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To: Brilliant
LIBOR is used as a floor to interest rate prices. If LIBOR is manipulated up, that sets the price of interest higher across a broad swath of the global economy.
10 posted on 07/19/2012 4:53:38 PM PDT by uncommonsense (Conservatives believe what they see; Liberals see what they believe.)
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To: uncommonsense

“If LIBOR is manipulated up, that sets the price of interest higher across a broad swath of the global economy.”

No, if LIBOR is manipulated up, then borrowers will just negotiate a narrower margin. If, for example, market rates are 9%, and LIBOR is 6%, then the margin is 3%. If market rates are 9%, and the Bank manipulates LIBOR so that it’s 7%, then the borrowers will say, “I can get 9% at the bank down the street, so I’m only going to pay you LIBOR plus 2%.”


14 posted on 07/19/2012 5:03:45 PM PDT by Brilliant
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