England's Barclays Bank has been fined 1/4 BILLION POUNDS over their manipulation of the London Interbank Offered Rate (LIBOR).

Here is what LIBOR is all about, and what it means to you.

LIBOR is the average cost of borrowing for banks, calculated daily. That average is used to price trillions of pounds of loans and products across the world. The rate is worked out by asking banks to submit their borrowing costs, discarding the top four and bottom four rates, and taking the average of the rest. There are several Libor rates, of which 3-month Libor is seen as the benchmark. Libor is also calculated for different currencies of which Euribor, in euros, is one.

So what did Barclays do?

From 2005, Barclays traders started asking Barclays treasury function to submit artificial Libor rates to benefit their positions and boost profits. From late 2007, orders came through from senior management who were worried that high Libor rates were making Barclays look risky. To combat the perception, Barclays deliberately understated their rates. They LIED.

So what does this mean for us?

Barclays’ lies would have had a tiny affect on the final Libor readings if not for the fact that those very same Libor readings were used to price hundreds of TRILLIONS of pounds worth of debt stock. In this case, even the smallest change has enormous implications. Because of Barclays lies, lenders and borrowers paid more or received less than they should have. Those costs seeped through to the real economy, where households and companies have unknowingly picked up the tab.

In other words, it's all a huge con-job stiffing.