This small town that borders France and Germany is known for its summer art festival and as the birthplace of Zionism. However, you would not give the rather plain building that houses the Bank for International Settlements, or BIS, in Basel, Switzerland, a second look. There is nothing about this building that indicates it is the most important 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 the bank from their hotels nearby. Unlike the world leaders who travel only in motorcades, these men do not want to draw any kind of special attention.
Inside the boot-like building is great secrecy. Several years ago, I was one of the fortunate reporters to take the only tour the bank has conducted of its building during the annual meeting. As you would imagine, there are designated meetings rooms – the auditorium where member central bank ministers meet for the annual meeting, a special room where the Group of Ten central bank ministers meet, another for the Group of Seven. Both have round tables positioned in the middle of the room with some kind of round halo hanging from the ceiling.
And then there is the “green” room. It is shaped like an almond or an eye, and because of its shape and color, is almost foreboding.
The building has 18 floors, and on the top floor the G-10 Central Bank ministers meet monthly to determine what is going to happen financially worldwide. Alan Greenspan was returning home from this meeting when his plane was diverted as a result of the Sept. 11, 2001, attacks.
In order to get into the tower, one must have permission to enter and be escorted. You do not walk through a normal doorway. You first walk close to a set of glass, circular doors. In order to be admitted to the middle of the circle, the two back glass panels slide around to let you in. Then when you are inside the middle, they close and the two front glass panels slide open to allow you to enter the tower where all of the offices and work of the BIS takes place.
I was standing there one year looking at the glass doors when a reporter from a major British news agency said, “Masonic-looking, isn’t it?”
Over the years the Bank for International Settlements has amassed more power over the global financial infrastructure and more power to destroy you or your country financially than the Mafia.
While their mandate is bank regulation and supervision, I believe it is safe to say they do much more. Because it comprises the meeting place of the world’s central bankers, their brain trust, they have the ability to determine if a country’s currency should be bought or sold by the other member banks. Depending on how much is bought or sold will determine if the currency has value or is worthless.
The bank has a number of very powerful committees, including the Basel Committee on Banking Supervision, which has been working on how to regulate not only international banks but eventually all banks in the world.
I remember interviewing one of its former chairmen. When he tried to tell me the Asian crisis was caused by the fact that when the barriers between countries dropped, they did not realize they should have had a new structure in place to keep the countries from falling apart, I replied, “But you have all the brain power in the world, how could that be?”
Then there is the Committee on the Global Financial System that monitors financial markets around the world with the objective of identifying potential risks for financial stability. In January, Roger W. Ferguson, Jr., vice chairman of the Federal Reserve System. was appointed the new chairman.
The Committee on Payment and Settlement Systems looks to strengthen the financial markets infrastructure with sound rules on the payments and transfers of monies between central bank members.
Lastly, there is the newly created Financial Stability Forum, or FSF. As a result of the Asian crisis and the demise of Long Term Capital Management, which was a large enough financial operation to create tremors throughout the world’s financial markets, the Group of Seven called for a committee of this type to help safeguard the entire global system.
Until recently, this forum was chaired by Andrew Crockett, former BIS managing director, who recently was knighted by the queen for his service to international finance. Roger Ferguson has been named chairman of this forum, which is comprised of the G7 Central Bank governors, G7 finance ministers and the G7 regulatory agencies, such as 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.
Lastly, besides the G7 countries, members of a number of emerging market countries such as India, China, New Zealand, Pakistan, Indonesia, Korea, Malaysia, Thailand and the Philippines participate.
Let me point out that the forum represents a “coming together” of the central bank ministers, the treasury secretaries and the regulatory authorities of a country. This is very significant, because until 1999, there was no such interaction between these various groups from the G7 countries. In an interview with the new managing director, I described the interaction between FSF members as “representing greater cohesiveness, harmonization among countries,” to which he agreed.
Furthermore, all of the above represents a transfer of power from the legislatures of the countries to the central bankers and the BIS.
Over the years, I have watched as the BIS has amassed greater powers to help oversee a borderless financial and economic world. But we have to remember that their growing power is as a result of their financial control over a country that borrows money from them. Our central bank, the Federal Reserve, was established in 1913. Therefore, Alan Greenspan has more power than George Bush – all you have to do is follow the money!
Dr. Carroll Quigley, Bill Clinton’s mentor at Georgetown University, described the BIS, established in 1930, as being the “apex” of a feudalistic “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 … acting in concert, by secret agreements arrived at in frequent private meetings and conferences.”
As I read this year’s annual report and a number of speeches given over the past year by Sir Andrew, I saw the future – the next round of Enrons and Long Term Capital Management which will extend further the current financial “permanent revolution.”
The tearing down of the political, economic, legal and financial borders between the nation-states has fulfilled the socialist dream of “open borders.” However, open borders is not utopia, just ask those people in Third World countries who have experienced the lost value in their currencies as money runs around the world looking for the highest return and quickest play. This volatility has contributed to the financial instability that the BIS and its member central banks want to eliminate by more regulations and control – sort of like a cat chasing its tail.
In an interview with Dr. Malcolm Knight, he said the main objective of the BIS was to maintain “low, predictable and stable inflation.”
However, his predecessor, Mr. Crockett said in a February speech, “Two possible factors help explain why financial instability seems to persist. One lies in the paradox that success in taming inflation can make economies even more vulnerable to those ways of excessive optimism that breed unsustainable dynamics.”
Is he suggesting their target of low, predictable and stable inflation contributes to market volatility? If so, it is going to be permanent. Quigley also explained central bankers prefer deflation because it allows them to obtain a higher value on their money.
Banks have been transferring risky investments into the equity markets to get risk off of their balance sheets. I asked a senior economic official if this was going to be our next “Enron” and he admitted he was concerned about this.
He said the amount being transferred would have to be monitored and those buying the investments – insurance and reinsurance companies along with pension plans – would have to know what they were buying.
While low interest rates help to stimulate a slow economy by giving families the chance to reposition debt, many are using the opportunity to borrow unrealized gains from the current value of their homes. What this means is that if the housing bubble were to burst, those who have taken out all of the equity from their home for the swimming pool, exotic vacation, etc., may find themselves in the poor house.
People forget banks are in business to not only make money but to increase assets.
The term “permanent revolution” refers to a political scheme where there are always problems or a series of problems in which someone who wants to change the system can do it “honestly” in such a manner that their agenda is put forth as the solution.
In order for you and I to land on our feet and protect our assets, we must understand the next set of problems. The bottom line is to protect what we have and invest wisely given an agenda “transfer wealth” through various “Nasdaq” maneuvers.
Joan Veon is a certified financial planner and is president of Veon Financial Services, Inc., an investment advisory firm. Visit her website, WomensGroup.org.
