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> What is not legal is if even two or more has station owners make a secret pact to keep prices the same. This isn't analogous, because the gas stations aren't

> What is not legal is if even two or more has station owners make a secret pact to keep prices the same. This isn't analogous, because the gas stations aren't repeatedly buying gas and selling it back to other gas stations within very short intervals. They're buying it from suppliers and selling it to consumers who use it. Banks are buying and selling liquid assets (money) to/from each other overnight. The same banks alternate back and forth between being buyers and sellers (and some may even act as both buyers and sellers within the same trading period). So "price fixing" doesn't have the same effect as it does in other markets, because it's essentially a closed system. It's weird to talk about Libor as collusion because, again, the entire point is to save banks the trouble of having to run around and find out all of the possible rates that each bank would charge each other. Instead, they can use Libor as a estimate of the "going rate", and with the caveat that everyone knows it's not always accurate, they can figure out their own pricing accordingly.

mcguire 10y ago
"So "price fixing" doesn't have the same effect as it does in other markets, because it's essentially a closed system." Except that it's not a closed system. That would be the point.
- chimeracoder 10y ago
  > Except that it's not a closed system. That would be the point. Overnight interbank loans are a closed system, by definition. The part that isn't a closed system is when people use Libor as a metric for other purposes. Which isn't a reasonable complaint, because that's explicitly not what the Libor was created for, and it was never intended to mean anything else.
  - AnimalMuppet 10y ago
    That's like saying that the Internet was created to connect military computers, and therefore it's not reasonable for civilians to complain when governments spy on their internet activity. That is: Things grow beyond "what they were created for". To say that any such use is fair game for abuse is both unreasonable and unwise.
    - chimeracoder 10y ago
      > That's like saying that the Internet was created to connect military computers, and therefore it's not reasonable for civilians to complain when governments spy on their internet activity. No, it's not at all. It's more like when people complain that memcache doesn't make a good tool for session handling, or that it's not fault-tolerant and has zero replication. Of course not - it was never meant to be used that way, and the documentation explicitly says it shouldn't be used that way[0]. If you still want to, fine, but don't complain that memcache is a bad system when you're simply using it against its intended design. [0] https://github.com/memcached/memcached/wiki/ProgrammingFAQ#how-do-you-handle-replication https://github.com/memcached/memcached/wiki/ProgrammingFAQ#h...
      - AnimalMuppet 10y ago
        Your analogy says that the use was incompatible to the original intent; mine says it was outside the scope of the original intent. So, to see which analogy fits better: Is there a document (issued by someone authoritative) that says that Libor should not be used the way it was (i.e., to set interest rates for non-interbank loans)? If not, then what we have, essentially, is your claim that it shouldn't be used that way, against everyone using it that way.
  - mcguire 10y ago
    Overnight interbank loans are an important part of banks' risk management strategy, which is why they need to know them during trading hours and why they got written in to other contracts.

mcguire 10y ago

"So "price fixing" doesn't have the same effect as it does in other markets, because it's essentially a closed system." Except that it's not a closed system. That would be the point.

chimeracoder 10y ago
> Except that it's not a closed system. That would be the point. Overnight interbank loans are a closed system, by definition. The part that isn't a closed system is when people use Libor as a metric for other purposes. Which isn't a reasonable complaint, because that's explicitly not what the Libor was created for, and it was never intended to mean anything else.
- AnimalMuppet 10y ago
  That's like saying that the Internet was created to connect military computers, and therefore it's not reasonable for civilians to complain when governments spy on their internet activity. That is: Things grow beyond "what they were created for". To say that any such use is fair game for abuse is both unreasonable and unwise.
  - chimeracoder 10y ago
    > That's like saying that the Internet was created to connect military computers, and therefore it's not reasonable for civilians to complain when governments spy on their internet activity. No, it's not at all. It's more like when people complain that memcache doesn't make a good tool for session handling, or that it's not fault-tolerant and has zero replication. Of course not - it was never meant to be used that way, and the documentation explicitly says it shouldn't be used that way[0]. If you still want to, fine, but don't complain that memcache is a bad system when you're simply using it against its intended design. [0] https://github.com/memcached/memcached/wiki/ProgrammingFAQ#how-do-you-handle-replication https://github.com/memcached/memcached/wiki/ProgrammingFAQ#h...
    - AnimalMuppet 10y ago
      Your analogy says that the use was incompatible to the original intent; mine says it was outside the scope of the original intent. So, to see which analogy fits better: Is there a document (issued by someone authoritative) that says that Libor should not be used the way it was (i.e., to set interest rates for non-interbank loans)? If not, then what we have, essentially, is your claim that it shouldn't be used that way, against everyone using it that way.
- mcguire 10y ago
  Overnight interbank loans are an important part of banks' risk management strategy, which is why they need to know them during trading hours and why they got written in to other contracts.