The Ongoing New Financial Era Thread

Blue&White
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The Ongoing New Financial Era Thread

Postby Blue&White » Thu Aug 17, 2017 9:22 am

Picking up from something we discussed over the past several years.

Has anyone seen the news on LIBOR? There are a number of articles you can find if you google, but here's a quick summary: the whole thing is made up and has been for well over a decade and possibly two.

For those not familiar, LIBOR stands for London Interbank Offered Rate. It's the rate at which banks lend to each other. The way the LIBOR rate works is every day, at around 11 AM GMT time, 12 big banks submit to the UK regulator the rate at which they plan to loan or would expect to borrow from another bank. These rates are based on the rates used in the most recent transactions. The regulator throws out the high and the low rates, averages the rest, and that is your daily LIBOR rate.

Here is why it matters: just about every loan on the planet is underpinned by LIBOR. There are some pinned to the US prime rate, but even that is influenced by LIBOR. If you look at the terms of you home equity loan, your credit card, your car loan, etc. you'll see, somewhere in there, a reference to LIBOR and how that impacted not only the initial loan percentage you paid, but how things like late payments are calculated. There are also banks which run derivatives off of LIBOR and a couple of years ago it turned out that the big banks were (I know, this is a shock) colluding on their LIBOR submissions so they could make money (at the expense of millions of borrowers world wide)

Because of the fixing scheme, the UK regulator said that all LIBOR submissions had to be based on actual transactions. And, they recently discovered a funny thing - there aren't any. Banks don't borrow from each other anymore. They haven't for close to 2 decades. There are some transactions but very few. Not enough to really establish a market. So, not only was LIBOR manipulated, it turns out the entire thing is a fiction.

Right now the UK is trying to figure out how they are going to replace LIBOR with something that is based on real information. I suspect this may cause some market fluctuations in the near term, though.

psu_dad
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Re: The Ongoing New Financial Era Thread

Postby psu_dad » Thu Aug 17, 2017 9:58 am

I've been reading about it, but the more I read, the more confused I get.

I've read some articles that suggested the LIBOR banks were manipulating the interest rates up to screw the average shmo. I've read other articles that suggested the LIBOR banks were manipulating the interest rates down because there were often circumstances wherein that benefited them. One guy on Forbes said that by keeping interest rates low, LIBOR effectively created a totally artificial economic prosperity bubble. And he basically predicted an economic Zombie Apocalypse when LIBOR is replaced and more reasonable (i.e., higher) interest rates are established. And that confused me even more because I thought Federal Reserve manipulation was keeping interest rates low in the U.S. on purpose, not LIBOR.

This is beyond my knowledge of economics. And it doesn't help that 10 economists will give you 10 different answers. It makes my hair hurt.

Blue&White
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Re: The Ongoing New Financial Era Thread

Postby Blue&White » Thu Aug 17, 2017 10:48 am

I've read some different things too and I'm equally confused. The one consistent comment I've seen is that the world economy is better off running with a metric that is completely made up than doing something rash and not well thought of, because that can bring global economies crashing down around our heads. So, now that they have identified the problem, fixing it is a whole other issue.

The other thing I've picked up is that this may not be outright fraud. It sounds like the Banks were trying to comply with the regulatory requirement. Yes, at one point they outright manipulated the whole thing, and that was criminal (although you'd never know it from the number of people who went to jail -- none) but this was done more to meet the requirement and keep LIBOR afloat.

It quickly gets beyond my ability to determine what's real, what's fantasy and what the real risk is. It all sounds pretty gloomy but who knows.

psu_dad
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Re: The Ongoing New Financial Era Thread

Postby psu_dad » Thu Aug 17, 2017 11:24 am

And speaking of the new financial era, I'm losing my health care plan at the end of the 3rd Quarter. ("If you like your health care plan, you can keep it." -- President Pinocchio).

No, it's not that grim. My company has traditionally offered employees a choice of several plans from different health care insurers, but the costs are crushing them, The company claims that they don't have enough people with any one insurer to negotiate a favorable rate and that going to a single insurer will allow them to do that. They're going with Aetna. Supposedly we'll be offered a couple of Aetna plans to choose from (higher out-of-pocket with lower monthly premium and vice versa). My current insurer (Harvard-Pilgrim) has its own top-notch medical facilities and doctors. I suspect I can wave bye-bye to them, but I don't have the details yet on where I can/can't get care.

Blue&White
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Re: The Ongoing New Financial Era Thread

Postby Blue&White » Thu Aug 17, 2017 11:42 am

Assume you'll not be able to get care from an provider ever again and then you can only be pleasantly surprised.

Blue&White
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Re: The Ongoing New Financial Era Thread

Postby Blue&White » Thu Sep 07, 2017 10:35 pm

If you're not familiar with the Equifax hack, you need to get familiar with it quickly. Personal information on almost half the US population has been compromised.

psu_dad
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Re: The Ongoing New Financial Era Thread

Postby psu_dad » Fri Sep 08, 2017 7:31 am

On the Equifax web site, there's a link to determine whether you may have been impacted by the hack. I clicked and got this. It may be nothing, but it doesn't give you a warm & fuzzy feeling.

EDIT - Never mind. The warning I got not to proceed was the result of the web browser I was using (Google Chrome), A different browser (Explorer) produced no such warning,

Blue&White
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Re: The Ongoing New Financial Era Thread

Postby Blue&White » Fri Sep 08, 2017 8:56 am

I'm going to sign up for the credit monitoring stuff just to be safe.

This is really unbelievable. Half the country was impacted. Probably more. I know it's only a mere 44% of the population but that total number includes children. When you narrow the scope to only people with credit cards and who buy stuff, I suspect the impacted number is well over 50%.

psu_dad
Posts: 229
Joined: Sun Aug 13, 2017 6:59 pm

Re: The Ongoing New Financial Era Thread

Postby psu_dad » Fri Sep 08, 2017 9:05 am

According to the inquiry I made, Equifax "believes" I was not impacted ... whatever that means.

Blue&White
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Joined: Sat Aug 12, 2017 10:01 am

Re: The Ongoing New Financial Era Thread

Postby Blue&White » Fri Sep 08, 2017 9:55 am

It means they don't really know. That's why I'm signing up for all the monitoring.

In other awesome news, did anyone see this?

Drug company faked cancer patients to sell drug

As if the fraud aspects of this were not enough, there was this tidbit in there:

Insys got around this by finding calculated ways for its employees to create the impression on the phone calls that the answer was yes, they did have cancer, without explicitly saying so, according to the report.

A recording of a such a call, obtained by McCaskill's investigators and released Wednesday, shows the wordplay Insys employees engaged in.

The call involves a New Jersey woman named Sarah Fuller, who did not have cancer but was nevertheless prescribed Subsys by her doctor. Fuller died last year of a Subsys overdose, and state authorities later petitioned to have her doctor's license temporarily suspended.


Someone died as a direct result of this fraud. How is that not manslaughter, at least?

Of course, the company has a great defense to all this. It was all bad employees who used to work there. They only have good employees now. Their CEO should be doing a perp walk and facing, at minimum, a manslaughter charge. Criminal charges have been filed for some of these allegations. We'll see what happens. I'm not optimistic.