Barclays is bad, but Bank of England is baddest

Barclays Bank can trace its origins to a firm of goldsmiths founded in 1690 four years before the Bank of England in 1694.

Both therefore originated in different forms of what amounts to fraud right at the start of the history of modern banking in Britain.

In Barclays’ case, John Freame and Thomas Gould would have likely engaged in the early form of fractional reserve banking, in which they took in depositors’ gold and issued notes for many times its value so as to be able to make money in interest from people wanting to borrow with fingers crossed that not everyone would want the same “fractional reserve” of real gold back at once.

In the Bank of England’s case, it was more of a rent seeking con than a fraud initially, as a private company gaining monopoly privileges from the state in order to induce people to invest so that they could in turn lend to the state at interest rates that would make even twenty-first century Irish and Greek eyes water.

Little seems to have changed in those 320 years then. The confidence tricks may be a bit more sophisticated. The Bank of England may be more trustworthy in the eyes of many citizens because it is now actually owned by the state it was set up to fleece. But the revelation of Barclays’ manipulation of market interest rates in recent days should not detract from the fact that the Bank of England does this all the time, and with far more devastating results.

I have no doubt that those responsible, both on the trading floors and their overseers in the boardroom at Barclays and elsewhere, should face the full force of the law - their actions are certainly no less illegal in my opinion than, say, the bankers, advisers and directors of Guinness were in 1986, manipulating equity markets to their advantage. My only complaint is that now that they are limited liability firms rather than partnerships the individuals concerned will remain fabulously wealthy even after a good long stretch in the Scrubs unless they also face a proceeds of crime action!

But in this incestuous world of high finance one of the organisations involved in policing the activities of the commercial banks such as Barclays is of course the Bank of England, whose own, officially sanctioned, manipulation of market rates has a way more far reaching impact than that of poor little benighted Barclays.

I’ve reported on this before, and nobody has ever taken it terribly seriously, not even the committee of useless politicians to whom it was said, but the late Eddie George, predecessor to current Bank of England governor Mervyn King, was explicit that ten or eleven years ago the Bank of England deliberately manipulated interest rates artificially downward to stoke consumer confidence by pumping markets full of as much “cheap money” as they could. As he told the Treasury Select Committee in March 2007, they knew this was an unsustainable course in the long run, risking the creation of the very asset bubble that eventually caused the credit crunch and the current depression.

Barclays is “merely” one of the small, again officially sanctioned and hugely privileged, cartel that amongst other things implemented this reckless and unsustainable official policy by lending more when the Bank of England artificially lowers rates and trying to rein in lending when it artificially raises them. And yes, they get fabulously rich from doing so.

The system is utterly corrupt, from Number 11 Downing Street and Number 1 Horse Guards via the Old Lady of Threadneedle Street, down to the antics of these client banks they sanction and oversee. They wreak havoc on economic decision making in the real economy and ensure that those most closely connected to power gain most from their market manipulation and the creation of artificially inflated purchasing power in the economy.

Over the past decade or so they have overseen a massive shovelling of money from those who can barely afford it to those who cannot even spend what they have, and are even now continuing to squeeze those earlier victims whilst the champagne flows in the offices of the bankers’ estate agents and luxury car dealerships. All sanctioned, no, instigated, by government and the central bank who claim to be working for us, the little people who naively think we put them in those positions of power to protect us from such scams.

If we are going to get all indignant about Barclays and the no doubt other banks that have been manipulating the interbank money markets, demanding criminal prosecutions and inquiries as we should, we must start with the mother of all market manipulators, the state and its agents at the the bank of banks in Threadneedle Street, and expose the economically devastating fraud at the very heart of the system.