Ellen Brown: Secretive Plan For a Global Currency
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Secretive Plan For a Global Currency Excerpt from "The Global
Economic Crisis: The Great Depression of the XXI Century"
By Ellen Brown
URL of this article: www.globalresearch.ca/index.php?context=va&aid=23762
Global Research, March 17, 2011
The following is an excerpt of a chapter by Ellen Brown from the
new book by Global Research Publishers, "The Global Economic Crisis:
The Great Depression of the XXI Century."
The Global Economic Crisis
Michel Chossudovsky Andrew Gavin Marshall (editors)
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By acting together to fulfill these pledges we will bring the world
economy out of recession and prevent a crisis like this from recurring
in the future. We are committed to take all necessary actions to
restore the normal flow of credit through the financial system and
ensure the soundness of systemically important institutions,
implementing our policies in line with the agreed G20 framework for
restoring lending and repairing the financial sector. We have agreed
to support a general SDR allocation which will inject $250bn into
the world economy and increase global liquidity. G20 Communiqui,
London, April 2, 2009
Towards a New Global Currency?
Is the Group of Twenty Countries (G20) envisaging the creation of
a Global Central bank? Who or what would serve as this global central
bank, cloaked with the power to issue the global currency and police
monetary policy for all humanity? When the worlds central bankers
met in Washington in September 2008 at the height of the financial
meltdown, they discussed what body might be in a position to serve
in that awesome and fearful role. A former governor of the Bank of
England stated:
The answer might already be staring us in the face, in the form of
the Bank for International Settlements (BIS)... The IMF tends to
couch its warnings about economic problems in very diplomatic
language, but the BIS is more independent and much better placed
to deal with this if it is given the power to do so.[1]
And if the vision of a global currency outside government control
was not enough to set off conspiracy theorists, putting the BIS in
charge of it surely would be. The BIS has been scandal-ridden ever
since it was branded with pro-Nazi leanings in the 1930s. Founded
in Basel, Switzerland, in 1930, the BIS has been called the most
exclusive, secretive, and powerful supranational club in the world.
Charles Higham wrote in his book Trading with the Enemy that by the
late 1930s, the BIS had assumed an openly pro-Nazi bias, a theme
that was expanded on in a BBC Timewatch film titled Banking with
Hitler broadcast in 1998.[2] In 1944, the American government backed
a resolution at the Bretton Woods Conference calling for the
liquidation of the BIS, following Czech accusations that it was
laundering gold stolen by the Nazis from occupied Europe; but the
central bankers succeeded in quietly snuffing out the American
resolution.[3]
In Tragedy and Hope: A History of the World in Our Time (1966), Dr.
Carroll Quigley revealed the key role played in global finance by
the BIS behind the scenes. Dr. Quigley was Professor of History at
Georgetown University, where he was President Bill Clintons mentor.
He was also an insider, groomed by the powerful clique he called
the international bankers. His credibility is heightened by the
fact that he actually espoused their goals. Quigley wrote:
I know of the operations of this network because I have studied it
for twenty years and was permitted for two years, in the early
1960s, to examine its papers and secret records. I have no aversion
to it or to most of its aims and have, for much of my life, been
close to it and to many of its instruments... In general my chief
difference of opinion is that it wishes to remain unknown, and I
believe its role in history is significant enough to be known...
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 worlds central banks which
were themselves private corporations.[4]
The key to their success, said Quigley, was that the international
bankers would control and manipulate the money system of a nation
while letting it appear to be controlled by the government.
The statement echoed one made in the 18th century by the patriarch
of what became the most powerful banking dynasty in the world. Mayer
Amschel Bauer Rothschild is quoted as saying in 1791: Allow me to
issue and control a nations currency, and I care not who makes its
laws. Mayers five sons were sent to the major capitals of Europe
London, Paris, Vienna, Berlin and Naples with the mission of
establishing a banking system that would be outside government
control. The economic and political systems of nations would be
controlled not by citizens but by bankers, for the benefit of
bankers.
Eventually, a privately-owned central bank was established in nearly
every country. This central banking system has now gained control
over the economies of the world. Central banks have the authority
to print money in their respective countries, and it is from these
banks that governments must borrow money to pay their debts and
fund their operations. The result is a global economy in which not
only industry but government itself runs on credit (or debt) created
by a banking monopoly headed by a network of private central banks.
At the top of this network is the BIS, the central bank of central
banks in Basel.
Behind the Curtain
For many years the BIS kept a very low profile, operating behind
the scenes in an abandoned hotel. It was here that decisions were
reached to devalue or defend currencies, fix the price of gold,
regulate offshore banking, and raise or lower short-term interest
rates. In 1977, however, the BIS gave up its anonymity in exchange
for more efficient headquarters. The new building has been described
as an eighteen story-high circular skyscraper that rises above the
medieval city like some misplaced nuclear reactor. It quickly became
known as the Tower of Basel. Today the BIS has governmental immunity,
pays no taxes, and has its own private police force.[5] It is, as
Mayer Rothschild envisioned, above the law.
The BIS is now composed of 55 member nations, but the club that
meets regularly in Basel is a much smaller group; and even within
it, there is a hierarchy. In a 1983 article in Harpers Magazine
called Ruling the World of Money, Edward Jay Epstein wrote that
where the real business gets done is in a sort of inner club made
up of the half dozen or so powerful central bankers who find
themselves more or less in the same monetary boat those from
Germany, the United States, Switzerland, Italy, Japan and England.
Epstein said:
The prime value, which also seems to demarcate the inner club from
the rest of the BIS members, is the firm belief that central banks
should act independently of their home governments... A second and
closely related belief of the inner club is that politicians should
not be trusted to decide the fate of the international monetary
system.[6]
In 1974, the Basel Committee on Banking Supervision was created by
the central bank Governors of the Group of 10 nations (now expanded
to twenty). The BIS provides the twelve-member Secretariat for the
Committee. The Committee, in turn, sets the rules for banking
globally, including capital requirements and reserve controls. In
a 2003 article titled The Bank for International Settlements Calls
for Global Currency, Joan Veon wrote:
The BIS is where all of the worlds central banks meet to analyze
the global economy and determine what course of action they will
take next to put more money in their pockets, since they control
the amount of money in circulation and how much interest they are
going to charge governments and banks for borrowing from them...
When you understand that the BIS pulls the strings of the worlds
monetary system, you then understand that they have the ability to
create a financial boom or bust in a country. If that country is
not doing what the money lenders want, then all they have to do is
sell its currency.[7]
The Controversial Basel Accords
The power of the BIS to make or break economies was demonstrated
in 1988, when it issued a Basel Accord raising bank capital
requirements from six percent to eight percent. By then, Japan had
emerged as the worlds largest creditor; but Japans banks were less
well capitalized than other major international banks. Raising the
capital requirement forced them to cut back on lending, creating a
recession in Japan like that suffered in the U.S. today. Property
prices fell and loans went into default as the security for them
shriveled up. A downward spiral followed, ending with the total
bankruptcy of the banks. The banks had to be nationalized, although
that word was not used in order to avoid criticism.[8]
Among other collateral damage produced by the Basel Accords was a
spate of suicides among Indian farmers unable to get loans. The BIS
capital adequacy standards required loans to private borrowers to
be risk-weighted, with the degree of risk determined by private
rating agencies; farmers and small business owners could not afford
the agencies fees. Banks therefore assigned one hundred percent
risk to the loans, and then resisted extending credit to these
high-risk borrowers because more capital was required to cover the
loans. When the conscience of the nation was aroused by the Indian
suicides, the government, lamenting the neglect of farmers by
commercial banks, established a policy of ending the financial
exclusion of the weak; but this step had little real effect on
lending practices, due largely to the strictures imposed by the BIS
from abroad.[9]
Economist Henry C K Liu has analyzed how the Basel Accords have
forced national banking systems to march to the same tune, designed
to serve the needs of highly sophisticated global financial markets,
regardless of the developmental needs of their national economies.
He wrote:
National banking systems are suddenly thrown into the rigid arms
of the Basel Capital Accord sponsored by the Bank of International
Settlement (BIS), or to face the penalty of usurious risk premium
in securing international interbank loans... National policies
suddenly are subjected to profit incentives of private financial
institutions, all members of a hierarchical system controlled and
directed from the money center banks in New York. The result is to
force national banking systems to privatize...
BIS regulations serve only the single purpose of strengthening the
international private banking system, even at the peril of national
economies... The IMF and the international banks regulated by the
BIS are a team: the international banks lend recklessly to borrowers
in emerging economies to create a foreign currency debt crisis, the
IMF arrives as a carrier of monetary virus in the name of sound
monetary policy, then the international banks come as vulture
investors in the name of financial rescue to acquire national banks
deemed capital inadequate and insolvent by the BIS.
Ironically, noted Liu, developing countries with their own natural
resources did not actually need the foreign investment that trapped
them in debt to outsiders: "Applying the State Theory of Money
[which assumes that a sovereign nation has the power to issue its
own money], any government can fund with its own currency all its
domestic developmental needs to maintain full employment without
inflation."[10]
When governments fall into the trap of accepting loans in foreign
currencies, however, they become debtor nations subject to IMF and
BIS regulation. They are forced to divert their production to
exports, just to earn the foreign currency necessary to pay the
interest on their loans. National banks deemed capital inadequate
have to deal with strictures comparable to the conditionalities
imposed by the IMF on debtor nations: escalating capital requirement,
loan write-offs and liquidation, and restructuring through selloffs,
layoffs, downsizing, cost-cutting and freeze on capital spending.
Liu wrote:
Reversing the logic that a sound banking system should lead to full
employment and developmental growth, BIS regulations demand high
unemployment and developmental degradation in national economies
as the fair price for a sound global private banking system.[11]
The Last Domino to Fall
While banks in developing nations were being penalized for falling
short of the BIS capital requirements, large international banks
managed to skirt the rules, although they actually carried enormous
risk because of their derivative exposure. The mega-banks took
advantage of a loophole that allowed for lower charges against
capital for off-balance sheet activities. The banks got loans off
their balance sheets by bundling them into securities and selling
them off to investors, after separating the risk of default out
from the loans and selling it off to yet other investors, using a
form of derivative known as credit default swaps.
It was evidently not in the game plan, however, that U.S. banks
should escape the regulatory net indefinitely. Complaints about the
loopholes in Basel I prompted a new set of rules called Basel II,
which based capital requirements for market risk on a Value-at-Risk
accounting standard. The new rules were established in 2004, but
they were not levied on U.S. banks until November 2007, the month
after the Dow passed 14 000 to reach its all-time high. On November
1, 2007, the Office of the Controller of the Currency approved a
final rule implementing advanced approaches of the Basel II Capital
Accord.[12] On November 15, 2007, the Financial Accounting Standards
Board or FASB, a private organization that sets U.S. accounting
rules for the private sector, adopted FAS 157, the rule called
mark-to-market accounting.[13] The effect on U.S. banks was similar
to that of Basel I on Japanese banks: they have been struggling to
survive ever since.[14]
The mark-to-market rule requires banks to adjust the value of their
marketable securities to the market price of the security.[15] The
rule has theoretical merit, but the problem is timing: it was imposed
ex post facto, after the banks already had the hard-to-market assets
on their books. Lenders that had been considered sufficiently well
capitalized to make new loans suddenly found they were insolvent;
at least, they would have been if they had tried to sell their
assets, an assumption required by the new rule. Financial analyst
John Berlau complained in October 2008:
Despite the credit crunch being described as the spread of the
American flu, the mark-to-market rules that are spreading it were
hatched [as] part of the Basel II international rules for financial
institutions. Its just that the U.S. jumped into the really icy
water last November when our Securities and Exchange Commission and
bank regulators implemented FASBs Financial Accounting Standard
157, which makes healthy banks and financial firms take a loss in
the capital they can lend even if a loan on their books is still
performing, even when the market price [of] an illiquid asset is
that of the last fire sale by a highly leveraged bank. Late last
month, similar rules went into effect in the European Union, playing
a similar role in accelerating financial failures...
The crisis is often called a market failure, and the term mark-to-market
seems to reinforce that. But the mark-to-market rules are profoundly
anti-market and hinder the free-market function of price discovery...
In this case, the accounting rules fail to allow the market players
to hold on to an asset if they dont like what the market is currently
fetching, an important market action that affects price discovery
in areas from agriculture to antiques.[16]
Imposing the mark-to-market rule on U.S. banks caused an instant
credit freeze, which proceeded to take down the economies not only
of the U.S. but of countries worldwide. In early April 2009, the
mark-to-market rule was finally softened by the FASB; but critics
said the modification did not go far enough, and it was done in
response to pressure from politicians and bankers, not out of any
fundamental change of heart or policies by the BIS or the FASB.
Indeed, the BIS was warned as early as 2001 that its Basel II
proposal was procyclical, meaning that in a downturn it would only
serve to make matters worse. In a formal response to a Request for
Comments by the Basel Committee for Banking Supervision, a group
of economists stated:
Value-at-Risk can destabilize an economy and induce crashes when
they would not otherwise occur... Perhaps our most serious concern
is that these proposals, taken altogether, will enhance both the
procyclicality of regulation and the susceptibility of the financial
system to systemic crises, thus negating the central purpose of the
whole exercise. Reconsider before it is too late.[17]
The BIS did not reconsider, however, even after seeing the devastation
its regulations had caused; and that is where the conspiracy theorists
came in. Why did the BIS sit idly by, they asked, as the global
economy came crashing down? Was the goal to create so much economic
havoc that the world would rush with relief into the waiting arms
of a global economic policeman with its privately-created global
currency?
Notes
[1] Andrew Gavin Marshall, The Financial New World Order: Towards
a Global Currency and World Government, Global Research,
http://www.globalresearch.ca/index.php?context=va&aid=13070, 6 April
2009. See also Chapter 17.
[2] Alfred Mendez, The Network, The World Central Bank: The Bank
for International
Settlements, http://copy_bilderberg.tripod.com/bis.htm.
[3] HubPages, BIS Bank of International Settlement: The Mother of
All Central Banks, hubpages.com, 2009.
[4] Carroll Quigley, Tragedy and Hope: A History of the World in
Our Time, 1966.
[5] HubPages, BIS Bank of International Settlement: The Mother of
All Central Banks, hubpages.com, 2009.
[6] Edward Jay Epstein, Ruling the World of Money, Harpers Magazine,
November 1983.
[7] Joan Veon, The Bank for International Settlements Calls for
Global Currency, News with Views, 26 August 2003.
[8] Peter Myers, The 1988 Basle Accord Destroyer of Japans Finance
System, http://www.mailstar.net/basle.html, 9 September 2008.
[9] Nirmal Chandra, Is Inclusive Growth Feasible in Neoliberal
India?, networkideas.org, September 2008.
[10] Henry C. K. Liu, The BIS vs National Banks, Asia Times,
http://www.atimes.com/global-econ/DE14Dj01.html, 14 May 2002.
[11] Ibid.
[12] Comptroller of the Currency, OCC Approves Basel II Capital
Rule, Comptroller of the Currency Release, 1 November 2007.
[13] Vinny Catalano, FAS 157: Timing Is Everything,
vinnycatalano.blogspot.com, 18 March 2008.
[14] Bruce Wiseman, The Financial Crisis: A look Behind the Wizards
Curtain, Canada Free Press, 19 March 2009.
[15] Ellen Brown, Credit Where Credit Is Due,
webofdebt.com/articles/creditcrunch.php, 11 January 2009.
[16] John Berlau, The International Mark-to-Market Contagion,
OpenMarket.org, 10 October 2008.
[17] Jon Danielsson, et al., An Academic Response to Basel II, LSE
Financial Markets Group Special Paper Series, May 2001.
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