I'm not strongly arguing for or against any particular solution. I'm an amateur on monetary policy and alternative currencies and the Federal Reserve system. I merely know what fraud looks like, and I'm confident it's happened in the past, and continues to happen to this day because no one has been held accountable for past fraud, on a massive scale. So, I don't know what the optimal solution looks like, exactly, but I know it's not what we have today. It may just be that upholding the law, rigorously and blind to wealth (i.e. billionaires can go to jail), would be sufficient to keep fraud in check.
But, I'm highly suspicious of any system that allows the people who loan money to governments to also be the people determining the rates at which they borrow money (usually indirectly, as there is a very high bandwidth revolving door between the Fed and the big banks in the US, but some of the biggest banks actually had people working directly for the Fed while working for the bank, which is an SEC violation; likewise, the banks themselves are determining LIBOR, which determines the rates at which they get and loan money to governments). This is obviously inviting the fox into the hen house and expecting them to help keep the hens warm at night. Turns out that foxes, when invited into hen houses, tend to eat the hens. There's also been bid-rigging on a massive scale in the US, including JP Morgan Chase and Bank of America in their bids for municipal accounts, which studies indicate has cost taxpayers billions.
At one point I might have argued, on principle, that regulation was the cause of all of life's problems, and that market solutions should be sought. I still lean very far libertarian (or market anarchist), but I'm not convinced our society is quite enlightened enough to get there yet--and when politicians do use libertarian rhetoric it's usually a corporatist agenda masquerading as freedom. In the meantime, the bleeding has to be stopped. We can't keep pumping trillions of dollars out of the middle class all over the world and into the hands of a select few billionaire bankers and expect anything good to happen. Freedom for a few to rob the masses is not libertarian.
You're wrong about a few things, but for now I'll just pick on one.
You do realise that the 'IB' in LIBOR stands for 'inter-bank'? The LIBOR rate has no bearing on the cost of a sovereign government's cost of funds - e.g. in US, treasury bills. The spread between them can be quite volatile (http://en.wikipedia.org/wiki/TED_spread). In short - governments don't lend or borrow at LIBOR - that's the point of having LIBOR in the first place.
I understand that (though my understanding of this particular situation is less deep than that of the US banking crisis). It's also my understanding that LIBOR is used to determine rates for municipal bonds, consumer loan rates (including loans insured by government), and other types of debt that do impact taxpayers and consumers. The LIBOR is a baseline...manipulating it manipulates the entire lending market in the UK. That's illegal and unethical and screws a bunch of people over and compromises the integrity of every bank that participates. (At least, that is my understanding of it, but I'd never heard the word LIBOR until two days ago.)
But, I'm highly suspicious of any system that allows the people who loan money to governments to also be the people determining the rates at which they borrow money (usually indirectly, as there is a very high bandwidth revolving door between the Fed and the big banks in the US, but some of the biggest banks actually had people working directly for the Fed while working for the bank, which is an SEC violation; likewise, the banks themselves are determining LIBOR, which determines the rates at which they get and loan money to governments). This is obviously inviting the fox into the hen house and expecting them to help keep the hens warm at night. Turns out that foxes, when invited into hen houses, tend to eat the hens. There's also been bid-rigging on a massive scale in the US, including JP Morgan Chase and Bank of America in their bids for municipal accounts, which studies indicate has cost taxpayers billions.
At one point I might have argued, on principle, that regulation was the cause of all of life's problems, and that market solutions should be sought. I still lean very far libertarian (or market anarchist), but I'm not convinced our society is quite enlightened enough to get there yet--and when politicians do use libertarian rhetoric it's usually a corporatist agenda masquerading as freedom. In the meantime, the bleeding has to be stopped. We can't keep pumping trillions of dollars out of the middle class all over the world and into the hands of a select few billionaire bankers and expect anything good to happen. Freedom for a few to rob the masses is not libertarian.