The forex market is one of the biggest and most liquid markets in the world with over $5 trillion per day of trading. Given this you would think that it would be a very difficult market to rig but you would be wrong. One problem is that the top 10 banks account for over 75% of the trading, so it is in fact quite a concentrated market. The other thing is that it is possible to rig the market very temporarily, for example, large orders to buy dollars (i.e. sell euros) at certain times of the day say at 16:00 can temporarily move the exchange rate for a minute or so say from $1.2000/€1 to say $1.1970/€1. The rate at this time might then be relevant for the settlement of futures, options and swap contracts (i.e. derivatives) that expire at that time or for the settlement of certain customers trades, so that small changes in the exchange rate then mean big profits on those contracts settlement. This is what seems to have happened in this case. The banks involved are Citigroup $965 million, Barclays $650 million, JPMorgan $550 million, RBS $395 million, Bank of America $205 billion. to the US Justice Department plus a combined $1.6 billion to the Federal Reserve and $1.3 billion to New York Department of Financial Services, the Commodity Futures Trading Commission and the UK Financial Conduct Authority. Other key banks have yet to settle including HSBC and Deutsche Bank. Following on from the LIBOR scandal we now know banks have rigged two of the most important markets in the global financial system. We are supposed to trust banks this conduct is unacceptable the pity is that as usual it is the innocent shareholders that suffer the most. As I have said before fines need to come out of banks bonus pools not from shareholders. A link to the Bloomberg story is here LINK1
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Let's be clear things are tough for Greece since 2009 it's economy is 25% smaller its debt to GDP ratio is around 180% and it has a hard left government that wants to stay in the Euro yet fail to implement reforms that creditor governments and agencies like the ECB, EU and IMF require before new loans are extended. It is also clear that the Greek repayment schedule is such that new funds are required to pay creditors or it simply cannot pay them back ! It has existing Treasury bills and Treasury bonds to redeem making this year a particularly tough one. A lot of commentators, particularly Americans, tend to think a default on debt repayments means Greece would have to leave the Euro. This is simply not true a default on its euro denominated debt will hit creditors but not automatically mean Greece leaves the Euro. In fact I think there is every reason to believe Greece could actually stay in the Euro in the event of a default as it has a primary fiscal deficit of only around 1% meaning that its taxes are roughly the same as its Government expenditure. It is the interest payments on its National Debt that make the deficit much bigger but these payments cease in a default scenario. In my view the most likely scenario remain that Greece stays in the Euro, undertakes reforms sufficient to "rollover" its debt and eventually we get a further debt reduction package in couple of years time. It is not in the interests of the creditors or Greece that it leaves the Euro and goes back to a new drachma. The loss of payments to the creditors and the potential economic shock of a country leaving the Euro would put immediate pressure on Ireland, Portugal , Italy and Spain who would all be vulnerable to speculation about possible exits from the Euro. The Guardian has a nice article today discussing the benefits/costs of Greece exiting the Euro LINK1 There is a nice schedule of interest and principal repayments by the Greeks to its creditors here LINK2 
I am no expert art lover but I do like Picasso but in no way is his Women of Algiers painting worth $160 million except to the greater fool who thinks they can sell it on to someone else at an even higher price somewhere down the road. With 12% commission costs it will be a total of $179.2 million. Good luck to the buyer they will need it.LINK1
The art market is a particularly wierd one as each work of art is unique and hence is worth what the higgest bidder is willing to pay above the next potential buyer. There are relatively few buyers willing to pay $100 million plus for a work of art and the market can become very illiquid for long periods of time. There is also quite a lot of evidence that art can be used to money launder and keeping, maintaining and insuring one of thse works of art is quite a costly business. The top end art market has been very hot recently and I just can't help feeling we are at the peak of a bubble. Of course the dealers will hype the market as much as they can but this really is a case of caveat emptor ( buyer beware) at these crazy prices.
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AuthorThe author of this blog is Keith Pilbeam who is currently Professor of International Economics and Finance at City, University of London. 
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