G-7 - Controlling World's Monetary System: Banking System For International Settlements
by Joan Veon
August 26, 2003
News With Views
While most people understand what took place when the American Revolution was fought, many are not aware of the permanent financial revolution that is being fought over the world's monetary system since 1694 when the Bank of England was created. At that time, a group of private individuals decided that they could make a great deal of money if they changed the laws of the land to shift control of the country's finances from the government to them. The Bank of England, which is England's "central bank," is a private corporation which earns a continuous stream of income when the British government borrows from them to run the country. England was the ingenious country that recognized they could run the world's finances if they established private corporations in all the countries of the world. The combined debt of all the world's country's would create an income stream of unbelievable amounts.
In 1913, Congress passed the Federal Reserve Act creating our central bank. Most Americans don't know that this organization is a private corporation established to control America's monetary system through the banking industry.
In the last several years, our central bank has helped to push through two major pieces of legislation expanding its power over not only the banking system, but the stock market, insurance and real estate industries as well. Let me explain. When the stock market crashed in 1929, to safe guard our financial system Congress passed the Glass-Steagall Act separating the commercial activities of banks (savings, checking, deposits and loans) from that of investment banks that bring new stocks and bonds to market, offering them to investor through their in-house stockbrokers. Our Federal Reserve worked very hard with the Clinton Administration to pass the Banking Modernization Act in 1999 which erased the Glass-Steagall Act. Furthermore this law expanded the functions of commercial banks to not only syndicate securities but to also sell both personal and commercial insurance as well as real estate, thus creating what is termed, "financial conglomerates."
Now let's understand what really took place. When Congress passed the Federal Reserve Act in 1913, this private group of bankers only got control of our monetary system via the banking system. They did not have control over the insurance industry and stock markets. By passing the Banking Modernization Act 86 years later, they now have control over ALL of these areas worth trillions of dollars.
That same year, Congress also passed the Gramm-Leach-Bliley Act with very little fanfare. Former Treasury Secretary Robert Rubin, now a co-Chairman at Citigroup which is a financial conglomerate, praised this bill as being necessary and critical. What it really did was amend key banking laws such as the Banking Act of 1933, the Bank Holding Company Act of 1956, the Federal Deposit Institutions Act, the Community Reinvestment Act of 1977 and the International Banking Act of 1978 to substitute the Federal Reserve as being responsible for our financial system instead of Congress! The permanent financial revolution that has been waged in America has been without any bullets being fired and with very little explanation from the main stream press.
While the Federal Reserve is a private corporation, it is also one of the owners of the Bank for International Settlements-BIS which America helped establish in 1930. Bill Clinton's mentor at Georgetown University, Dr. Carroll Quigley, said the BIS was to "serve as a 'Central Bankers' Bank'". The BIS is where all of the world's 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. Quigley further explained, "[T]he 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, a private bank owned and controlled by the world's central banks which were themselves private corporations."
There is not a whole lot of press about its activities, hence it is not a household name. The boot like structure of the BIS is only apparent from the backside. There is nothing about it that indicates it is the most important bank (and building) in the world. When the BIS holds its two-hour annual meeting, those who control the monetary system of their country-the central bank ministers walk to it from nearby hotels.
Once you enter the front doors of the BIS, you are confronted with two sets of glass doors that are circular. The only way to go beyond them is to have permission. Those who enter are escorted at all times. In order to be admitted to the middle of the circular doors, the two back glass panels slide open to let you in. When you are in the middle they close and the two front glass panels then slide open to allow you to enter into the tower where the offices are. Because it is rather unique, a fellow reporter remarked, "Masonic looking isn't it."
The great security makes you wonder why all the secrecy. Only once in all the years of holding annual meetings has the BIS given a tour for "outsiders" such as me. Of the various meetings rooms, two stand out: the special room where the Group of Ten* central bank ministers meet which has a round table positioned in the middle of the room with some kind of round halo hanging from the ceiling over it, giving the impression of the "Knights of the Round Table". Then there is the "green" room which is shaped like an almond, reminding you of an "eye" because of its shape and color. I gasped when I first entered the room, for the illusion could not be missed.
Over the years, the Bank for International Settlements has amassed more power over the global financial infrastructure then most people are aware of. They have a number of very powerful committees which include: the Basel Committee on Banking Supervision which has been working on how to regulate not only international banks of the world, but eventually those rules will pertain to every national bank as well, the Committee on the Global Financial System which monitors financial markets around the world with the objective of identifying potential risks for financial stability, and the Committee on Payment and Settlement Systems looks to strengthen the infrastructure of financial markets with regard to rules on how to transfer monies and how to make payments between member banks.
One very important committee is Financial Stability Forum-FSF which was created as a result of the Asian Crisis. Their mandate is to help set up safeguards for the entire global economic system (notice that this responsibility no longer belongs to the individual nation-states). It should be noted that Federal Reserve Vice Chairman Roger Ferguson is Committee Chairman of both the Committee on Global Financial Systems and the FSF. This Forum is comprised of the G7 Central Bank Governors, G7 Finance Ministers and the G7 Regulatory Agencies (in the US they are the Comptroller of the Currency and Federal Deposit Insurance Corporation). In addition, a number of international organizations take active part: the World Bank, International Monetary Fund, the Organization for Economic Cooperation and Development, the International Association of Insurance Supervisors, the International Organization of Security Commissioners and the newly formed International Accounting Standards Board. Besides the G7 countries, there are a number of emerging market countries such as India and China that participate. Dr. Knight concurred with my assessment that the FSF represents "greater cohesiveness and harmonization among countries."
Over the years, I have watched as the BIS has continued to push the envelope further in a borderless world. Some of their growing powers have come directly from governments like ours that have transferred the regulatory power they used to have over the banking system to the central bank while the rest comes from the simple fact that they do indeed control the monetary system of the world.
In an exclusive interview with the new BIS Managing Director Dr. Malcolm Knight , he went on record when he said, "We are not a central bank. We are the bank for the central bankers." This is extremely important for this fact has not been written about in books on the BIS. Furthermore, to my knowledge, no one at the BIS has explained that they are the "central banks' bank."
Dr. Knight, who received his post-graduate degrees from the London School of Economics explained that "Central banks need to operate in independence." This means no control by government which is pretty clear by the above changes to American law. When Alan Greenspan goes to Congress, they ask him what he thinks and what he will do. It should be noted that he is not elected, he is appointed and his word literally moves markets. Interestingly enough since 1997 the Bank of England and the Bank of Japan have been given more power to determine monetary policy which includes the freedom to set interest rates apart from government opinion and to intervene in foreign exchange markets. These are the same powers as what the Federal Reserve has.
When you understand that the BIS pulls the strings of the world's 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. So when Dr. Knight talks about controlling the "financial centers where a lot of hot money could be placed," he is explaining that as a result of the work of the FSF, they are "implementing rules on financial behavior all over the world" which means they positioning the BIS to be able to control hot money.
Lastly, one very important aspect of my interview with Dr. Knight is that of a harmonization of global currencies. In an interview 18 months ago with noted economist Dr. Jacob Frenkel who does not hide his view that all of the currencies of the world need to be harmonized, I asked him when he thought that would occur. He told me then it would occur after the economies were harmonized. When I posed this question to Dr. Knight, he only addressed that fact that many central banks have a consistency of objectives that harmonize their policies. Interestingly enough, the Wall Street Journal reported on a meeting which included Dr. Frenkel, former U.S. Fed Chairman Paul Volcker and Dr. Robert Mundell that took place on June 30, the same day I was interviewing Dr. Knight. Their theme was "Does the Global Economy Need a Global Currency?" The thesis was that if the euro can replace the franc, mark and lira, why can't a new world currency merge the dollar, euro and yen? I submit to you that this is the next agenda of the central bankers. When this change occurs, I can assure you, they will make money on a new global currency. Time will tell if we do.
The difference between Dr. Knight's view of the BIS and mine are diametrically opposed. I believe, as Dr. Quigley said, that the central banks have the financial power over both markets and governments versus Dr. Knight who believes they are fixing the markets.
*G7: U.S., Canada, Germany, Japan, Italy, France, Great Britain; G10 is G7 plus Switzerland, Sweden, the Netherlands and Belgium.
© 2003 Joan Veon - All Rights Reserved