Autoearth has an excellent update/report on LIBOR and its effects. Click here.
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 thinkthey can borrow. 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 1x 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.
