Interest rates all over the world are mostly made up.
That's the verdict of a new study by the International Organization of Securities Commissions, a copy of which was obtained by Bloomberg. It found that more than half of the benchmark lending rates in the U.S., Europe and Asia are "calculated by methodologies that were unclear, not transparent and only rarely subject to specific regulatory standards or obligations." Less than half of all benchmark lending rates, in contrast, were based on actual market transactions.
In other words, the interest rates that affect personal and business loans, and hundreds of trillions of dollars in derivatives contracts around the world, are based on either guesses or lies: Not particularly comforting.
“The risk of manipulation will be greater where participants in the process have both incentive and opportunity to submit inaccurate data or apply a methodology inaccurately,” IOSCO wrote, according to Bloomberg. “Furthermore, where judgment is required in determining the data to be submitted, the problem is particularly acute.”
English translation: When banks can just make up these benchmark numbers, they're likely to cheat. Even when they can't just totally make up the numbers, they still try to find ways to cheat.
Value added is bullshit.
So are interests rates.
The numbers provided by the government are bullshit too.
Does anybody actually believe the unemployment rate?
Or the GDP numbers that are reported?
We live in this age where we give numbers and figures increasing importance even as it becomes clearer and clearer that they do not actually provide the truth we think they do.
Whether it's in education or in the economy, numbers are misleading us - beware the data fetishists who think everything can be measured, quantified and evaluated.
As The Flower Kings once noted, There is more to this world than we see...