The US economy is about to pay the butcher’s bill for a massive disruption of worldwide financial markets resulting from the elimination of the London Interbank Offered Rate, or LIBOR.  And, we are doing this on purpose.  It seems the denizens of the heights of our international financial fabric felt they had to do this in light of the discovery that a handful of bankers had unlawfully colluded to cause LIBOR to be mispriced for their personal advantage.  As Captain Renault said, “I’m shocked, shocked!”  This was so bad that we had to blow up the LIBOR index upon which trillions of dollars of financial assets are based?  While bankers behaving badly is a problem, why are we punishing markets because our banking regulatory cadres failed to prevent bad behavior?  At best, this is a monument to irrational rectitude.
Continue Reading Killing LIBOR: A Victory for Irrational Rectitude