LIBOR lies defraud billions, yes; but essential ‘bank’ fraud costs 99% trillions

Here are three stories to understand about criminal US economics:

  1. LIBOR criminal fraud that costs US local government agencies billions.
  2. Essential bank fraud that private corporations have authority to issue credit/loans to maximize their own profit rather than debt-free money and public at-cost credit. This annually costs trillions to the 99%.
  3. Essential fraud in government Comprehensive Annual Financial Reports (CAFRs) cost trillions to the 99% each year

1. What is the LIBOR scandal regarding local US government agencies?

Ellen Brown is the US leading voice for credit and banking reform; in articles from March and July, 2012 she explains how the lies of private banks’ reports of the London Interbank Offered Rate (LIBOR) defrauded US local governments of billions (Washington’s Blog also has excellent explanation and for manipulation in other markets, and I recommend Paul Craig Roberts’ analysis).

Criminal fraud with LIBOR works this way:

  • Local US government agencies were encouraged by investment and loan managers to enter into interest rate swap agreements to “save money.” This is buying insurance against rising interest rates for local government debt securities.
  • The terms of the swap cost billions more than falling interest rates: collective tens of billions were transferred from US local governments to almost exclusively JP Morgan, BofA, Citi, and Goldman Sachs.
  • Because the interest rates are now acknowledged as contrived, the swaps become fraudulent because these four banks sold a product without disclosing their own manipulation over interest rates.

2. What is essential bank fraud, and how does it cost us trillions?

The essential fraud of banks is they don’t lend money; they create credit (loans) out of nothing and then demand repayment with interest. These private businesses exist to maximize their own profit and create debt, not “banks” keeping people’s money safe and lending excess cash. Creating what we use for money as a debt with interest means US aggregate debt can never be repaid because this is what we use for money.

The essential fraud is to call a national debt system a “monetary” system, and that unpayable debt is somehow “good” for the 99%.

Money that is debt-free could be created by government for direct payment of public goods and services. This eliminates national debt and almost all local debts (the gross interest cost of the national debt that is never reduced but only increased is currently ~$450 billion/year). Debt-free money has three game-changing benefits: full-employment as government can be employer of last resort for infrastructure investment, optimal infrastructure, and falling overall prices because infrastructure contributes more to economic output than cost of inputs (documentation in my paper on monetary reform for the Claremont Colleges’ conference).

The annual benefits of money rather than debt are quickly calculated in the trillions with elimination of the source of all local, state, and national debt, having full employment, ever-improving infrastructure, falling prices, and far less crime. If credit became public rather than private, a state-owned bank could offer 2% mortgages and credit cards that would abundantly cover all state taxes.

3. What is CAFR fraud, and how can we reclaim trillions there?

Comprehensive Annual Financial Reports (CAFRs) disclose taxpayer surpluses in the trillions. For example, the state of California claims austerity from a $16 billion budget deficit while the state has $600 billion in surplus taxpayer assets the public doesn’t know about, “leaders” never discuss, corporate media never mention, and that could easily be restructured for financial success.

Hiding 35 times the deficit in a document the public doesn’t know about while saying we have “no choice” but austerity is “emperor has no clothes” obvious fraud. The collective state totals of CAFR taxpayer surpluses has been data-sampled at $8 trillion.

I summarize reforms in money, credit and CAFR here.

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