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Why Bankers Rule the World


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Why Bankers Rule the World

By Ellen Brown

Global Research, November 15, 2012

Asian Times

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In the 2012 edition of Occupy Money released this month, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our gross domestic product.

That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed” but because of the inexorable mathematics of our private banking system.

This hidden tribute to the banks will come as a surprise to most people, who think that if they pay their credit card bills on time and don’t take out loans, they aren’t paying interest. This, says Kennedy, is not true. Tradesmen, suppliers, wholesalers and retailers all along the chain of production rely on credit to pay their bills. They must pay for labor and materials before they have a product to sell and before the end buyer pays for the product 90 days later. Each supplier in the chain adds interest to its production costs, which are passed on to the ultimate consumer. Kennedy cites interest charges ranging from 12% for garbage collection, to 38% for drinking water to, 77% for rent in public housing in her native Germany.

Her figures are drawn from the research of economist Helmut Creutz, writing in German and interpreting Bundesbank publications. They apply to the expenditures of German households for everyday goods and services in 2006; but similar figures are seen in financial sector profits in the United States, where they composed a whopping 40% of US business profits in 2006. That was five times the 7% made by the banking sector in 1980. Bank assets, financial profits, interest, and debt have all been growing exponentially.

chart131112.gif

Adapted from here .

Exponential growth in financial sector profits has occurred at the expense of the non-financial sectors, where incomes have at best grown linearly.

chart131112a.gif

Source: lanekenworthy.net

By 2010, 1% of the population owned 42% of financial wealth, while 80% of the population owned only 5% of financial wealth. Dr Kennedy observes that the bottom 80% pay the hidden interest charges that the top 10% collect, making interest a strongly regressive tax that the poor pay to the rich.

Exponential growth is unsustainable. In nature, sustainable growth progresses in a logarithmic curve that grows increasingly more slowly until it levels off (the red line in the first chart above). Exponential growth does the reverse: it begins slowly and increases over time, until the curve shoots up vertically (the chart below). Exponential growth is seen in parasites, cancers… and compound interest. When the parasite runs out of its food source, the growth curve suddenly collapses.

chart131112b.gif

People generally assume that if they pay their bills on time, they aren’t paying compound interest; but again, this isn’t true. Compound interest is baked into the formula for most mortgages, which compose 80% of US loans. And if credit cards aren’t paid within the one-month grace period, interest charges are compounded daily.

Even if you pay within the grace period, you are paying 2% to 3% for the use of the card, since merchants pass their merchant fees on to the consumer. Debit cards, which are the equivalent of writing checks, also involve fees. Visa-MasterCard and the banks at both ends of these interchange transactions charge an average fee of 44 cents per transaction – though the cost to them is about four cents.

How to recapture the interest

The implications of all this are stunning. If we had a financial system that returned the interest collected from the public directly to the public, 35% could be lopped off the price of everything we buy. That means we could buy three items for the current price of two, and that our paychecks could go 50% farther than they go today.

Direct reimbursement to the people is a hard system to work out, but there is a way we could collectively recover the interest paid to banks. We could do it by turning the banks into public utilities and their profits into public assets. Profits would return to the public, either reducing taxes or increasing the availability of public services and infrastructure.

By borrowing from their own publicly owned banks, governments could eliminate their interest burden altogether. This has been demonstrated elsewhere with stellar results, including in Canada, Australia, and Argentina among other countries.

In 2011, the US federal government paid US$454 billion in interest on the federal debt – nearly one-third the total $1,100 billion paid in personal income taxes that year. If the government had been borrowing directly from the Federal Reserve – which has the power to create credit on its books and now rebates its profits directly to the government – personal income taxes could have been cut by a third.

Borrowing from its own central bank interest-free might even allow a government to eliminate its national debt altogether. In Money and Sustainability: The Missing Link (at page 126), Bernard Lietaer and Christian Asperger, et al, cite the example of France.

The Treasury borrowed interest-free from the nationalized Banque de France from 1946 to 1973. The law then changed to forbid this practice, requiring the Treasury to borrow instead from the private sector. The authors include a chart showing what would have happened if the French government had continued to borrow interest-free versus what did happen. Rather than dropping from 21% to 8.6% of GDP, the debt shot up from 21% to 78% of GDP.

“No ‘spendthrift government’ can be blamed in this case,” write the authors. “Compound interest explains it all!”

chart131112c.gif

More than just a Federal solution

It is not just federal governments that could eliminate their interest charges in this way. State and local governments could do it too.

Consider California. At the end of 2010, it had general obligation and revenue bond debt of $158 billion. Of this, $70 billion, or 44%, was owed for interest. If the state had incurred that debt to its own bank – which then returned the profits to the state – California could be $70 billion richer today. Instead of slashing services, selling off public assets, and laying off employees, it could be adding services and repairing its decaying infrastructure.

The only US state to own its own depository bank today is North Dakota. North Dakota is also the only state to have escaped the 2008 banking crisis, sporting a sizable budget surplus every year since then. It has the lowest unemployment rate in the country, the lowest foreclosure rate, and the lowest default rate on credit card debt.

Globally, 40% of banks are publicly owned, and they are concentrated in countries that also escaped the 2008 banking crisis. These are the BRIC countries – Brazil, Russia, India, and China – which are home to 40% of the global population. The BRICs grew economically by 92% in the last decade, while Western economies were floundering.

Cities and counties could also set up their own banks; but in the US, this model has yet to be developed. In North Dakota, meanwhile, the Bank of North Dakota underwrites the bond issues of municipal governments, saving them from the vagaries of the “bond vigilantes” and speculators, as well as from the high fees of Wall Street underwriters and the risk of coming out on the wrong side of interest rate swaps required by the underwriters as “insurance.”

One of many cities crushed by this Wall Street “insurance” scheme is Philadelphia, which has lost $500 million on interest swaps alone. (How the swaps work and their link to the LIBOR scandal was explained in an earlier article here.) This month, the Philadelphia City Council held hearings on what to do about these lost revenues. In an October 30 article titled “Can Public Banks End Wall Street Hegemony?“, Willie Osterweil discussed a solution presented at the hearings in a fiery speech by Mike Krauss, a director of the Public Banking Institute.

Krauss’ solution was to do as Iceland did: just walk away. He proposed “a strategic default until the bank negotiates at better terms”. Osterweil called it “radical”, since the city would lose its favorable credit rating and might have trouble borrowing. But Krauss had a solution to that problem: the city could form its own bank and use it to generate credit for the city from public revenues, just as Wall Street banks generate credit from those revenues now.

A solution whose time has come

Public banking may be a radical solution, but it is also an obvious one. This is not rocket science. By developing a public banking system, governments can keep the interest and reinvest it locally. According to Kennedy and Creutz, that means public savings of 35% to 40%. Costs can be reduced across the board; taxes can be cut or services can be increased; and market stability can be created for governments, borrowers and consumers. Banking and credit can become public utilities, feeding the economy rather than feeding off it.

Ellen Brown is an attorney and president of the Public Banking Institute. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com, http://EllenBrown.com, and http://PublicBankingInstitute.org.

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Why Bankers Rule the World

By Ellen Brown

Global Research, November 15, 2012

Asian Times

=================================

In the 2012 edition of Occupy Money released this month, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our gross domestic product.

An obviously false claim and since the blogger didn’t quote Kennedy directly it’s not clear she made such a claim. I didn’t see anything along those lines in the book’s linked Amazon page. And Kennedy is not an economist.

Prof. Dr. Margrit Kennedy, is an architect with a Masters Degree in Urban and Regional Planning and a Ph.D. in Public and International Affairs. She has published books, articles and reports on community school planning and building, women and architecture, urban ecology, permaculture, money, land and tax systems. She has also practised architecture and urban planning in Brazil, Nigeria, Scotland, the USA and Germany and has worked as a professor for Ecological Building Technologies at the Department of Architecture, University of Hanover.

Though it’s true (according to her CV) that:

As a consultant in complementary currencies, she helped in the preparation for creating a sustainable money system with demurrage for the planned international city of Aurovillle, India, for Cali, Columbia, for different Regions in Argentina, Germany und New Zealand. Margrit and her husband, Prof. Declan Kennedy, have been running international workshops on different aspects of monetary reform, in English and German, since 1988 in Steyerberg.

Based on the Google translation of his German Wikipedia bio Creutz was also an architect who dabbled economics. So we supposedly have one German pseudo-economist citing another German pseudo-economist “interpreting Bundesbank publications”. What indications are there her claims have anything to do with any country outside Germany?

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If you dont like the source I use below,just go to GOOGLE and put in the phrase ,the 11th marble does not exist.

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THE ELEVENTH MARBLE

by Michael Rivero SMALL_11thmarble.jpg

Any five-year old child knows that if you put ten marbles into a tin can, you can only take ten marbles back out. No amount of wishful thinking, dreaming, or praying, will yield that eleventh marble from inside that can. That eleventh marble does not exist. It never did, and it never will. All discussions about the eleventh marble are the product of imagination. The eleventh marble is a fantasy. SMALL_tinworld.jpg

Private central bankers issuing the public currency as interest-bearing loans operate on the belief that they can put ten marbles (dollars) into a tin can (the world) and magically get 11 marbles back out. Thus, we may conclude that the bankers are dumber than five-year old children! But unlike five-year old children, the bankers will take your home, your business, and your nation when they don't get that eleventh marble! The spoiled child may cry and throw a tantrum, but that will be the end of their upset. The spoiled banker, however, in his or her arrogant rage that they cannot have the eleventh marble their imagination says must still be in that tin can, may start a war before they will admit that eleventh marble was never really there.

Economies are like tin cans. Before you can take a marble out, you must have put a marble in. Nobody can give you a marble that does not exist, yet this simple reality is lost to the priests of that fantastic religion called "economics" in that unholiest of temples called the Private Central Bank. Their religious doctrine seems to be that there must always be an eleventh marble inside the tin can, and that the tin can unfairly withholds that eleventh marble, indeed cheats them of their right to the eleventh marble, purely out of spite. That faith in the existence of the eleventh marble, unseen and improvable, is the article of faith the religion of banking rests on. It is far easier to burn the heretics than to question the dogma.

Today we see the bankers, having already retrieved their ten marbles from the tin can, flogging the world for that missing eleventh marble. Greece does not have that eleventh marble, so they turn to Germany and ask, "Do you have an eleventh marble", and Germany replies, "Sorry, but the bankers already took the ten marbles they put in our tin can, and we are searching for an eleventh marble ourselves. Try the Americans." The Americans, of course, have only just surrendered the last of their ten marbles back to the bankers and are looking under seat cushions for that missing eleventh marble nobody seems able to find.

But the eleventh marble will never be found. After all that mayhem brought down on the tin can there still will be no eleventh marble. It does not exist. It never did, and it never will.

The problem with all modern reserve banking systems is that the moment the first bank note goes into circulation as the proceed of a loan at interest, more money is owed to the banks than actually exists. Ten marbles have been put into the tin can, but the bankers see 11 marbles owed back to them. Sooner or later the non-existence of that eleventh marble will create a crisis of faith. People will stop believing in the religion called private central banking, and that crisis of faith will bring the system crashing down, as did the Temple of Baal in ancient times when the Syrians saw through the priests' trickery. This evil magic of creating money out of debt was a fraud all along, as fraudulent and silly as the idea that one can put ten marbles into a tin can, and take out eleven.

In ages to come economists will look back at this failed experiment in debt-based currency, and dump it into the same category of human folly as Tulip mania, The Nation of Poyais, Credit Mobilier, the Great South Seas Company, and Mortgage-Backed Securities.

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The 11th marble is a very important concept. It explains a lot of economic problems. Too STUPID to think = Colby. I am offering you an explanation for many of todays economic problems and all u do is insult. This is PEARLS SWINE (no curiosity). In the time of Jesus Pearls would be as valuable as GOLD TIMES 50 in todays value.

Edited by Steven Gaal
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Dear Michael, I have no worry. You see in Colby's postings he said he "OWNEDGAAL". He did so by using the work of Miles Kara.

Michael ..ah .. KARA ....he isnt a 911mythbuster (as Colby defines himself) or 911truther (as Colby defines me) but this fellow he uses is really part of the truth of 911....you see he is a aviation consultant of top security clearance that worked for the JCS in March of 2001 before 911 on Terrorism ....so you see Colby has outed himself using this man who is much much closer to 911 than a 911 Comission consultant (which he was) but part of .........911. Kara is a myth creator covering up for himself and Colby is his

puppet.

=============

Air Defense 911 Anomalies (see this thread)

http://www.scribd.co...s-L-Kara-Sr-563

Miles Kara, a lifelong coverup man from the DOD.

Edited by Kathy Beckett
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Corporate Profits Hit Record High While Worker Wages Hit Record Low

By Pat Garofalo on Dec 3, 2012 at 9:25 am THINKPROGRESS

corporate_flag.jpgA constant conservative charge against President Obama is that he is inherently anti-business. However, businesses keep defying the storyline by making larger and larger profits, rebounding nicely out of the Great Recession.

In the third quarter of this year, “corporate earnings were $1.75 trillion, up 18.6% from a year ago.” Corporations are currently making more as a percentage of the economy than they ever have since such records were kept. But at the same time, wages as a percentage of the economy are at an all-time low, as this chart shows. (The red line is corporate profits; the blue line is private sector wages.):

corporateprofitsvswages1.png

Corporations made a record $824 billion in profits last year as well, while the stock market has had one of its best performances since 1900 while Obama has been in office.

Meanwhile, workers are getting the short end of the stick. As CNN Money explained, “a separate government reading shows that total wages have now fallen to a record low of 43.5% of GDP. Until 1975, wages almost always accounted for at least half of GDP, and had been as high as 49% as recently as early 2001.”

Edited by Steven Gaal
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Why Bankers Rule the World (HOW ABOUT PURE MURDER)

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Is the World Bank Funding Death Squads in Honduras?

4th December 2012

http://www.constantinereport.com/allposts/is-the-world-bank-funding-death-squads-in-honduras/

By Annie Bird, Rights Action

Upside Down World, November 8, 2012

muertos_mca_tierras_facusse-e1354637924886.jpgThe Dinant Corporation and subsidiaries of the Jaremar Corporation, both Honduran African palm oil corporations blamed by campesino movements for the murder of approximately 80 campesinos in the Aguan river valley region since the June 2009 military coup, have received millions of dollars from the World Bank since the coup.

Most recently, on November 2, 2012, Orlando Campos, Reynaldo Rivera Paz, and José Omar Paz – all former members of a campesino movement which contests rights to the “ Panama farm” against Dinant Corporation’s illegitimate claims – were killed in a drive-by shooting as they waited for a bus. The following day, in an unprecedented arrest of a death squad member, police officer Marvin Noe García Santos was arrested for these assassinations.

On August 13, 2012, the Compliance Advisor Ombudsman [CAO] – internal agency of the World Bank that monitors compliance with Bank standards and safeguards – published its appraisal of a $30 million loan from the World Bank’s private financing arm, the International Finance Corporation [iFC], to the Dinant Corporation palm oil corporation of Honduras, and found that an audit of the Dinant loan should be conducted. This appraisal was “initiated by the CAO Vice-President in response to a letter submitted in November 2010 by Rights Action to the President of the World Bank Group in November 2010, and conversations between CAO and local NGOs.” It determined an audit of the World Bank loan’s social and environmental performance will be conducted.

On November 17, 2010, two days after five campesinos from the Movimiento Campesino del Aguan (MCA) were killed by security forces employed by the Dinant Corporation owned by Miguel Facusse, Rights Action sent a letter to the president of the World Bank charging that the Bank shared responsibility for the killings given that, one year before, on November 5, 2009, the World Bank released $15 million dollars to Dinant, the first half of the $30 million loan. This World Bank loan disbursement occurred while a military-backed junta controlled Honduras , in the aftermath of the June 2009 military coup, and brutal State repression was again becoming systematic throughout Honduras . For months on end, every single day, peaceful pro-democracy protests against the military coup took place in the streets of Honduras , and were violently repressed by the junta. Death squads began operating again in Honduras, targeting pro-democracy activists.

Faccuse’s Dinant Corporation has been involved in land rights disputes with campesinos since 1994 when, through violence and fraud, it began acquiring land titles to African palm cooperatives. Since January 2010, Dinant security forces have been accused of participation in death squad activities and are likely responsible for the murder of approximately 80 campesino land rights activists and bystanders.

Lack of Reaction to 2009 Military Coup

In reaction to the June 28, 2009 military coup, the Organization of American States suspended Honduras ’ membership from July 5, 2009 to June 1, 2011, when ousted president Manuel Zelaya was allowed to return to the country. While the OAS’s reaction to the military coup was a historic moment, as the nations of Latin America roundly rejected the dangerous resurgence of military coups in Latin America, the World Bank and the Inter-American Development Bank (IDB) continued to allow most funding to flow, only temporarily suspending the signature of new loan agreements. Honduran recipients of World Bank / IDB loan at the time of the coup were largely businessmen who also – not surprisingly – played a central role backing the coup, particularly Miguel Facusse.

The World Bank’s reaction – actually its lack of reaction – to the 2009 coup contributed directly to the sweeping impunity enjoyed by the authors of the coup, the same climate of impunity which has spawned politically motivated death squad activity in Honduras on a level not seen in Central America since the years of US-backed military repression of the 1980s and early 90s. The World Bank’s role in basically legitimizing the 2009 military coup and post-coup junta demonstrates, once again, how urgent it is that multilateral investment banks not be allowed to act with such impunity, continuing with “business as usual”.

All transactions of the “development” banks must be fundamentally based on the guarantee of human rights and compliance with international law, frameworks are almost entirely, rhetoric aside, ignored by the World Bank and IDB. The Operational Directives that govern the World Bank are completely inadequate and in no way provide a rights protective framework for people impacted by the Bank’s investment decisions … even as the World Bank, for the first time, begins to fund public security forces.

In our November 17, 2010 letter, Rights Action commented:

“The potential for this human rights disaster had been widely known, given that at least 19 farmers in this region have been killed in the context of conflicts with biofuel industry interests and given that Honduras, since the June 2009 military coup, has been ruled by an illegitimate and repressive regime. This history, combined with the absolute lack of a human rights protective framework capable of adequately addressing conflicts in Honduras , made the decision to release funding to Dinant Corporation a case of gross negligence of the World Bank’s human rights and due diligence obligations.”

The letter explains that in October 2009, prior to the loan disbursement, the UN Working Group on Mercenaries denounced that Honduran African palm producers were recruiting Colombian former AUC paramilitaries implicated in grave human rights abuses in their own country. The letter continues:

“Decisions and actions taken by the World Bank following the June 28, 2009 coup in Honduras, have impacted negatively on the rule of law internationally and the general well-being of the Honduran population. The World Bank decision to release funds to Dinant sent a clear message to Dinant: that the company and its owners enjoy impunity for their actions, and the World Bank will tolerate violence, illegal land grabbing, and even participation in military coups by corporations and their owners… .”

“Because World Bank members can only consist of the internationally and domestically recognized governments of a given state, loans disbursed or agreed upon by the World Bank to or with a ‘de facto’ government are illegitimate and therefore non-binding on the population of that territory. The World Bank should defer to the OAS and other international organizations in determining which governments are internationally recognized and legitimated… .

“It is also important to emphasize that the member nations within the Board of Directors of the Bank cannot evade their obligations under customary law and general principles of law by creating an international organization that would not be bound by the legal limits imposed upon its Member States.”

The WB internal oversight appraisal determined that there was sufficient cause for concern to carry out an audit of the loan, given that “the CAO concludes that the IFC’s social and environmental performance in relation to this investment merits further enquiry.” The audit will examine: “whether IFC exercised due diligence in its review of the social risks attached to the Project; whether IFC responded adequately to the context of intensifying social and political conflict surrounding the Project post commitment; and whether IFC policies and procedures provide adequate guidance to staff on how to assess and manage social risks associated with projects in areas that are subject to conflict or conflict prone.”

It is unclear when this audit will or has begun, and whether it could lead to a suspension of the second disbursement of the Dinant loan, or whether the audit will address the Bank’s role in grave human rights violations and contributing to impunity in Honduras following the June 28, 2009 military coup.

In 2008, Dinant lined up a series of publicly funded loans totaling slightly under $100 million from the World Bank Group, the Inter American Development Bank, the Central American Bank for Economic Integration (BCIE) and a German “development” bank. However, on April 12, 2011, the German state-owned development bank, DEG Deutsche Investitions, announced suspension of the loan after pressure from European human rights organizations. As of yet, the IDB and BCIE appear to have proceeded with funding.

“Greenwashing’ and ‘Land Laundering’

In addition, Dinant was actively participating in the Round-table on Sustainable Palm Oil (RSPO), planning ‘clean’ palm oil certification mechanisms, and had applied for carbon credits with the United Nations sponsored Clean Development Mechanism. While the large loans indicate that Dinant may have been preparing for expansion, the RSPO participation and UN carbon credits may have had other objectives, not just ‘green washing’, but ‘land laundering’. Land laundering is a term coined in Colombia to describe the various means employed by former paramilitaries to “wash” or give legitimacy to illegally obtained land titles. A key strategy in Colombia has been engaging with international “development” agencies, lending an air of legitimacy to corporations with dubious land rights claims and often heavily implicated in drug trafficking.

The World Bank must get out of green washing and land laundering. The Bank’s actions assist in the robbery of land, stolen by violent actors that enjoy Bank funding, who actively undermine a functional justice system, and generate impunity for grave human rights violations related to the violent and illegal land grabbing.

Annie Bird is co-director of Rights Action.

TAKE ACTION

Please write to the President of the World Bank (with copies to your own elected politicians) to express your demand that the World Bank suspend its $30 million loan to the Dinant Corporation of Honduras, an African palm oil corporation that belongs to Miguel Facusse, one of Honduras’ wealthiest persons and largest landowners, whose security forces, in collaboration with State security forces, are believed to be responsible for the murder of over 80 campesino land rights activists and their supporters in the Aguan region of northern Honduras. Demand that the World Bank explain why it continues to invest in a country controlled by a military junta, where the rule of law, the most fundamental element of a rights protective framework necessary for just development, is not functional. Demand that the World Bank ensure they never again provide funding during a military coup and that they stop supporting military coup supporters.

President Jim Yong Kim

The World Bank Group

1818 H Street NW

Washington, DC 20433

Edited by Steven Gaal
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Don't worry, Steven. I've got the goods on Colby. He'll be resigning soon, or I'll go public. He doesn't know who he messed with when he took me on. And he wouldn't want to know.

Bring it on Mr. Schweitzer, I have nothing to hide.

Still waiting

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Why Bankers Rule the World (HOW ABOUT illegal and immoral manipulation of rates ?? )

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Libor scandal exposes banks’ rigging of global rates

6 July 2012 wsws.org

Rotting in its own criminality, the capitalist financial system produces ever more powerful arguments for its expropriation and reconstitution under public ownership and democratic control.

The latest banking scandal, thus far focused on UK-based Barclays bank, goes to the heart of the global financial system. It provides a glimpse into the mechanisms by which a handful of giant banks rig the so-called “free market” to boost their profits and the fortunes of their executives and big investors. It is a process of economic plunder whose result is mass unemployment, poverty and ever increasing social inequality.

Barclays last week became the first of many big banks to admit to manipulating the most important benchmark for international interest rates, the London interbank offered rate (Libor). The daily Libor rate, which is supposed to measure the average cost of short-term loans between major banks, determines the interest rates for loans and investments that affect hundreds of millions of people around the world.

Libor influences an estimated $360 trillion of loans and credit default swaps. It impacts futures contracts traded on the Chicago Mercantile Exchange with a notional value of more than $564 trillion.

Libor and its Brussels-based counterpart, Euribor (European interbank offered rate), also the target of bank manipulation, are used to set the borrowing rates for $10 trillion in mortgages, student loans and credit cards. Some 90 percent of US commercial and mortgage loans are linked to the index.

As one Financial Times commentator put it, rigging Libor is “the financial equivalent of contaminating the water supply.”

Last week, Barclays, the fourth-largest bank by assets in the world, admitted “misconduct” in a settlement with Britain’s Financial Services Authority (FSA), the US Commodity Futures Trading Commission (CFTC) and the US Department of Justice. It agreed to pay a total of $453 million to the three agencies for seeking to manipulate the Libor rate between 2005 and 2009.

The reports issued by the three entities included emails, text messages and telephone conversations showing that from 2005 to 2007 the bank knowingly submitted false estimates, mostly high, of its interbank borrowing costs to the Libor board. It did so in response to employees at its derivatives trading desks who asked for phony submissions to benefit their bets on credit default swaps and other derivatives.

From 2007 to 2009, at the height of the global financial crisis, the bank deliberately underestimated the cost of loans from other banks in its submissions to the Libor board in order to conceal its weakened financial position.

This type of gaming of the Libor and Euribor rates (as well as the Tokyo-based Tibor) was being carried out by virtually all of the major international banks. A dozen regulators around the world are investigating somewhere between 12 and 20 other banks, including HSBC, the largely state-owned Royal Bank of Scotland, Deutsche Bank, Credit Suisse, UBS, JPMorgan Chase, Citigroup, Bank of America, Bank of Tokyo-Mitsubishi and Sumitomo Mitsui. More settlements along the lines of the Barclays deal are expected in the coming weeks.

This bankers’ conspiracy has a very real and vast impact on the lives of ordinary people. Countless billions were effectively stolen from new homeowners or those with variable-rate mortgages, credit card holders, students with college loans, small business borrowers and other consumers when the banks priced the Libor rate artificially high. The Wall Street Journal noted Thursday that an extra 0.3 percentage point would add $100 to the monthly payment on a $500,000 adjustable-rate mortgage.

The lowballing of the Libor rate, on the other hand, cost bondholders who were not parties to the plot untold billions in lower returns. This includes state and local governments that have pared budget deficits by slashing jobs, wages and public services. It also includes pension funds and retirees with fixed investments, whose income was significantly lowered.

The settlement with Barclays is a whitewash designed to let the bank’s top executives off the hook and conceal the complicity of governments and bank regulators in the scam. The $453 million fine is a fraction of the billions Barclays made illegally over the years by falsifying its loan rates to Libor and Euribor. It is a small price to pay for allowing what is, in essence, a criminal operation to continue.

Incredibly, despite emails and other evidence to the contrary, the regulators concluded they could not determine whether Barclays’ top executives were involved. The $160 million settlement with the US Justice Department exempted the bank from criminal prosecution. No official at Barclays or any of the other banks has to date been criminally or civilly charged. This includes CEO Robert Diamond, who resigned Tuesday.

Last year Diamond received close to $39 million in total remuneration. Since joining the Barclays board in 2005, he has taken in $311.7 million in salary, benefits, bonuses and share awards. Less than a year ago, Diamond, who appeared Wednesday before the British House of Commons treasury select committee, told the same group that “the period of remorse and apology” by banks was over.

One reason the US and British governments and regulators want to sweep the scandal under the rug as quickly as possible is because they are directly implicated.

Charges that the banks were rigging Libor were raised at least as early as 2007 and were ignored by US and European governments and regulators. They were, in fact, encouraging the banks to submit low loan rate estimates after the financial crisis erupted in 2007 in order to hide the depth of the crisis and protect the financial elite. Barclays contends that Paul Tucker, deputy governor of the Bank of England, suggested to Diamond in October of 2008 that its submissions to the Libor board were too high.

Libor itself is a product of the deregulation of the banks carried out by capitalist governments of all stripes, nominally “left” as well as conservative, over the past 30 years. Launched in the mid-1980s, it is a prime example of “self-regulation,” a euphemism for giving the banks a free hand to rig markets and plunder the population.

It is presided over by the British Bankers’ Association (BBA), a private banking trade and lobby group, presently headed by the chairman of Barclays, Marcus Agius. Eighteen of the world’s biggest banks submit loan data to the Libor board every morning to help set the global rate to which their own trading bets are tied. These same banks control the BBA.

This, like so many other market mechanisms, is intrinsically corrupt and riddled with conflicts of interest.

Any claim that this cesspool of avarice and corruption can be “reformed” is the product of ignorance, self-delusion or deliberate deceit. The bankers who have committed fraud must be brought to justice and their illegally obtained fortunes seized and used to provide relief for the unemployed, the homeless and all those victimized by the financial mafia.

The fate of humanity, the rational and progressive allocation of resources to benefit the world’s inhabitants and prevent a further descent into social devastation, requires the expropriation of the banks by the working class and their transformation into public utilities democratically controlled and run in the interests of social need, not private profit.

Barry Grey

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Bruce Springsteen -- "Tomorrow Never Knows" (2009)

”Well he who waits for the day’s riches will be lost. In the whispering tide, where the river flows, tomorrow never knows.”

The Boss has been adopted by the nation as America’s working-class musical hero. "Tomorrow Never Knows" is a track from the 2009 release Working on a Dream, and its message is that you never know which day may be your last. Instead of focusing on money and other material possessions, center your attention on the finer things in life.

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  • 2 weeks later...

Don't worry, Steven. I've got the goods on Colby. He'll be resigning soon, or I'll go public. He doesn't know who he messed with when he took me on. And he wouldn't want to know.

Bring it on Mr. Schweitzer, I have nothing to hide.

Still waiting

Still waiting Michael, this is the 3rd time I've asked you in the 3+ weeks since you claimed to have "the goods on" me. I've got nothing to hide.

NOTE TO MODERATORS: I realize that Michael is (like I am) on moderation, I ask that you give him free reign in any reply he may post on this topic..

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The Libor Swindle: Systematic Financial Rigging of the Benchmark Global Interest Rate

By Andre Damon

Global Research, December 22, 2012

World Socialist Web Site

The latest sweetheart settlement with a major international bank, in this case involving criminal activities that financial regulators describe as “epic,” has once again lifted the lid on the cesspool of corruption otherwise known as the world financial system.

UBS, Switzerland’s largest bank, admitted this week to systematically rigging the London Interbank Offered Rate (Libor), the benchmark global interest rate to which hundreds of trillions of dollars of financial contracts are tied. It did so to increase its profits and conceal its financial problems.

UBS’s actions defrauded hundreds of millions of people who pay interest on mortgages, credit cards, student loans and car loans, as well as institutional investors such as pension funds and state and local governments, and countless millions of retirees who rely for income on fixed investments. The term grand larceny does not begin to describe the scale of this plunder.

UBS has become, following the settlement with Barclays last June, the second bank to admit to being part of an international Libor-rigging operation and pay a modest fine in exchange for being let off without any serious repercussions. In both cases, no senior officials were charged and the banks themselves did not have to plead guilty to any crime.

More than a dozen other banks and brokerage houses in the US, Europe and Asia are under investigation for rigging Libor and its euro and yen counterparts—Euribor and Yen Libor. These include JPMorgan Chase, Citigroup and Bank of America.

The rigging of Libor is only one in an unending series of scandals involving the world’s biggest banks, including various and sundry accounting frauds, insider trading, the forging of mortgage documents, and the fraudulent issuance of mortgage-backed securities that triggered the financial crash of 2008.

These are the very institutions that have been bailed out to the tune of trillions in public funds, and continue to be subsidized with virtually free credit, compliments of the world’s central banks. They are in the forefront of demanding that the resulting bankrupting of national governments be paid for through the destruction of social programs and the impoverishment of the working class.

Only last week, British–based HSBC admitted to laundering hundreds of billions of dollars for Mexican drug lords. Once again, no criminal charges were lodged, in this case for activities that contributed to the deaths of tens of thousands of people in the Mexican drug war as well as the flooding of working-class neighborhoods in the US and other countries with narcotics.

In the UBS Libor-rigging case, the US Justice Department deliberately chose not to pursue criminal charges against UBS itself. Instead, it extracted a guilty plea on one relatively minor count of wire fraud from the bank’s Japanese unit. As the Wall Street Journal reported, “Justice Department officials said they decided not to charge the Zurich-based company, fearing such a move could endanger its stability.”

This is an admission that, no matter what crimes the big banks carry out, they are in practice immune from prosecution. The financial mafia, which engages in parasitic, socially destructive and illegal activities every day, is above the law.

Increasingly, society is defined by the aristocratic principle: the laws that apply to mere mortals do not apply to the financial nobles. America—as for that matter Europe, Japan and the other advanced economies—is a democracy in name only. The Oxford English Dictionary defines “plutocracy” as “rule by the wealthy.” Can anyone seriously dispute that this definition applies to the United States?

In announcing the settlement with UBS, Lanny Breuer, the head of the Justice Department’s criminal division, sought to portray the settlement as a stinging rebuke to the banks. “We cannot, and we will not, tolerate misconduct on Wall Street,” he declared.

What a farce! Not only has the Libor swindle exposed the criminality of the banks, it has laid bare the nexus of corruption and complicity involving governments and financial regulators the world over.

It is sufficient to cite a few examples of the incestuous relationship between the banks and the regulators who supposedly police them:

• Mark Branson, in charge of bank supervision at the Swiss Financial Market Supervisory Authority, recused himself from the UBS investigation. Why? Because Mr. Branson headed UBS’s Japanese unit during the very years it carried out the Libor-rigging for which it has now pled guilty.

• Robert Khuzami, director of the Division of Enforcement of the US Securities and Exchange Commission (SEC), has recused himself from a multibillion-dollar accounting fraud investigation by the SEC into Deutsche Bank. Why? Because before taking his SEC post, Khuzami was Deutsche Bank’s counsel for the Americas.

• Stephen Cutler, who, in his capacity as general counsel, is presently leading the defense of JPMorgan Chase in connection with a probe of billions in unexplained and concealed speculative losses, is a former head of enforcement at the SEC.

• Timothy Geithner, as president of the New York Federal Reserve Bank, knew about the rigging of Libor at least as early as 2007, according to documents released in recent months, yet did nothing to stop it. Obama appointed Geithner as his treasury secretary, a post he continues to hold.

• Bank of England Governor Mervyn King and his deputy, Paul Tucker, were likewise alerted to the Libor-rigging operation. They also looked the other way and did nothing. Tucker lied to a parliamentary committee last July when he said that until just weeks before, “we were not aware of allegations of dishonesty” in setting the Libor rate. Tucker continues to serve as deputy governor of the Bank of England.

The bank regulatory agencies, loaded with former bank executives, facilitate the criminal activities of the banks rather than stopping or preventing them.

The global financial aristocracy can defraud, steal and plunder with impunity, knowing it will be protected by a thoroughly bribed political system that it dominates. The day-to-day functioning of the capitalist financial system has assumed the form of a criminal conspiracy against the people.

This is not a system that can be reformed. Its rampant criminality is not the result of “bad apples.” Illegality and corruption are intrinsic to the system itself.

The multimillionaire financiers, rather than being feted as economic titans, deserve to be frog-marched to prison. The only solution for this state of affairs is a revolutionary one. The working class must mobilize its immense power to expropriate the banks and place them under public ownership and popular democratic control.

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The Libor Swindle: Systematic Financial Rigging of the Benchmark Global Interest Rate

By Andre Damon

Global Research, December 22, 2012

World Socialist Web Site

The latest sweetheart settlement with a major international bank, in this case involving criminal activities that financial regulators describe as “epic,” has once again lifted the lid on the cesspool of corruption otherwise known as the world financial system.

UBS, Switzerland’s largest bank, admitted this week to systematically rigging the London Interbank Offered Rate (Libor), the benchmark global interest rate to which hundreds of trillions of dollars of financial contracts are tied. It did so to increase its profits and conceal its financial problems.

UBS’s actions defrauded hundreds of millions of people who pay interest on mortgages, credit cards, student loans and car loans, as well as institutional investors such as pension funds and state and local governments, and countless millions of retirees who rely for income on fixed investments. The term grand larceny does not begin to describe the scale of this plunder.

UBS has become, following the settlement with Barclays last June, the second bank to admit to being part of an international Libor-rigging operation and pay a modest fine in exchange for being let off without any serious repercussions. In both cases, no senior officials were charged and the banks themselves did not have to plead guilty to any crime.

More than a dozen other banks and brokerage houses in the US, Europe and Asia are under investigation for rigging Libor and its euro and yen counterparts—Euribor and Yen Libor. These include JPMorgan Chase, Citigroup and Bank of America.

The rigging of Libor is only one in an unending series of scandals involving the world’s biggest banks, including various and sundry accounting frauds, insider trading, the forging of mortgage documents, and the fraudulent issuance of mortgage-backed securities that triggered the financial crash of 2008.

[...]

Would be more convincing if it had any references and didn't get its basic facts wrong. The banks artificially LOWERED the interest rates, the primary victims were other financial institutions. The WSJ article which broke the story indicated this 8 times, here are two:

The Journal analysis indicates that
Inc., WestLB, HBOS PLC,
& Co. and
AG are among the banks that have been reporting significantly
lower borrowing costs
for the London interbank offered rate, or Libor, than what another market measure suggests they should be...Overall, in the first four months of this year, the three-month and six-month dollar L
ibor rates were about a quarter percentage point lower
than the borrowing rates suggested by the default-insurance market, the analysis shows.

http://online.wsj.com/article/SB121200703762027135.html

Hmm five posts in 13 days, Gaal for reasons unknown has suddenly become obsessed with a four year old scandal.

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