Long time readers know my affiliation with Eurodollar futures. I started in the T-Bill pit in 1984 and was in the group of young guys and gals that migrated over to a new contract in 1986. Strips of Eurodollars were the most innovative and elegant exchange traded product ever. Their use, as shown in open interest, mirrors the great credit driven economic expansion as their decline coincides with the Great Recession (we call debt depression).
The post-crash analysis has focused on the diminishing returns on Federal Reserve quantitative easing measures. The focus should be on the replacement of the money market based system with the collateral based one. As the new system has been rolled out some of its own draw backs are becoming evident. General Collateral rates have risen and available supply has diminished. What about the old system? As we have noted before, it has been put into a coma to keep it from further damaging itself. LIBOR submissions for dollars have clustered in the mid-40s rather than the mid-20's fantasy. Throughout the EZ meltdown, the money system barely twitched. If it were to wake, surely the harsh reality of market determined rates would shock the majority of "risk on- risk off" drive by players. The economy is anemic because the financial system that supports it is a fraud.
The Barclay's settlement is just the tip of the trouble to come for the old system and the $360T in contracts based on it. Barclay's submission at the low of the distribution on the day of the fine should be framed and mounted. The record shows manipulation well before the crisis and that makes one wonder, why? Simple, just like LTCM, because a big customer needed it. The settlement shows that virtually any and all transactions made in LIBOR over last decade were subject to a conspiracy. Ho hum, where's RIMM? LIBID is not LIBOR, there is NO offer. The alternative to the Matrix is an ugly beast. Let's go take a look at it.