How is fraud in a commercial index relevant to our understanding of money and central banking? Did the Enron scandal undermine our understanding of steam turbines?
How is the interbank interest rate being defined on the fly in-mente relevant to our understanding of some large central banks determining their total credit supply by punching some numbers into a computer ex nihilo?
> the interbank interest rate being defined on the fly
All prices are determined on the fly, certainly day-to-day ones. Libor wasn’t the interbank rate, it was one commercial offering, albeit a powerful one. The Fed Funds rate always was and now SOFR are transactionally derived, which is fundamentally different from Libor, which was never anything more than a survey.
> a finite amount of energy in this universe and yet here we are at "Practically all prices are determined on the fly"
This is a silly comparison. Stars don’t model their fusion output. Particles interact on the fly. There is also no model relating entropy to overnight collateralised borrowing rates.
> calculating physically intrinsic value for a sufficient number of commodities
The sum total positive energy contained in the universe can be calculated and predicted.
>Interbank funds aren’t a finite commodity.
This statement is obviously false and can run into brick walls in practice.
The comparison isn't silly in the slightest. Currencies must be coupled to a finite resource to function; Lest agent A buy all of agent B's gold using practically nothing but chutzpah.
That you think the comparison is "silly" shows limited/magical thinking on the subject.
No, it isn’t, though misunderstanding it isn’t even fundamental to the flaw in your thinking. A couple of banks can create and destroy an infinite amount of money among them with no real effect. JPMorgan credits UBS a trillion trillion trillion dollars at the latter’s JPMorgan account at the same time UBS credits JPMorgan at its UBS account, and then they both undo it a moment later. No real effect. Hell, JPMorgan could create the money with no counterbalance so they could look at it how pretty it is for an indefinite amount of time. Same deal. Regulators won’t be happy, but that’s because of the potential effects of UBS trying to buy the Fed’s balance sheet.
It’s when the interbank market interacts with broader markets that anything real happens.
> What need do banks have for that capability where the capability shouldn't clearly be criminalised?
Banks don't legally have that capability.
The point wasn't that banks do this. It's that it would have the same-real world effect (again, outside regulatory action and law enforcement) as me writing you a trillion-dollar IOU.
You screwed up the answer here in this classic Uber-commodity based economy (which no actual economist has ever proposed outside of thought experiments).
The traditional answer when people go down this path is “what ever the producer and consumer agree the price is based on a currency denominated in joules that can be extracted from an atom”.
By doing so you’ve eliminated all forms of value adding capabilities from your economic system. The paper clip is no more valuable than its unprocessed atomic components, which is clearly not how real value is derived (or your currency is completely divorced from value).
> it's accounting related rather than technology related
Precisely. The accounting scandal has as much to do with the underlying technology as the Libor scandal does with our understanding of the mechanics of banking. Nobody informed walked away from the Libor scandal rethinking the fundamentals of banking in the same way chickens didn’t get bioengineered in response to chicken Libor.
