[chefdave]

There's been a fair bit of feigned outrage over the LIBOR rate these past few weeks but I'm struggling to get my head around it.

As a society are we really shocked by the idea that privately owned businesses such Barclays price their products in a way that'll boost their margins? What do think's happening when banks lend money to each other?

For those who think it's disgusting consider this; the Bank of England's Monetary Policy Committee (an arms length organisation made up of 9 unelected appointees) meet behind closed doors each month and arbitrarily set the economy's key interest rate; the Bank of England base rate. Rather than drive LIBOR up with IRs that reflect the true rate of inflation (3%) they've created a low interest environment that makes it as easy as possible for the banks to make money. In other words the MPC have taken it upon themselves to manipulate the base rate for their banker chums, yet nobody questions the validity of this institution. We just accept it. Why the outrage then when banks use the exact same methods to make themselves a bit of extra cash?


TLDR: Interest rate manipulation is sewn into the fabric of the monetary system. In theory a good bank would borrow low, lend high and generally turn a profit for shareholders. IR manilpulation shouldn't shock us; its the name of the game when it comes to banking.

[Captain Haddock]

I don't think you've understood the scandal. It's not that they were setting interests rates too low, it's that they were lying about how low they actually are. I.e., the interest rates remained what they truly were in practice, but were reported to be much lower thus giving a false reflection of risk.