If you are like most Americans, you’ve probably heard the term LIBOR. But if you are like like most Americans, you do not realize the impact this tiny particle of the economy has on everything we do on a daily basis.
What has happened is the financial world has been playing games with LIBOR. LIBOR stands for “London InterBank Offer Rate”. In essence it is the interest rate banks can charge other banks for loans. The reason it is important is the Commodities Futures Trading Commission (CFTC) has estimated over $800 trillion in financial instruments are pegged to LIBOR. By contrast the world’s annual economy is about $52 trillion.
by Dr. Richard Ebeling
The economic crisis through which the United States and much of the rest of the world are now passing is not another supposed instance of the “failure” of unrestrained capitalism. It is the failure of the government’s own policies. In other words, it is a crisis of the Interventionist State.
The recession has been the inevitable outcome of the prior artificial investment boom and housing bubble, which were caused by the misguided and highly expansionary monetary policy of the Federal Reserve between 2003 and 2008. The money supply was increased by nearly 50 percent during this five-year period, and key interest rates, when adjusted for inflation, were at or below zero. Investment and housing decisions were radically out of balance with available real savings to sustain such long-term financial commitments. Consumers and homeowners were induced by low interest rates and easy mortgage policies to get in way over their heads.
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By Addison Wiggin at The Daily Reckoning
Baltimore, Maryland – Uh-ho… The Swiss mega-bank UBS completed a survey of 80 central bank reserve managers yesterday. More than half predicted the US dollar would be replaced as the world’s reserve by a “portfolio of currencies” sometime in the next 25 years.
That UBS even conducted a survey on the dollar’s validity represents a sea change in attitude since we first published Demise of the Dollar in 2005.
Between them, the bank reserve managers control about $8 trillion.
“The results [of the survey],” according to The Financial Times, “are the latest sign of dissatisfaction with the dollar as a reserve currency, amid concerns over the US government’s inability to rein in spending and the Federal Reserve’s huge expansion of its balance sheet.”