Here’s more information relating to the global monetary system – who controls it and how it works. This article discusses the Trilateral Commission, the new world order, the Bank for International Settlements and the global elite’s plan for a one world currency.
jg – June 14, 2010
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Global Banking: The Bank for International Settlements
http://www.augustreview.com/
http://www.augustreview.com/issues/banking/global_banking:_the_bank_for_international_settlements_200510147/
Who controls global monetary affairs? The BIS! Based in Basle, Switzerland, the BIS is central bank to central banks. The BIS has greater immunity than a sovereign nation, is accountable to no one, runs global monetary affairs and is privately owned. This is a must-read report to understand the globalization process.
By Patrick Wood, Editor
October 15, 2005
Preface
When David Rockefeller and Zbigniew Brzezinski founded the Trilateral Commission in 1973, the intent was to create a "New International Economic Order" (NIEO). To this end, they brought together 300 elite corporate, political and academic leaders from North America, Japan and Europe.
Few people believed us when we wrote about their nefarious plans back then. Now, we look back and clearly see that they did what they said they were going to do... globalism is upon us like an 8.6 magnitude earthquake.
The question is, "How did they do it?" Keep in mind, they had no public mandate from any country in the world. They didn't have the raw political muscle, especially in democratic countries where voting is allowed. They didn't have global dictatorial powers.
Indeed, how did they do it?
The answer is the Bank for International Settlements (BIS), self-described as the "central bank for central bankers", that controls the vast global banking system with the precision of a Swiss watch.
This report offers a concise summation of BIS history, structure and current activities.
Introduction
The famous currency expert Dr. Franz Pick once stated, "The destiny of the currency is, and always will be, the destiny of a nation."
With the advent of rampant globalization, this concept can certainly be given a global context as well: "The destiny of currencies are, and always will be, the destiny of the world."
Even though the BIS is the oldest international banking operation in the world, it is a low profile organization, shunning all publicity and notoriety. As a result, there is very little critical analysis written about this important financial organization. Further, much of what has been written about it is tainted by its own self-effacing literature.
The BIS can be compared to a stealth bomber. It flies high and fast, is undetected, has a small crew and carries a huge payload. By contrast, however, the bomber answers to a chain of command and must be refueled by outside sources. The BIS, as we shall see, is not accountable to any public authority and operates with complete autonomy and self-sufficiency.
Leading up to Founding
As we will see, the BIS was founded in 1930 during a very troubled time in history. Some knowledge of that history is critical to understanding why the BIS was created, and for whose benefit.
There are three figures that play prominently in the founding of the BIS: Charles G. Dawes, Owen D. Young and Hjalmar Schacht of Germany.
Charles G. Dawes was director of the U.S. Bureau of the Budget in 1921, and served on the Allied Reparations Commission starting in 1923. His latter work on "stabilizing Germany's economy" earned him the Nobel Peace Prize in 1925. After being elected Vice President under President Calvin Coolidge from 1925-1929, and appointed Ambassador to England in 1931, he resumed his personal banking career in 1932 as chairman of the board of the City National Bank and Trust in Chicago, where he remained until his death in 1951.
Owen D Young was an American industrialist. He founded RCA (Radio Corporation of America) in1919 and was its chairman until 1933. He also served as the chairman of General Electric from 1922 until 1939. In 1932, Young sought the democratic presidential nomination, but lost to Franklin Delano Roosevelt.
More on Hjalmar Schacht later.
In the aftermath of World War I and the impending collapse of the German economy and political structure, a plan was needed to rescue and restore Germany, which would also insulate other economies in Europe from being affected adversely.
The Versailles Treaty of 1919 (which officially ended WWI) had imposed a very heavy reparations burden on Germany, which required a repayment schedule of 132 billion gold marks per year. Most historians agree that the economic upheaval caused in Germany by the Versailles Treaty eventually led to Adolph Hitler's rise to power.
In 1924 the Allies appointed a committee of international bankers, led by Charles G. Dawes (and accompanied by J.P. Morgan agent, Owen Young), to develop a plan to get reparations payments back on track. Historian Carroll Quigley noted that the Dawes Plan was "largely a J.P. Morgan production"1 The plan called for $800 million in foreign loans to be arranged for Germany in order to rebuild its economy.
In 1924, Dawes was chairman of the Allied Committee of Experts, hence, the "Dawes Plan." He was replaced as chairman by Owen Young in 1929, with direct support by J.P. Morgan. The "Young Plan" of 1928 put more teeth into the Dawes Plan, which many viewed as a strategy to subvert virtually all German assets to back a huge mortgage held by the United States bankers.
Neither Dawes nor Young represented anything more than banking interests. After all, WWI was fought by governments using borrowed money made possible by the international banking community. The banks had a vested interest in having those loans repaid!
In 1924, the president of Reichsbank (Germany's central bank at that time) was Hjalmar Schacht. He had already had a prominent role in creating the Dawes Plan, along with German industrialist Fritz Thyssen and other prominent German bankers and industrialists.
The Young Plan was so odious to the Germans that many credit it as a precondition to Hitler's rise to power. Fritz Thyssen, a leading Nazi Industrialist, stated
"I turned to the National socialist party only after I became convinced that the fight against the Young Plan was unavoidable if complete collapse of Germany was to be prevented." 2
Some historians too quickly credit Owen Young as the idea-man for the Bank for International Settlements. It was actually Hjalmar Schacht who first proposed the idea3, which was then carried forward by the same group of international bankers who brought us the Dawes and Young Plans.
It is not necessary to jump to conclusions as to the intent of these elite bankers, so we will instead defer to the insight of renowned Georgetown historian, Carroll Quigley:
"The Power of financial capitalism had another far reaching plan, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalistic fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world's central banks, which were themselves private corporations. Each central bank, in the hands of men like Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the Bank of France, and Hjalmar Schacht of the Reichsbank, sought to dominate its government by its ability to control treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence co-operative politicians by subsequent rewards in the business world."4 [Bold emphasis added]
So here we have a brief sketch of what led up to the founding of the BIS. Now we can examine the nuts and bolts of how the BIS was actually put together.
The Hague Agreement of 1930
The formation of the BIS was agreed upon by its constituent central banks in the so-called Hague Agreement on January 20, 1930, and was in operation shortly thereafter. According to the Agreement,
The duly authorised representatives of the Governments of Germany, of Belgium, of France, of the United Kingdom of Great Britain and Northern Ireland, of Italy and of Japan of the one part; And the duly authorised representatives of the Government of the Swiss Confederation of the other part Assembled at the Hague Conference in the month of January, 1930, have agreed on the following:
Article 1. Switzerland undertakes to grant to the Bank for International Settlements, without delay, the following Constituent Charter having force of law: not to abrogate this Charter, not to amend or add to it, and not to sanction amendments to the Statutes of the Bank referred to in Paragraph 4 of the Charter otherwise than in agreement with the other signatory Governments.5
As we will see, German reparation payments (or lack thereof) had little to do with the founding of the BIS, although this is the weak explanation given since its founding. Of course, Germany would make a single payment to the BIS, which in turn would deposit the funds into the respective central bank accounts of the nations to whom payments were due. (It would be the subject of another paper to show the shallowness of this operation: Money and gold were shuffled around, but the net amount that Germany actually paid was very small.)
The original founding documents of the BIS have little to say about Germany, however, and we can look directly to the BIS itself to see its original purpose:
“The objects of the Bank are: to promote the co-operation of central banks and to provide additional facilities for international operations; and to act as trustees or agent in regard to international financial settlements entrusted to it under agreements with the parties concerned.” 6
Virtually every in-print reference to the BIS, including their own documents, consistently refer to it as "the central banker's central bank."
So, the BIS was established by an international charter and was headquartered in Basle, Switzerland.
BIS Ownership
According to James C. Baker, pro-BIS author of The Bank for International Settlements: Evolution and Evaluation, "The BIS was formed with funding by the central banks of six nations, Belgium, France, Germany, Italy, Japan, and the United Kingdom. In addition, three private international banks from the United States also assisted in financing the establishment of the BIS."7
Each nation's central bank subscribed to 16,000 shares. The U.S. central bank, the Federal Reserve, did not join the BIS, but the three U.S. banks that participated got 16,000 shares each. Thus, U.S. representation at the BIS was three times that of any other nation. Who were these private banks? Not surprisingly, they were J.P. Morgan & Company, First National Bank of New York and First National Bank of Chicago.
On January 8, 2001, an Extraordinary General Meeting of the BIS approved a proposal that restricted ownership of BIS shares to central banks. Some 13.7% of all shares were in private hands at that time, and the repurchase was accomplished with a cash outlay of $724,956,050. The price of $10,000 per share was over twice the book value of $4,850.
It is not certain what the repurchase accomplished. The BIS claimed that it was to correct a conflict of interest between private shareholders and BIS goals, but it offered no specifics. It was not a voting issue, however, because private owners were not allowed to vote their shares.8
Sovereignty and Secrecy
It is not surprising that the BIS, its offices, employees, directors and members share an incredible immunity from virtually all regulation, scrutiny and accountability.
In 1931, central bankers and their constituents were fed up with government meddling in world financial affairs. Politicians were viewed mostly with contempt, unless it was one of their own who was the politician. Thus, the BIS offered them a once-and-for-all opportunity to set up the "apex" the way they really wanted it -- private. They demanded these conditions and got what they demanded.
A quick summary of their immunity, explained further below, includes
• diplomatic immunity for persons and what they carry with them (i.e., diplomatic pouches)
• no taxation on any transactions, including salaries paid to employees
• embassy-type immunity for all buildings and/or offices operated by the BIS
• no oversight or knowledge of operations by any government authority
• freedom from immigration restrictions
• freedom to encrypt any and all communications of any sort
• freedom from any legal jurisdiction9
Further, members of the BIS board of directors (for instance, Alan Greenspan) are individually granted special benefits:
• “immunity from arrest or imprisonment and immunity from seizure of their personal baggage, save in flagrant cases of criminal offence;”
• “inviolability of all papers and documents;”
• “immunity from jurisdiction, even after their mission has been accomplished, for acts carried out in the discharge of their duties, including words spoken and writings;”
• “exemption for themselves, their spouses and children from any immigration restrictions, from any formalities concerning the registration of aliens and from any obligations relating to national service in Switzerland ;”
• “the right to use codes in official communications or to receive or send documents or correspondence by means of couriers or diplomatic bags.”10
Lastly, all remaining officials and employees of the BIS have the following immunities:
• “immunity from jurisdiction for acts accomplished in the discharge of their duties, including words spoken and writings, even after such persons have ceased to be Officials of the Bank;”[bold emphasis added]
• “exemption from all Federal, cantonal and communal taxes on salaries, fees and allowances paid to them by the Bank…”
• exempt from Swiss national obligations, freedom for spouses and family members from immigration restrictions, transfer assets and properties – including internationally – with the same degree of benefit as Officials of other international organizations.11
Of course, a corporate charter can say anything it wants to say and still be subject to outside authorities. Nevertheless, these were the immunities practiced and enjoyed from 1930 onward. On February 10, 1987, a more formal acknowledgement called the "Headquarters Agreement" was executed between the BIS and the Swiss Federal Council and basically clarified and reiterated what we already knew:
Article 2
Inviolability
• The buildings or parts of buildings and surrounding land which, whoever may be the owner thereof, are used for the purposes of the Bank shall be inviolable. No agent of the Swiss public authorities may enter therein without the express consent of the Bank. Only the President, the General Manager of the Bank, or their duly authorised representative shall be competent to waive such inviolability.
• The archives of the Bank and, in general, all documents and any data media belonging to the Bank or in its possession, shall be inviolable at all times and in all places.
• The Bank shall exercise supervision of and police power over its premises.
Article 4
Immunity from jurisdiction and execution
• The Bank shall enjoy immunity from criminal and administrative jurisdiction, save to the extent that such immunity is formally waived in individual cases by the President, the General Manager of the Bank, or their duly authorised representative.
• The assets of the Bank may be subject to measures of compulsory execution for enforcing monetary claims. On the other hand, all deposits entrusted to the Bank, all claims against the Bank and the shares issued by the Bank shall, without the prior agreement of the Bank, be immune from seizure or other measures of compulsory execution and sequestration, particularly of attachment within the meaning of Swiss law. 12 [bold emphasis added]
As you can see, the BIS, its directors and employees (past and present) can do virtually anything and everything they want, with complete secrecy, immunity and with no one looking over their shoulders. It was truly a banker's dream come true, and it paved the international freeway for the rampant financial globalism that we see manifest today.
Day-to-Day Operations
Acting as a central bank, the BIS has sweeping powers to do anything for its own account or for the account of its member central banks. It is like a two-way power-of-attorney – any party can act as agent for any other party.
Article 21 of the original BIS statutes define day-to-day operations:
1. buying and selling of gold coin or bullion for its own account or for the account of central banks;
2. holding gold for its own account under reserve in central banks;
3. accepting the supervision of gold for the account of central banks;
4. making advances to or borrowing from central banks against gold, bills of exchange, and other short-term obligations of prime liquidity or other approved securities;
5. discounting, rediscounting, purchasing, or selling with or without its endorsement bills of exchange, checks, and other short-term obligations of prime liquidity;
6. buying and selling foreign exchange for its own account or for the account of central banks;
7. buying and selling negotiable securities other than shares for its own account or for the account of central banks;
8. discounting for central banks bills taken from their portfolio and rediscounting with central banks bills taken from its own portfolio;
9. opening and maintaining current or deposit accounts with central banks;
10. accepting deposits from central banks on current or deposit account;
11. accepting deposits in connection with trustee agreements that may be made between the BIS and governments in connection with international settlements.;
12. accepting such other deposits that, as in the opinion of the Board of the BIS, come within the scope of the BIS’ functions.13
The BIS also may
1. act as agent or correspondent for any central bank
2. arrange with any central bank for the latter to act as its agent or correspondent;
3. enter into agreements to act as trustee or agent in connection with international settlements, provided that such agreements will not encroach on the obligations of the BIS toward any third parties.14
Why is "agency" an important issue? Because any member of the network can obscure transactions from onlookers. For instance, if Brown Brothers, Harriman wanted to transfer money to a company in Nazi Germany during WWII (which was not "politically correct" at that time), they would first transfer the funds to the BIS thus putting the transaction under the cloak of secrecy and immunity that is enjoyed by the BIS but not by Brown Brothers, Harriman. (Such laundering of Wall Street money was painstakingly noted in Wall Street and the Rise of Hitler, by Antony C. Sutton.)
There are a few things that the BIS cannot do. For instance, it does not accept deposits from, or provide financial services to, private individuals or corporate entities. It is also not permitted to make advances to governments or open current accounts in their name.15 These restrictions are easily understood when one considers that each central bank has an exclusive franchise to loan money to their respective government. For instance, the U.S. Federal Reserve does not loan money to the government of Canada. In like manner, central banks do not loan money directly to the private or corporate clients of their member banks.
How Decisions are Made
The board of directors consist of the heads of certain member central banks. Currently, these are:
• Nout H E M Wellink, Amsterdam (Chairman of the Board of Directors)
• Hans Tietmeyer, Frankfurt am Main (Vice-Chairman)
• Axel Weber, Frankfurt am Main
• Vincenzo Desario, Rome
• Antonio Fazio, Rome
• David Dodge, Ottawa
• Toshihiko Fukui, Tokyo
• Timothy F Geithner, New York
• Alan Greenspan, Washington
• Lord George, London
• Hervé Hannoun, Paris
• Christian Noyer, Paris
• Lars Heikensten, Stockholm
• Mervyn King, London
• Guy Quaden, Brussels
• Jean-Pierre Roth, Zürich
• Alfons Vicomte Verplaetse, Brussels16
Of these, five members ( Canada, Japan, the Netherlands, Sweden and Switzerland) are currently elected by the shareholders. The majority of directors are "ex officio," meaning they are permanent and are automatically a part of any sub-committee.
The combined board meets at least six times per year, in secret, and is briefed by BIS management on financial operations of the bank. Global monetary policy is discussed and set at these meetings.
It was reported in 1983 that there is an inner club of the half dozen central bankers who are more or less in the same monetary boat: Germany, U.S., Switzerland, Italy, Japan and England.17 The existence of an inner club is neither surprising nor substantive: the whole BIS operation is 100% secret anyway. It is not likely that members of the inner club have significantly different beliefs or agendas apart from the BIS as a whole.
How the BIS works with the IMF and the World Bank
The interoperation between the three entities is understandably confusing to most people, so a little clarification will help.
The International Monetary Fund (IMF) interacts with governments whereas the BIS interacts only with other central banks. The IMF loans money to national governments, and often these countries are in some kind of fiscal or monetary crisis. Furthermore, the IMF raises money by receiving "quota" contributions from its 184 member countries. Even though the member countries may borrow money to make their quota contributions, it is, in reality, all tax-payer money.18
The World Bank also lends money and has 184 member countries. Within the World Bank are two separate entities, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The IBRD focuses on middle income and credit-worthy poor countries, while the IDA focuses on the poorest of nations. In funding itself, the World Bank borrows money by direct lending from banks and by floating bond issues, and then loans this money through IBRD and IDA to troubled countries.19
The BIS, as central bank to the other central banks, facilitates the movement of money. They are well-known for issuing "bridge loans" to central banks in countries where IMF or World Bank money is pledged but has not yet been delivered. These bridge loans are then repaid by the respective governments when they receive the funds that had been promised by the IMF or World Bank.20
The IMF is the BIS' "ace in the hole" when monetary crisis hits. The 1998 Brazil currency crisis was caused by that country's inability to pay inordinate accumulated interest on loans made over a protracted period of time. These loans were extended by banks like Citigroup, J.P. Morgan Chase and FleetBoston, and they stood to lose a huge amount of money.
The IMF, along with the World Bank and the U.S., bailed out Brazil with a $41.5 billion package that saved Brazil, its currency and, not incidentally, certain private banks.
Congressman Bernard Sanders (I-VT), ranking member of the International Monetary Policy and Trade Subcommittee, blew the whistle on this money laundry operation. Sander's entire congressional press release is worth reading:
IMF Bailout for Brazil is Windfall to Banks, Disaster for US Taxpayers Says Sanders
BURLINGTON, VERMONT - August 15 - Congressman Bernard Sanders (I-VT), the Ranking Member of the International Monetary Policy and Trade Subcommittee, today called for an immediate Congressional investigation of the recent $30 billion International Monetary Fund (IMF) bailout of Brazil.
Sanders, who is strongly opposed to the bailout and considers it corporate welfare, wants Congress to find out why U.S. taxpayers are being asked to provide billions of dollars to Brazil and how much of this money will be funneled to U.S. banks such as Citigroup, FleetBoston and J.P. Morgan Chase. These banks have about $25.6 billion in outstanding loans to Brazilian borrowers. U.S. taxpayers currently fund the IMF through a $37 billion line of credit.
Sanders said, "At a time when we have a $6 trillion national debt, a growing federal deficit, and an increasing number of unmet social needs for our veterans, seniors, and children, it is unacceptable that billions of U.S. taxpayer dollars are being sent to the IMF to bailout Brazil."
"This money is not going to significantly help the poor people of that country. The real winners in this situation are the large, profitable U.S. banks such as Citigroup that have made billions of dollars in risky investments in Brazil and now want to make sure their investments are repaid. This bailout represents an egregious form of corporate welfare that must be put to an end. Interestingly, these banks have made substantial campaign contributions to both political parties," the Congressman added.
Sanders noted that the neo-liberal policies of the IMF developed in the 1980's pushing countries towards unfettered free trade, privatization, and slashing social safety nets has been a disaster for Latin America and has contributed to increased global poverty throughout the world. At the same time that Latin America countries such as Brazil and Argentina followed these neo-liberal dictates imposed by the IMF, from 1980-2000, per capita income in Latin America grew at only one-tenth the rate of the previous two decades.
Sanders continued, "The policies of the IMF over the past 20 years advocating unfettered free trade, privatizing industry, deregulation and slashing government investments in health, education, and pensions has been a complete failure for low income and middle class families in the developing world and in the United States . Clearly, these policies have only helped corporations in their constant search for the cheapest labor and weakest environmental regulations. Congress must work on a new global policy that protects workers, increases living standards and improves the environment."
One can surmise that a financial circle exists where the World Bank helps nations get into debt, then when these countries can't pay their massive loans, the IMF bails them out with taxpayer money -- and in the middle stands the BIS, collecting fees as the money travels back and forth like the ocean tide, while assuring everyone that all is well.
BIS dumps gold-backed Swiss Francs for SDR's
On March 10, 2003, the BIS abandoned the Swiss gold franc as the bank's unit of account since 1930, and replaced it with the SDR.
SDR stands for Special Drawing Rights and is a unit of currency originally created by the IMF. According to Baker,
"The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. SDR's are allocated to member countries in proportion to their IMF quotas. The SDR also serves as the unit of account of the IMF and some other international organizations. Its value is based on a basket of key international currencies."21
This "basket" currently consists of the euro, Japanese yen, pound sterling and the U.S. dollar.
The BIS abandonment of the 1930 gold Swiss franc removed all restraint from the creation of paper money in the world. In other words, gold backs no national currency, leaving the central banks a wide-open field to create money as they alone see fit. Remember, that almost all the central banks in the world are privately-held entities, with an exclusive franchise to arrange loans for their respective host countries.
Regional and Global Currencies: SDR's, Euros and Ameros
There is no doubt that the BIS is moving the world toward regional currencies and ultimately, a global currency. The global currency could well be an evolution of the SDR, and may explain why the BIS recently adopted the SDR as its primary reserve currency.
The Brandt Equation, 21st Century Blueprint for the New Global Economy notes, for instance, that
Since the SDR is the world's only means of meeting international payments that has been authorized through international contract, "The SDR therefore represents a clear first step towards a stable and permanent international currency"22 [bold emphasis added]
As to regional currencies, the BIS has already been hugely successful in launching the euro in Europe. Armed with new technical and social know-how, the BIS' next logical step is to focus on America and Asia.
For instance, according to BIS Papers No. 17, Regional currency areas and the use of foreign currencies,
"Canada, Mexico and the United States are members of the trade group NAFTA. Given the high proportion of Canada and Mexico’s trade with the United States, a NAFTA dollar or “Amero” has been proposed by some Canadian academics such as Grubel (1999). See also Beine and Coulombe (2002) and Robson and Laidler (2002)."23
Assuming that NAFTA permanently identifies Canada, the U.S. and Mexico as one trading block, then North America will look like the European Union and the Amero will function like the Euro. All of the work put into the SDR would be perfectly preserved by simply substituting the Amero for the U.S. dollar when they choose to bring the Amero to ascendancy over the dollar.
For those American readers who do not grasp the significance of the adoption of the euro by European Union countries, consider how one American globalist describes it.
C. Fred Bergsten is a prominent and core Trilateral Commission member and head of the Institute for International Economics. On January 3, 1999, Bergsten wrote in the Washington Post
"The adoption of a common currency is by far the boldest chapter of European integration. Money traditionally has been an integral element of national sovereignty ...and the decision by Germany and France to give up their mark and franc ...represents the most dramatic voluntary surrender of sovereignty in recorded history. The European Central Bank that will manage the euro is a truly supranational institution".24 [bold emphasis added]
Bergsten will have to rephrase this when the U.S. gives up the dollar for the amero -- that will become the most dramatic voluntary surrender of sovereignty in recorded history!
Conclusions
Our credo is "Follow the money, follow the power." This report has endeavored to follow the money. We find that:
• The BIS is central bank to all major central banks in the world
• It is privately owned by central banks themselves, most of whom are also private
• It was founded under questionable circumstances by questionable people
• It is accountable to no one, especially government bodies
• It operates in complete secrecy and is inviolable
• Movement of money is obscured and hidden when routed through the BIS
• The BIS is targeting regional currency blocks and ultimately, a global currency
• It has been hugely successful at building the New International Economic Order, along with its attendant initiatives on global governance.
As to "follow the power," another paper will more fully explore the influence of power that the BIS exerts over other banks, nations and governments. For your own consideration in the meantime, Proverbs 22:7 provides a useful compass: "The rich rule over the poor, and the borrower is servant to the lender".
NOTE: Carl Teichrib, World Research Library Senior Fellow, contributed to this report.
Footnotes
1. Quigley, Tragedy & Hope, (MacMillan, 1966), p.308
2. Edgar B Nixon, ec., Franklin D. Roosevelt and Foreign Affairs, Volume III (Cambridge: Balknap Press, 1969) p. 456
3. Sutton, Wall Street and the Rise of Hitler, (GSC & Associates, 2002) p. 26
4. Quigley, op cit, p. 324
5. BIS web site, Extracts from the Hague Convention, http://www.bis.org/about/conv-ex.htm
6. BIS, Statutes of the Bank for International Settlements Article 3 [as if January 1930, text as amended on March 10,2003], Basic Texts (Basle, August 2003), p. 7-8
7. Baker, The Bank for International Settlements: Evolution and Evaluation, (Quorum, 2002), p. 20
8. ibid., p. 16
9. BIS, Protocol Regarding the Immunities of the Bank for International Settlements, Basic Texts, (Basle, August 2003), p. 33
10. ibid, Article 12, p.43.
11. ibid, p. 44
12. BIS, Extracts from the Headquarters Agreement, http://www.bis.org/about/hq-ex.htm
13. Baker, op cit, p. 26-27
14. ibid, p. 27
15. BIS, The BIS in profile, Bank for International Settlements flyer, June, 2005
16. BIS, Board of Directors, www.bis.org/about/board.htm
17. Epstein, Ruling the World of Money, Harper's Magazine, 1983
18. IMF web site, http://www.imf.org
19. World Bank web site. http://www.WorldBank.org
20. Baker, op cit, p. 141-142
21. IMF web site, http://www.imf.org/external/np/exr/facts/sdr.htm
22. The Brandt Equation: 21 st Century Blueprint for the New Global Economy. The Brandt Proposals – A Report Card: Money and Finances. See http://www.brandt21forum.info/1ckMoney.htm.
23. BIS, Regional currency areas and the use of foreign currencies, BIS Papers No. 17, September, 2003
24. Washington Post, The Euro Could Be Good for Trans-Atlantic Relations, C. Fred Bergsten, January 3, 1999
Books for Purchase:
Quigley, Tragedy & Hope, (MacMillan, 1966)
Sutton, Wall Street and the Rise of Hitler, (GSC & Associates, 2002)
Baker, The Bank for International Settlements: Evolution and Evaluation, (Quorum, 2002)
Showing posts with label The Bank for International Settlements. Show all posts
Showing posts with label The Bank for International Settlements. Show all posts
Friday, September 15, 2006
BIS Warns Countries Over Debt - June 28 2010
Here we see the people behind the New World Order telling us what’s coming – a global ‘double-dip’ recession/depression. You know we’re nearing something significant if we see quotes like this in mainstream media.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
Let’s apply some truth to the statement above. What are the ‘remaining vulnerabilities’? That would be a world monetary system saturated with debt. What is the ‘intensive care’ mentioned above? That would be all of the various government ‘stimulus’ packages that have done nothing but prolong the inevitable collapse of the system while increasing sovereign debt around the world by massive amounts.
This is like pulling a drowning man out of the water – giving him a few moments to breathe – and then tossing him back in the water. Thanks for the help.
Basically, you and I are being told that the nations of the world are in a no-win situation – compliments of the world’s current monetary system. Get ready for some ‘solutions’ that will replace the current system. It’s only a matter of time.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
jg – June 28, 2010
__________________________________
JUNE 28, 2010, 8:40 A.M. ET
BIS Warns Countries Over Debt
By NATASHA BRERETON
Wall St. Journal
BASEL, Switzerland—Global policy makers face a "daunting" task to balance their support for still-fragile economies and markets, while avoiding unwanted side effects from long-standing stimulus policies, the Bank for International Settlements said Monday.
In its annual report, the bank for central banks highlighted the risks posed by high public-debt levels, concerns about which are already jeopardizing recovery in the euro zone, and in the longer term could curb potential growth and make it harder to keep inflation low and stable.
Central banks will have to take the impact of much-needed fiscal tightening into consideration when judging their appropriate policy stance, but they must also be aware of the dangerous distortions that can occur from keeping interest rates extremely low for an extended period, it warned.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
European Union finance ministers and the International Monetary Fund agreed last month to commit €750 billion ($928.95 billion) to support euro-zone governments that have difficulty borrowing in the international bond markets, after investors' fears about Greece's creditworthiness spread to other countries.
The European Central Bank began to buy euro-zone government bonds in an effort to bring down borrowing costs, while the U.S. Federal Reserve also simultaneously reopened dollar swap lines with several major central banks.
The BIS said that events in Greece underscored the risk that highly indebted governments now have hardly any financial room for maneuver, and may not be able to act as buyers of last resort to save their banks in a crisis.
Unless countries take resolute action to address their fiscal problems, there's a "key risk" that investor concerns will worsen and engulf other countries, it warned. "The sovereign debt crisis in Greece is clearly jeopardizing Europe's nascent recovery from the deep recession brought on by the earlier crisis," it said.
The BIS also noted that persistently higher levels of public debt over the longer run could make economies more vulnerable to adverse shocks, reduce their growth potential and endanger prospects for monetary stability.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
While acknowledging that such scenarios are unlikely in the near-term, a greater likelihood that they might come to pass could push up public inflation expectations, prompt investors to demand greater compensation for inflation risk and cause medium- and long-term interest rates to rise.
"So far, there is no evidence that inflation expectations have become unanchored," the BIS said. "However, a failure by governments to make headway in restoring fiscal sustainability increases the risk that inflation expectations may abruptly and unexpectedly change."
The BIS also warned that while recovery in the large advanced economies is "far from self-sustained," the longer emergency policy measures are maintained, the greater the risk of creating unhealthy distortions.
"Such powerful measures have strong side effects, and their dangers are beginning to become apparent," it said, adding that such direct support was delaying essential post-crisis adjustments and "runs the risk of creating zombie financial and non-financial firms."
Still-fragile market and economic conditions continue to make tightening risky in many places. But "we cannot ignore the fact that the culminating side effects themselves pose a danger that, at the very least, implies exiting sooner than may be comfortable for many," the BIS said.
"A prolonged period of exceptionally low real interest rates alters investment decisions, postpones the recognition of losses, increases risk-taking in the ensuing search for yield and encourages high levels of borrowing," it warned.
An additional risk for central banks is that although output in the countries that were worst affected by the crisis is still well below potential, the amount of economic slack could be smaller than conventional measures of the output gap suggest, the BIS said.
The buildup of imbalances before the crisis suggests that potential output growth wasn't as high as was commonly believed, it said, and noted that financial disruption and the lost skills of the long-term unemployed could reduce potential output. "Inflationary pressures could therefore reappear earlier than anticipated," it warned.
The BIS noted that while implementation of macroprudential policy measures should improve the resilience of the financial system, monetary policy needs to play a greater role in leaning against the buildup of systemic financial vulnerabilities during booms.
"A monetary policy strategy narrowly focused on stabilizing inflation, looking out over a short horizon of about two years, is not sufficiently forward-looking to ensure financial stability and is thus not sufficient to stabilize inflation over the longer term," the BIS said.
It added that since credit and asset prices have boomed, even during times of low and stable inflation, there is a risk that monetary policy could accommodate or even contribute to the buildup of financial vulnerabilities.
"Adding a few years to the monetary policy framework, beyond the two years ahead commonly focused upon, would help monetary policy makers to weigh longer-term threats to financial stability, including the impact of interest-rate settings, against nearer-term inflation," it said.
Additionally, the BIS predicted further "substantial" declines in household debt in the U.S., U.K. and Spain.
It also expressed doubts about the sustainability of bank profits, citing potential for further asset writedowns, high exposure to sovereign risk, possible difficulties refinancing and a renewed squeeze on dollar funding. It noted that in 2009, profits at many U.S. and European banks were heavily based on volatile fixed-income and currency markets, while credit extended to the private sector shrank, and loan-to-deposit ratios for many international banks fell. Furthermore, the trend toward investing in longer-dated securities could also backfire if the yield curves flattens, it said.
Write to Natasha Brereton at natasha.brereton@dowjones.com
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
Let’s apply some truth to the statement above. What are the ‘remaining vulnerabilities’? That would be a world monetary system saturated with debt. What is the ‘intensive care’ mentioned above? That would be all of the various government ‘stimulus’ packages that have done nothing but prolong the inevitable collapse of the system while increasing sovereign debt around the world by massive amounts.
This is like pulling a drowning man out of the water – giving him a few moments to breathe – and then tossing him back in the water. Thanks for the help.
Basically, you and I are being told that the nations of the world are in a no-win situation – compliments of the world’s current monetary system. Get ready for some ‘solutions’ that will replace the current system. It’s only a matter of time.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
jg – June 28, 2010
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JUNE 28, 2010, 8:40 A.M. ET
BIS Warns Countries Over Debt
By NATASHA BRERETON
Wall St. Journal
BASEL, Switzerland—Global policy makers face a "daunting" task to balance their support for still-fragile economies and markets, while avoiding unwanted side effects from long-standing stimulus policies, the Bank for International Settlements said Monday.
In its annual report, the bank for central banks highlighted the risks posed by high public-debt levels, concerns about which are already jeopardizing recovery in the euro zone, and in the longer term could curb potential growth and make it harder to keep inflation low and stable.
Central banks will have to take the impact of much-needed fiscal tightening into consideration when judging their appropriate policy stance, but they must also be aware of the dangerous distortions that can occur from keeping interest rates extremely low for an extended period, it warned.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
European Union finance ministers and the International Monetary Fund agreed last month to commit €750 billion ($928.95 billion) to support euro-zone governments that have difficulty borrowing in the international bond markets, after investors' fears about Greece's creditworthiness spread to other countries.
The European Central Bank began to buy euro-zone government bonds in an effort to bring down borrowing costs, while the U.S. Federal Reserve also simultaneously reopened dollar swap lines with several major central banks.
The BIS said that events in Greece underscored the risk that highly indebted governments now have hardly any financial room for maneuver, and may not be able to act as buyers of last resort to save their banks in a crisis.
Unless countries take resolute action to address their fiscal problems, there's a "key risk" that investor concerns will worsen and engulf other countries, it warned. "The sovereign debt crisis in Greece is clearly jeopardizing Europe's nascent recovery from the deep recession brought on by the earlier crisis," it said.
The BIS also noted that persistently higher levels of public debt over the longer run could make economies more vulnerable to adverse shocks, reduce their growth potential and endanger prospects for monetary stability.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
While acknowledging that such scenarios are unlikely in the near-term, a greater likelihood that they might come to pass could push up public inflation expectations, prompt investors to demand greater compensation for inflation risk and cause medium- and long-term interest rates to rise.
"So far, there is no evidence that inflation expectations have become unanchored," the BIS said. "However, a failure by governments to make headway in restoring fiscal sustainability increases the risk that inflation expectations may abruptly and unexpectedly change."
The BIS also warned that while recovery in the large advanced economies is "far from self-sustained," the longer emergency policy measures are maintained, the greater the risk of creating unhealthy distortions.
"Such powerful measures have strong side effects, and their dangers are beginning to become apparent," it said, adding that such direct support was delaying essential post-crisis adjustments and "runs the risk of creating zombie financial and non-financial firms."
Still-fragile market and economic conditions continue to make tightening risky in many places. But "we cannot ignore the fact that the culminating side effects themselves pose a danger that, at the very least, implies exiting sooner than may be comfortable for many," the BIS said.
"A prolonged period of exceptionally low real interest rates alters investment decisions, postpones the recognition of losses, increases risk-taking in the ensuing search for yield and encourages high levels of borrowing," it warned.
An additional risk for central banks is that although output in the countries that were worst affected by the crisis is still well below potential, the amount of economic slack could be smaller than conventional measures of the output gap suggest, the BIS said.
The buildup of imbalances before the crisis suggests that potential output growth wasn't as high as was commonly believed, it said, and noted that financial disruption and the lost skills of the long-term unemployed could reduce potential output. "Inflationary pressures could therefore reappear earlier than anticipated," it warned.
The BIS noted that while implementation of macroprudential policy measures should improve the resilience of the financial system, monetary policy needs to play a greater role in leaning against the buildup of systemic financial vulnerabilities during booms.
"A monetary policy strategy narrowly focused on stabilizing inflation, looking out over a short horizon of about two years, is not sufficiently forward-looking to ensure financial stability and is thus not sufficient to stabilize inflation over the longer term," the BIS said.
It added that since credit and asset prices have boomed, even during times of low and stable inflation, there is a risk that monetary policy could accommodate or even contribute to the buildup of financial vulnerabilities.
"Adding a few years to the monetary policy framework, beyond the two years ahead commonly focused upon, would help monetary policy makers to weigh longer-term threats to financial stability, including the impact of interest-rate settings, against nearer-term inflation," it said.
Additionally, the BIS predicted further "substantial" declines in household debt in the U.S., U.K. and Spain.
It also expressed doubts about the sustainability of bank profits, citing potential for further asset writedowns, high exposure to sovereign risk, possible difficulties refinancing and a renewed squeeze on dollar funding. It noted that in 2009, profits at many U.S. and European banks were heavily based on volatile fixed-income and currency markets, while credit extended to the private sector shrank, and loan-to-deposit ratios for many international banks fell. Furthermore, the trend toward investing in longer-dated securities could also backfire if the yield curves flattens, it said.
Write to Natasha Brereton at natasha.brereton@dowjones.com
Gold Swap Signals the Roadmap Ahead - July 27 2010
The article below provides some history of the Bank of International Settlements and how it operates.
If we (once again) strip away all of the smoke and mirrors – what do we see? We see yet another central banking institution swapping worthless fiat currency for real assets. In this case – the asset is gold – lots of gold.
We’re also watching the opening moves to setup a world currency.
The nations of the world are blind to what is happening to them.
The ‘beast’ is tightening its grip on the world.
Interesting times.
"...the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations." - Professor Carroll Quigley
jg – July 27, 2010
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Guest Post: Gold Swap Signals the Roadmap Ahead
Submitted by Tyler Durden on 07/23/2010 10:34 -0400
Submitted by Gordon T. Long of Tipping Points
Sultans of Swap: Gold Swap Signals the Roadmap Ahead
The news rocked the global gold market when an almost obscure line item in the back of a 216 page document releasedby an equally obscure organization was recently unearthed. Thrust into the unwanted glare of the spotlight, the little publicized Bank of International Settlements (BIS) is discovered to have accepted 349 metric tons of gold in a $14B swap. Why? With whom? For what duration? How long has this been going on? This raises many questions and as usual with all $617T of murky unregulated swaps, we are given zero answers. It is none of our business!
Considering the US taxpayer is bearing the burden of $13T in lending, spending and guarantees for the financial crisis, and an additional $600B of swaps from the US Federal Reserve to stem the European Sovereign Debt crisis, some feel that more transparency is merited. It is particularly disconcerting, since the crisis was a direct result of unsound banking practices and possibly even felonious behavior. The arrogance and lack of public accountability of the entire banking industry blatantly demonstrates why gold manipulation, which came to the fore in recent CFTC hearings, has been able to operate so effectively for so long. It operates above the law or more specifically above sovereign law in the un-policed off-shore, off-balance sheet zone of international waters.
Since President Richard Nixon took the US off the Gold standard in 1971, transparency regarding anything to do with gold sales, leasing, storage or swaps is as tightly guarded by governments as the unaudited gold holdings of Fort Knox. Before we delve into answering what this swap may be all about and what it possibly means to gold investors, we need to start with the most obvious question and one that few seem to ask. Who is this Bank of International Settlements and who controls it?
BANK OF INTERNATIONAL SETTLEMENTS (BIS)
The history of the BIS reads with all the intrigue of a spy novel and comes with a very checkered past. According to the BIS web site, as a privately held bank, it decided in recent years to become wholly owned and controlled by the Central Banks of the world - a highly unusual decision for a private enterprise. Lengthy court cases in Le Hague were involved by private members who objected. Something like this is usually called a buy out or takeover, but there are no public records of any of the central banks making such an acquisition - an extremely strange set of events with little media coverage.
The history of the BIS reads with all the intrigue of a spy novel and comes with a very checkered past. According to the BIS web site, as a privately held bank, it decided in recent years to become wholly owned and controlled by the Central Banks of the world - a highly unusual decision for a private enterprise. Lengthy court cases in Le Hague were involved by private members who objected. Something like this is usually called a buy out or takeover, but there are no public records of any of the central banks making such an acquisition - an extremely strange set of events with little media coverage.
I am sure it can all be explained very logically until we get to the size of the balance sheet. We are talking close to a half trillion dollar balance sheet, or more specifically 259 billion SDR’s, which is approximately $400B. Where did the capital or deposits come from? The BIS goes out of its way to specifically assert it only accepts deposits from member central banks, though it does also state confusingly in the financial notes that there are deposits from previous financial statements from recognized international banks. Therefore, are we to conclude that the US Federal Reserve has huge deposits at the BIS? Though I couldn’t find the assets on the Fed’s balance sheet, I’m sure they are there in the small print or on the New York Feds balance sheet somewhere. It would be a legal requirement. It is a forensic accounting nightmare to find these items based on public documents of the various private organizations. Apparently it is just none of our business. For such a major element of the world’s operating financial structure to have such poor visibility, it seems preposterous until you actually do the research. It should be laid out so a freshman Economics class could easily follow the ownership acquisition and money flows. It isn’t and it appears to this researcher that it is intentionally opaque.
Since the BIS goes out of its way to ensure readers in its annual financial report that no private funds are accepted, maybe all we really need to know is what the BIS officially tells us. The BIS is owned and controlled by their member Central Banks. Therefore if the BIS was to do a gold swap of the magnitude of 349 metric tonnes, then board member Ben Bernanke would have known of it in advance and approved it. He would know exactly who the transaction was with and why. If he didn’t then he is legally negligent in his fiduciary responsibility as a BIS board member, because of the size of the transaction and its material effect. Other board members include: Mervyn King, Governor of the Bank of England, Jean-Claude Trichet, President of the European Central Bank, Axel Weber, President of the Deutsche Bundesbank and William C Dudley, President of the Federal Reserve Bank of New York. You can’t have it both ways.
Though we can suspect many things, there is no other conclusion we can reach than the swap is part of an agreed upon plan or concurrence between these board members. So what is the possible understanding or plan?
WHO GAVE UP THE GOLD?
There are not a lot of institutions who possess 349 metric tonnes of gold. So who needs $14B worth of cash and has this amount of gold? That shouldn’t be too hard to find.
Sovereign governments have historically created their wealth by invading other countries to pillage their treasuries which held gold, silver and the crown jewels. The winning and seizure of more land allowed the sovereign to give it to the nobles who used it to tax and tithe the feudal tenets. Recurring wealth flowed upward to the sovereign treasury.
Considering today’s EU membership, where sovereign countries can no longer print their own currency (the politicians first weapon of choice), there are three channels (other than the very politically unpopular increase in taxes and fees) open in modern times to raising money for the treasury:
Sovereign governments have historically created their wealth by invading other countries to pillage their treasuries which held gold, silver and the crown jewels. The winning and seizure of more land allowed the sovereign to give it to the nobles who used it to tax and tithe the feudal tenets. Recurring wealth flowed upward to the sovereign treasury.
Considering today’s EU membership, where sovereign countries can no longer print their own currency (the politicians first weapon of choice), there are three channels (other than the very politically unpopular increase in taxes and fees) open in modern times to raising money for the treasury:
- The public sale of debt offerings instruments such as Bills, Notes and Bonds
- The more recent and stealthy approach of selling assets, including revenue streams from such things as taxes, fees, licensing etc. These are sold into the securitization market through complex derivative structures such as Interest Rate and Currency Swaps contracts. This approach, as recently discovered, has been rampant throughout Europe even prior to the creation of the EU.
- When you exhaust all of the above, you then sell the family jewels – the sovereign treasury of gold holdings.
The BIS was very quick to respond to public speculation about the massive gold swap when they immediately clarified that the gold swap was with a commercial bank. Since by its own statements, as I mentioned above, it doesn’t accept deposits from non member banks, this seems confusing on the surface. Does it or doesn’t it accept private deposits? It would be respectful to assume that the BIS is telling the truth and that they did in fact conduct the transaction with a private bank who was transacting the swap on behalf of a central bank or sovereign treasury. This would sort of make everything work. For the BIS to be telling the truth in all their statements, the transaction must be with a member central bank with the involvement of an intermediary commercial bank. But something still isn’t right here.
When you work through the details you quickly arrive at an astounding coincidence. Portugal shows it has 348 tonnes of sovereign gold. The swap was for 346. Portugal is a member bank, though does not sit on the Board, but attends the General Meeting as an observer only. Portugal, as a member of the PIIGS, only days after the unearthing of the swap, was again downgraded by Moody’s, thereby making its lending costs even higher than the already elevated levels being demanded by the financial markets. There is a very strong possibility that the swap is with Portugal. Though who the swap is with is important to those trading debt and credit derivatives it isn’t quite as important to those interested in the gold market.
When you work through the details you quickly arrive at an astounding coincidence. Portugal shows it has 348 tonnes of sovereign gold. The swap was for 346. Portugal is a member bank, though does not sit on the Board, but attends the General Meeting as an observer only. Portugal, as a member of the PIIGS, only days after the unearthing of the swap, was again downgraded by Moody’s, thereby making its lending costs even higher than the already elevated levels being demanded by the financial markets. There is a very strong possibility that the swap is with Portugal. Though who the swap is with is important to those trading debt and credit derivatives it isn’t quite as important to those interested in the gold market.
Ben Davies the CEO of Hinde Capital in London and a player in the gold market suspects (12:40) we may have a modified form of swap emerging. There is the possibility that the commercial bank is in fact a major gold bullion bank. Some of the bullion banks have major short positions on gold that far outstrip the annual physical production of gold. The disconnect between physical and paper gold along with rising gold prices is likely causing serious strains on their balance sheet. As Davies points out the gold may be transacted from a central bank to the BIS through a bullion bank while the gold physically remains with the originating central bank; is classified as ‘unallocated’ at the BIS but in fact remains on the books of the bullion bank. It effectively is double accounted for. The increase in gold would allow gold prices to be pushed lower, which in fact is what has been happening. A careful reading of the BIS financial statements shows more clearly the accounting for such a transaction.
There can be little doubt that the Gold Swap is with a central bank where the physical gold remains. The transaction is considered a deposit at the BIS (liability) but has been lent to a commercial bank (likely a bullion bank) as a loan (asset). The question is only why a bullion bank needs to borrow this quantity of gold, remembering it never gets the physical gold because it remains at the originating central bank. The reader is encouraged to read the Financial Policy notes #4,5, 6, 13, 14, 15, 16, 17 and 19 within the BIS Financial Statement for a clearer understanding along with Notes to the Financial Statements #4 and #11.
The BIS may equally be referred to as the Central Gold Bullion Bank to the Gold Bullion Banks.
The March 31 2010 Financial Statement of the BIS shows 43.0B SDR’s of gold or 16.6% of total assets. According to note #4 to the BIS Financial Statements: “ Included in ’Gold bars held at central banks” is SDR 8,160.1 million (346 tonnes) (2009: nil) of gold, which the Bank held in connection with gold swap operations, under which the Bank exchanges currencies for physical gold. The Bank has an obligation to return the gold at the end of the contract.” It is very important to appreciate this note is pertaining specifically to BIS ‘assets’ which in the case of banks are what the reader would consider ‘loans’. Under Financial Policy notes #5 to the Financial Statement the BIS is clear that under banking portfolios “all gold financial assets in these portfolios are designated as loans and receivables”. Separately, but very interestingly the BIS additionally states “ the remainder of the Banks equity is held in gold. The Bank’s own gold holdings are designated as available for sale”.
SPECIAL DRAWING RIGHT (SDR)
If problems get worse for Portugal, as possibly the global economic climate worsens, then the gold may never legally belong to Portugal. The contracted swap terms at some point may simply reclassify it a net zero sale, if Portugal fails to return the cash portion of the swap. The BIS would have 346 tonnes of gold and Portugal the $14B of Euros it has long since spent to solve a 2010 problem. By then Portugal likely would need even more loans in whatever currency would replace a crumpling or possibly extinct Euro.
Up until 2004 the BIS denominated its financial statements in Gold Francs. It now has made a major shift to denominating itself into Special Drawing Rights (SDRs). The calculation is exactly the same as used for the IMF. The SDR is operating as a defacto currency.
Up until 2004 the BIS denominated its financial statements in Gold Francs. It now has made a major shift to denominating itself into Special Drawing Rights (SDRs). The calculation is exactly the same as used for the IMF. The SDR is operating as a defacto currency.
It takes a little arithmetic (which is not done in the financial statements) to be able to get values in any currency that can give the reader a perspective of the scope of the activities at the BIS. The SDR reporting obscures the BIS’s significant size and scope.
FUNDING
For those who followed the European Sovereign Debt Crisis and the negotiations with Greece, you know that the IMF was an unwelcomed intruder into EU financial affairs. Greece on more than one occasion held the IMF as a negotiating ploy and as a funding alternative to the EU’s procrastination and lack of decisiveness.
The IMF’s willingness to interfere created a lot of bad feelings within the EMU and Germany specifically. As Ambrose Evans-Prichard reported: “The ECB is barely on speaking terms with the IMF – the "Inflation Maximizing Fund" as it was dubbed in a Bundesbank memo - - The IMF has not caught up to the reality in Europe said ECB über-hawk Jürgen Stark on July 9th” The final EU bailout in fact heavily involved the IMF participation. The very busy IMF is the dominant crisis lender of last resort throughout all Central & Eastern European current financial problems.
What we are seeing is the emergence of another funding structure based on the SDR - SDR’s that have a degree of gold backing. The BIS now has a total of 12.4% of its deposits (32B SDR) in the form gold deposits. Note #11 to the BIS financial statements states: “Gold deposits placed with the Bank originate entirely from Central Banks. They are all designated as financial liabilities measured as amortized cost”.
For those who followed the European Sovereign Debt Crisis and the negotiations with Greece, you know that the IMF was an unwelcomed intruder into EU financial affairs. Greece on more than one occasion held the IMF as a negotiating ploy and as a funding alternative to the EU’s procrastination and lack of decisiveness.
The IMF’s willingness to interfere created a lot of bad feelings within the EMU and Germany specifically. As Ambrose Evans-Prichard reported: “The ECB is barely on speaking terms with the IMF – the "Inflation Maximizing Fund" as it was dubbed in a Bundesbank memo - - The IMF has not caught up to the reality in Europe said ECB über-hawk Jürgen Stark on July 9th” The final EU bailout in fact heavily involved the IMF participation. The very busy IMF is the dominant crisis lender of last resort throughout all Central & Eastern European current financial problems.
What we are seeing is the emergence of another funding structure based on the SDR - SDR’s that have a degree of gold backing. The BIS now has a total of 12.4% of its deposits (32B SDR) in the form gold deposits. Note #11 to the BIS financial statements states: “Gold deposits placed with the Bank originate entirely from Central Banks. They are all designated as financial liabilities measured as amortized cost”.
ARE WE SETTING THE PINS UP FOR AN ALTERNATIVE RESERVE CURRENCY?
Are we moving towards the BIS and IMF being fractional reserve banks that will create money & credit - a reserve currency that will satisfy Russia and China with an element of Gold backing? A bank such as the BIS could easily assume this role (if it hasn’t already) as could the IMF with possible banking charter adjustments.
The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency.
The chances are high that this is the roadmap we will find ourselves taking. Like all banking that started as Gold backed you could expect that in this case the little gold backing that starts the process is quickly diminished so a limitless money machine could begin functioning. The gold backing would likely be an initial requirement by Russia and China. The partial gold backing would lend credibility to the acceptance and a possible reserve currency alternative and eventual establishment as the global reserve currency.
SHADOW BANKING REPLACEMENT
The collapse of the Shadow Banking system and its attendant SIV / CDO structures were at the root of the financial crisis. That structure which is representative of a huge amount of the credit growth since the dotcom bubble burst isn’t coming back soon, if ever. The world needs more liquidity than the central banks or sovereign treasuries can currently deliver politically. The central bankers, huddled in their bimonthly board meeting at the BIS in Basel, Switzerland, know this better than anyone. Their discussions in the very halls of the BIS must resonate with them to use all the tools available at their disposal - quickly.
The collapse of the Shadow Banking system and its attendant SIV / CDO structures were at the root of the financial crisis. That structure which is representative of a huge amount of the credit growth since the dotcom bubble burst isn’t coming back soon, if ever. The world needs more liquidity than the central banks or sovereign treasuries can currently deliver politically. The central bankers, huddled in their bimonthly board meeting at the BIS in Basel, Switzerland, know this better than anyone. Their discussions in the very halls of the BIS must resonate with them to use all the tools available at their disposal - quickly.
Paul McCulley and Richard Clarida at Pacific Investment Management Co. (PIMCO) have written extensively about the Shadow Banking System and its growth. An extensive slide presentation on the Shadow Banking System can be found on my web site at TIPPING POINTS. I won’t go into the detail here, but suffice it to say that the shadow banking system collapse has created a massive hole in credit creation that central bankers can’t fill in the manner in which they presently appear to be approaching the problem. Of course appearances can be deceiving
The problem has now reached crisis proportions and the central bankers know they must urgently act in a coordinated manner. Deflation now has a firm hand on the global economy and this must be reversed. I have been calling for a US Quantitative Easing QE II of $5T in my writings for some time. This amount is required for the US alone. The entire global requirement is three to four times this amount.
The above chart serves as an illustration to simplify the essence of the Shadow Banking System . The international bankers prefer to refer to the process as Capital Arbitrage. An arms-length agreement allowed the banks to invest in a Structured Investment Vehicle (SIV) as an affiliate investment. The large spread that an SIV captured made it an excellent investment, but more importantly it allowed the banks to use their fractional reserve (10X) money creation abilities to buy risky securitization products without them appearing on their balance sheet. The banks received huge multiplier leveraged returns from the high yielding Collateralized Debt Obligations (CDOs) until the crisis imploded the game.
HOW MUCH LEVERAGE WILL THE CENTRAL BANKER CHOOSE TO COMPOUND? => “x” times “y”
When the financial crisis unfolded you may recall that then US Treasury Secretary Hank Paulson’s (former Chairman and CEO of Goldman Sachs during the explosion of Shadow Banking structures) first solution was to create a $100B Super SIV. The SIV leverage thinking was so entrenched that this was the first ‘go to’ solution to fight de-leveraging. If we were to jump forward to today when we are further along in increasing and unprecedented de-leveraging, what the central bankers need to replace the shadow banking system is a vehicle that will deliver the previous scale of leverage PLUS an order of magnitude more. The answer is the Bank of International Settlements. The SIV model is used as illustrated ‘Shadow Central Banking System’ above.
With the use of the SDR ‘currency’, central bankers can compound fractional reserve lending.
IT’S ALREADY HAPPENING
It is my view this process is already well along. The following Bloomberg global money supply growth chart graphically shows this. As the circles indicate, once again money is flowing into the pipeline or at least into global bank reserves.
CONCLUSION
The advantage of this approach is:
The advantage of this approach is:
- Leverage: Compounding money creation between banks
- Partial gold backing: Present BIS levels of 12.4%
- SDR: Offers a basket of currencies approach versus a single currency dependency.
- Former Communist bloc regime backing: China and Russia would likely support this approach for a number of reasons, which they have already expressed as short comings to the current global reserve situation.
- Reserve Currency: The SDR approach offers a migration path from today’s US$ reserve currency to an alternative bank reserve currency to a future global reserve currency.
This may be the final lever required to initiate a Minsky Melt-Up (see: EXTEND & PRETEND - Manufacturing a Minsky Melt-Up) and the $5T in QE II (see:EXTEND & PRETEND: A Guide to the Road Ahead) I have been writing about for some time now.
There are many questions that are raised in the above discussion - many about the future role and safety of gold. Time and space don’t allow for this here. I hope to work through the answers in forthcoming articles.
If you would like to be notified as the articles are released, then sign-up and additionally follow the ongoing daily developments at Tipping Points.
The following gave me concern when I first read it many years ago and something for you to think about:
There are many questions that are raised in the above discussion - many about the future role and safety of gold. Time and space don’t allow for this here. I hope to work through the answers in forthcoming articles.
If you would like to be notified as the articles are released, then sign-up and additionally follow the ongoing daily developments at Tipping Points.
The following gave me concern when I first read it many years ago and something for you to think about:
"...the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations."
Professor Carroll Quigley
Tragedy and Hope: A History of the World in Our Time (1966)
President Bill Clinton’s Georgetown Professor
Tragedy and Hope: A History of the World in Our Time (1966)
President Bill Clinton’s Georgetown Professor
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