The LIBOR scandal is so much bigger and more important than this HSBC case but it seemingly gets a pass from public outrage since there's no easy TL;DR explanation of it.
In other words, Breuer is saying the banks have us by the balls, that the social cost of putting their executives in jail might end up being larger than the cost of letting them get away with, well, anything.
You're paying an interest rate on your car, your mortgage and your bank loan right? OK, that interest rate is set by the bank. The way they do that is to use LIBOR, and add a bit on top which is their profit. So your loans follow LIBOR. The banks basically rigged the game, and changed LIBOR as they saw fit, meaning that you paid more in interest than you should. Your neighbour did too. And his neighbour. If you add it all up it's billions.
They fucked everyone to make a quick buck, and it's illegal as hell.
"At the onset of the financial crisis in September 2007 with the collapse of Northern Rock, liquidity concerns drew public scrutiny towards Libor. Barclays manipulated Libor submissions to give a healthier picture of the bank's credit quality and its ability to raise funds. A lower submission would deflect concerns it had problems borrowing cash from the markets."
"From as early as 28 August, the New York Fed said it had received mass-distribution emails that suggested that Libor submissions were being set unrealistically low by the banks."
Ie - you, the borrower - benefited from this manipulation.
The reason I omitted it was the difficult problem of explaining a complex subject in very few words, and still pointing the finger at banks. If you tell joe six-pack that his mortgage sometimes got cheaper you'll either have to divulge a complex explanation of why this is bad for him (which he won't understand or care about) or have him think that the banks should do some more of that LIBOR rigging so his mortgage can be lower.
It's a compromise.
Seriously, who the fuck cares who wrote the articles?
Do you have any reason to think the article is wrong, besides who the author is and where it was published? Any at all?
The second response is to embrace something like Bitcoin, which decentralizes everything. No central banking, no LIBOR scandal. But also no ability to stop "money laundering", defined as a transaction that a government doesn't want you to engage in. That's the tradeoff: the Bitcoin protocol is based on an adversarial environment and gives no special privileges to government or banking nodes.
LIBOR (banks), QE4 (govt), and the bailouts (both) are all enabled by the fact that some nodes in our system are granted special powers to set rates and print money.
Libor is not a central bank mechanism. It's a rate published by the British Bankers' Association, a private trade association. Similar to the S&P 500 for U.S. large caps, it is simply a metric that private parties have chosen to reference when setting. Libor is influenced by central banks' rates, but so would a Bitcoin economy's reference rate be a function of international money rates.
it is simply a metric that private parties have chosen to
reference when setting. Libor is influenced by central
banks' rates, but so would a Bitcoin economy's reference
rate be a function of international money rates.
I wouldn't be able to pull it off, but banks do this all the time with cash-substitutes. A small number of people do insist on real cash, but there's a huge amount of credit and debt built on top of a small amount of actual currency.
The banks loan your money out, and charge interest to the borrowers. In return they keep your money safe, and pay you enough interest to encourage you to not switch banks, or demand "real" money.
And governments can go into debt on gold, or US dollars (even if they don't have them, and can't get them in the near future). You can get a complete collapse if the government finds itself bankrupt. In that case, you'll have a bank run, or the IMF will step in, or lenders will take a haircut. It's nothing revolutionary (well, it can start revolutions, but that's not really new).
They can do exactly the same thing with bitcoins.
There really is a difference between what would happen if people started demanding real paper USD as payment (i.e., just print more for the right banks) vs. what would happen if people started demanding real BTC as payment.
Bitcoins are closer to cash than it may seem at first glance and just like cash you can't really fake having it.
If I paint your fence and you give me an IOU, we just created money - real services were rendered and a nominal claim was accepted in return. Similarly, Bitcoins are as (if not more) theoretically fungible as Treasuries. Banks finance themselves in the wholesale markets collateralised by Treasuries. A repurchase agreement using Bitcoins is not beyond practical contemplation.
Note that fractional reserve banking originated on the gold standard.
Let's say the government does the exact same thing to make money that they do now : legislate that more money is printed. Now bitcoiners have 2 choices : use the modified code that specifically allows this transfer/money creation, or go to jail.
What do you think big players will do ?
Bitcoin is actually extra bad for this since it publishes a full financial record. To anyone with a sufficiently large source of identified transactions your accounts are an open book, if they can find just one transaction they're sure was done by you (say, paying your taxes). They don't have to contact 20 banks to find out where your funds went and who was involved, that information is public record. There is no way to pass through a bank in Saudi Arabia or some other bastard country to obscure and/or delay investigations.
Besides, having undeclared money in bitcoin is money laundering. Just having it. Penalty : up to 10 years jail time (Western Europe, and 50 km from here it's up to life in jail, gotta love the dutch). For the moment nobody's been found guilty, but that's mostly because it's only just starting to surface.
And frankly, this is exactly what we want. We may not like governments printing money and abusing it, but anybody who studied the great financial crises of the end of the 19th beginning of the 20th century, it is plainly obvious that the current situation (regularly "big financial scandal, you're probably overpaying your insurance $10") is better than what happened with the gold standard (regularly "surprise ! All your savings are gone. Oh and the same happened to the government so we're raising taxes 50%. Happy starving").
Let's say the government does the exact same thing to make
money that they do now : legislate that more money is
Russia recently made it almost impossible to extradite Russian citizens to the US:
And I don't think the USG is going to be renditioning Chinese citizens from the mainland anytime soon, given how broke the Americans are and how much they owe to China (not to mention that they are a nuclear power).
A lot of people wanted a multipolar world. We're going to get it, and among other things it means the USG will not be able to print money (and thereby dilute your stake, and seize your work product) for much longer.
Probably because the ledgers of the bullion vaults were kept secret.
Bitcoin is a global distributed ledger. You cannot claim to hold btc because the fact of the holding is verifiable through the ledger.
> Bitcoins are closer to cash than it may seem at first glance and just like cash you can't really fake having it.
Really? Banks do the same thing with cash. It's called "fractional reserve banking", and unless you want to outlaw it (and have more lobbying power than all of Wall Street) it's not going away just because you've substituted paper money for a digital equivalent.
If you want to keep cash under your mattress, you are free to do so. Bitcoins offer no massive advantage here. If you want to have the bitcoin equivalent (a digital wallet), go for your life. But normal people will want the 1% interest the banks pay, and the security of not having their life savings stolen if some bot cracks their computer.
There's only 3 differences between bitcoins, and paper money - they are easier to send, much easier to steal (since crackers can do it), and don't lose value to inflation (which isn't really a new thing - it's just a return to the "gold standard").
People aren't going to stop using banks any time soon. I don't even see which way bitcoins will shift the balance - a few cipherpunks will build their own vaults, and a few grannies will no longer bury their savings under their tulips.
This may sound a bit far-fetched but there were cases in the Middle Ages of artisans doing exactly that. In fact sometimes they'd even issue their own token-based currency and settle the accounts with other artisans after market day.....
Then imagine doing that 'as a bank', either you have a bitcoin or you don't, you can't borrow one you don't have. Bitcoin is very subtle in this way and it seems as though lots of people underestimate the amount of thinking that went into it.
Our financial sector is currently hopelessly corrupt and, at least in the US, the banking sector itself has a total grip on any attempt to regulate it.