What’s the most basic service banks provide? Borrow money and lend it out. You put your savings in a bank to hold in trust, and the bank agrees to pay you interest on it. Or you borrow money from the bank and you agree to pay the bank interest.

How is this interest rate determined? We trust that the banking system is setting today’s rate based on its best guess about the future worth of the money. And we assume that guess is based, in turn, on the cumulative market predictions of countless lenders and borrowers all over the world about the future supply and demand for the dough.

But suppose our assumption is wrong. Suppose the bankers are manipulating the interest rate so they can place bets with the money you lend or repay them – bets that will pay off big for them because they have inside information on what the market is really predicting, which they’re not sharing with you.

That would be a mammoth violation of public trust. And it would amount to a rip-off of almost cosmic proportion – trillions of dollars that you and I and other average people would otherwise have received or saved on our lending and borrowing that have been going instead to the bankers. It would make the other abuses of trust we’ve witnessed look like child’s play by comparison.

Sad to say, there’s reason to believe this has been going on, or something very much like it. This is what the emerging scandal over “Libor” (short for “London interbank offered rate”) is all about.

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This is insider trading on a gigantic scale. It makes the bankers winners and the rest of us – whose money they’ve used for to make their bets – losers and chumps. http://bit.ly/MBCdyi

LIBOR: The Largest Insider Trading Scandal Ever

And we want to go to more war.....


The fact that the big banks have committed insider trading on their core function – setting rates based upon market demand for loans – is particularly damning given that traditional deposits and loans have become such a small part of their business. As we noted last week:

The big banks no longer do very much traditional banking. Most of their business is from financial speculation. For example, less than 10% of Bank of America’s assets come from traditional banking deposits. Instead, they are mainly engaged in financial speculation and derivatives. (and see this)
The big banks have slashed lending since they were bailed out by taxpayers … while smaller banks have increased lending. See this, this and this
A huge portion of the banks’ profits comes from taxpayer bailouts. For example, 77% of JP Morgan’s net income comes from taxpayer subsidies

Banks have been ripping people off for eons.

That's why the Koran forbids lending money for interest.

And this surprises you how?

Probably the best book about banking- http://www.amazon.com/The-Mystery-Banking-Murray-Rothbard/dp/1105528782/ref=sr_1_1?ie=UTF8&qid=1343956741&sr=8-1&keywords=mystery+of+banking

I'm pretty sure the free pdf is available for download at mises.org.