UK to Make Currency Manipulation a Crime

British authorities are planning criminal penalties for those who rig benchmark financial and commodity rates. The government will soon propose rules that would criminalize manipulation of the foreign-exchange, fixed-income and commodities market rates. Britain has already introduced a maximum seven-year jail term for trying to manipulate the LIBOR interbank interest rate, and plans to introduce similar criminal penalties for rigging benchmarks in currency, commodity and fixed income markets. Chancellor of the Exchequer George Osborne used his post’s annual Mansion House Speech on Thursday night to announce plans for a crackdown on market scandals that “call into question the integrity of our financial markets.” Osborne said, “We’re not going to wait for more scandals to hit – instead we are going to act now, and get ahead.” “We will introduce tough new domestic criminal offences for market abuse, rather than opt in to European rules we do not think suitable or sufficient for our needs,” Osborne said in a speech to London's financial community. The finance ministry said the new rules would be as tough, if not tougher than the upcoming EU laws. EU laws taking effect in 2016 will make it a criminal offence with a four-year jail term to rig key prices in a wide range of financial markets. But Osborne does not want these laws to apply in London, the world's biggest center for currency trading. Osborne told in April that allegations of foreign exchange (“ForEx”) manipulation was “potentially very, very serious”. Others have warned that the scandal could be just as bad as the Libor rate rigging scandal that tarnished the banking industry, claiming the scalp of Barclays CEO, Bob Diamond. In June 2012 Barclays was fined more than $450 million by regulators in the UK and US, prompted scrutiny of other benchmarks used to price financial products and has led to investigations into the $5trillion-a-day currency markets as well as an analysis of gold pricing. On Thursday, Osborne was speaking alongside the governor of the Bank of England, Mark Carney, who last month warned that capitalism could destroy itself unless bankers realize they have an obligation to create a fairer society, the Bank of England governor has warned. The Bank's governor warned that there was a growing sense that the basic social contract at the heart of capitalism was breaking down amid rising inequality. “We simply cannot take the capitalist system, which produces such plenty and so many solutions, for granted. Prosperity requires not just investment in economic capital, but investment in social capital.” Unfortunately, neither Osborne, nor Carnet can realize that the contemporary monetary system is manipulative at the root. Because fiat money is intrinsically worthless, this money cannot be used as a measure of the quality or quantity of work. Fiat money is just creating by a whim of central banks. If governments are going to imprison people who rig currencies issued by the states, people will use private or virtual currencies (e.g., bitcoin). The tougher the regulation of governments, the nearer the end of modern financial system.