John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (10299)	10/17/2008 12:17:01 AM
From: Joseph Silent	Read Replies (2) of 33421

JP .... regarding LIBOR ... nakedcapitalism.com I'm trying to understand some of these problems and tend to come up with black holes in information flow. Well, at least I have a picture of the LIBOR situation. Each day, the market's information-mongers work in a bunch of terms into the news to help increase the sense of urgency and panic. The LIBOR term has been bandied around for the past year or so. It seems to be the case that the national central bankers have distorted LIBOR by making it an unnecesary index. After all, why do each of 16 bean counters at different banks need to worry about the accurate cost of dealing with each other when they can feed at a central trough for a wave and a smile? Given the above, I am baffled that other (mortgage?) rates (and news hounds) are so tightly tied to LIBOR. For now it seems that this trimmed average is something many other things are tied to. Instead, it seems things should be tied to averages at central banks who have effectively created another trading exchange. Given that this is a recognized distortion, I am truly puzzled that the LIBOR index hasn't been either adjusted by the market, or simply ignored. Regarding the CDS/AIG problem in the next week or so, does anyone have an idea how bad it might be?

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