (90% by Goldman Sachs, JP Morgan, Citibank and Bank of America), moving LIBOR by a quarter of a basis point represents a potential profit of $6 billion a year. But why worry, apparently a 6 billion theft is peanuts if it’s taken 0.0025% at a time.

    4. Myshkin

      “the Libor traders despite their tremendous efforts fought hard trying to push those rates down by 0.25bp, often without success not 25%, not 0.25%, 0.0025%.”

      The rate push crushed the rate down .0025% Does that mean the rate might otherwise have not risen x%?

    5. Yves Smith Post author

      You are completely full of shit.

      During the peak of the crisis, Libor was underreported by 30 to 40 bps. This was WIDELY reported.

      Put it another way: you say you know better than State Street, which is one of the top custodians in the US and has nothing to gain by doing this analysis? Please. Why don’t YOU provide some evidence? The fact that you aren’t up on the basics of the Libor scandal (or do and are just blowing smoke) discredits you in a big way.

      1. steve from virginia

        @ swapping:

        There is an ongoing ICAP investigation; manipulating the interest rate swaps’ benchmark. The notational in this market is an order of magnitude greater than LIBOR. This is where the big numbers arrive from.

        Libor fixing effects the short-term money markets and repo. Costs ricochet through the entire system. Risk has a cost, too, it might not appear tomorrow but it will.

        Add the shenanigans in futures markets and LBMA gold fixing. It’s all a scam.

        1. steve from virginia

          @ swapping:

          Munis and states borrow tens of billions, interest costs are lofty and increases can be bankrupting. When states borrow they hedge w/ interest rate swaps to protect against adverse moves. It is generally considered that an increase in rates is adverse to the borrower: the swap eliminates the rate risk by exchanging a floating rate for a fixed for a fee.

          If the rates decline then margin is demanded from the borrower, the structure of the swap favors the lender who gains more from the borrower than the latter can gain from the swap. Here’s an example, you can see the amounts involved are stupendous:

          Italy vs. Giant Bank.

  4. i_love_swapping

    Retail bank certificates of deposit, you see, are very popular with senior citizens, and they are priced based on LIBOR benchmarks. As Alexander Arapoglou and Jerri-Lynn Scofield have explained on AlterNet, that alone could cause Grandma’s income to drop by as much as 2 percent.

    The income dropped on Libor benchmark because Libor rates went down. Libor rates went down because the FED has a 0% rate policy !!! The truth is, the FED policy is killing all retirees and those who have saved hard-earned money; and transferring indirectly that money to eternal borrowers, of which the US govt is #1.

    1. TomDor

      Get a real job.
      Plundering – via the spread rigging in libor, is a criminal act of theft. Go long go short. Just don’t make excuses for criminal behaviour… unless, of course, you are defending yourself in criminal actions – – I suspect that is it.

    2. ambrit

      Oh come on, pull the other one. If you’d been around this site much you’d know that America is a monetarily sovreign nation. It really doesn’t have to borrow if it had the political willpower. The truth here is that all this money is going into the pockets of a small coterie of crooks and not into the nations economy, where it rightfully belongs.

      1. i_love_swapping

        youre an idiot. i guess no one who comments here knows what libor is. actually i can tell you before it broke in the news even few traders, lets not say buyers or sellers of Libor based products knew what it is (much like you might not know every chemical component which is written on the back of your shampoo)…

        the FACT is the 110,000,000 $ number is a fantasy. ive just demonstrated it by large. now anyone saying the contrary doesnt know how to count. the people trying to give these figures dont know how to add. There are lawyers out there who want to make big bucks out of this story. There is (overall well deserved ) banker bashing.

        But lets get real in this big picture. if you want to talk about looting, talk about the 0% FED policy. talk about fraudulent mortgages. this criminal activity is just comdemnable but certainly not THE BIGGEST THEFT in HISTORY as you could read in some newspaper and Matt Taibbi is a total idiot

        1. Thisson

          Libor is a big theft. There *is* a lot of notional out there. Trillions and trillions. Ok, so it’s not as big a theft as what the Fed’s doing. That’s like arguing we shouldn’t convict anyone for attempted murder because murder is worse. You’re making the wrong argument.

        2. Yves Smith Post author

          No, as I indicated earlier, YOU are the one who does not know what he is talking about. You aren’t even remotely on top of the Libor story, as indicated by your gross underestimation of the amount of Libor suppression during the acute period of the crisis. This was widely discussed in the media and was disclosed in various official reports.

          You’ve clearly read bupkis and yet try to pretend you are some sort of expert, as opposed to a bullying no-nothing.

      2. Thisson

        It’s a load of nonsense to insist that the US doesn’t have to borrow, because you don’t mean that we would actually have a balanced budget. What you mean is that we can print the sovereign currency, right? Well, there are obvious limits to that when the populace go to the supermarket and see grocery prices increasing. There is a cost to spending more than you take in, even for a government with a sovereign currency. The choice is simply whether the cost is imposed by taxes, by incurring debts, or by inflation.

        1. Calgacus

          It’s a load of nonsense to insist that the US doesn’t have to borrow, because you don’t mean that we would actually have a balanced budget. What you mean is that we can print the sovereign currency, right? Well, there are obvious limits to that when the populace go to the supermarket and see grocery prices increasing.

          Right, but printing money (monetizing debt, QE, whatever) is not inflationary compared to printing bonds, what is very wrongly called government borrowing. Right now, it is almost certain that QE and low rates are deflationary, not inflationary. This is a good thing. Of course there are inflationary limits on government spending. But we can spend more if we just print the money out of thin air, than if we pretended to borrow it by printing bonds out of thin air.

          There is a cost to spending more than you take in, even for a government with a sovereign currency. The choice is simply whether the cost is imposed by taxes, by incurring debts, or by inflation. Right, there is a cost. One of these things are inevitable – (if one correctly considers printed currency as government debt, one and the same thing as a bond.)

          But don’t ignore a much bigger cost. The cost of not printing enough money. If the government doesn’t print enough of its scarce and desirable money, we get unemployment, as right now, which imposes colossal costs which dwarf all the above problems; and longterm, unemployment causes inflation. Spend more, especially by printing the money with ZIRP and while the total debt will likely go up, the debt/GDP will almost certainly go down, and there will be no inflation to speak of. In the USA 2013 the costs you mention are real. But they are comparatively trivial, negligible, as Abba Lerner lucidly explained long ago.

          1. Don Levit

            Calgacus wrote:
            “We can spend more if we just print the money out of thin air, than if we pretended to borrow it, by printing bonds out of thin air.”
            By “We” can spend more, I assume you mean the government.
            Actually, we are essentially spending money out of thin air now, for, indeed, we ARE pretending to borrow it.
            The interest is paid with debt, and the principal is rolled over, so essentially we have loans which incur no cash consequences, for we do not have a surplus in which to spend the cash.

            “If the government doesn’t print enough of its scarce and desirable money, we get unemployment.”
            How does the printing of additional money affect unemployment? Is this some kind of new discovery that we have overlooked for thousands of years?
            Unemployment is caused when supply exceeds demand, not when the supply of government dollars is less than the demand.
            The supply of money for all of us is always less than we would like. How can you satisfy an insatiable demand with more government dollars?
            Where do humans enter into your solution for unemployment, apart from giving them additional dollars in which to spend?
            If that narrow, nonsensical suggestion would solve our problems, well, you would probably take away all our evil, even our evil inclination.
            Don Levit

          2. lolcar

            “Where do humans enter into your solution for unemployment, other than giving them additional dollars to spend”

            Spending is GDP. GDP is spending. How does any economic expansion happen if humans don’t spend additional dollars? Nothing more needs to be said. The whole edifice of capitalist economics is built on the idea that firms in a competitive environment maximize profits, when presented with additional demand, by expanding production rather than raising prices. If you don’t believe in that, you don’t believe in capitalism.

  5. banger

    On the bright side–no one can claim that the Democratic Party is the party of reform or that it supports the working and middle classes. It like the Republican Party support the rich–and not just the rich–but the most criminal portion of the oligarchy.

    We have to wean ourselves from supporting either party in any way, particularly votes. We have to spread the word that we no longer live in the country we thought we lived in and to stop allowing ourselves to be misdirected by peripheral cultural issues. Both parties support the same people using different styles and methods.

    Virtually anything the federal government does today is wrong for most of us and I think that needs to sink in. Take your time–but, really, we’ve crossed the tipping point. The federal gov’t is not the same now as it was during FDR and not even close. As someone deeply familiar with Washington I’ve seen it coming for decades and it far, far, far worse now than it was a few decades ago, even under Reagan.

    Progressives are helpless and hapless living in the past. The right is merely destructive–I think we ought to take a second look at the right and consider defunding the federal government and devolving power to the states and localities–I believe that is the way it will work as more and more people give up on the government. Where I live, most people have lost all faith in the federal government–time to hitch your star to something else.

    1. lolcar

      You are advocating either the dissolution of the United States or deliberately giving yourself the monetary architecture of the Eurozone.

      1. banger

        Not, nothing like that. What I’m advocating is losing an emotional attachment towards a bureaucracy that does not represent us and allowing other institutions to fill the gap. Who knows what will emerge?

        any rate, some very different structure will emerge because increasing numbers of people have lost faith in the central government as an honest broker and justifiably so–and I see no evidence to that trend changing even if the recovery, such as it is continues.

        What is your alternative? Working within a system that is structured in such a way that reform cannot happen? Reform will happen but not coming from our current dominant institutions.

        1. jrs

          I think the alternative is to fight in the meantime for the programs still worth saving (SS is the best example). This alternative will probably lose. Of course devolving power to the states won’t work all that well either as many problems can’t be solved on that level (most environmental problems can’t for instance – water, air, these are broad issues). If the actual goal were to give more power to the states, programs like that have existed, to redistribute taxes back to the states etc.. I think they were last active under Carter though.

          Now mind you I live in a blue state (California) so I don’t really have that many problems with how my state is run, no it’s obviously not perfect, but on many things it’s light years ahead of the Feds. Woah be it if I lived in Alabama though!

        2. lolcar

          Devolving all the responsibilities of government – education, infrastructure etc. – on states and localities without giving them the power to control their own borders or issue their own currency sets the scene for a Eurozone-style race to the bottom.

    2. jake chase

      The federal gomint was coopted by the looters in 1946. Taft Hartley and the National Security State and foreign aid boondoggles and the Viet Nam War and Nixon embracing China and Carter’s energy policy and Vokler’s credit crunch and Reagan’s deregulation of S&Ls and ‘tax reform’ and Bush I’s war against Saddam and Clinton’s trade deals and bank deregulation and Bush II’s tax cuts for the super rich and his invasion of Iraq. The gomint has supported the looters against the people consistantly for sixty-seven years.

  6. clarence swinney

    “You are going to exclude a lot of younger workers”
    80% that would get a raise are adults.
    Add in those indirectly affected it is 92% adults.
    Most are parents. Seven million children would be affected.
    The majority that would get a raise are women.
    The Republicans rejected a proposal to go to $10.10
    and indicated they would oppose Obama’s $9.00 proposal.
    Polls show nearly 75% support the increase.
    Will Republicans ever stop working to stop Progress of the Middle Class?
    Still old Country Club Outfit! Aid the rich. Trickle down nonsense.

  7. i_love_swapping

    as for your argument that US govt doesnt need to borrow but can create money, i am afraid that of course it can print its own money. that strategy has been tried over centuries everywhere in the world and the consequences are well known.

    Fortunately for you, let me make the bold prediction that will be done in a near future in the US and elsewhere.

    Monetization of govt debt and outright monetary printing is very similar. the FED could forgive on a click all the debt it holds it would be similar to what to suggest. who would care ? the money is already in circulation. rolling the FED holding is tantamount to maintaining the statuquo and gives flexibility by leaving open the flexible option that in a (wonderland) scenario, things can be reversed, the bond portfolio not being rolled, or even being sold to the market… but the effect to the real economy has ALREADY happened exactly *AS IF* the govt had issued its own money.

    and looking at the economic numbers, one can hardly argue that has been a triumphant economic policy.

    IMHO there is no easy way out of this but pain for everybody and MMR is just another Chimera, just as BubbleDebtonomics.

    Paper wealth must and will be destroyed.

    1. Don Levit

      The dollar’s strength depends on the full faith and credit of the U.S. Government.
      To think, even for a moment, that the strength of that faith is dependent on the strength of the printing press is nonsense.
      Any two-bit country can create a printing press.
      Being monetarily sovereign does nothing for me.
      Don Levit

  8. i_love_swapping

    if the mighty US (or any) govt starts using a printing press earnestly, on an even faster scale than it is now, then i would expect the full faith and credit of the US (or any) govt to soon decline and very quickly when it does

    1. Harry

      You must have spent the last 5 years very surprised by the failure of inflation to show up so far.

      Of course I hope that we can eventually get inflation. But lets not fool ourselves. QE is there to cushion balance sheet contraction. There is no inflationary effect because up to now there has been more balance sheet contraction than there has been QE.

      I suspect there wont be inflation going forward because you can buy all the government debt you like but it wont make any private sector debt disappear. The poor saps who borrowed money will be supporting those fat old white people for decades on the golf courses of their dreams. If you think that we are nowhere near the limits of serviceable private sector debt then I can relax a little. Me personally I suspect we are already past that limit and we will experience constant deflationary pressure like Japan.

      1. Thisson

        Harry, please consider that both inflation and deflation mean a loss of real purchasing power for consumers. The difference is in who primarily bears the burden: debtors, creditors, laborers (in the form of higher unemployment), etc. Whether we get inflation or deflation, a lot of people are going to be stuck holding empty promises.

        1. Harry

          I dont disagree. Its about who gets to pay for it.

          Me personally I think we should stuff bond holders. Get off your fat old white bond-owning asses and do some work , and stop expecting the skinny brown masses to do your work for you.

          If we dont inflate then we ought to default. But of course fat old white people generally disagree. Same as Turkeys are generally against Thanksgiving.

      2. washunate

        I’m curious what you mean by this:

        “You must have spent the last 5 years very surprised by the failure of inflation to show up so far.”

        Your definition, I presume, is inflation = CPI?

        I think we come off looking out of touch, or even idiotic, if we act like spending money on nonproductive outlays is irrelevant forever. Ultimately, over time, productivity is wealth. Money is an idea, a framework to conceptualize claims on that wealth.

        A different perspective would observe that the way CPI has been calculated has changed over the years in a nonrandom way to decrease the official rate (in particular, to hide the fact that wages are stagnant even as prices are rising).

        Another perspective would observe that the main expenses of ordinary households like food, housing, medical care, transportation, and education are much higher now than they would be today if we hadn’t spent the past five (plus) years bailing out the predatory elite. The proper frame of reference for prices is not five years ago, but rather, more like 15. Or even 20.

        Still another perspective would observe that inflation is a monetary event – an expansion of the money supply faster than the underlying productive growth of the real economy. Prices don’t rise meaningfully until that monetary inflation gets in the hands of the real economy.

        I guess a final perspective might be less academic, more like, what are you talking about? Have you tried living on earned wages in this country? Prices are astronomical (or as the joke goes, stop insulting physics – they’re economical).

        1. Calgacus

          I think we come off looking out of touch, or even idiotic, if we act like spending money on nonproductive outlays is irrelevant forever.
          Right, but we have to measure the productivity of the outlay correctly. Right now, with unemployment so high, building pyramids would be a productive outlay. Measuring government expenditures according to “sound business principles”, according to their naive ROI is very, very wrong. One of the main victories of the quackonomists was to return to this mismeasure.

          Ultimately, over time, productivity is wealth. Money is an idea, a framework to conceptualize claims on that wealth. Money is more than that. Money, credit, is LOGICALLY necessary for the division of labor. Money is a store and measure of value. This productivity which necessitates the division of labor is impossible without the necessary ingredient of money.

          Thinking about “real stuff”, real goods and services and capital first and adding on money & credit later as an afterthought – and almost everyone falls into the trap of spouting neoclassical BS quackonomics eventually, even entirely against their will. (The only real way to avoid this is by not even mentioning money ever.) Think about money and “real stuff” as equally “real”, equally meaningful things, from the beginning and don’t confuse the two – and you get Institutional, Keynesian, creditary, MMT economics.

        2. lolcar

          “I think we come off looking out of touch … if we keep spending money on non-productive outlays forever”

          Careful there, you’re dissing the all-powerful “invisible hand”. Once a dollar enters the system, whether through the credit lines of a big company, the extension of a home mortgage, or a government social security payment, it has no greater or lesser chance of being spent productively than any other.

  9. antifa

    If the US government wanted to, it could stop collecting taxes and just create money as needed to facilitate the productive work of the people of the nation. Whether it’s green paper or cowrie shells, the “full faith and credit of the United States” is what’s valuable about the objects we pass between us.

    The problem is, the Fed currently prints money and sends it by the trillions to foreign and domestic banks to prop up a system that helps America defend and grow an worldwide economic-military empire.

    Our government has no interest in governing or managing a successful nation. Only a successful empire. The domestic economy has been sacrificed to feed that goal of global hegemony.

    It’s what you do with the sovereign money you print that matters, that makes all the difference. If all the trillions Helicopter Ben spent on the banks here and abroad were instead spent on getting this country off of oil, with rebuilt bridges and free schooling for life and fiber broadband to every home — like South Korea does — and creating a thriving nation, no one would be coddling investment bankers. They’d be looked down on like the mafia cretins they are.

    What wiseguys who love swapping don’t grasp is that they are feeding on their fellow citizens for 30 pieces of silver, and crowing about it on a dung heap of hollow morals.

    If the nation doesn’t prosper, how will the parasites that feed upon it prosper?

    1. Thisson

      There’s nothing wrong with swapping, in and of itself. It’s just like offering insurance and taking a fee for it, and we can all acknowledge that insurance serves a legitimate purpose and isn’t provided for free. The problem is when the trading isn’t backed by real capital held in reserve, real collateral posted, etc. This stuff should all be moved onto an exchange and handled through clearing houses.

      1. Susan the other

        So then it really does amount to multiple tens of trillions to the naked swappers. Money out of thin air? What a clever printing press. And how many FIRE industries will crash to dust if it is exposed and stopped?

        1. Thisson

          Focusing on the notional amount is a distraction. For example, if you are an insurance company insuring a house, you don’t focus exclusively on the value of the house – you focus on the amount of exposure you have after considering the deductible, the premium paid, etc. In Swaps, the maximum exposure is much less than the notional amount outstanding (even without addressing netting)

    2. Susan the other

      “If a nation doesn’t prosper how will the parasites that feed on it prosper?”

      They jump ship and go global with trade pacts that supercede state and federal law and even national constitutions. They become untouchable. The FIRE industry has been given very beneficial trade concessions in TPP and US-EU documents. Corporations aren’t just people, they are emperors. So that when one nation declines they dump their interests in it and move on to another one. It is interesting that the talks now underway in the immigration debate have to do with moving labor to the various nations around the world where manufacturing is given good incentives by that “government” and it is paid back, like good grifters, with jobs to stimulate local economies. Even though local labor hardly benefits. That’s the big picture behind “immigration reform.”

  10. greg

    “Interestingly, Oregon Governor John Kitzhaber received large contributions from the DGA when he ran in 2010. Perhaps that has something to do with his silence on LIBOR.”

    It is one thing to take money and protect an industry’s legitimate interest. It is another to take money and protect an industry’s criminal activity. That is being a paid accomplice, and is a crime. He should be prosecuted. In any case, he holds the banking sector’s favor above the harm it has done to his constituency, even though they bought him off cheap.

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