LIBOR: The Biggest Con in Financial History

LIBOR: The Biggest Con in Financial History

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Could a lie destroy the Western world’s financial system?

The libor (London Interbank Offered Rate) is the benchmark interest rate for a whopping $800 trillion of financial instruments—that’s more than 10 times global gross domestic product. It is at the heart and core of virtually every piece of debt that is issued to consumers around the world. Credit cards, car loans, mortgages, student loans, interest rate swaps and other complex derivative products all depend on the libor rate.

And apparently libor is rigged.

Barclays, JP Morgan Chase, Bank of America, Lloyds and 12 other big banks stand accused of colluding to manipulate libor. The Bank of England, the Federal Reserve, and now U.S. Treasury Secretary Timothy Geithner stand accused of aiding and abetting.

The Anglo-Saxon financial system is in turmoil.

If regulators allow lawsuits to proceed, and if banks are proven in court to have manipulated libor rates, the financial consequences will be massive. More critical, however, is the damage to confidence in the English-speaking world’s financial system—-that broken trust may very well be irreparable.

It could even be the end of Anglo-Saxon global financial dominance.

The good news, if you can call it that, is that so far only British bank Barclays has admitted to fixing interest rates. As punishment, authorities fined it $455 million—peanuts for an organization whose yearly profits often run into the multiple billions. Not a person went to jail. It is about the equivalent of fining Bonnie and Clyde or John Dillinger $100 and turning them loose again.

But America and Britain’s other big banks have now been fingered. JP Morgan Chase, Citi Group, Bank of America and others have admitted they are under investigation. If guilty, they may have defrauded investors, states, municipalities, pension plans—even everyday homeowners with a mortgage—tens of billions of dollars. Maybe a lot more.

According to allegations, the banks colluded to set interest rates and then passed the information on to their trading units, which then were able to speculate with impunity—at the expense of virtually the whole world.

A couple of years ago there was a lot of media mystification about how big banks like Goldman Sachs were able to go a whole quarter without a single day of trading losses. Now we know. It isn’t that they are smarter than everyone else, it is because they cheat.

But the scandal goes beyond cheating. Barclays has indicated that both the Bank of England and the Federal Reserve of New York (then under current U.S. Treasury Secretary Timothy Geithner) were aware of the manipulation at least as far back as 2007—but chose to do nothing. The Bank of England stands accused of actually encouraging Barclays to manipulate the interest rate so as to let it appear financially stronger than it actually was during the 2008 financial crisis.

But most shocking of all is the lack of shock.

The consensus of some analysts is that, yes, the banks were cheating—but they are banks! Isn’t that what they do?

One Barclays manager excused the bank’s actions this way: “So, to the extent that, um, the libors have been understated, are we guilty of being part of the pack? You could say we are.”

Everyone was lying. Everyone was cheating. Everyone was stealing. And nobody had any problem with that.

It’s as if people checked their moral coats at the door when they came into work. “Dude! I owe you big time!” wrote one happy Barclays staffer in an e-mail after colluding to manipulate the interest rate. “Come over one day after work and I’m opening a bottle of Bollinger,” said another in a separate e-mail.

The regulators were in on it too.

Bank of England’s Mervyn King knew about it in 2007. Nothing was done. The Federal Reserve has admitted it knew about Barclays too. In 2008, President Timothy Geithner fired off a quick memo to the Bank of England suggesting needed libor reforms, one of which was giving more U.S. banks a say in setting rates. That appears to have been the extent of Geithner’s effort to stop the fraud.

So the state-sanctioned pillaging continued.

It’s the crime of the century, says the Nation’s Robert Scheer: “Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined ….

“It reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon, totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.”

“I don’t believe that there is a money pro on either the buy or sell side over the past 30 years who didn’t understand that the Libor Fixing was ‘fixed,’” writes retired FX trader Bruce Krasting. “If they claim to be ‘shocked’ today, they are either lying or stupid. The same goes for every central banker and treasury official.”

The whole system—from head to toe—is sick. There is no soundness to it.

Bank of England Deputy Governor Paul Tucker says his investigation has revealed a “cesspit.”

He says that beyond libor, other indexes and markets need to be investigated too. “I can’t be confident about anything after learning about this cesspit,” he said.

Mr. Tucker should know all about that cesspit. Barclays officials accuse him of not only condoning the libor manipulations, but have produced e-mails that they claim show he actually encouraged it during the height of the financial crisis in 2008.

If all the allegations prove true, this is the biggest financial scandal the world has ever seen, by far. Bernie Madoff is a piker. The mortgage mess, the robo-signing/rocket-docket perpetrators, Enron, WorldCom and the Long Term Capital Management frauds are nothing compared to libor.

Imagine if you were told that the Dow Jones Industrial average was rigged. Or that the U.S. dollar index never really measured the dollar’s value. That’s how big a deal this is.

And the sordid revelations keep coming.

Everyone knows that the crude oil market is subject to manipulation. The opec cartel exists for that reason. Similarly, everyone knows the Federal Reserve, the Bank of England, the Bank of China and other central banks manipulate the values of their currencies to achieve policy goals.

But now investigators are finding that even the most widely relied-upon and important indices—ones that the public has been led to believe to be free—are actually fixed too. Markets for natural gas, various metals, foodstuffs and other commodities may be just as fraudulently manipulated by financial institutions and their traders as libor.

On July 2, the U.S. Federal Energy Regulatory Commission sued JP Morgan over possible manipulation of electricity markets in California and the Midwest. The allegations could hardly come at a worse time.

The global financial system was apparently a racket all along—the banksters just temporarily convinced the world otherwise.

Now confidence in the whole system is being broken.

“If you can’t trust what is believed to be a market-based price, then you have to question all market-based prices,” says Cumberland Advisers chief investment officer, David Kotok.

libor is probably the single-most supposedly market-based price of credit in the world,” he says. “And now we see it may have been rigged and rigged for a long period of time. It’s destructive of confidence to the ‘nth’ degree and calls into question huge elements of finance.

“If you can’t trust the regulatory authorities, who are supposed to be protecting investors, institutions and participants, then who can you trust?”

That’s a hugely important question that investors and governments around the world are sure to be asking: Can the Anglo-Saxon financial system be trusted?

The implications will affect us all.

The U.S. dollar is a fiat currency. Like all fiat currencies, its value is not linked to any tangible asset. The only thing backing the value of the dollar is the confidence that it will be able to purchase a similar amount of goods tomorrow as it does today. But here is the catch. There is no standard that determines what a dollar is worth—it’s all relative. The dollar’s value could collapse overnight.

The same is true for every currency, whether euro, yuan or pound. Each is backed by confidence—confidence that the national government will impartially enforce the law, confidence that the government will honestly pay its debts (not just print more money), and confidence that the currency will remain a store of wealth.

And most importantly, the value of the dollar is predicated on confidence that the economic system as a whole is largely trustworthy.

It is that confidence—confidence in America and Britain—that is now being questioned.

When that confidence is broken, faith-based economic systems collapse rapidly and spectacularly. Foreign investors flee; capital flight ensues; governments can no longer borrow money, so they print it; inflation soars, currencies devalue; economies devolve—and First World nations become Third World.

The libor scandal should better be called the liebor scandal. And it may very well be the lie that breaks America and Britain.

Washington’s About-Face on the Muslim Brotherhood

U.S. Secretary of State Hillary Clinton was in Jerusalem Monday meeting with Israeli officials about the power struggle in Egypt, the civil war in Syria, the Iranian nuclear threat and the diplomatic process with the Palestinians. She’s got a full plate—and so does Israel, as you can see from that agenda.

Israeli officials said her meetings in Egypt over the weekend will be high on the agenda of Clinton’s talks here in Jerusalem. On Saturday, Clinton met with the new Egyptian President Mohammed Morsi in Cairo. Despite Morsi’s ties to the Muslim Brotherhood, Clinton told the new president that the U.S. government would support him and “the full transition to civilian rule, with all that it entails.”

Though the media highlighted Clinton’s muted reaction to the new president’s ongoing power struggle with Egypt’s military generals, she did imply that the military should cease overstepping its bounds. She said she would work “to support the military’s return to a purely national security role.”

The New York Times reported, “In brief remarks after the meeting with Mr. Morsi, her sole reference to the military decrees dissolving the Islamist-led parliament and eviscerating his powers was a call for ‘consensus’ among all sides in order ‘to work on a new constitution and parliament, to protect civil society, to draft a new constitution that will be respected by all, and to assert the full authority of the presidency.’”

On Sunday, Clinton then met with Field Marshall Mohamed Tantawi, the Egyptian general who is at odds with President Morsi. After his meeting with Clinton, Tantawi vowed that the military would not let “one group” take over Egypt. “Egypt will not fall. It is for all Egyptians and not just one group …. The armed forces will not allow it,” he said.

During her meetings in Egypt, Secretary Clinton also said she is working on delivering the billion-dollar aid package the Obama administration previously promised to Egypt, despite Congress’s requirements that continued aid to the country be contingent upon proof of its commitment to democracy. In the lead-up to the presidential elections, Egypt’s military council ignored multiple threats by the U.S. that it would withdraw its annual financial aid as the military implemented controversial decisions to prevent the Muslim Brotherhood from gaining too much power. Weeks later, the Muslim Brotherhood is now in the driver’s seat and gaining speed, while the flow of finances from Washington has continued.

The military council’s willingness to risk the much-needed financial support should be taken as a direct sign of just how serious a threat it considers the Muslim Brotherhood to be. It also serves as yet another sign of America’s weakening influence throughout the region.

As the New York Times noted, “The generals, who seized power last year after the ouster of the strongman Hosni Mubarak, have repeatedly rebuffed American pressure. The new president, Mr. Morsi, and the other leaders of the Muslim Brotherhood still harbor deep doubts about Washington’s agenda and have repeatedly surprised American officials in Washington with the accelerating pace of their moves to take power.”

The Times said, “Despite open channels of communication, Brotherhood leaders have repeatedly surprised Washington with their brisk moves to challenge the generals: running for and winning more parliamentary seats than they said they would, breaking a pledge not to run a presidential candidate, and then last week using a presidential decree to call back the parliament in defiance of the generals’ order dissolving it.”

So far, Clinton is the highest-ranking U.S. official to meet with Cairo’s new government, though Morsi has already been invited to meet with President Barack Obama at the White House in September.

Washington’s newfound friendship with the Muslim Brotherhood-dominated government in Cairo is an astonishing about-face from its previous stance regarding the organization.

Just seven years ago, then Secretary of State Condoleezza Rice emphatically stated, “We have not engaged the Muslim Brotherhood—and we won’t.”

But as soon as President Obama set foot in the White House, Washington began in earnest to aggressively court the Muslim Brotherhood’s support. And along the way, it ousted the pro-American regime of Hosni Mubarak, welcomed a radical Islamist government into the neighborhood of nations and called on the Egyptian military to give Mohammed Morsi free reign.

Europe 2012—The Revival of the Nazi Vision

Europe 2012—The Revival of the Nazi Vision

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Today’s euro crisis is forcing the final pieces into place for the ultimate fulfillment of the grand Nazi vision of 1942.

United States of Europe, Ten Nations, EU Empire, German Dominance, German Empire—all these terms have been used on more than one occasion by a multiplicity of media in past months to describe the European Union. All infer that the EU has become an imperial entity dominated by Germany.

That the world remains largely ignorant to the fact of one white-haired patriarch having prophesied this would be the case—even when Germany lay in abject defeat at the close of World War ii—is rather sad. Particularly when one considers that he even prophesied that the seventh resurrection of the Holy Roman Empire would be catalyzed by a great financial crisis, such as we see rampant in Europe today!

What is even sadder is that multiple thousands who were witness to Herbert Armstrong’s detailed prophecies of that which has become today’s reality in Europe—publicized by him to millions for over five decades—seem to be so blinded to that truth today, despite the massive amount of evidence that now exists to support the fulfillment of those prophecies!

“Partisans of the European project invariably argue that nationalism leads to war,” observes historian Thierry Baudet. He continues, “Nationalism does not lead to war. Attempts to build European empires lead to war. The urge to impose a straitjacket on the will of peoples will lead to war. In short, the European project will lead to war.

“Fascism and Nazism were both focused on the creation of Europe. As early as 1933, Mussolini declared that Europe could once again exert its power in the world if it succeeded in establishing a certain political unity” (Handelsblad, July 9; emphasis added throughout).

Baudet is not alone in his view of the reviving EU empire. This current revival is the latest of six previous attempts at resurrecting the old Holy Roman Empire.

“Seton-Watson, of the University of Oxford, concludes that Hitler’s intentions were not confined to what could be described as German nationalism.

“His goal was to conquer all of Europe as well as a vast territory further afield. For his part, Mussolini wanted to found a new Roman Empire centered on the Mediterranean” (ibid).

Two documents that came to light 10 years ago, courtesy of translation from the German into English by Euroskeptic activist Edward Spalton, shed a deal of light on the imperialist motives behind the EU vision. They detail the Nazis’ imperial plan of 70 years ago and show the uncanny parallels between that plan and today’s outcome of the growth of the European Community into an undoubted imperial power.

Introducing these items on his website, www.freenations.freeuk.com, British political economist Rodney Atkinson states: “Those who thought that the ‘building of Europe’ in the 1950s could in no way replicate the German-dominated Europe of the 1940s may now be reconsidering their optimism. The years since the Second World War have culminated in a rich German state, dominant German industry and a European Union run by Berlin while other EU countries seem politically powerless or approach bankruptcy—or both.”

In his own introduction to these translated documents, Edward Spalton writes: “With increasing stresses and strains in the EU, German dominance of Europe is emerging as an incontestable fact ….”

As to the history of the postwar revival of the imperialist Nazi vision, Spalton observes: “The Nazis did not invent any really new ideas. They continued a view of the world (Weltanschauung) which has predominated amongst the German political class since before Germany became a single nation and continues today. The methods change but the objectives remain remarkably constant. They saw their national destiny (Schicksal) as defined by natural resources and geography, plus the vitality of the Volk (people), and devised a combined academic discipline, geopolitics (Geopolitik) to give it a rationale. It was a common market, a customs union (Zollverein), which brought the many German states together into a single, large-area economy (Grossraumwirtschaft) in the 1840s.”

Concerning this vision taking on hegemonic overtones directly akin to the vision of today’s EU elites, Edward Spalton further observes: “Not only did German politicians aspire to such a single economic order amongst Germans; they believed that Germany needed the resources of the peoples of Central Europe (Mitteleuropa) and the Balkans under German control in a single living space (Lebensraum). This would provide a market for German manufactured goods and a source of raw materials. The similarity with the arguments put forward today for the advantages of the EU single market is inescapable.”

Those Anglo-Saxons who personally witnessed the revival of the imperialist Teutonic dream shortly after World War ii are, sadly, a dying breed. Those who published their objective assessment of that revival, aided and abetted as it was by too many of their fellow countrymen, are even fewer.

One who did pen his personal observations of the Adenauer years is Harry Beckough. In an e-mail to the Trumpet, Rodney Atkinson describes Harry as “a leading light in German universities in the postwar denazification period … responsible for denazifying the universities of Cologne and Bonn! He subsequently became a member of the British secret services.” Harry’s recollections of those immediate post-war years are penned in his book, “Thinker, Tailor, Soldier, Spy.”

Harry Beckough, having personally witnessed Hitler’s grasp for power while visiting Germany in 1933, was, during the immediate period following the war, placed in a unique position where he was able to closely observe the actions of Germany’s first postwar chancellor, Konrad Adenauer.

As Mr. Beckough himself recalled in an e-mail exchange with Rodney Atkinson last week, “having witnessed Lance Corp. Hitler’s vault to total power (instead of von Papen, already chosen by the dying Hindenburg) … whence came the money and power drive, and again between 1933-35, it was obvious then that a hidden secret power was the manipulating driving force; the smell was there but the fog only began to lift after the Russian maneuver and the aftermath of World War ii; German brains and skills were ably supported to plot the aftermath long-term, as they were also ‘assisted’ to move their leaders and spoils (loot) across the world; the barefaced cheek of establishing headquarters in Madrid and persuading Adenauer to take back some 150 flagrant Nazis into his first cabinet and ministers shows the contempt they had for the poor fools of British and Americans ‘helping’ them back to normality.”

To the ignorant it is a challenging exercise to read the translated Nazi documents made available at www.freenations.freeuk.com that present the revival of this vision of imperial Europa way back in 1942, and to admit that vision has steadily evolved into a most current postwar reality. The historic facts are detailed on Rodney Atkinson’s video foundhere.

To the once-enlightened, it takes a degree of moral courage to admit the remarkable foresight that drove Herbert Armstrong to state that this whole Germanic vision would live on, underground, through the waning years of World War ii. To live on, only to be resurrected and begin to be brought to ultimate fruition by many of the perpetrators of the horrors of that war, with the approval of the very Allied nations that defeated the Nazis the last time an attempt was made to resurrect the old Holy Roman Empire of the German Nation.

Now the whole reality of that old Nazi vision literally stares us in the face.

1942, 2012—déjà vu indeed!

The spectacular failure of America’s Muslim outreach

Three years ago, President Obama set out to redefine America’s relationship with the Muslim world. In was a “new beginning”—a chance to remove the wedge President Bush and others had driven between the United States and Islam.

That approach—reaching out to Islam—has been a spectacular failure, as Caroline Glick wrote in her column last week. After Obama’s Cairo speech in 2009, my father predicted that Obama’s speech would powerfully impact prophetic events in the Middle East—including clearing the way for the Muslim Brotherhood, which would “no doubt … gain control of Egypt,” he said.

For a closer look at this incredible article from my father in 2009, as well as Caroline Glick’s insightful commentary on where this approach from the Obama administration has gotten us today, listen to today’s podcast from Jerusalem.

Their Love for Jerusalem

JERUSALEM—Last week, my wife and I attended a special screening of Teddy’s Museum, a new film about former Jerusalem Mayor Teddy Kollek’s dream to establish a museum that would rival the leading cultural institutions of the world. Today, that dream is known as the Israel Museum. Some have called this the “Holy Temple of Israeli culture.”

Israel’s former Prime Minister Yitzhak Rabin once said Teddy Kollek was the greatest builder of Jerusalem since Herod the Great. In the movie that I watched last week, Kollek was described as a man of visionandaction.

In learning more about Teddy Kollek’s love for Jerusalem and his tireless work to upbuild and beautify Israel’s capital city, it’s easy now to see why he became such close friends with Herbert W. Armstrong—a visionary who shared Teddy’s love for Jerusalem, fine culture and a diligent work ethic.

On Wednesday, July 11, I posted a podcast edition revolving around the relationship between Jerusalem’s greatest mayor, Teddy Kollek, and Herbert W. Armstrong, one of the best-known, most prominent religious leaders in the 20th century. Their relationship was founded on the city of Jerusalem.

In 1971, six years after becoming mayor, Kollek visited Mr. Armstrong at the Ambassador College campus in Pasadena, California. Just two weeks after that meeting, the mayor hosted Mr. Armstrong here in Jerusalem, at Hebrew University.

These two meetings centered around the city of Jerusalem and planning for its future! Even to this day, it seems incredible to me that Mr. Armstrong—a theologian from California—actually took part in discussions about Jerusalem’s future!

Mr. Armstrong’s contributions did not go unnoticed by those who sat in the gates of Jerusalem. Beginning with his first meeting in the Knesset in 1968 to his death in 1986, Mr. Armstrong was welcomed by every prime minister and president of Israel, including prime ministers Golda Meir, Yitzak Rabin, Menachem Begin and Shimon Peres. Mayor Kollek was not the only one who valued the work, the counsel and the friendship of Herbert Armstrong.

But among them all, I think it’s safe to say that Mayor Kollek valued his friendship with Mr. Armstrong the most. In response to Mr. Armstrong’s death in 1986, Mayor Kollek said, “There have been very few people that I have known that I so enjoyed speaking with and so greatly admired and valued their counsel.”

For more about this unique relationship between a mayor of Jerusalem and a servant of God from Pasadena, download our free booklet A Warm Friend of Israel. In many ways, the present-day work of the Armstrong International Cultural Foundation is built on the foundation of that relationship Mr. Armstrong had with Mayor Kollek and this city of Jerusalem.

Rabbis Urge German Jews to Defy Ban, Continue Circumcision

An influential group of European rabbis urged Germany’s Jewish community on Thursday to continue circumcising baby boys, despite a regional court having banned the practice.

Three weeks ago, Cologne’s regional court said that even if parents want the procedure, circumcising young boys on religious grounds amounts to bodily harm. Thousands of baby boys are circumcised in Germany each year, mostly for religious reasons, and religious groups said they feared that the decision sets a precedent that other German courts will soon follow.

The Conference of European Rabbis called the ban the “worst attack on Jewish life since the Holocaust.”

The president of the conference, Rabbi Pinchas Goldschmidt, said, “If the ruling is allowed to stand, then I don’t see a future for Jews in Germany.”

On Friday, German Chancellor Angela Merkel’s spokesman said that Jews and Muslims will be allowed to continue circumcision in spite of the court ban, but the ruling still represents another red flag showing that anti-Semitism continues to simmers in Germany. Berlin has a history of double-crossing its allies, and Bible prophecy says it is going to do so again, this time to Israel. To understand more, read our article “Can Israel Trust Germany?