You know banks like Citibank, Bank of America, Wells Fargo, etc. You
read about the World Bank and the International Monetary Fund (IMF),
even if you're not quite sure what they do (not to worry--they're a
little confused, too). And you're probably aware that the Federal
Reserve is neither federal nor a reserve, but a consortium of
privately owned banks. Chances are, though, that you've never even
heard of what is arguably the most powerful financial institution on
earth, the Bank for International Settlements (BIS).
The BIS is headquartered in Basel, Switzerland. It was founded in
1929, for the purpose of overseeing reparation payments owed by
Germany as a result of the Treaty of Versailles that ended World War
I. It's been with us ever since, and its mission has, to put it
mildly, grown a bit.
A banker's bank, the BIS does no direct business with individuals,
governments, or corporate entities. Instead, it deals solely with
member nations' central banks (most of which are privately owned).
There are 55 of them at present, and the list includes every central
bank of consequence in the world.
All members are owners and have voting privileges, in proportion to
the number of shares they have. (Private citizen ownership was
originally allowed, and comprised about 14% of shares outstanding,
but in 2001 all of those were bought out by the central banks.) We
were unable to pin down the exact present share structure, but it
can be assumed that the founding members have the most clout.
The founders were the central banks of Belgium, France, Germany,
Italy, Japan and the U.K., all of which got an identical number of
shares. The U.S. Federal Reserve was not an original shareholder;
however, three American banks (J. P. Morgan, First Bank of New York,
First Bank of Chicago) each got the same number, giving the U.S.
three times the voting power from the outset.
Management's inner circle is of course the Board of Directors. There
are six ex officio (i.e., permanent) members, the central bank
governors of Belgium, France, Germany, Italy, and the U.K., plus the
chairman of the Fed. These six appoint six others of their own
nationality, and then there can be up to nine more elected members
(there are five at the moment, representing Canada, Japan, the
Netherlands, Sweden and Switzerland). Ben Bernanke has thus just
replaced Alan Greenspan as the U.S.'s ex officio rep, and his
appointed American sidekick is New York Bank President Timothy
So, what does the BIS do these days? According to the bank's
website, "BIS . . . fosters international monetary and financial
cooperation and serves as a bank for central banks . . . by acting
as: a forum for discussion and decision-making among central banks
and within the international financial and supervisory community; a
centre for economic and monetary research; a prime counterparty for
central banks in their financial transactions; and agent or trustee
in connection with international financial operations."
That is, it helps central banks construct and implement financial
policy decisions, in concert with one another. And it acts as a
third party in transactions, facilitating the flow of money and
other financial instruments, including gold.
Putting it succinctly: "Promoting monetary and financial stability
is one key objective of the BIS," although it would probably be more
accurate to call that the key objective. The bank sees as its
primary job the stabilization of world financial markets.
It accomplishes this through control of currencies. It currently
holds 7% of the world's available foreign exchange funds, whose unit
of account was switched in March of 2003 from the Swiss gold franc
to Special Drawing Rights (SDR), an artificial fiat "money" with a
value based on a basket of currencies (44% U.S. dollar, 34% euro,
11% Japanese yen, 11% pound sterling).
The bank also controls a huge amount of gold, which it both stores
and lends out, giving it great leverage over the metal's price and
the marketplace power that brings, since gold is still the only
universal currency. BIS gold reserves were listed on its 2005 annual
report (the most recent) as 712 tons. How that breaks down into
member banks' deposits and the BIS personal stash is unknown.
By controlling foreign exchange currency, plus gold, the BIS can go
a long way toward determining the economic conditions in any given
country. Remember that the next time Ben Bernanke or European
Central Bank President Jean-Claude Trichet announces an interest
rate hike. You can bet it didn't happen without the concurrence of
the BIS Board.
Obviously, this bank wields a lot of power. But are they good guys
or bad guys? In their own estimation, unsurprisingly, they are the
white hats. They work to prevent chaos and, as they put it, address
"imbalances" in the increasingly interconnected global financial
marketplace. They derail panics and currency meltdowns when they
While we at WWNK generally prefer that private interests do things
that government would like to get its hands on (and screw up), we
are also free-marketers, and therefore uneasy with any entity,
public or private, that can tamper with the free market. Preventing
a currency meltdown may be a good thing, or it may not. A
devaluation may be just what a country's money needs. Not to mention
that we can't ignore a simple corollary: anyone with the power to
prevent a currency debacle can also cause one.
Another negative is that the BIS can cooperate with governments on
transactions that said governments would rather keep out of the
public view. For example, U.S. taxpayer monies can be passed through
BIS to the IMF and from there anywhere. In essence, the BIS launders
the money, since there is no specific accounting of where particular
deposits came from and where they went.
This is what happened during the Brazilian panic of 1998, when the
IMF, courtesy of American workers, bailed that country out. Not
incidentally, our taxpayers were generally unaware that what they
were mostly doing was subsidizing the large American banks
(Citigroup, J. P. Morgan Chase and FleetBoston among them), which
had made a lot of risky loans and didn't feel like paying a penalty
for their mistakes.
Maybe we'd feel better about the BIS if it were more transparent,
but most everything about it, including its bi-monthly member and
board meetings, is shrouded in secrecy. And perhaps more worrisome
is that the BIS is free from oversight. By rights granted under its
agreement with the Swiss Federal Council, all of the bank's
archives, documents and "any data media" are "inviolable at all
times and in all places." Furthermore, officers and employees of BIS
"enjoy immunity from criminal and administrative jurisdiction, save
to the extent that such immunity is formally waived . . . even after
such persons have ceased to be Officials of the Bank." Finally, no
claims against BIS or its deposits may be enforced "without the
prior agreement of the Bank."
In other words they can do whatever they want, without consequences.
How's that for a leak-proof legal umbrella?
But in the end, how you feel about the BIS may come down to how you
feel about a one-world currency. The bank was a major player
promoting the adoption of the euro as Europe's common currency.
There are rumors that its next project is persuading the U.S.,
Canada and Mexico to switch to a similar regional money, perhaps to
be called the "amero," and it's logical to assume the bank's
ultimate goal is a single world currency. That would simplify
transactions and really solidify the bank's control of the planetary
Will the day ever come when the earth is flooded with fiat "globos?"
We sincerely hope not. And, as the recent transnational rush to turn
paper into gold suggests, the market is beginning to agree with us.
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03-07-2006 6:29 PM