HuffPO-

It’s been a bit surprising to witness the conspicuous lack of pitchforks and torches, what with all the hubbub about the Libor having been rigged. It’s not as if it’s headline news though. The media, if they mention it all, has given it a requisite plug between Tom and Katie’s break up and the weather. If it makes it past the cutting room floor, it’s being downplayed as inconsequential and unimportant. They’re describing it as an inter-bank interest rate, rolling their eyes and sloughing it off as something that only affects those financial geniuses on Wall Street. True, the definition does lend itself to that assumption. From Wikipedia: The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. Move a long, nothing to see here.

So here’s what you need to know if you don’t read past the next few paragraphs: As Matt Taibbi puts it in an interview on Eliot Spitzer’s Viewpoint, “Libor is the Sun at the center of the financial universe … this is like finding out the world is built on quicksand.” Libor, Spitzer clarifies, affects every interest rate in the world.

More importantly, Libor is the standard interest rate used to determine consumer interest rates on credit cards, adjustable rate mortgages, interest-only mortgages, and a majority of small business loans. Lenders earn money by offering consumers loans based on the Libor rate. For example: “LIBOR +1” or the “LIBOR rate + one percent.” Meaning that as Libor moves up or down, it can change the amount you pay every month to service your debt. If you have a small business, own a home, finance a car, have a credit card, Libor is in your life.

[HUFFINGTON POST]

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