Monday 16 July 2012

Everything's Fixed!

Oh My God! What a Monday. Over the weekend it appears that politicians across the US and UK have realised that,well, market fix prices. Worse and almost unbelievably, people could conspire to try and fix things for their own ends.

This earth-shattering news come at a difficult time. Already Politicians and Regulators have been caught bang to rights in causing the Great Recession we are enduring. Now of course they are seeking to deepen the crisis as much as they can by keeping the euro and refusing all monetary approaches to trying to return the economies of the West to growth.

In the UK, the Leveson enquiry has not been enough to make people forget the stain of the political expenses scandal and the new Libor investigation is trying to see to that.

But now the focus is on expanding this. Many prices in the world economy are set like LIBOR. Nearly all commodities have benchmark pricing, Gold and Silver too (mind you, with allegations of real corruption here this is perhaps one set that could do with an investigation). Indeed, asking market participants for their pricing input is, um, how you would get a price out of a series of private players.

Of course, there are suspicions this is open to abuse, it is why there is much disquiet in the city over the Chinese takeover of the London Metal Exchange. The rise of hedge funds as key players in markets trying to fix things for their own ends is nothing new (see Armajaro Holdings and the Chocolate Finger), It does need to watched and regulated.

Equally though, wantonly saying that most of the Western system for benchmark pricing is corrupt is rather silly thing to do. Just like saying all our banks are bust and crooked. This has not helped the economy recover nor done our reputation any good - in fact things just keep getting worse as the double dip recession proves.

More importantly though, rent-a-gob politicians get to lightly grill some executives from the City in the House of Commons or Congress and get in their class-war inspired jibes about how horrid these people are though. And it distracts from the calamitous decision-making of US and UK regulators and politicians - whose reputation must be upheld above all others of course.


Jim said...

So how is the QE program not a massive fix of interest rates? Are pensioners and savers not being defrauded by billions by the artificial suppression of long term rates? When are we going to see some outrage about that?

Or is a fix OK when the State does it, but not when private individuals do it?

Anonymous said...

TopGear sets a benchmark for supercars, but that doesn't mean you can't have your own opinion about which car is worth the money.

Smee Again said...

"wantonly saying that most of the Western system for benchmark pricing is corrupt is rather silly thing to do."
'Wantonly', huh? What if we say it timidly. Would that do?

"Just like saying all our banks are bust and crooked."
Well, they are, arent they?

"This has not helped the economy recover"
So we should all just shut up, should we? When house prices are through the roof and wages and savings are falling. And all this with the connivance of the government to protect the banks. Get the banks and government out of the f**king way and allow the economy to operate. How the hell is the economy going to recover with these deadweights hanging off it, leeching every penny from our savings and pensions?

The facts are that the wilder fringes of the web have been screaming about this for a decade now. They were written off as 'conspiracy theorists' (a badge of honour at this stage) and derided by all comers. Funny thing is, they were right all along.....

Elby the Beserk said...

Leveson - 99% of people either don't know about it or don't give a flying duck about it. .75% see it as an exercise by MPs to get back at journos for exposing how corrupt MPs are, .25% see it as a showcase for BBCistas & Guardianistas to attack the Tories.

A total waste of time and money.

Anonymous said...

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

Carl Marx

CityUnslicker said...

ummm, carl marx..that is Adam Smith. Try reading as well as making clever quotes.

re the other comments. I am really begging you to read what happened in the 1930's when Europe and the US tried to deleverage at the same time. it did not work out well at all, on any level.

If Germany and CHina and other countires were prepared ot eat into their surplu sand let the currencies appreciate and import more, things would balance. But they are not. Banks are crooked, but not all of them - their bustness is a symptom of the economic crisis caused by politicans and regulators firstly.

I will explore this more later this week.

hovis said...

As has been said on here before CU,both Germany and China are mercantalists and therefore view and play things differently ( if not idiotically to our eyes.)

Anonymous said...

I don't think China is a big problem. You cannot get rich by selling our labour for $1 per hour. China is the latest recipient of the 60 year economic supercycle. Huge amounts of built up cash are now washing around in the system looking for somewhere to invest that is showing that elusive property known as growth. However, there simply isn't enough growth available in the economy of today to absorb all the cash built up from the post-war economy. So huge bubbles are building up and then bursting.

Bascially we are all too rich in cash and have lost sight of the purpose of the real economy. We need to go back to the time before socialism and modern capitalism to the time of the Victorians who perceived that you could make Britain a better place simply by focussing on known problems and fixing them. I would start with the built environment which frankly is a disgrace in a civilised country and most of which needs to be knocked down and re-built for the good of all of us. Doing that should keep us busy for quite some time.