Given the loss of confidence in the big banks in the wake of revelations that they have been manipulating the world’s most important economic benchmark– Libor – regulators in the U.S. and UK have announced that they will abandon Libor and adopt a new standard.
In the run up to the change in standards, Bank of England chief Mervyn King had called for a benchmark based on actual transaction prices. King’s theory was that Libor – which stands for London Inter Bank Offered Rate – is supposed to measure that interest rates which banks actually offer to loan each other money.
But regulators on both sides of the Atlantic considered such a scheme too cumbersome and “lead-footed”.
Disgraced former Barclay’s chairman Agius (who until 2 days ago was also head of the British Banker’s Association), JP Morgan boss Dimon (a class A directorof the Federal Reserve) and others who can easily wear conflicting hats as regulators and bankers – while holding pristine moral standards and doing God’s Work – have all suggested a more realistic standard.
The new standard – announced today – would promote growth, reduce bookkeeping costs, and free regulators from having to whisper from the sidelines. It also more accurately reflects current banking practices.
They call it Limor (pronouced “LieMore”).
Unlike it’s predecessor Libor, the new standard Limor – Let’s Immaculately Makeup Official-sounding Rates – reflects the prevailing view of the political class and top mainstream economists that bankers are saints who can do no wrong, whose every movement and release of gas creates jobs and stimulates the economy … in the same way that flowers spontaneously grow wherever a holy man walks.
Since these great men have only the best interests of the little people in their heart, letting them make up the appropriate Limor rate will benefit the world, as the great Invisible Hand guides the markets to their divine destiny.