$800 Trillion, That’s Real Money…

“The CEO of Barclays, Bob Diamond, has resigned in disgrace…” writes Matt Taibbi of Rolling Stone. This scandal is all about manipulating the interbank exchange rate, LIBOR, on a grand scale since possibly as early as 2001, which the Wall Street Journal is calculating to effect $800 Trillion in contracts, with the express purpose of gaming the system to make the banks involved, including Barclays, lots of money. Barclays CEO getting called out is just the tip of the proverbial iceberg.

This manipulation has the effect of skimming money off the top of pension funds, State and local bond holdings, private and institutional investors, derivatives markets to the tune of hundred of trillions of dollars. LIBOR is described by The Guardian as: “The London interbank offer rate [LIBOR] is set each day at 11am in all the key currencies lent and borrowed in London. Each major bank submits the interest rate it is paying to the British Bankers’ Association and the average becomes the benchmark rate for most of the world’s loans and financial contracts. For example, there are some $554tn worth of so-called interest rate derivative contracts whose price is linked to Libor – manufactured products whose alleged purpose is to hedge the risk of unexpected interest rate changes in a world of floating exchange rates and free capital movements.” As the interest rate that so many other financial transactions are based off of, it is hard to estimate the reach this manipulation has had.

Robert Scheer, formerly a Los Angeles Times reporter, also writes about what he describes as “the crime of the century.”

“Study Casts Doubt on Key Rate” was the headline on the May 29, 2008, investigative report, which concluded: “Major banks are contributing to the erratic behavior of a crucial global lending benchmark, a Wall Street Journal analysis shows.” Even then, according to the report, it was known that the Libor rate was being manipulated “to act as if the banking system was doing better than it was at critical junctures in the financial crisis.”

And:

“As The New York Times editorialized: “The evidence, cited by the Justice Department—which Barclays agreed is ‘true and accurate’—is damning. ‘Always happy to help,’ one employee wrote in an email after being asked to submit false information. ‘If you know how to keep a secret, I’ll bring you in on it,’ wrote a Barclays trader to a trader at another bank, referring to their strategies for mutual gain. If that’s not conspiracy and price-fixing, what is?””

So, why is nobody (in the US) freaking out over the LIBOR banking scandal?

More here, and here.

Bring Our War Dollars Home: Afghanistan

A recent article in Armed Forces Journal could not be clearer on the state of the war in Afghanistan. Lt. Col. Daniel L. Davis writes in Truth, lies, and Afghanistan:

I spent last year in Afghanistan, visiting and talking with U.S. troops and their Afghan partners. My duties with the Army’s Rapid Equipping Force took me into every significant area where our soldiers engage the enemy. Over the course of 12 months, I covered more than 9,000 miles and talked, traveled and patrolled with troops in Kandahar, Kunar, Ghazni, Khost, Paktika, Kunduz, Balkh, Nangarhar and other provinces.

What I saw bore no resemblance to rosy official statements by U.S. military leaders about conditions on the ground.

I came across this piece through the excellent online newsletter put out by the Afghanistan Study Group, the Afghanistan Weekly Reader. Wonkish and authoritative the ASG’s reports and news releases are non-partisan, and of the highest quality sort of analysis and information I’ve found on the subject of the decade-plus war being waged in Afghanistan.

The latest DoD request: $88 billion for the war effort in 2013 as the drawdown of troops continues. And for what, asks ASG’s Mary Kaszynski?

We’ve mentioned before that this number seems suspiciously high, considering the pace of the drawdown, We’re not the only ones who think so. At the budget briefing two weeks ago a reporter noted that the cut from last year’s war costs to this year “doesn’t seem like it’s that much of a reduction” and asked DOD officials to “give us some sense of what that’s for, that 88.4 billion?” JCS Chair General Dempsey’s response: “For recapitalization, for reconstitution, we’ve always said that it would take years following the end of the conflict to recapitalize the force.  And some of the OCO costs are caught up in that. ”

Dempsey’s answer is not that surprising. The need to “recapitalize” or “reset” the force after a decade of war is a favorite line for those who want to keep defense spending high. Trimming the defense budget, we are told, would hollow out our military forces and leave us open to all sorts of dangers.

The problem with this argument is that it’s simply not true. A new report from the Congressional Research Service says, in a typically understated way, “it can be argued that the use of the term “hollow force” is inappropriate under present circumstances.”

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