GLOBAL VOLATILITY FACILITATES GLOBAL FINANCIAL INTEGRATION

 

 

 

By Joan Veon
February 9, 2004
NewsWithViews.com

Every G-7 meeting is important because it strengthens the integration among countries that has been in the making for the last 60 years. The global harmony that will result will benefit the international bankers and those in key support positions while making it harder for the average American to make ends meet as a result of currency devaluation, loss of purchasing power and market losses. The methods used to create global integration among the 193 countries of the world, is currency and market volatility. In order to understand how the individual nation-state will be integrated into a global economy, we must review the past to understand the present.

As a result of President Nixon refusing to convert gold-backed dollars held by foreigners into gold in 1971, the world entered a post-gold era. Because currencies were separated from the gold standard, they were forced to float against one another to determine their value. At that time, the dollar could buy 3.66 Deutsche marks or 3.57 yen. By separating the world's currencies from gold, the world's monetary system was in a position to be devalued at the whim of any central banker by simply selling that country's currency, since it is now based on paper.

The rise of the central banks began in 1668 with the Sveriges Riksbank in Sweden birthed the concept of a private corporation lending money to the government which would pay interest in perpetuity, thus being forever in debt to the central bank. However, it was not until the Bank of England in 1694 that the idea became global. The Bank of France began in 1803, the German Bundesbank in 1870, the Bank of Japan in 1882, the Bank of Italy in 1893 and the U.S. Federal Reserve in 1913. At this point in time, most countries have a private corporation that controls their monetary system. The newest central banks have been set up in Afghanistan, Russia, China and Iraq.

Dr. Carroll Quigley, Bill Clinton's mentor at Georgetown University, wrote about the purpose of central banks in his book Tragedy and Hope, "[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. Each bank�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 cooperative politicians by subsequent economic rewards in the business world." Furthermore, Dr. Quigley said, "When a currency is off the gold standard, fluctuations of exchange can go on indefinitely. The unbalance of international payments is worked out by a shift in exchange rates."

The brain trust of the world's central banks is the Bank for International Settlements in Basle, Switzerland. Over the years, they have increased and expanded their activities and jurisdiction over the world's international banking system. Their goal is to "foster international monetary cooperation." To understand the importance of the G7 Finance Ministers meeting with the G7 Central Bank ministers, we need to take a look at another group that has facilitated the open, integrated world we live in.

Over the past 29 years, the Group of Eight-G8 has become a key center of power in world affairs. Originally the U.S., France, England and Germany met after the U.S. went off the gold standard in 1975. Then Canada and Japan joined with the newest member, Russia, joining two years ago. While the purpose of the Group of Eight was originally to monitor a post-gold world, it has evolved over the years into a "global board of directors" with their own global cabinet. Their agenda now includes all areas of government: labor, education, law, finance, health, transportation, trade, foreign affairs, etc. The G8, however, has never hid their goal: global integration. In 1991 they declared, "We seek to build world partnership, based on common values and to strengthen the international order." In 1994, the year that they decided to strengthen the international financial architecture (free trade, new international mechanisms to facilitate economic integration), they pledged their full energies "to strengthening the institutions in partnership with the entire membership to enhance the security and prosperity of the world. The major challenge confronting us is to manage increased interdependence."

While the Group of Eight heads of state originally met on a yearly basis with the Finance and Foreign Ministers, in 1999 they began to meet separately. Each now holds their own meetings with their own agendas and issuing their own statements. Furthermore, in 1998, using the Asian Currency Crisis as their reason, the G7 central bankers joined the finance ministers in their deliberations. While the reason given was the Asian Crisis, I believe we could also look at it from a standpoint of evolving power. Because the central banks lend money to the countries of the world, they are debtors to them. The real question is more about "who has the real power." If the countries are broke and basically in debtor's prison, that means the evolving international financial architecture is really about the transfer of wealth into the hands of the international bankers who own and finance the central bank's of the world.

In order to facilitate a transfer of assets, there has to be an open system-a world without borders where laws have been changed to facilitate integration and harmonization. The biggest economy in the world, the U.S., has been the driving force behind the integration. While there are many laws we could point to, the Monetary Control Act of 1980 is foundational. The Monetary Control Act of 1980 did three things: First, it changed various laws so that foreigners could invest in America and we could invest in their countries which lead to the proliferation of foreign and global mutual funds; global mergers and acquisitions and to $2T in stateless money running around the world looking for the quickest play and highest return. Second, it removed any ceilings and floors on how much interest banks had to pay and charge on savings and certificates of deposit. This deregulation has led to a time in which we are charged maximum interest for money borrowed and minimum interest on bank savings. Lastly, it gave the Federal Reserve, which is a private corporation and not part of the U.S. Treasury or government, greater power over the U.S. Government.

Furthermore, with the birth of the World Trade Organization in 1994, the trade barriers between nation-states began to fall. Key for our purposes is the WTO Financial Services Agreement that demands that all countries allow foreign banks, brokerage firms and insurance companies to buy their banks, brokerage firms and insurance companies. In other words, if a country wants to maintain financial sovereignty by only allowing nationals to buy their banks, brokerage firms and insurance companies, they cannot. This was demonstrated in an interview with John Fratto from the Treasury Department. I asked him what needed to be done to have complete global integration. He replied, "There is still a lot more that needs to be done. There are many countries around the world with trade barriers affecting financial services, affecting capital flows, allowing for financial services firms to invest and be welcomed into their countries and we are going to see a lot more of that and is part of the free trade agreement/negotiations, regionally and at the [WTO] Doha Round as well and is a very important part of our trade effort. Treasury plays a major role in negotiating the investment chapters [of the WTO agreement] and the chapters that concern financial flow and we will see a lot more of that."

How do you integrate the countries of the world? By creating market and currency volatility. The right situations have been created: (1) countries currencies backed by paper, not gold; (2) a central banking system in every country that can either add monies to the banking system to create market highs or they can reduce the amount of money in the banking system to create a recession or they can sell a country's currency if they want to teach a wayfaring country a lesson; (3) a system of world trade whereby products and companies can move from country to country to take advantage of low wages and (4) the ability of money to travel freely around the world looking for the quickest play and highest return.

If you look at the 1990s, there were massive problems that created high and lows for the dollar, euro, yen and Deutsche mark (which has now been replaced by the euro). In every case where the dollar dropped to new post-World War II lows against the yen and Deutsche mark the central banks of the world had to bail out the dollar. Currently the dollar comprises 65% of the foreign exchange reserves of central banks.

I believe that the change in the value of the euro, yen and dollar was primarily to help further monetary integration between countries. When the dollar is weak, our exports are cheaper than foreign products and America is on sale. When the euro dropped over 30% after it was birthed, that made European products cheaper than American or Japanese products and Europe was on sale. When the yen dropped over 30% in value, that made Japanese products more competitive and Japan was on sale. Money moves where there is opportunity and the $2T in stateless money that moves around the world daily is able to make a killing if they play the currencies right.

Lastly, if you do not want to play these games, there are ways to help you change your mind. After doing extensive research on the 1997 Asian Crisis, I found that Malaysia, Singapore, Thailand, Korea and Japan did not want to open their financial borders to the World Trade Organization Financial Services Agreement. As such, their currencies were crashed. In a borderless world based on paper money, this is possible with the push of a button or a telephone call to key central banks.

Carroll Quigley was right, "[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 meeting of the G7 Finance Ministers and Central Bankers is not about anything less than a world system of financial control in private hands. They refer to it as integration.

� 2004 Joan Veon - All Rights Reserved

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