Structural Interest Rate Fraud: Why the Global Economy Is Stuck and Consumers Have Stopped Spending

07/02/2012 11:01 am ET | Updated Sep 01, 2012

This week in the Financial Times, two stories provided neat bookends on the economic conundrum blighting the global economy. On page 18 of the FT we learn that In London, "Rate-Rigging at Barclays was pervasive." As you know, we've been reporting on this for years. Big banks, highly leveraged casinos, do whatever they can to keep the cost of their gambling as cheap as possible. This means keeping interest rates as cheap as possible. The central banks; consortia set up by these same TBTF banks, oblige with their rate setting committee meetings; either the FOMC (Federal Open Market Committee) in Washington or the MPC (Monetary Policy Committee) in London.

Much has been written about why it's a bad idea to forgo the free market and have a central planning committee fix the cost of money via interest rate policies. Ron Paul for example has based most of his entire political life this past decade on 'auditing the Fed' and 'Ending the Fed' -- actions seen as a necessary curative to eliminate this blockage from the workings of free market capitalism.

Now the issue has taken on a new dimension and urgency with the revelation that Barclays bank in London. involved in the daily committee meetings settling the Libor rate, is involved in manipulating that rate (down) to favor its interests as a speculator seeking the lowest possible cost for its gambling operation. The bank is also guilty of siphoning off Libor fraud gains to paper over holes on its balance sheet in a move reminiscent of JPMorgan's dipping into segregated customer funds at MF Global to paper over holes on its balance sheet.

Structurally, this corrupts not only the multi-hundred trillion dollar credit market but also permanently damages the global pension market as we see in another story run by the FT on the same day on page 15.

Low interest rates, engineered lower by 'financial repression,' Libor manipulation, quantitative easing, and other fraudulent central bank and commercial bank crimes has now permanently altered the assumptions used to calculate returns on pensions. Because the free market has been thwarted by these gangsters, a 'new normal' of artificially low interest rates has taken root and the government has now freed corporations from making good on pension obligations that had been set during a time before the criminal rackets in London and Wall St. permanently altered global rates lower.

Once again savers, the backbone of any economy, are being penalized and asked to subsidize speculators.

Predictably, establishment mouthpieces like Paul Krugman ignore all this and instead argue for more 'aggregate demand' in the form of more government interference by the same kleptomaniacs who are rigging interest rates (and various other markets). He wants consumption to return to 70 percent or more of GDP to get the economy moving again- - in the face of consumers 'retrenching' and committing the sin, in his eyes, of saving.

Completely absent in Krugman's analysis is the role structural central and commercial bank fraud has played in destroying savings, pensions (and wages) in reducing consumption.

Revisionism is another of Krugman strong suits. He reasons that America got out of the Depression using Keynesian balance sheet legerdemain -- and never mentions bank reform including the Glass-Steagall Act (later repealed the TBTF banks) and the Pecora Commission that put bankers in jail -- thus restoring confidence in consumers

To Krugman and the other central planners I say, keep saving, preferably with gold and silver. When this whole fraudulent house of cards crashes finally, we'll be in a good position to help rebuild the economy based on the sound principles that were in force before the crooks and their mouthpieces took over.