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Bank Crimes Pay: Under the Thumb of the Global Financial Mafiocracy

Bank Crimes Pay: Under the Thumb of the Global Financial Mafiocracy

By: Andrew Gavin Marshall

27 November 2015

Originally posted at Occupy.com

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On Nov. 13, the United Kingdom’s Serious Fraud Office (SFO) announced it was charging 10 individual bankers, working for two separate banks, Deutsche Bank and Barclays, with fraud over their rigging of the Euribor rates. The latest announcement shines the spotlight once again on the scandals and criminal behavior that have come to define the world of global banking.

To date, only a handful of the world’s largest banks have been repeatedly investigated, charged, fined or settled in relation to a succession of large financial scams, starting with mortgage fraud and the Libor scandal in 2012, the Euribor scandal and the Forex (foreign exchange) rate rigging. At the heart of these scandals, which involve the manipulation of interest rates on trillions of dollars in transactions, lie a handful of banks that collectively form a cartel in control of global financial markets – and the source of worldwide economic and financial crises.

Banks such as HSBC, JPMorgan Chase, Barclays, Bank of America, Citigroup, Deutsche Bank, Royal Bank of Scotland and UBS anchor the global financial power we have come to recognize as fraud. The two, after all, are not mutually exclusive. In more explicit terms, this cartel of banks functions as a type of global financial Mafia, manipulating markets and defrauding investors, consumers and countries while demanding their pound of flesh in the form of interest payments. The banks force nations to impose austerity measures and structural reforms under the threat of cutting off funding; meanwhile they launder drug money for other cartels and organized crime syndicates.

Call them the global Mafiocracy.

In May, six major global banks were fined nearly $6 billion for manipulation of the foreign exchange market, which handles over $5 trillion in daily transactions. Four of the six banks pleaded guilty to charges of “conspiring to manipulate the price of U.S. dollars and euros exchanged.” Those banks were Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland, while two additional banks, UBS and Bank of America, were fined but did not plead guilty to the specific charges. Forex traders at Citigroup, JPMorgan Chase and other banks conspired to manipulate currency prices through chat room groups they established, where they arrogantly used names like “The Mafia” and “The Cartel.”

The FBI said the investigations and charges against the big banks revealed criminal behavior “on a massive scale.” The British bank Barclays paid the largest individual fine at around $2.3 billion. But as one trader at the bank wrote in a chat room conversation back in 2010, “If you aint cheating, you aint trying.” The total fines, while numerically large, were but a small fraction of the overall market capitalization of each bank – though the fine on Barclays amounted to some 3.4% of the bank’s market capitalization, the highest percentage by far among the group.

Despite the criminal conspiracy charges covering the years 2007 through 2013, the banks and their top officials continue to lay the blame squarely at the feet of individual traders. Axel Weber, the former president of the German Bundesbank (the central bank of Germany), who is now chairman of Switzerland’s largest bank, UBS, commented that “the conduct of a small number of employees was unacceptable and we have taken appropriate disciplinary actions.”

Looking at the larger scale of bank fines and fraud in the roughly eight years since the global financial crisis, the numbers increase substantially. In addition to a 2012 settlement for mortgage-related fraud in the U.S. housing market, which amounted to some $25 billion, several large banks paid individual fines related to mortgage and foreclosure fraud – including a $16 billion fine for Bank of America, and $13 billion for JPMorgan Chase. Added to these are fines related to the rigging of the Libor rate (the interest rate at which banks lend to each other) and the Forex rigging, as well as money laundering, violating sanctions, manipulating the price of gold, manipulating the U.S. electricity market and assisting tax evasion, among other crimes.

According to a research paper published in June, the total cost of litigation (fines, penalties, settlements, etc.) paid by 16 major global banks since 2010 has reached more than $300 billion. Bank of America paid the most, amounting to more than $66 billion, followed by JPMorgan Chase, Lloyds, Citigroup, Barclays, RBS, Deutsche Bank, HSBC, BNP Paribas, Santander, Goldman Sachs, Credit Suisse, UBS, National Australia Bank, Standard Chartered and Société Générale.

Virtually all of these banks also appear on a list of data, compiled through 2007, revealing them to be among the most interconnected and powerful financial institutions in the world. This core group of corporations forms part of a network of 147 financial institutions that Swiss scientists refer to as the “super-entity,” which, through their various shareholdings, collectively controland own each other and roughly 40% of the world’s 43,000 largest transnational corporations.

In other words, the big banks – along with large insurance companies and asset management firms – do not simply act as a cartel in terms of engaging in criminal activities, but they form a functionally interdependent network of global financial and corporate control. Further, the banks work together in various industry associations and lobbying groups where they officially represent their collective interests.

The largest European banks and financial institutions are represented by the European Financial Services Round Table (EFR), whose membership consists of the CEOs or Chairmen of roughly 25 of the top financial institutions on the continent, including Deutsche Bank, AXA, HSBC, Allianz, RBS, ING, Barclays, BNP Paribas, UBS, and Credit Suisse, among others.

In the United States, the Financial Services Forum (FSF) represents the largest American along with some European banks and financial institutions. The Forum’s membership consists of less than 20 executives, including the CEOs or Chairmen of such firms as Bank of America, Morgan Stanley, JPMorgan Chase, Goldman Sachs, Citigroup, UBS, HSBC, AIG, Bank of New York Mellon, State Street Corporation, Deutsche Bank and Wells Fargo, among others.

And on a truly global scale, there is the Institute of International Finance (IIF), the premier global association representing the financial industry, with a membership of nearly 500 different institutions from more than 70 countries around the world, including banks, insurance companies, asset management firms, sovereign wealth funds, central banks, credit ratings agencies, hedge funds and development banks.

In addition to these various groups and associations, many of the same large banks and their top executives also serve as members, leaders or participants in much more secretive groups and forums – for example, the International Monetary Conference (IMC), a yearly meeting of hundreds of the world’s top bankers hosted by the American Bankers Association, which invites selected politicians, central bankers and finance ministers to attend their off-the-record discussions. In addition, there is the Institut International d’Etudes Bancaires (International Institute of Banking Studies), or IIEB, which brings together the top officials from dozens of Europe’s major financial institutions for discussions with central bankers, presidents and prime ministers in “closed sessions” with virtually no coverage in the media.

These financial institutions are major owners of government debt, which gives them even greater leverage over the policies and priorities of governments. Exercising this power, they typically demand the same thing: austerity measures and “structural reforms” designed to advance a neoliberal market economy that ultimately benefits those same banks and corporations. The banks in turn create the very crises that require governments to bail them out, racking up large debts that banks turn into further crises, pressuring economic reforms in return for further loans. The cycle of crisis and control continues, and all the while, the big banks and financial institutions engage in criminal conspiracies, fraud, manipulation and money-laundering on a massive scale, including acting as the financial services arm of the world’s largest drug cartels and terrorists organizations.

Welcome to the world governed by the global financial Mafiocracy – because if you’re not concerned, you’re not paying attention.

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Globalization’s Game of Thrones, Part 2: Managing the Wealth of the World’s Dynasties

Globalization’s Game of Thrones, Part 2: Managing the Wealth of the World’s Dynasties

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By: Andrew Gavin Marshall

27 May 2014

In part 1 of this series (“Globalization’s Game of Thrones”) I examined the concept of corporate and financial dynasties holding significant power in the modern world. In this, part 2 of the series, I examine the realities of the ‘wealth management’ industry in being responsible for handling the wealth and investments of the world’s richest families, and the role of a unique institution dedicated to protecting and propagating dynastic wealth: the family office.

A Family Affair

In 2010, Forbes – a major financial publication which publishes an annual list of the world’s richest people – noted that the richest of the richest 400 Americans were members of prominent corporate and financial dynasties, with six of the top ten wealthiest Americans being heirs to prominent fortunes, as opposed to being ‘self-made’ billionaires. What’s more, since the financial crisis began in 2007 and 2008, the fortunes of these dynasties – and the other super-rich who made the Forbes list – had only increased in value.

Corporate America can frequently be seen as the emblem of the ‘self-made’ rich, a representation of a supposedly democratic, capitalist society, where firms are run by “professional managers” who received the right education and developed the appropriate talents to make successful companies. The reality, however, is that roughly a third of the Fortune 500 companies (that is, many of the world’s largest multinational corporations) are in fact “family businesses,” frequently run by family members, and often outperforming the “professionally managed” firms “by a surprisingly large margin,” noted the New York Times.

In other words, in the United States – the beacon of the ‘self-made’ millionaire – a huge percentage of the most successful companies are owned by family dynasties, and most of the richest individuals are heirs to these family dynasties. The picture that begins to emerge better reflects that of an aristocracy, rather than a democracy.

As the New York Times noted in 2010, “the increasing use of so-called dynasty trusts” was undermining the notion that America was a meritocracy (where people ‘rise through the ranks’ of society based upon merit instead of money, access or family lineage). Dynastic trusts allow super-rich families “to provide their heirs with money and property largely free from taxes and immune to the claims of creditors,” not only providing for children, but “for generations in perpetuity – truly creating an American aristocracy.” In laws that predate the formation of the United States as an independent nation, such family trusts were only able to limit the term of the existing trust to roughly 90 years, after which the property and wealth which was consolidated into the trust would be owned directly by the family members. However, in changes that were implemented through Congress in the mid-1980s and in state legislatures across the U.S. in the 1990s, the rules were amended – with the pressure of the banking lobby – to allow family trusts to exist “forever,” a quiet coup for the existing and emerging aristocratic American class.

Thus, the modern dynasty trust was officially sanctioned as a legal entity – a type of private family company – that would be responsible for handling the collective wealth – in money, property, land, art, equities (stocks), bonds (debt), etc. – of the entire family, for generation after generation. The focus is on long-term planning to maintain, protect and increase the wealth of the dynasty, and to hold it ‘in trust’ against the inevitable in-fighting that accompanies dynastic succession and generational differences. This would prevent – in theory – one generation or patriarch from mishandling and squandering the entire family fortune.

The legal structure of a family trust differs greatly from public corporations, in that their focus is not on maximizing short-term quarterly profits for shareholders, but in maintaining multi-generational wealth and prestige. Family trusts are increasingly used to manage the wealth of the world’s super-rich dynasties, alongside private banking institutions and other wealth management and consulting firms. There is an entire industry dedicated to the management of money, wealth and investments for the super-rich, and it is focused largely – and increasingly – on family dynasties.

Of Rockefellers and Rothschilds

One of the world’s most famous family trusts – the “family office” – is that of Rockefeller & Co., now known as Rockefeller Financial. It was founded in 1882 by the oil baron industrialist John D. Rockefeller as the ‘family office’ to manage the Rockefeller family’s investments and wealth. Roughly a century after it was founded, in the 1980s, Rockefeller & Co. began selling its ‘expertise’ to other rich families, and by the year 2008, the trust had roughly $28 billion under management for multiple clients.

When the CEO of Rockefeller & Co., James S. McDonald, shot himself in an alley behind a car dealership in 2009, the family looked for and found a successor in the former Undersecretary of State for Economic, Energy, and Agricultural Affairs for the Bush administration, Rueben Jeffery III, a former partner at Goldman Sachs. Jeffery was responsible for handling the family’s wealth throughout the global financial crisis, and by 2012, the assets under management by Rockefeller Financial had grown to $35 billion.

As of late 2012, Rockefeller & Co. had approximately 298 separate clients, providing them with “financial, trust, and tax advice.” The typical clients for Rockefeller & Co. are families with more than $30 million in investments, and the group charges new clients a minimum annual fee of $100,000. However, the family office has increasingly been attracting clients beyond other family dynasties, including major multinational corporations awash with cash in a world where nation states are flooded in debt. David Harris, the chief investment officer of Rockefeller Financial, explained in a 2012 interview with Barron’s (a magazine for the super-rich), that as the world’s nations were stuck in a debt crisis, triple-A rated multinational conglomerates represented “the new sovereigns” with “unprecedented” amounts of cash to be invested.

And while prominent family trusts have become increasingly attractive for other rich families and institutions to handle their wealth, they have also become attractive investments in and of themselves. One of Europe’s largest banks, the French conglomerate Société Générale (SocGen) purchased a 37% stake in Rockefeller & Co. in June of 2008. However, with the European debt crisis, the bank had to cut a great deal of its assets, and so in 2012 Rueben Jeffery III managed the sale of the 37% stake in the Rockefeller enterprise from SocGen to RIT Capital Partners, the investment arm of the London Rothschild family, one of the world’s most famous financial dynasties.

Barron’s magazine noted that the official union of these two major financial dynasties “should provide some valuable marketing opportunities” in such an uncertain economic and financial landscape, where “new wealth” from around the world would seek “to tap the joint expertise of these experienced families that have managed to keep their heads down and their assets intact over several generations and right through the upheavals of history.”

Early in 2012, the Rothschild family, with various banks and investment entities spread out across multiple European nations and family branches, was making a concerted effort to begin the process of “merging its French and British assets into a single entity,” aiming to secure “long-term control” over the family’s “international banking empire,” reported the Financial Times. The main goal of the merger was “to cement once and for all the family’s grip on the business,” giving the family a 57 percent share in the voting rights, thus protecting the merged entity from hostile takeovers. Thus, as the Rothschild banking dynasty was seeking to consolidate its own family interests across Europe, they were simultaneously looking to expand into the U.S. through the Rockefellers.

Thus, when Lord Jacob Rothschild – who managed the British Rothschild’s family trust, RIT Capital Partners – announced that RIT would be purchasing a 37% stake in Rockefeller Financial Services in May of 2012 for an “undisclosed sum,” it was announced as a “strategic partnership” that would allow the Rothschilds to gain “a much sought-after foothold in the US,” representing a “transatlantic union” that officially unites the two family patriarchs of David Rockefeller and Jacob Rothschild, “whose personal relationship spans five decades.”

At the time of the announcement, David Rockefeller, who was then 96-years-old, commented that, “Lord Rothschild and I have known each other for five decades. The connection between the two families is very strong.” Rockefeller & Co.’s CEO, Rueben Jeffery III, declared that, “there is a shared vision, at the conceptual and strategic level, that marrying the two names with particular products, services, geographic market opportunities, can and will have resonance. These are things we will want to act on as this partnership and overall relationship evolves.” In a world where families hold immense wealth and power, the official institutional union of two of the world’s most famous and recognizable dynastic names makes for an attractive investment for newer dynasties seeking propagation and preservation.

The Family Office

As the Financial Times noted in 2013, the “family office” for the world’s wealthy dynasties, which had “long been cloaked in a shroud of secrecy as rich families have sought to keep their personal fortunes private” has become more popular with “the explosion of wealth in the past few decades and dissatisfaction with the poor performance of portfolios handled by global private banks.” Still, many so-called “single family offices” continue to operate in secrecy, managing the wealth of a single dynasty, but the emergence of “multi-family offices” (MFOs) has become an increasing trend in the world of wealth management, handling the wealth and investments of multiple families.

The world’s largest private banks have specific “family office arms” which are dedicated to managing dynastic wealth, and these banks continue to dominate the overall market. Bloomberg Markets published a list of the top 50 MFOs in 2013, with HSBC Private Wealth Solutions topping the list, advising assets totaling $137.3 billion, with other banks appearing on the top ten list such as BNY Mellon Wealth Management, Pictet and UBS Global Family Office. Despite the fact that the family office arms of the world’s top private banks dominate the list, many of the oldest family offices made the list, such as Bessemer Trust and Rockefeller & Co. A top official at HSBC Private Bank was quoted by the Financial Times as saying: “Very wealthy families are becoming more and more globalized. It’s not just the fact that they are acquiring assets – like real estate – in several jurisdictions, but family members are scattered around the globe and need to be able to transact in those countries.” In effect, we are witnessing the era of the globalization of family dynasties.

Such a view is shared by Carol Pepper, a former financial adviser and portfolio manager at Rockefeller & Co. who established her own consulting firm – Pepper International – in 2001, specializing in advising families with more than $100 million in net worth. In a 2013 interview with Barron’s, Pepper explained that with the globalization of higher education – where the super-rich from around the world send their children to the same prominent academic institutions – as well as with the emergence of associations designed to bring wealthy families together, “the 19th century [is] coming back,” referring to the era of Robber Baron industrialists and co-operation between the major industrial and financial fortunes of the era. Pepper explained that in the present global environment, she was witnessing “a lot more exchange of ideas among wealthy families from different countries than there ever was before,” with such families increasingly investing in and with each other, noting that “inter-family transactions” had increased by 60% in the previous two years.

The globalization of family dynasties and the ‘return’ to the 19th century is an institutional phenomenon, facilitated by elite universities, business and family associations, international organizations, conferences and other organizations. Thus, regardless of geographic location, the world’s wealthiest families tend to send their children to one of a list of relatively few elite universities, such as Wharton, Harvard or the London School of Economics. At these and similar schools, noted Carol Pepper, the future heirs of family fortunes attain “both the know-how and the contacts for forging overseas collaborations between family businesses.”

So-called ‘non-profit’ associations like the International Family Office Association, the Family Business Network, and ESAFON, among others, are institutional representations of “intentional efforts by rich clans to rub shoulders with one another.” Instead of a rich family in one region hiring an outside firm to introduce them to a new market, they simply are able to reach out directly to the wealthy families within that market, and, as Pepper explained, their interests will be increasingly aligned and “hopefully you’ll all make money together.”

Instead of relying on banks as intermediaries between markets, rich families with more than $47 million to invest are pooling their wealth into the multi-family offices (MFOs). The Financial Times explained that such wealthy families were “crying out for something financial institutions have singularly failed to provide: a one-stop shop to manage both their business and personal interests.” Further, as banks have been coming under increased scrutiny since the financial crisis, “there is still a clandestine nature to the family-office world that will continue to attract clients.” Explaining this, the Financial Times appropriately quoted advice by the character Don Corleone from The Godfather, when he told his son: “Never tell anybody outside the family what you’re thinking.”

As the Wall Street Journal noted, family offices “are private firms that manage just about everything for the wealthiest families: tax planning, investment management, estate planning, philanthropy, art and wine collections – even the family vacation compound.” As such, regardless of where many family fortunes are made, the family office has come to represent the central institution of modern dynasties. And the growth of multi-family offices has been astounding, with the number increasing by 33% between 2008 and 2013, with more than 4,000 in the United States alone, the country with the highest number of wealthy families and individuals, including 5,000 households that have more than $100 million in assets. The Wall Street Journal noted: “You don’t have to be a Rockefeller to join a family office.” However, it does help to have hundreds of millions of dollars.

In 2012, the list of the largest multi-family offices were largely associated with major banks, including HSBC, BNY Mellon, UBS, Wells Fargo and Bank of America, but Rockefeller Financial maintained a prominent position as the 11th largest multi-family office (according to assets under advisement and number of families being served). And beyond the specific arm of the ‘multi-family office’ to the list of the top wealth management groups as a whole, private bank branches of some of the world’s most recognizable bank names dominated the list: Bank of America Global Wealth & Investment Management, Morgan Stanley Smith Barney, JPMorgan, Wells Fargo & Company, UBS Wealth Management, Fidelity, and Goldman Sachs, among others. However, after the top 19 wealth management companies in the world – all of which were arms of major global banking and financial services conglomerates – came number twenty on the list: Rockefeller Financial.

Indeed, things have never been better for the super-rich. A 2012 poll of 1,000 wealthy Americans by the Merrill Lynch Affluent Insights Survey revealed that 58% of respondents felt more financially secure in 2012 than they did the previous year. In 2013, U.S. Trust, the private banking arm of Bank of America, released a survey of 711 individuals with more than $3 million in investable assets, of whom 88% reported that they were more financially secure today than they were before the financial crisis in 2007. Further, the main goal for the super-rich in 2013 was reported to be “asset appreciation” as opposed to “extreme caution”, as the survey reported for 2012.

In 2013, Bloomberg Markets Magazine reported that the number of wealthy people in the world with more than $1 million in investable assets had increased by 9.2% over 2012, reaching a new record of 12 million individuals, and the assets by the rich increased by roughly 10%, reaching a combined total of roughly $46.2 trillion. With this growth in extreme wealth, the wealth management business is itself becoming a major growth industry, with independent firms competing against the big banks in a race to manage the spoils of the world’s super-rich.

And the world’s big banks want to get more of this investable wealth. For example, Goldman Sachs has boosted its private wealth management services. The number of partners at the bank working in asset management in 2010 represented 4.5% of the bank’s total partners, a number which grew to 12% by 2012. Tucker York, the head of private wealth management in the U.S. for Goldman Sachs, noted: “This is a relationship business, and long-term relationships matter… The focus for us is to have the right quality and caliber of people come into the business and stay in the business for a long, long time.”

The managing director and chief investment officer of Goldman Sachs’ private wealth management arm, Mossavar-Rahmani, told Barron’s in 2012: “This is the time to be a long-term investor… There are very few market participants in today’s environment who can truly be long-term investors. Who can really afford to be a long-term investor? The ultra-high-end client is the only one we could think of, because they generally have more money than their spending needs.” In addition, he noted, “their assets are multigenerational,” and, what’s more, “they are not accountable to anyone.”

In a world of immense inequality, with the super-rich controlling more wealth than the rest of humanity combined, the wealth management industry – and within it, the ‘family office’ – have become growth industries and increasingly important institutions. The whole process of globalization has facilitated not only the internationalization of financial markets, multinational corporations and the economies they dominate, but it has in turn facilitated the globalization of family dynasties themselves, whose wealth is largely based on control over corporate and financial assets and institutions.

In globalization’s ‘Game of Thrones’, the world’s super-rich families compete and cooperate for control not simply over nations, but entire regions and the world as a whole. As dynasties seek perpetuation, most people on this planet are concerned with survival. Whoever wins this ‘Game of Thrones,’ the people lose.

The research for this series has been undertaken as part of The People’s Book Project. For this – and similar – research to continue, please consider making a donation today:

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.

Global Power Project, Part 6: Banking on Influence With Bank of America

Global Power Project, Part 6: Banking on Influence With Bank of America

By: Andrew Gavin Marshall

Originally posted at Occupy.com

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Part 1: Exposing the Transnational Capitalist Class

Part 2: Identifying the Institutions of Control

Part 3: The Influence of Individuals and Family Dynasties

Part 4: Banking on Influence with JPMorgan Chase

Part 5: Banking on Influence With Goldman Sachs

This July, Bank of America was expecting to report an earnings increase of 32% from last year. The Washington Business Journal declared the bank among the top 10 “most improved brands” of the year. Bank of America is the second-largest bank in the United States following JPMorgan Chase.

So why does this bank deserve such an “improved” reputation? Perhaps it’s worth looking at a little of the bank’s record for some clarity.

During the first year of the global financial crisis, which the big banks helped to create and which they profited enormously from, the government stepped in to bail out Bank of America. They rewarded the bank $20 billion for its massive financial crimes, as well as a special guarantee for nearly $100 billion of potential losses on the balance sheets of Merrill Lynch, which Bank of America acquired during the crisis.

As it turns out, Bank of America and other big banks continue to get “backdoor bailouts” through the Federal Reserve Bank of New York, which acts as a legal guarantor and protector of the Wall Street chain gang of criminal conglomerates. The bank was recently added to a list, compiled by a corporate watchdog group, of the “dirty dozen” criminal financial institutions for its role deceiving investors, committing mortgage and foreclosure abuses and engaging in municipal bond rigging and illegal payments.

When Matt Taibbi wrote in Rolling Stone that Bank of America was “a hypergluttonous ward of the state whose limitless fraud and criminal conspiracies we’ll all be paying for until the end of time,” he wasn’t exaggerating. The bank foreclosed on tens of thousands of Americans through a “mass perjury” scheme and pushed worthless mortgages on pension funds and unions. As several big banks – including BofA, JPMorgan, Wells Fargo and Citigroup – agreed to pay a $25 billion settlement with the government over “abusive mortgage practices,” the Department of Justice granted the banks what amounted to legal immunity “from civil government claims over faulty foreclosures.” In January, Bank of America settled to pay $11.6 billion to the government-controlled mortgage company Fannie Mae in response to a legal battle over “bad loans.”

In June of 2013, six former BofA employees and one contractor issued sworn statements in which they accused the bank of lying to homeowners, fraudulently denying loan modifications and paying bonuses to staff who pushed people into foreclosure. One of the whistleblowers commented, “we were told to lie to customers.” Employees that pushed ten or more homeowners per month into foreclosure would receive a $500 bonus, and the Bank also “gave employees gift cards to retail stores like Target or Bed Bath and Beyond as rewards for placing accounts into foreclosure.”

Further, anyone who “questioned the ethics” of the bank’s practices was summarily fired – a policy that led to a lawsuit in which homeowners accused the bank of racketeering “to defraud homeowners who sought modifications and then acted as the kingpin of that [racketeering] enterprise.”

Of course, it doesn’t end there. Bank of America, along with multiple other big banks, has been accused of laundering money for Mexican drug cartels. The FBI confirmed that BofA was involved in laundering drug money for the Los Zetas drug cartel in Mexico. However, in a twist of fine news for the bank, U.S. government regulators indicated they would not hold the bank responsible for its actions.

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Banking on Influence

So how does a massive criminal enterprise engaging in large-scale fraud, racketeering and money laundering get a free pass from the U.S. government? The bank’s financial clout in the economy certainly plays a part. But so too do its affiliations with dominant national and international organizations, institutionalizing the bank within the larger global power structures and the elites who run them.

Research conducted for the Global Power Project found 28 individuals at Bank of America, including executives and members of board of directors, with institutional affiliations. Four of the individuals who hold leadership positions at BofA are also affiliated with the major foreign-policy think tank in the United States: the Council on Foreign Relations. Three individuals are connected to Morgan Stanley, another major financial institution, while two affiliations exist with the World Business Council for Sustainable Development (promoting big business “solutions” to environmental crises), the Business Council, Catalyst, Duke University, Stanford University, and BlackRock.

The following institutions each also hold one individual affiliated with Bank of America: Royal Dutch Shell, DuPont, Deere & Company, the World Wildlife Fund, the President’s Export Council, Harvard, the World Economic Forum, Brookings Institution, Sara Lee Corporation, Monsanto, CBS Corporation, BAE Systems, General Dynamics, Walt Disney Company, President Obama’s Council on Jobs and Competitiveness, the Rockefeller Foundation, Business Roundtable, Financial Services Forum, PepsiCo, Carlyle Group, Booz Allen Hamilton, Goldman Sachs, the International Advisory Panel of the Monetary Authority of Singapore and the International Advisory Board of the National Bank of Kuwait.

Meet the Elites

Bank of America’s CEO, Brian T. Moynihan, was a former executive vice president at Fleet Boston and director of BlackRock. He is currently a member of the Business Roundtable and Vice Chairman of the Financial Services Forum, as well as being a member of the International Advisory Panel of the Monetary Authority of Singapore.

Charles O. Holliday, Jr. is the Chairman of the Board of Bank of America and a director of Royal Dutch Shell, and was the CEO of DuPont from 1998 to 2009. He was the former Chairman of the World Business Council for Sustainable Development, the Business Council, Catalyst, the Society of Chemical Industry, and is a founding member of the International Business Council. Holliday is a director of Deere & Company, a member of the board of Planet Forward, Climate Works Foundation, the Nicholas Institute for Environmental Policy Solutions at Duke University, and is a member of the board of directors of the National Geographic Education Foundation and the World Wildlife Fund (WWF).

Mukesh D. Ambani is a member of the board of Bank of America and is the Chairman and Managing Director of Reliance Industries. He is a member of the Global Board of Advisors of the Council on Foreign Relations, a member of the Prime Minister’s Council on Trade and Industry for the Government of India, a member of the board of governors of the National Council of Applied Economic Research in New Delhi, and a member of the Millennium Development Goals Advocacy Group. Ambani is also a member of the Foundation Board of the World Economic Forum, a member of the Indo-U.S. CEOs Forum, a member of the International Advisory Board of the National Bank of Kuwait, Vice Chairman of the World Business Council for Sustainable Development, and a member of the Advisory Council of the Graduate School of Business at Stanford University. Additionally Ambani is a member of the Business Council, the India-Russia CEO Council, Co-Chair of the Japan-India Business Leader’s Forum, Chairman of the Board of Governors of the Indian Institute of Management, and is a member of the International Advisory Council of the Brookings Institution.

Monica C. Lozano is Chairman and CEO of ImpreMedia and CEO of La Opinion, as well as a member of the board of directors of the Walt Disney Company. She is also a member of the Board of Regents of the University of California, a Trustee of the University of Southern California and a director of the Weingart Foundation, as well as a member of the board of directors of the Commission of the 21st Century Economy. Lozano was a member of President Obama’s Economic Recovery Advisory Board from 2009-2011, and has since been a member of President Obama’s Council on Jobs and Competitiveness as well as a member of the Board of Trustees of the Rockefeller Foundation and a member of the Council on Foreign Relations.

Charles O. Rossotti is a senior adviser to the Carlyle Group and was the Commissioner of the IRS from 1997 to 2002, also sitting on the board of directors of Booz Allen Hamilton, Quorum Management Solutions, Primatics Financial and AES Corporation. He too is a member of the Council on Foreign Relations.

Linda P. Hudson, who sits on the board of BofA, is the President and CEO of the military contractor BAE Systems, and former Vice President of General Dynamics. Hudson sits on the board of the Smithsonian National Air and Space Museum and on the executive committee of the Aerospace Industries Association. She is a member of the University of Florida Foundation Board and the International Women’s Forum.

Anne M. Finucance, who is the Global Strategy and Marketing Officer at Bank of America, is also a director of Partners HealthCare System, CVS Caremark Corporation, a trustee of Stonehill College and Carnegie Hall, and a member of the Council on Foreign Relations. Finucance sits on the boards of the John F. Kennedy Library Foundation, the American Ireland Fund, the International Center of Journalists, and the National September 11 Memorial & Museum.

bankofamerica-thiefs

Banking on America?

Bank of America is, in short, a profound symbol of much that is wrong on Wall Street: massive fraud, money laundering, racketeering, conspiracy, and weighty influence in Washington and beyond. Surely it’s comforting to know that a woman who sits on the board of BofA, Monica Lozano, also sits on President Obama’s Council on Jobs and Competitiveness, advising the president as to how to appropriately manage the economic “recovery”. In terms of the media reporting on Bank of America’s crimes, Lozano, as CEO of a media company and board member of the Walt Disney Company, along with BofA board member Charles K. Gifford — who sits on the board of directors of CBS Corporation — signal that a “fair” portrayal of the bank’s activities aren’t exactly what the public should expect.

What is clear is that Bank of America, like all big banks in our era, isn’t merely a financial institution but simultaneously acts as an influential institution in the media, military industrial complex, think tanks, chemical companies and government circles.

The bank is too big to fail. Too big to jail. And too connected to change.

Andrew Gavin Marshall is a 26-year old independent researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, head of the Geopolitics Division of the Hampton Institute, the research director of Occupy.com’s Global Power Project, and has a weekly podcast with BoilingFrogsPost.

The Global Banking ‘Super-Entity’ Drug Cartel: The “Free Market” of Finance Capital

The Global Banking ‘Super-Entity’ Drug Cartel: The “Free Market” of Finance Capital

By: Andrew Gavin Marshall

HSBC bankers testifying before U.S. Senate on laundering billions in drug money (photo courtesy of The Economist, 21 July 2012)

 

This essay is the product of research undertaken for the first volume of The People’s Book Project. Please donate to help the first volume come to completion: a study of the institutions, ideas, and individuals of power and resistance in a snap-shot of the world today, looking at the global economic crisis, war and empire, repression and the global spread of anti-austerity and resistance movements.

I would like to introduce you, the reader, to some realities of our global banking system, resting on the rhetoric of free markets, but functioning, in actuality, as a global cartel, a “super-entity” in which the world’s major banks all own each other and own the controlling shares in the world’s largest multinational corporations, influence governments and policy with politicians in their back pockets, routinely engaging in fraud and bribery, and launder hundreds of billions of dollars in drug money, not to mention arms dealing and terrorist financing. These are the “too big to fail” and “too big to jail” banks, the centre of our global economy, what we call a “free market,” implying that the global banks – and corporations – have “free reign” to do anything they please, engage in blatantly criminal activities, steal trillions in wealth which is hidden offshore, and never get more than a slap on the wrist. This is the real “free market,” a highly profitable global banking cartel, functioning as a worldwide financial Mafia.

Scientific Research Proves the Existence of a Global Financial “Super-Entity”

In October of 2011, New Scientist reported that a scientific study on the global financial system was undertaken by three complex systems theorists at the Swiss Federal Institute of Technology in Zurich, Switzerland. The conclusion of the study revealed what many theorists and observers have noted for years, decades, and indeed, even centuries: “An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.” As one of the researchers stated, “Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market… Our analysis is reality-based.” Using a database which listed 37 million companies and investors worldwide, the researchers studied all 43,060 trans-national corporations (TNCs), including the share ownerships linking them.[1]

The mapping of ‘power’ was through the construction of a model showing which companies controlled which other companies through shareholdings. The web of ownership revealed a core of 1,318 companies with ties to two or more other companies. This ‘core’ was found to own roughly 80% of global revenues for the entire set of 43,000 TNCs. And then came what the researchers referred to as the “super-entity” of 147 tightly-knit companies, which all own each other, and collectively own 40% of the total wealth in the entire network. One of the researchers noted, “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network.” This network poses a huge risk to the global economy, as, “If one [company] suffers distress… this propagates.” The study was undertaken with a data set established prior to the economic crisis, thus, as the financial crisis forced some banks to die (Lehman Bros.) and others to merge, the “super-entity” would now be even more connected, concentrated, and problematic for the economy.[2]

The top 50 companies on the list of the “super-entity” included (as of 2007): Barclays Plc (1), Capital Group Companies Inc (2), FMR Corporation (3), AXA (4), State Street Corporation (5), JP Morgan Chase & Co. (6), UBS AG (9), Merrill Lynch & Co Inc (10), Deutsche Bank (12), Credit Suisse Group (14), Bank of New York Mellon Corp (16), Goldman Sachs Group (18), Morgan Stanley (21), Société Générale (24), Bank of America Corporation (25), Lloyds TSB Group (26), Lehman Brothers Holdings (34), Sun Life Financial (35), ING Groep (41), BNP Paribas (46), and several others.[3]

In the United States, five banks control half the economy: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs Group collectively held $8.5 trillion in assets at the end of 2011, which equals roughly 56% of the U.S. economy. This data was according to central bankers at the Federal Reserve. In 2007, the assets of the largest banks amounted to 43% of the U.S. economy. Thus, the crisis has made the banks bigger and more powerful than ever. Because the government invoked “too big to fail,” meaning that the big banks will be saved because they are very important, the big banks have incentive to make continued and bigger risks, because they will be bailed out in the end. Essentially, it’s an insurance policy for criminal risk-taking behaviour. The former president of the Federal Reserve Bank of Minneapolis stated, “Market participants believe that nothing has changed, that too-big-to-fail is fully intact.” Remember, “market” means the banking cartel (or “super-entity” if you prefer). Thus, they build new bubbles and buy government bonds (sovereign debt), making the global financial system increasingly insecure and at risk of a larger collapse than took place in 2008.[4]

When politicians, economists, and other refer to “financial markets,” they are in actuality referring to the “super-entity” of corporate-financial institutions which dominate, collectively, the global economy. For example, the role of financial markets in the debt crisis ravaging Europe over the past two years is often referred to as “market discipline,” with financial markets speculating against the ability of nations to repay their debt or interest, of credit ratings agencies downgrading the credit-worthiness of nations, of higher yields on sovereign bonds (higher interest on government debt), and plunging the country deeper into crisis, thus forcing its political class to impose austerity and structural adjustment measures in order to restore “market confidence.” This process is called “market discipline,” but is more accurately, “financial terrorism” or “market warfare,” with the term “market” referring specifically to the “super-entity.” Whatever you call it, market discipline is ultimately a euphemism for class war.[5]

The Global Supra-Government and the “Free Market”

In December of 2011, Roger Altman, the former Deputy Secretary of the Treasury under the Clinton administration wrote an article for the Financial Times in which he explained that financial markets were “acting like a global supra-government,” noting:

They oust entrenched regimes where normal political processes could not do so. They force austerity, banking bail-outs and other major policy changes. Their influence dwarfs multilateral institutions such as the International Monetary Fund. Indeed, leaving aside unusable nuclear weapons, they have become the most powerful force on earth.[6]

Altman continued, explaining that when the power of this “global supra-government” is flexed, “the immediate impact on society can be painful – wider unemployment, for example, frequently results and governments fail.” But of course, being a former top Treasury Department official, he went on to endorse the global supra-government, writing, “the longer-term effects can be often transformative and positive.” Ominously, Altman concluded: “Whether this power is healthy or not is beside the point. It is permanent,” and “there is no stopping the new policing role of the financial markets.”[7] In other words, the ‘super-entity’ global ‘supra-government’ of financial markets carries out financial extortion, overthrows governments and impoverishes populations, but this is ultimately “positive” and “permanent,” at least from the view of a former Treasury Department official. From the point of view of those who are being impoverished, the actual populations, “positive” is not necessarily the word that comes to mind.

In the age of globalization, money – or capital – flows easily across borders, with banks, hedge funds and other financial institutions acting as the vanguards of a new international order of global governance. Where finance goes, corporations follow; where corporations venture, powerful states stand guard of their interests. Our global system is one of state-capitalism, where the state and corporate interests are interdependent and mutually beneficial, at least for those in power. Today, financial institutions – with banks at the helm – have reached unprecedented power and influence in state capitalist societies. The banks are bigger than ever before in history, guarded by an insurance policy that we call “too big to fail,” which means that despite their criminal and reckless behaviour, the government will step in to bail them out, as it always has. Financial markets also include credit ratings agencies, which determine the supposed “credit-worthiness” of other banks, corporations, and entire nations. The lower the credit rating, the riskier the investment, and thus, the higher the interest is for that entity to borrow money. Countries that do not follow the dictates of the “financial market” are punished with lower credit ratings, higher interest, speculative attacks, and in the cases of Greece and Italy in November of 2011, their democratically-elected governments are simply removed and replaced with technocratic administrations made up of bankers and economists who then push through austerity and adjustment policies that impoverish and exploit their populations. In the age of the “super-entity” global “supra-government,” there is no time to rattle around with the pesky process of formal liberal democracy; they mean business, and if your elected governments do not succumb to “market discipline,” they will be removed and replaced in what – under any other circumstances – is referred to as a ‘coup.’

Banks and financial institutions provide the liquidity – or funds – for what we call “free markets.” Free markets in principle would allow for free competition between companies and countries, each producing their own comparative advantage – producing what they are best at – and trading with others in the international market, so that all parties rise in living standards and wealth together. The “free market” is, of course, pure mythology. In practice, what we call “free markets” are actually highly protectionist, regimented, regulated, and designed to undermine competition and enforce monopolization. The “free markets” serve this purpose for the benefit of large multinational corporations and banks.

When we use the term “free markets” we are generally referring to the “real” economy, legitimate and legal. When it comes to illegitimate markets, for example, the global drug trade, we do not tend to refer to them as “free markets” but rather, “illegal” and run by “cartels.” Cartels, like corporations, are hierarchically organized totalitarian institutions, where decisions and power and exercised from the top-down, with essentially no input going from the bottom-up. Large multinational corporations, like large international cartels, seek to control their particular market throughout entire nations, regions, and beyond. Often, co-operation between corporations allow them to function in an oligopolistic manner, where the collectively dominate the entire market, carving it up between them. Major oil companies, agro-industrial firms, telecommunications, pharmaceutical, military contractors and water management corporations are well-known for these types of activities.

Cartels have often been known to engage in a similar practice, though typically they are more competitive with each other. When interests are threatened – which is defined as when a corporation or cartel is at risk of losing its total dominance of its market in a particular region – conflict arises, and often violently so, with the potential for coups, assassinations, terror campaigns, and war. This is when the state intervenes to protect the market for the cartel or corporate interests. Thus, a market like the global drug trade functions relatively similar to those of the “legitimate” economy, pharmaceuticals, energy, technology, etc. The illicit trade in drugs is as much a “free market” as is the trade in automobiles or oil. And of course, the money ends up in the same place: the global supra-government of “financial markets.”

Banking Cartel or Drug Cartel… or What’s the Difference?

In 2009, the United Nations Office on Drugs and Crime reported that billions of dollars in drug money saved the major banks during the financial crisis, providing much-needed liquidity. Antonio Maria Costa, the head of the UN Office on Drugs and Crime stated that drug money was “the only liquid investment capital” available to banks on the brink of collapse, with roughly $325 billion in drug money absorbed by the financial system. Without identifying specific countries or banks, Costa stated that, “Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities… There were signs that some banks were rescued that way.”[8]

In 2010, Wachovia Bank (now owned by Wells Fargo) settled the largest action ever under the U.S. bank secrecy act, paying a fine of $50 million plus forfeiting $110 million of drug money, of which the bank laundered roughly $378.4 billion out of Mexico. The federal prosecutor in the case stated, “Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations.” The fine that the bank paid for laundering hundreds of billions of dollars in drug money was less than 2% of the bank’s 2009 profit, and on the same week of the settlement, Wells Fargo’s stock actually went up. The bank admitted in a statement of settlement that, “As early as 2004, Wachovia understood the risk” of holding such an account, but “despite these warnings, Wachovia remained in the business.” The leading investigator into the money laundering operations, Martin Woods, based out of London, had discovered that Wachovia had received roughly six or seven thousand subpoenas for information about its Mexican operation from the federal government, of which Woods commented: “An absurd number. So at what point does someone at the highest level not get the feeling that something is very, very wrong?” Woods had been hired by Wachovia’s London branch as a senior anti-money laundering officer in 2005, and when in 2007 an official investigation was opened into Wachovia’s Mexican operations, Woods was informed by the bank that he failed “to perform at an acceptable standard.” In other words, he was actually doing his job. In regards to the settlement, Woods stated:

The regulatory authorities do not have to spend any more time on it, and they don’t have to push it as far as a criminal trial. They just issue criminal proceedings, and settle. The law enforcement people do what they are supposed to do, but what’s the point? All those people dealing with all that money from drug-trafficking and murder, and no one goes to jail?[9]

As the former UN Office of Drugs and Crime czar Antonio Maria Costa said, “The connection between organized crime and financial institutions started in the late 1970s, early 1980s… when the mafia became globalized,” just like other major markets. Martin Woods added that, “These are the proceeds of murder and misery in Mexico, and of drugs sold around the world,” yet no one went to jail, asking, “What does the settlement do to fight the cartels? Nothing – it doesn’t make the job of law enforcement easier and it encourages the cartels and anyone who wants to make money by laundering their blood dollars. Where’s the risk? There is none.” He added: “Is it in the interest of the American people to encourage both the drug cartels and the banks in this way? Is it in the interest of the Mexican people? It’s simple: if you don’t see the correlation between the money laundering by banks and the 30,000 people killed in Mexico, you’re missing the point.” Woods, who now runs his own consultancy, told the Observer in 2011 that, “New York and London… have become the world’s two biggest laundries of criminal and drug money, and offshore tax havens. Not the Cayman Islands, not the Isle of Man or Jersey. The big laundering is right through the City of London and Wall Street.”[10]

Just as the “too big to fail” program acts as an insurance policy for the big banks to engage in constant criminal activity, taking ever-larger financial risks with the guarantee that they will be bailed out, the settlements and lack of criminal prosecutions for banks laundering drug money provides the incentive to continue laundering hundreds of billions in drug money, because so long as the fine is smaller than the profit accrued from such a practice, it comes down to a simple cost-benefit analysis: if the cost of laundering drug money is less than the benefit, continue with the policy. The same cost-benefit analysis goes for all forms of criminal activity by banks and corporations, whether bribery, fraud, or violating environmental, labour and other regulations. So long as the penalty is less than the profit, the problem continues.

An article in the Observer from July of 2012 referred to global banks as “the financial services wing of the drug cartels,” noting that HSBC, Britain’s biggest bank, had been called before the U.S. Senate to testify about laundering drug money from Mexican cartels, holding one “suspicious account” for four years on behalf of the largest drug cartel in the world, the Sinaloa cartel in Mexico.[11] In fact, a multi-year investigation into HSBC revealed that the bank was not only a major international drug money-laundering conduit, but also laundered money for clients with ties to terrorism. In July of 2012, as the Senate was publicly investigating HSBC, Antonio Maria Costa stated, “Today I cannot think of one bank in the world that has not been penetrated by mafia money.” The global drug trade is estimated to be worth roughly $380 billion annually, with most of the money made in the consumer markets of North America and Europe. Using the example of the $35 billion per year cocaine market in the United States, only about 1.5% of these profits make their way to the coca-leaf producers (mostly poor peasants) in South America (who became the target of our bombing and chemical warfare campaigns in the “war on drugs”), while the international traffickers get roughly 13% of the profits, with the remaining 85% earned by the distributors in the U.S. HSBC was accused of laundering the profits of the distributors.[12]

The U.S. Senate report concluded that HSBC had exposed the U.S. financial system to “a wide array of money laundering, drug trafficking, and terrorist financing,” including billions in “proceeds from illegal drug sales in the United States.” HSBC acknowledged, in an official statement, that, “in the past, we have sometimes failed to meet the standards that regulators and customers expect.” Among those “standards” that HSBC “sometimes failed to meet,” according to the Senate investigation, were financing provided to banks in Saudi Arabia and Bangladesh which were tied to terrorist organizations, while the bank’s regulator failed to take a single enforcement action against HSBC.[13] Among the terrorist organizations which potentially received financial assistance from HSBC through Saudi banks was al-Qaeda. HSBC put aside $700 million to cover any potential fines for such activities, which is not uncommon for banks to do. Banks like ABN Amro, Barclays, Credit Suisse, Lloyds and ING had all reached major settlements for admitting to facilitating transactions and engaging in money laundering for clients in Cuba, Iran, Libya, Myanmar and Sudan.[14]

As executives from HSBC appeared in the U.S. Senate, the bank’s head of compliance since 2002, David Bagley, resigned as he testified before the committee, commenting, “Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators.”[15] As Ed Vulliamy reported in the Observer, in May of 2012, a poor black man named Edward Dorsey Sr. was convicted of peddling 5.5 grams of crack cocaine in Washington D.C. and was given 10 years in jail. Meanwhile, just across the river from where Dorsey had committed his crime, executives from HSBC admitted before the U.S. Senate that they laundered billions in drug money, just as Wachovia had admitted to the previous year, with no one going to prison.[16] The lesson from this is clear: if you are poor, black, and are caught with a couple grams of crack-cocaine, you can expect to go to prison for several years (or in this case, a decade); but if you are rich, white, own a bank, and are caught laundering billions of dollars (or hundreds of billions of dollars) in drug money, you will be fined (but not enough to make such practices unprofitable), and may have to resign. Too big to fail is simply another way of saying “too big to jail.”

Of course, it’s not fair to put all the blame for international drug money-laundering on the shoulders of HSBC and Wachovia, as Bloomberg reported, Mexican drug cartels also funneled money through the Bank of America and even the banking branch of American Express, Banco Santander, and Citigroup.[17] Even the FBI has accused Bank of America of laundering Mexican drug cartel funds.[18] But it’s not just drug money that banks launder; all sorts of illicit funds are laundered through major banks, many of which have been fined or are now being investigated for their criminal activities, including JPMorgan, Standard Chartered, Credit Suisse, Lloyds, Barclays, ING, and the Royal Bank of Scotland, among others.[19] Another major Swiss bank, UBS, has been very consistent in committing fraud and engaging in various conspiracies, a great deal of which was committed against Americans, though the bank was given “conditional immunity” from the U.S. Department of Justice.[20]

Financial Fraud and the ‘Get Out of Jail Free Card’

The major banks of the world have been caught in conspiracies of ripping off small towns and cities across the United States, which allowed banks like JPMorgan Chase, GE Capital, UBS, Bank of America, Lehman Brothers, Wachovia, Bear Stearns, and others, to steal billions of dollars from schools, hospitals, libraries, and nursing homes from “virtually every state, district and territory in the United States,” according to a court settlement on the issue. The theft was done through the manipulation of the public bidding process, something that the Mafia has become experts in with regards to garbage and construction industry contracts. In short, the banking system actually functions like a Mafia cartel system, not to mention, taking money from the Mafia and cartels themselves.[21] Banks like JP Morgan Chase and Goldman Sachs engaged in bribery, fraud, and conspiracies which resulted in the bankruptcy of counties all across the United States.[22] Still, they continue to be ‘respected’ by the political class which refuses to punish them for their criminal activity, and instead, rewards them with bailouts and follows their instructions for policy.

Over the summer of 2012, another major banking scandal hit the headlines, regarding the manipulation of the London inter-bank lending rate known as the Libor. The Libor rate, explained the Economist, “determines the prices that people and corporations around the world pay for loans or receive for their savings,” as it is used as a benchmark for establishing payments on an $800 trillion derivatives market, covering everything from interest rate derivatives to mortgages. Essentially, the Libor is the interest rate at which banks lend to each other on the short term, and is established through an “honour system” of where 18 major banks report their daily rates, from which an average is calculated. That average becomes the Libor rate, and reverberates throughout the entire global economy, setting a benchmark for a massive amount of transactions in the global derivatives market. Whereas the derivatives market is a massive casino of unregulated speculation, the Libor scandal revealed the cartel that owns the casino.

The scandal began with Barclays, a 300-year old bank in Britain, revealing that several employees had been involved in rigging the Libor to suit their own needs. More banks quickly became implemented, and countries all over the world began opening investigations into this scandal and the role their own banks may have played in it. By early July, as many as 20 major banks were named in various investigations or lawsuits related to the rigging of the Libor.[23]

Among the major global banks which are being investigated by U.S. prosecutors are Barclays, Deutsche Bank, Citigroup, JPMorgan Chase, Royal Bank of Scotland, HSBC, UBS, Bank of America, Bank of Tokyo Mitsubishi, Credit Suisse, Lloyds Banking Group, Rabobank, Royal Bank of Canada, Société Générale, and others. Prosecutors in the U.S., U.K., Canada and Japan were investigating collusion between the major banks on the manipulation of the Libor. In June of 2012, Barclays paid a fine to US and UK authorities, admitting its culpability in the rigging with a $450 million settlement.[24] With information and documents pouring out, implicating further banks and institutions in the scandal, a general consensus was emerging that the Libor had been manipulated since at least 2005, though, as one former Morgan Stanley trader wrote in the Financial Times, the rigging had began as early as 1991, if not before. The British Banker’s Association was responsible for setting the Libor rate by polling roughly 18 major banks on their highest and lowest rates daily. Thus, rigging by one bank would require the co-operating of at least nine other banks in purposely manipulating their rates in order to have any effect upon the Libor. Douglas Keenan, the former Morgan Stanley trader, wrote that, “it seems the misreporting of Libor rates may have been common practice since at least 1991.”[25]

Rolf Majcen, the head of a hedge fund called FTC Capital told Der Spiegel that, “the Libor manipulation is presumably the biggest financial scandal ever.” As regulators were using words like “organized fraud” and “banksters” to describe the growing scandal, it was becoming common to refer to the major banks as functioning like a “cartel” or “mafia.”[26] The CEO of Barclays, Bob Diamond, resigned in disgrace, as did Marcus Agius, the Chairman of Barclays (who also serves as a director on the board of BBC, and is married into the Rothschild banking dynasty). The “cartel” manipulated the Libor for a great number of reasons, among them, to appear to be in better health by rigging their credit ratings upwards.[27] The Business Insider referred to the Libor rigging as a “criminal conspiracy” from the start, essentially designed to promote manipulation as the Libor was determined by an “honor system” for banks to properly report their rates.[28] Imagine giving a pile of credit cards to a group of credit card fraud convicts and establishing an “honour system.” Could one truly be surprised if it didn’t work out? Well, the Libor scandal is effectively based upon the same logic, except that the repercussions are global in scope.

Traders at the Royal Bank of Scotland referenced, in internal emails, to their participation in operating a “cartel” that made “amazing” amounts of money through the manipulation of interest rates, with a former senior trader at RBS writing that managers at the bank had “condoned collusion.” The same trader, who was later hung out to dry by RBS as a scapegoat, wrote in an email to a trader at Deutsche Bank that, “It is a cartel now in London,” where the Libor is established.[29]

The cartel, however, did not simply include the major banks, but also required the cooperation or at least negligence of regulators and central banks. Documents released by the Federal Reserve Bank of New York and the Bank of England show correspondence between then-President of the NY Fed Timothy Geithner (who is now Obama’s Treasury Secretary) and Bank of England Governor Mervyn King discussing how Barclays was manipulating the Libor rates during the 2008 financial crisis. While the NY Fed corresponded with both the Bank of England and Barclays itself on the acknowledgment of interest rate manipulation, it never told the bank to stop the rigging practice. An official at Barclays even informed the NYFed in 2008 that the bank was under-reporting the rate at which it could borrow from other banks so that Barclays could “avoid the stigma” of appearing to be weaker than its peers, adding that “other participating banks were also under-reporting their Libor submissions.”[30]

A Barclays employee told the New York Fed in an April 2008 phone call that, “We know that we’re not posting um, an honest Libor… and yet we are doing it, because, um, if we didn’t do it, it draws, um, unwanted attention on ourselves.” The New York Fed official replied: “You have to accept it… I understand. Despite it’s against what you would like to do. I understand completely.” Several months later, a Barclays employee told a New York Fed official that the Libor rates were still “absolute rubbish.”[31]

While the New York Fed expressed sympathy for the poor and helpless global banks need to engage in fraud and interest rate manipulation in order to lie and appear to be healthier than it was, the Bank of England went a step further, when Paul Tucker, the head of markets at the BoE wrote a note to Barclays CEO Bob Diamond in 2008 suggesting that Barclays lower its Libor rate, thus encouraging the rigging itself, instead of just expressing sympathy for the “need” to commit fraud.[32]

The main British banking lobby group, the British Banker’s Association (BBA), which was responsible for overseeing the Libor rate process (no conflict of interest there, right?), was, in late September of 2012, stripped of its right to oversee the Libor, to be replaced with a formal regulator. The BBA’s “oversight” of Libor dates back to 1984, when the City of London (Britain’s Wall Street) had begun an experiment to establish a new way of setting interest rates, asking the banking lobby group to set the rate in 1986 when the Libor began.[33] The BBA’s Foreign Exchange and Money Markets Committee is responsible for setting the Libor, and they meet every two months to review the process in secret without any minutes being published, and even the membership of the Committee is kept a secret. Spokespersons at Credit Suisse, Royal Bank of Scotland, and UBS refused to comment on whether they had any representatives on the committee, while Barclays, Deutsche Bank, HSBC, Bank of America and Citigroup didn’t even respond to emailed inquiries about their involvement with the committee, as Bloomberg reported. A British regulator, in the understatement of the century, stated, “There is an apparent lack of transparency,” adding that the BBA’s committee “doesn’t appear to be sufficiently open and transparent to provide the necessary degree of accountability to firms and markets with a direct interest in being assured of the integrity of Libor.”[34] When the fox guards the henhouse, it takes a great deal of stupidity to be “surprised” when some hens go missing.

In an April 2008 meeting with officials at the Bank of England, Angela Knight, the head of the British Banker’s Association, suggested that the BBA perhaps should no longer be responsible for oversight of “the world’s most important number,” which had become too big for the BBA to manage. No one at the meeting cared enough to do anything about it, however, and so nothing changed.[35] Where was the incentive to change the system, after all? Yes, massive fraud was taking place, and this was well understood by the banks committing it, as well as the regulators and central banks overseeing it. But on the plus side, everyone was getting away with it. So indeed, there was no incentive to change the system. From the point of view of those managing it, the Libor was functioning as it should. A cartel was established because a cartel was desired. The fact that it was all highly illegal, fraudulent, and immoral was – and is – beside the point. Mexican drug cartels do not worry about the legality of their operations because they are, by definition, illegal. They worry simply about getting away with their illegal operations. The same can be said for the global banking cartel. So long as they get away with criminal cartel operations, there is no incentive to change the system, and instead, there is only an incentive to expand and further entrench the cartel’s operations.

Canada’s antitrust regulator began an investigation into the “international cartel” of banks rigging the Libor, focusing on the role played by banks such as JP Morgan Chase, Royal bank of Scotland, Deutsche Bank, HSBC, and Citigroup, among others. A law professor at the University of Toronto who was hired by the regulator to study the case commented that, “international cartels are of a significant concern for the Canadian economy.”[36] We have truly reached an impressive circumstance when the actual regulators of the banks refer to the banking system as an “international cartel.”

A lawsuit was being filed by several homeowners in the U.S. who were attempting to sue some of the world’s largest banks for fraud, as the Libor manipulation sparked increases on their mortgages, resulting in illegal profits for banks. The class action lawsuit filed in New York in October of 2012 accused banks such as Bank of America, Citigroup, Barclays, UBS, JPMorgan Chase, Deutsche Bank and others of fraud over a period of ten years.[37] For U.S. states and municipalities that bought interest-rate swaps before the financial crisis, the Libor rigging was poised to more than double their losses. Banks had sold roughly $500 billion of interest-rate swaps (in the derivatives market) to municipalities before the financial crisis, with roughly $200 billion of those swaps tied to the Libor. As one legal expert who studies derivatives told Bloomberg, “Almost all interest-rate swaps begin with Libor.” This prompted several states in the U.S. to begin their own investigations into how the Libor-rigging may have negatively affected them.[38]

Punishing the World’s Population into Poverty: Life Under the Global Cartel

While the global cartel of criminal banks rig rates, launder drug money, fund terrorists, engage in bribery, fraud and demand multi-trillion dollar bailouts from our governments (effectively selling their bad debts to the public), and then give themselves massive bonuses, they are also demanding – through what is called “market discipline” – that our governments deal with our debts by undertaking policies of “austerity” and “structural reform,” which are euphemisms for impoverishment and exploitation. Thus, after the cartel helped create a massive financial crisis, and after our governments rewarded them for their criminal activity, the cartel now demands that our governments punish their populations into poverty and open their economies, resources and labour up for cheap and easy exploitation by banks and multinational corporations. This is referred to as the “solution” for getting out of the ‘Great Recession,’ and which is sure to great a Great Depression. Greece is now two and a half years into its “austerity” and “adjustment” reforms, with its debt growing as a result, poverty exploding, misery spreading, health, education, welfare rapidly declining, suicide rates and hunger increasing, as the Greek people are subjected to a program of “social genocide.” Market discipline demands austerity and adjustment, or in other words, class warfare creates poverty and exploitation.[39]

Countries that refuse to implement programs of austerity and adjustment are subjected to financial terrorism by the “international cartel,” as financial markets engage in “market discipline” by using the derivatives market to speculate against that particular country’s ability to pay its interest or debt, thus making its credit ratings decrease and borrowing rates increase, plunging the country into a deeper crisis. In any other scenario, this is called terrorism or in the very least, extortion: do what I say or I will punish you and destroy you. This is what former U.S. Treasury official Roger Altman referred to in the Financial Times as the new “global supra-government” who can “force austerity, banking bail-outs and other major policy changes,” and thus, “have become the most powerful force on earth.”[40] Countries, regional, and international organizations all bow down to the dictates of the “international cartel” of the “global supra-government,” and so countries like Greece, Spain, Ireland, Italy, and Portugal, organizations like the European Union, European Central Bank, powerful states like Germany, France, Britain, and the U.S., and other international organizations like the IMF, Bank for International Settlements, and the OECD all demand and implement austerity measures and structural “reforms.” Either they follow the orders of the “cartel” – which we commonly refer to as the “invisible hand” of the “free market – or they directly challenge “the most powerful force on earth.” In the global economy, a small country like Greece standing up to the “global supra-government” is much like a small Greek restaurant trying to stand up to the city Mafia.

In the U.S., states that were defrauded in the billions of dollars by the cartel, and took on major debts as a result, are now the harbingers of austerity in America. Beginning in 2010, roughly 20 states across the U.S. began implementing austerity measures, and have been doing much worse economically as a result (the predicted effect of austerity). Even the institutions which are the most militant in demanding austerity measures, such as the European Union and the IMF, have acknowledged in recent reports that countries which pursue austerity to supposedly reduce their debts end up getting much larger debts as a result, and that such measures are actually extremely damaging to economies. This is not news, of course, since there is a rather large sample of data from the past 30 years of forced austerity and adjustment measures across Africa, Asia, and Latin America (at the behest of the IMF, World Bank, western governments, and of course, the “cartel”), which show quite clearly the effect that austerity and adjustment have in rapidly expanding poverty and facilitating exploitation. As austerity is hitting several U.S. states, jobs are lost and poverty increases with debt, standards of living decline and the recession deepens into a depression. The population is essentially punished for the crimes of the global cartel, while public employees, pensioners, welfare recipients, teachers and workers get the blame.[41]

In late October of 2012, the CEOs of 80 major corporations and banks in the United States banded together (as any well functioning cartel does) in order to pressure Congress, regardless of who the next President is, to pursue an agenda of harsh austerity measures and structural reforms. In a statement to Congress signed by the 80 CEOs, the American branch of the global cartel (its most significant branch), demanded that policies be enacted immediately, though implemented gradually, “to give Americans time to prepare for the changes in the federal budget.” Among the demands are to reform Medicare and Medicaid, healthcare, Social Security, increase taxes, and generally reduce spending. All of this amounts to a large federal program of austerity, to cut social spending and increase taxes on the population, thus impoverishing the population. This, in the words of the letter to Congress, “must be bipartisan and reforms to all areas of the budget should be included.”[42] Among the signatories to the letter were the CEOs of AT&T, Bank of America, BlackRock, Boeing, Caterpillar, Dow Chemical Company, General Electric, Goldman Sachs, JPMorgan Chase, Merck, Microsoft, Motorola, Time Warner, and Verizon, among many others.[43]

This followed roughly one week after a group of 15 major global bank CEOs sent a letter to President Obama and the U.S. Congress lecturing the U.S. political class on “moral authority,” giving their formal orders to the U.S. political establishment, that regardless of Democratic or Republican administrations, they are losing patience with the democratic apparatus of the state, and warned: “The solvency, productive capacity, and stability of the United States, as well as its moral authority as a global leader, require that its fiscal challenges be credibly met.” Among the signatories to the letter were the CEOs of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo. The Wall Street Journal, reporting on this letter, commented that even for “a dying democracy, it’s embarrassing enough to see bankers telling our government what to do,” but in this letter, “we even see foreign bankers telling our government what to do,” as other CEOs of the global cartel signed the letter, from banks such as UBS, Credit Suisse, and Deutsche Bank. The “consequences of inaction” on the U.S. debt, read the letter, “would be very grave.” In other words, the U.S. political class has received a threat from the global cartel that it is now time to implement austerity and adjustment measures, or to face the consequences of financial terrorism.[44]

Hiding the Loot: The Offshore Economy in the Age of the Global Plutonomy

While people are being forced into poverty to pay off the bad debts of the “super-entity” global banking cartel of drug-money laundering banks which make up the “global supra-government,” the richest people in the world have been hiding their wealth in offshore tax havens, and of course, with the help of those same banks. James Henry, a former chief economist at McKinsey, a major global consultancy, published a major report on tax havens in July of 2012 for the Tax Justice Network, compiling data from the Bank for International Settlements (BIS), the IMF and other private sector entities which revealed that the world’s superrich have hidden between $21 and $32 trillion offshore to avoid taxation. Henry stated: “This offshore economy is large enough to have a major impact on estimates of inequality of wealth and income; on estimates of national income and debt ratios; and – most importantly – to have very significant negative impacts on the domestic tax bases of ‘source’ countries.” John Christensen of the Tax Justice Network commented that, “Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people… This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich.” Roughly 92,000 of the super-rich, globally, hold at least $10 trillion in offshore wealth. In many cases, the worth of these offshore assets far exceeds the debts of the countries that they flow from, the same debts that are used to keep these countries and their populations in poverty and a constant state of exploitation.[45]

The estimated total of hidden offshore wealth amounts to more than the combined GDP of the United States and Japan, hidden in secretive financial jurisdictions like Switzerland and the Cayman Islands. The process of hiding this wealth is largely facilitated by the major global banks, which compete with one another to attract the assets of the world’s super-rich. James Henry explained that the wealth of the world’s super-rich is “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy;” more of that “free market” magic. The top ten banks in the world, which include UBS and Credit Suisse (based in Switzerland) as well as Goldman Sachs in the United States, collectively managed roughly $6.4 trillion in offshore accounts for 2010 alone. As the report revealed, “for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world,” debts which are largely illegitimate as it stands. This trend is exacerbated in the oil-rich states of the world such as Nigeria, Russia, and Saudi Arabia. The report stated: “The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments.” With roughly half of the world’s offshore wealth belonging to the top 92,000 richest individuals, they represent the top 0.001%, a far more extreme global disparity than that which is invoked by the Occupy movement’s 1% paradigm. Henry commented: “The very existence of the global offshore industry, and the tax-free status of the enormous sums invested by their wealthy clients, is predicated on secrecy.”[46] Remember, “free market” means that those who own the market (the global cartel), and free to do anything they please.

A 2005 report from Citigroup coined the term “plutonomy,” to describe countries “where economic growth is powered by and largely consumed by the wealthy few,” and specifically identified the U.K., Canada, Australia, and the United States as four plutonomies. Keeping in mind that the report was published three years before the onset of the financial crisis in 2008, the Citigroup report stated: “Asset booms, a rising profit share and favourable treatment by market-friendly governments have allowed the rich to prosper and become a greater share of the economy in the plutonomy countries,” and that, “the rich are in great shape, financially.”[47] It’s only everyone else that is suffering, which by definition, is a “well functioning” economy. As the Federal Reserve reported, “the nation’s top 1% of households own more than half the nation’s stocks,” and “they also control more than $16 trillion in wealth — more than the bottom 90%.” The term ‘Plutonomy’ is specifically used to “describe a country that is defined by massive income and wealth inequality,” and that they have three basic characteristics, according to the Citigroup report:

1. They are all created by “disruptive technology-driven productivity gains, creative financial innovation, capitalist friendly cooperative governments, immigrants…the rule of law and patenting inventions. Often these wealth waves involve great complexity exploited best by the rich and educated of the time.”

2. There is no “average” consumer in Plutonomies. There is only the rich “and everyone else.” The rich account for a disproportionate chunk of the economy, while the non-rich account for “surprisingly small bites of the national pie.” [Citigroup strategist Ajay] Kapur estimates that in 2005, the richest 20% may have been responsible for 60% of total spending.

3. Plutonomies are likely to grow in the future, fed by capitalist-friendly governments, more technology-driven productivity and globalization.[48]

Kapur, who authored the Citigroup report, stated that there were also risks to the Plutonomy, “including war, inflation, financial crises, the end of the technological revolution and populist political pressure,” yet, “the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.”[49]

In February of 2011, Ajay Kapur, the author of the Citigroup report who is now with Deutsche Bank, gave an interview in which he explained that, “the world economy is even more dependent on the spending and consumption of the rich,” and that, “Plutonomist consumption is almost 10 times as volatile that of the average consumer.” He further explained that increased debt levels are a sign of plutonomies:

We have an economy today where a large fraction of the population doesn’t pay federal income taxes and, because of demand for entitlements, we have a system of massive representation without taxation. On the other hand, you have plutonomists who protect their turf and the taxation amounts are not enough to pay for everyone’s demand. So I’ve come to the conclusion that budget deficits are biased toward getting bigger and bigger. Budget deficits are going to become a manifestation of a plutonomy.[50]

The plutonomy is largely characterized by a lack of a consuming and vibrant middle class. This is a trend that has been accelerating for several decades, particularly in North America and Britain, where the middle class population is heavily indebted. The middle class has existed as a consumer class, keeping the lower class submissive, and keeping the upper class secure and wealthy by consuming their products, produced with the labour of the lower class.

The most advanced plutonomies in the world are the most advanced industrial and technological nations, where the major corporations and banks are highly subsidized and protected by the state, as is typical for a state-capitalist society. While the industrial and rich northern state-capitalist societies were able to industrialize and grow rich through highly protectionist measures, the poor south of the world (Africa, Asia, Latin America) were subjected to “free market” policies which opened up their economies to be exploited and plundered by the rich northern nations. No country has ever become an industrial power by implementing free market policies, but rather, by doing the exact opposite: heavy subsidies and state protection for key industries, technologies, and corporate entities.

While the ‘Third World’ was forced to implement “free market” policies in order to get loans, the predictable result took place: mass impoverishment and exploitation. The ‘Third World’ states were run by tiny elites who dominated the countries politically and economically, and who hid their stolen wealth in foreign banks and offshore tax havens. Now, in the midst of the global economic crisis which has been ravaging the world for the past four years, the rich northern countries are themselves implementing the same “free market” policies, though designed to subject their populations to “market discipline” while maintaining – and in fact increasing – the protectionist and subsidized policies for the multinational corporations and banks. It is important to note that “market discipline” and actual “free market” policies are exclusively designed for the general population, not the elite. Workers, students, the elderly, the poor and the many are to be subjected to “market discipline” while the banks and multinational corporations continue to be heavily subsidized (as the largest national welfare recipients) and protected by the state. Thus, just as our banks and corporations have plundered the Third World with rapacious delight over the past three decades, now they will be able to do the same to the populations of the rich nations themselves. The state will transform, as it did in the ‘Third World’, into a typically totalitarian institution which is responsible for protecting the super-rich and controlling, oppressing, or, in extreme cases of resistance, eliminating the ‘problem populations’ (i.e., the people).

Welcome to the global plutonomy in the age of austerity, the result of living under – and tolerating – a global “super-entity” corporate-financial cartel. Truly, one must pause and, if only for a moment, appreciate the ability of this global cartel to function so effectively in spite of its blatant criminal activities, and face almost absolutely no repercussions. Something truly is wrong with a society when a poor black man caught with 5 grams of crack-cocaine goes to prison for ten years, while rich white bank executives admit to laundering billions of dollars in drug money and receive only a fine and a slap on the wrist (maybe).

The lesson is clear: if you are a thief, steal by the billions or trillions, and then no one can do anything about it. If you are in the drug trade: handle only billions (or hundreds of billions) in drug money, and then you will get away with it. If you don’t want to pay taxes, be a member of the top o.oo1% of the world’s super-rich and hide your billions in offshore tax-free accounts. If you want more, create a global economic crisis, demand to be saved by the state to the tune of tens of trillions of dollars, and then, tell the state to punish their populations into poverty in order to pay for your mistakes.

In other words, if you want to indulge your criminal fantasies, lie and steal, profit from death and drugs, dominate and demand, be king and command, become the highly-functioning socially-acceptable sociopath you always knew you could be… think big. Think BANK. Serial killers, bank robbers and drug dealers go to jail; bankers get bailouts and get an unlimited insurance policy called “too big to fail.”

Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.

 

Notes

[1]       Andy Coghlan and Debora MacKenzie, “Revealed – the capitalist network that runs the world,” New Scientist, 24 October 2011:

http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html

[2]       Ibid.

[3]       Ibid.

[4]       David J. Lynch, “Banks Seen Dangerous Defying Obama’s Too-Big-to-Fail Move,” Bloomberg, 16 April 2012:

http://www.bloomberg.com/news/2012-04-16/obama-bid-to-end-too-big-to-fail-undercut-as-banks-grow.html

[5]       Dean Baker, “The eurozone crisis is not about market discipline,” Al-Jazeera, 18 December 2011:

http://www.aljazeera.com/indepth/opinion/2011/12/2011121874651469307.html

[6]       Roger Altman, “We need not fret over omnipotent markets,” The Financial Times, 1 December 2011:

http://www.ft.com/intl/cms/s/0/890161ac-1b69-11e1-85f8-00144feabdc0.html#axzz1fnNHC8YP

[7]       Roger Altman, “We need not fret over omnipotent markets,” The Financial Times, 1 December 2011:

http://www.ft.com/intl/cms/s/0/890161ac-1b69-11e1-85f8-00144feabdc0.html#axzz1fnNHC8YP

[8]       Rajeev Syal, “Drug money saved banks in global crisis, claims UN advisor,” The Observer, 13 December 2009:

http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims

[9]       Ed Vulliamy, “How a big US bank laundered billions from Mexico’s murderous drug gangs,” The Observer, 3 April 2011:

http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

[10]     Ibid.

[11]     Ed Vulliamy, “Global banks are the financial services wing of the drug cartels,” The Observer, 21 July 2012:

http://www.guardian.co.uk/world/2012/jul/21/drug-cartels-banks-hsbc-money-laundering

[12]     John Paul Rathbone, “Money laundering: Taken to the cleaners,” 20 July 2012:

http://www.ft.com/intl/cms/s/0/702a64a6-d25e-11e1-ac21-00144feabdc0.html#axzz2ALt54B7K

[13]     Agustino Fontevecchia, “HSBC Helped Terrorists, Iran, Mexican Drug Cartels Launder Money, Senate Report Says,” Forbes, 16 July 2012:

http://www.forbes.com/sites/afontevecchia/2012/07/16/hsbc-helped-terrorists-iran-mexican-drug-cartels-launder-money-senate-report-says/

[14]     Roberto Saviano, “Where the Mob Keeps its Money,” The New York Times, 25 August 2012:

http://www.nytimes.com/2012/08/26/opinion/sunday/where-the-mob-keeps-its-money.html?pagewanted=all&_r=0

[15]     Dominic Rushe, “HSBC ‘sorry’ for aiding Mexican drugs lords, rogue states and terrorists,” The Guardian, 17 July 2012:

http://www.guardian.co.uk/business/2012/jul/17/hsbc-executive-resigns-senate

[16]     Ed Vulliamy, “Global banks are the financial services wing of the drug cartels,” The Observer, 21 July 2012:

http://www.guardian.co.uk/world/2012/jul/21/drug-cartels-banks-hsbc-money-laundering

[17]     Michael Smith, “Banks Financing Mexico Gangs Admitted in Wells Fargo Deal,” Bloomberg, 29 June 2010:

http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html

[18]     Alexander Eichler, “Mexican Drug Cartel Laundered Money Through BofA, FBI Alleges,” The Huffington Post, 9 June 2012:

http://www.huffingtonpost.com/2012/07/09/los-zetas-laundered-money-bank-america_n_1658943.html

[19]     Jessica Silver-Greenberg and Edward Wyatt, “In Laundering Case, a Lax Banking Law Obscured Money Flow,” The New York Times, 8 August 2012:

http://www.nytimes.com/2012/08/09/business/how-a-lax-banking-law-obscured-money-flow.html?pagewanted=all;

Jessica Silver-Greenberg and Ben Protess, “

Money-Laundering Inquiry Is Said to Aim at U.S. Banks,” The New York Times, 14 September 2012:

http://www.nytimes.com/2012/09/15/business/money-laundering-inquiry-said-to-target-us-banks.html?pagewanted=all&_r=0

[20]     James B. Stewart, “For UBS, a Record of Averting Prosecution,” The New York Times, 20 July 2012:

http://www.nytimes.com/2012/07/21/business/ubss-track-record-of-averting-prosecution-common-sense.html?pagewanted=all

[21]     Matt Taibbi, “The Scam Wall Street Learned From the Mafia,” Rolling Stone, 21 June 2012:

http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620

[22]     William D. Cohan, “How Wall Street Scams Counties Into Bankruptcy,” Bloomberg, 1 July 2012:

http://www.bloomberg.com/news/2012-07-01/how-wall-street-scams-counties-into-bankruptcy.html

[23]     “The Libor Scandal: The Rotten Heart of Finance,” The Economist, 7 July 2012:

http://www.economist.com/node/21558281

[24]     Shahien Nasiripour, “Nine more banks added to Libor probe,” The Financial Times, 26 October 2012:

http://www.ft.com/intl/cms/s/0/6f4e7960-1f1a-11e2-be82-00144feabdc0.html#axzz2ARAog5NE

[25]     Douglas Keenan, “My thwarted attempt to tell of Libor shenanigans,” The Financial Times, 26 July 2012:

http://www.ft.com/intl/cms/s/0/dc5f49c2-d67b-11e1-ba60-00144feabdc0.html#axzz2ARAog5NE

[26]     “The Cartel: Behind the Scenes in the Libor Interest Rate Scandal,” Der Spiegel, 1 August 2012:

http://www.spiegel.de/international/business/the-libor-scandal-could-cost-leading-global-banks-billions-a-847453.html

[27]     Matt Taibbi, “Why is Nobody Freaking Out About the LIBOR Banking Scandal?” Rolling Stone, 3 July 2012:

http://www.rollingstone.com/politics/blogs/taibblog/why-is-nobody-freaking-out-about-the-libor-banking-scandal-20120703

[28]     Raúl Ilargi Meijer, “LIBOR Was A Criminal Conspiracy From The Start,” The Business Insider, 11 July 2012:

http://www.businessinsider.com/libor-was-a-criminal-conspiracy-from-the-start-2012-7

[29]     Steven Swinford and Harry Wilson, “RBS traders boasted of Libor ‘cartel’,” The Telegraph, 26 September 2012:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9568087/RBS-traders-boasted-of-Libor-cartel.html

[30]     Jill Treanor and Dominic Rushe, “Timothy Geithner and Mervyn King discussed Libor worries in 2008,” The Guardian, 13 July 2012:

http://www.guardian.co.uk/business/2012/jul/13/tim-geithner-mervyn-king-libor

[31]     Mark Gongloff, “New York Fed’s Libor Documents Reveal Cozy Relationship Between Regulators, Banks,” The Huffington Post, 13 July 2012:

http://www.huffingtonpost.com/2012/07/13/new-york-fed-libor-documents_n_1671524.html

[32]     Chris Giles, “Libor scandal puts BoE in line of fire,” The Financial Times, 17 July 2012:

http://www.ft.com/intl/cms/s/0/68605a86-d02a-11e1-bcaa-00144feabdc0.html#axzz2ARAog5NE

[33]     Jill Treanor, “British Bankers’ Association to be stripped of Libor rate-setting role,” The Guardian, 25 September 2012:

http://www.guardian.co.uk/business/2012/sep/25/bba-libor-setting-role-stripped-banks

[34]     Liam Vaughan, “Secret Libor Committee Clings to Anonymity Following Scandal,” Bloomberg, 21 August 2012:

http://www.bloomberg.com/news/2012-08-20/secret-libor-committee-clings-to-anonymity-after-rigging-scandal.html

[35]     David Enrich and Max Colchester, “Before Scandal, Clash Over Control of Libor,” The Wall Street Journal, 11 September 2012:

http://online.wsj.com/article/SB10000872396390443847404577631404235329424.html

[36]     Andrew Mayeda, “Canada Regulator Says Has Power to Probe Libor ‘Cartel’,” Bloomberg, 22 June 2012:

http://www.bloomberg.com/news/2012-06-22/canada-regulator-says-has-power-to-probe-libor-cartel-.html

[37]     Halah Touryalai, “Banks Rigged Libor To Inflate Adjustable-Rate Mortgages: Lawsuit,” Forbes, 15 October 2012:

http://www.forbes.com/sites/halahtouryalai/2012/10/15/banks-rigged-libor-to-inflate-adjustable-rate-mortgages-lawsuit/

[38]     Darrell Preston, “Rigged Libor Hits States-Localities With $6 Billion: Muni Credit,” Bloomberg, 9 October 2012:

http://www.bloomberg.com/news/2012-10-09/rigged-libor-hits-states-localities-with-6-billion-muni-credit.html

[39]     Andrew Gavin Marshall, “Austerity, Adjustment, and Social Genocide: Political Language and the European Debt Crisis,” Andrewgavinmarshall.com, 24 July 2012:

https://andrewgavinmarshall.com/2012/07/24/austerity-adjustment-and-social-genocide-political-language-and-the-european-debt-crisis/

[40]     Roger Altman, “We need not fret over omnipotent markets,” The Financial Times, 1 December 2011:

http://www.ft.com/intl/cms/s/0/890161ac-1b69-11e1-85f8-00144feabdc0.html#axzz1fnNHC8YP

[41]     Ben Polak and Peter K. Schott, America’s Hidden Austerity Program,” The New York Times, 11 June 2012:

http://economix.blogs.nytimes.com/2012/06/11/americas-hidden-austerity-program/;

Jason Cherkis, “A Thousand Cuts: Austerity Measures Devastate Communities Around The World,” The Huffington Post, 17 July 2012:

http://www.huffingtonpost.com/2012/07/12/austerity-measures-a-thousand-cuts_n_1666309.html;

Editorial, “The Austerity Trap,” The New York Times, 23 October 2012:

http://www.nytimes.com/2012/10/24/opinion/the-austerity-trap.html?_r=0;

Derek Thompson, “American Austerity: Why the States Cutting Spending Are Doing Worse,” The Atlantic, 21 June 2012:

http://www.theatlantic.com/business/archive/2012/06/american-austerity-why-the-states-cutting-spending-are-doing-worse/258825/

[42]     “CEOs Deficit Manifesto,” The Wall Street Journal, 25 October 2012:

http://online.wsj.com/article/SB10001424052970203937004578076254182569318.html?mod=googlenews_wsj

[43]     “Executives Who Signed the Fix the Debt Declaration,” The Wall Street Journal, 25 October 2012:

http://online.wsj.com/article/SB10001424052970203897404578077251928040508.html

[44]     Al Lewis, “Bankers Face the Abyss,” The Wall Street Journal, 21 October 2012:

http://online.wsj.com/article/SB10000872396390444734804578064840879262594.html?mod=googlenews_wsj

[45]     Heather Stewart, “Wealth doesn’t trickle down – it just floods offshore, research reveals,” The Observer, 21 July 2012:

http://www.guardian.co.uk/business/2012/jul/21/offshore-wealth-global-economy-tax-havens

[46]     Heather Stewart, “£13tn hoard hidden from taxman by global elite,” The Observer, 21 July 2012:

http://www.guardian.co.uk/business/2012/jul/21/global-elite-tax-offshore-economy

[47]     We’re living in a plutonomy, The Telegraph, 2 April 2006:

http://www.telegraph.co.uk/finance/2935809/Were-living-in-a-plutonomy.html

[48]     Robert Frank, Plutonomics, The Wall Street Journal, 8 January 2007:

http://blogs.wsj.com/wealth/2007/01/08/plutonomics/

[49]     Ibid.

[50]     Gus Lubin, Deutsche Bank Says The ‘Global Plutonomy’ Is Stronger Than Ever, And That Means 10X More Volatility, Business Insider, 17 February 2011:

http://www.businessinsider.com/ajay-kapur-plutonomy-2011-2

 

The Financial New World Order: Towards a Global Currency and World Government

The Financial New World Order: Towards a Global Currency and World Government
Global Research, April 6, 2009

Introduction

Following the 2009 G20 summit, plans were announced for implementing the creation of a new global currency to replace the US dollar’s role as the world reserve currency. Point 19 of the communiqué released by the G20 at the end of the Summit stated, “We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity.” SDRs, or Special Drawing Rights, are “a synthetic paper currency issued by the International Monetary Fund.” As the Telegraph reported, “the G20 leaders have activated the IMF’s power to create money and begin global “quantitative easing”. In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it.”[1]

The article continued in stating that, “There is now a world currency in waiting. In time, SDRs are likely to evolve into a parking place for the foreign holdings of central banks, led by the People’s Bank of China.” Further, “The creation of a Financial Stability Board looks like the first step towards a global financial regulator,” or, in other words, a global central bank.

It is important to take a closer look at these “solutions” being proposed and implemented in the midst of the current global financial crisis. These are not new suggestions, as they have been in the plans of the global elite for a long time. However, in the midst of the current crisis, the elite have fast-tracked their agenda of forging a New World Order in finance. It is important to address the background to these proposed and imposed “solutions” and what effects they will have on the International Monetary System (IMS) and the global political economy as a whole.

A New Bretton-Woods

In October of 2008, Gordon Brown, Prime Minister of the UK, said that we “must have a new Bretton Woods – building a new international financial architecture for the years ahead.” He continued in saying that, “we must now reform the international financial system around the agreed principles of transparency, integrity, responsibility, good housekeeping and co-operation across borders.” An article in the Telegraph reported that Gordon Brown would want “to see the IMF reformed to become a ‘global central bank’ closely monitoring the international economy and financial system.”[2]

On October 17, 2008, Prime Minister Gordon Brown wrote an op-ed in the Washington Post in which he said, “This week, European leaders came together to propose the guiding principles that we believe should underpin this new Bretton Woods: transparency, sound banking, responsibility, integrity and global governance. We agreed that urgent decisions implementing these principles should be made to root out the irresponsible and often undisclosed lending at the heart of our problems. To do this, we need cross-border supervision of financial institutions; shared global standards for accounting and regulation; a more responsible approach to executive remuneration that rewards hard work, effort and enterprise but not irresponsible risk-taking; and the renewal of our international institutions to make them effective early-warning systems for the world economy.[Emphasis added]”[3]

In early October 2008, it was reported that, “as the world’s central bankers gather this week in Washington DC for an IMF-World Bank conference to discuss the crisis, the big question they face is whether it is time to establish a global economic “policeman” to ensure the crash of 2008 can never be repeated.” Further, “any organisation with the power to police the global economy would have to include representatives of every major country – a United Nations of economic regulation.” A former governor of the Bank of England suggested that, “the answer might already be staring us in the face, in the form of the Bank for International Settlements (BIS),” however, “The problem is that it has no teeth. 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.”[4]

Emergence of Regional Currencies

On January 1, 1999, the European Union established the Euro as its regional currency. The Euro has grown in prominence over the past several years. However, it is not to be the only regional currency in the world. There are moves and calls for other regional currencies throughout the world.

In 2007, Foreign Affairs, the journal of the Council on Foreign Relations, ran an article titled, The End of National Currency, in which it began by discussing the volatility of international currency markets, and that very few “real” solutions have been proposed to address successive currency crises. The author poses the question, “will restoring lost sovereignty to governments put an end to financial instability?” He answers by stating that, “This is a dangerous misdiagnosis,” and that, “The right course is not to return to a mythical past of monetary sovereignty, with governments controlling local interest and exchange rates in blissful ignorance of the rest of the world. Governments must let go of the fatal notion that nationhood requires them to make and control the money used in their territory. National currencies and global markets simply do not mix; together they make a deadly brew of currency crises and geopolitical tension and create ready pretexts for damaging protectionism. In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies, the source of much of today’s instability.”

The author explains that, “Monetary nationalism is simply incompatible with globalization. It has always been, even if this has only become apparent since the 1970s, when all the world’s governments rendered their currencies intrinsically worthless.” The author states that, “Since economic development outside the process of globalization is no longer possible, countries should abandon monetary nationalism. Governments should replace national currencies with the dollar or the euro or, in the case of Asia, collaborate to produce a new multinational currency over a comparably large and economically diversified area.” Essentially, according to the author, the solution lies in regional currencies.[5]

In October of 2008, “European Central Bank council member Ewald Nowotny said a “tri-polar” global currency system is developing between Asia, Europe and the U.S. and that he’s skeptical the U.S. dollar’s centrality can be revived.”[6]

The Union of South American Nations

The Union of South American Nations (UNASUR) was established on May 23, 2008, with the headquarters to be in Ecuador, the South American Parliament to be in Bolivia, and the Bank of the South to be in Venezuela. As the BBC reported, “The leaders of 12 South American nations have formed a regional body aimed at boosting economic and political integration in the region,” and that, “The Unasur members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela.”[7]

The week following the announcement of the Union, it was reported that, “Brazilian President Luiz Inacio Lula da Silva said Monday that South American nations will seek a common currency as part of the region’s integration efforts following the creation of the Union of South American Nations.” He was quoted as saying, “We are proceeding so as, in the future, we have a common central bank and a common currency.”[8]

The Gulf Cooperation Council and a Regional Currency

In 2005, the Gulf Cooperation Council (GCC), a regional trade bloc among Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE), announced the goal of creating a single common currency by 2010. It was reported that, “An economically united and efficient GCC is clearly a more interesting proposition for larger companies than each individual economy, especially given the impediments to trade evident within the region. This is why trade relations within the GCC have been a core focus of late.” Further, “The natural extension of this trend for increased integration is to introduce a common currency in order to further facilitate trade between the different countries.” It was announced that, “the region’s central bankers had agreed to pursue monetary union in a similar fashion to the rules used in Europe.”[9]

In June of 2008, it was reported that, “Gulf Arab central bankers agreed to create the nucleus of a joint central bank next year in a major step forward for monetary union but signaled that a new common currency would not be in circulation by an agreed 2010 target.”[10] In 2002, it was announced that the “Gulf states say they are seeking advice from the European Central Bank on their monetary union programme.” In February of 2008, Oman announced that it would not be joining the monetary union. In November of 2008, it was announced that the “Final monetary union draft says Gulf central bank will be independent from governments of member states.”[11]

In March of 2009, it was reported that, “The GCC should not rush into forming a single currency as member states need to work out the framework for a regional central bank, Saudi Arabia’s Central Bank Governor Muhammad Al Jasser.” Jasser was further quoted as saying, “It took the European Union 45 years to put together a single currency. We should not rush.” In 2008, with the global financial crisis, new problems were posed for the GCC initiative, as “Pressure mounted last year on the GCC members to drop their currency pegs as inflation accelerated above 10 per cent in five of the six countries. All of the member states except Kuwait peg their currencies to the dollar and tend to follow the US Federal Reserve when setting interest rates.”[12]

An Asian Monetary Union

In 1997, the Brookings Institution, a prominent American think tank, discussed the possibilities of an East Asian Monetary Union, stating that, “the question for the 21st century is whether analogous monetary blocs will form in East Asia (and, for that matter, in the Western Hemisphere). With the dollar, the yen, and the single European currency floating against one another, other small open economies will be tempted to link up to one of the three.” However, “the linkage will be possible only if accompanied by radical changes in institutional arrangements like those contemplated by the European Union. The spread of capital mobility and political democratization will make it prohibitively difficult to peg exchange rates unilaterally. Pegging will require international cooperation, and effective cooperation will require measures akin to monetary unification.”[13]

In 2001, Asia Times Online wrote an article discussing a speech given by economist Robert A. Mundell at Bangkok’s Chulalongkorn University, at which he stated that, “[t]he “Asean plus three” (the 10 members of the Association of Southeast Asian Nations plus China, Japan, and Korea) ‘should look to the European Union as a model for closer integration of monetary policy, trade and eventually, currency integration’.”[14]

On May 6, 2005, the website of the Association of Southeast Asian Nations (ASEAN) announced that, “China, Japan, South Korea and the 10 members of the Association of Southeast Asian Nations (ASEAN) have agreed to expand their network of bilateral currency swaps into what could become a virtual Asian Monetary Fund,” and that, “[f]inance officials of the 13 nations, who met in the sidelines of the Asian Development Bank (ADB) annual conference in Istanbul, appeared determined to turn their various bilateral agreements into some sort of multilateral accord, although none of the officials would directly call it an Asian Monetary Fund.”[15]

In August of 2005, the San Francisco Federal Reserve Bank published a report on the prospects of an East Asian Monetary Union, stating that East Asia satisfies the criteria for joining a monetary union, however, it states that compared to the European initiative, “The implication is that achieving any monetary arrangement, including a common currency, is much more difficult in East Asia.” It further states that, “In Europe, a monetary union was achievable primarily because it was part of the larger process of political integration,” however, “There is no apparent desire for political integration in East Asia, partly because of the great differences among those countries in terms of political systems, culture, and shared history. As a result of their own particular histories, East Asian countries remain particularly jealous of their sovereignty.”

Another major problem, as presented by the San Francisco Fed, is that, “East Asian governments appear much more suspicious of strong supranational institutions,” and thus, “in East Asia, sovereignty concerns have left governments reluctant to delegate significant authority to supranational bodies, at least so far.” It explains that as opposed to the steps taken to create a monetary union in Europe, “no broad free trade agreements have been achieved among the largest countries in the region, Japan, Korea, Taiwan, and China.” Another problem is that, “East Asia does not appear to have an obvious candidate for an internal anchor currency for a cooperative exchange rate arrangement. Most successful new currencies have been started on the back of an existing currency, establishing confidence in its convertibility, thus linking the old with the new.”

The report concludes that, “exchange rate stabilization and monetary integration are unlikely in the near term. Nevertheless, East Asia is integrating through trade, even without an emphasis on formal trade liberalization agreements,” and that, “there is evidence of growing financial cooperation in the region, including the development of regional arrangements for providing liquidity during crises through bilateral foreign exchange swaps, regional economic surveillance discussions, and the development of regional bond markets.” Ultimately, “East Asia might also proceed along the same path [as Europe], first with loose agreements to stabilize currencies, followed later by tighter agreements, and culminating ultimately in adoption of a common anchor—and, after that, maybe an East Asia dollar.”[16]

In 2007, it was reported that, “Asia may need to establish its own monetary fund if it is to cope with future financial shocks similar to that which rocked the region 10 years ago,” and that, “Further Asian financial integration is the best antidote for Asian future financial crises.”[17]

In September of 2007, Forbes reported that, “An East Asian monetary union anchored by Japan is feasible but the region lacks the political will to do it, the Asian Development Bank said.” Pradumna Rana, an Asian Development Bank (ADB) economist, said that, “it appears feasible to establish a currency union in East Asia — particularly among Indonesia, Japan, (South) Korea, Malaysia, Philippines, Singapore and Thailand,” and that, “The economic potential for monetary integration in Asia is strong, even though the political underpinnings of such an accord are not yet in place.” Further, “the real integration at the trade levels ‘will actually reinforce the economic case for monetary union in Asia, in a similar way that real-sector integration did so in Europe,” and ultimately, “the road to an Asian monetary union could proceed on a ‘multi-track, multi-speed’ basis with a seamless Asian free trade area the goal on the trade side.”[18] In April of 2008, it was reported that, “ASEAN bank deputy governors and financial deputy ministers have met in Vietnam’s central Da Nang city, discussing issues on the financial and monetary integration and cooperation in the region.”[19]

African Monetary Union

Currently, Africa has several different monetary union initiatives, as well as some existing monetary unions within the continent. One initiative is the “monetary union project of the Economic Community of West African States (ECOWAS),” which is a “regional group of 15 countries in West Africa.” Among the members are those of an already-existing monetary union in the region, the West African Economic and Monetary Union (WAEMU). The ECOWAS consists of Benin, Burkina Faso, Cote d’Ivoire, Guinea, Guinea Bissau, Mali, Niger, Senegal, Sierra Leone, Togo, Cape Verde, Liberia, Ghana, Gambia, and Nigeria.[20]

The African Union was founded in 2002, and is an intergovernmental organization consisting of 53 African states. In 2003, the Brookings Institution produced a paper on African economic integration. In it, the authors started by stating that, “Africa, like other regions of the world, is fixing its sights on creating a common currency. Already, there are projects for regional monetary unions, and the bidding process for an eventual African central bank is about to begin.” It states that, “A common currency was also an objective of the Organization for African Unity and the African Economic Community, the predecessors of the AU,” and further, that, “The 1991 Abuja Treaty establishing the African Economic Community outlines six stages for achieving a single monetary zone for Africa that were set to be completed by approximately 2028. In the early stages, regional cooperation and integration within Africa would be strengthened, and this could involve regional monetary unions. The final stage involves the establishment of the African Central Bank (ACB) and creation of a single African currency and an African Economic and Monetary Union.”

The paper further states that the African Central Bank (ACB) “would not be created until around 2020, [but] the bidding process for its location is likely to begin soon,” however, “there are plans for creating various regional monetary unions, which would presumably form building blocks for the single African central bank and currency.”[21]

In August of 2008, “Governors of African Central Banks convened in Kigali Serena Hotel to discuss issues concerning the creation of three African Union (AU) financial institutions,” following “the AU resolution to form the African Monetary Fund (AMF), African Central Bank (ACB) and the African Investment Bank (AIB).” The central bank governors “agreed that when established, the ACB would solely issue and manage Africa’s single currency and monetary authority of the continent’s economy.”[22]

On March 2, 2009, it was reported that, “The African Union will sign a memorandum of understanding this month with Nigeria on the establishment of a continental central bank,” and that, “The institution will be based in the Nigerian capital, Abuja, African Union Commissioner for Economic Affairs Maxwell Mkwezalamba told reporters.” Further, “As an intermediate step to the creation of the bank, the pan- African body will establish an African Monetary Institute within the next three years, he said at a meeting of African economists in the city,” and he was quoted as saying, “We have agreed to work with the Association of African Central Bank Governors to set up a joint technical committee to look into the preparation of a joint strategy.”[23]

The website for the Kenyan Ministry of Foreign Affairs reported that, “The African Union Commissioner for Economic Affairs Dr. Maxwell Mkwezalamba has expressed optimism for the adoption of a common currency for Africa,” and that the main theme discussed at the AU Commission meeting in Kenya was, “Towards the Creation of a Single African Currency: Review of the Creation of a Single African Currency: Which optimal Approach to be adopted to accelerate the creation of the unique continental currency.”[24]

A North American Monetary Union and the Amero

In January of 2008, I wrote an article documenting the moves toward the creation of a North American currency, likely under the name Amero. [See: Andrew G. Marshall, North-American Monetary Integration: Here Comes the Amero. Global Research: January 20, 2008] I will briefly outline the information presented in that article here.

In 1999, the Fraser Institute, a prominent and highly influential Canadian think tank, published a report written by Economics professor and former MP, Herbert Grubel, called, The Case for the Amero: The Economics and Politics of a North American Monetary Union. He wrote that, “The plan for a North American Monetary Union presented in this study is designed to include Canada, the United States, and Mexcio,” and a “North American Central Bank, like the European Central Bank, will have a constitution making it responsible only for the maintenance of price stability and not for full employment.”[25] He opined that, “sovereignty is not infinitely valuable. The merit of giving up some aspects of sovereignty should be determined by the gains brought by such a sacrifice,” and that, “It is important to note that in practice Canada has given up its economic sovereignty in many areas, the most important of which involve the World Trade Organization (formerly the GATT), the North American Free Trade Agreement,” as well as the International Monetary Fund and World Bank.[26]

Also in 1999, the C.D. Howe Institute, another of Canada’s most prominent think tanks, produced a report titled, From Fixing to Monetary Union: Options for North American Currency Integration. In this document, it was written that, “The easiest way to broach the notion of a NAMU [North American Monetary Union] is to view it as the North American equivalent of the European Monetary Union (EMU) and, by extension, the euro.”[27] It further stated that the fact that “a NAMU would mean the end of sovereignty in Canadian monetary policy is clear. Most obviously, it would mean abandoning a made-in-Canada inflation rate for a US or NAMU inflation rate.”[28]

In May of 2007, Canada’s then Governor of the Central Bank of Canada, David Dodge, said that, “North America could one day embrace a euro-style single currency,” and that, “Some proponents have dubbed the single North American currency the ‘amero’.” Answering questions following his speech, Dodge said that, “a single currency was ‘possible’.”[29]

In November of 2007, one of Canada’s richest billionaires, Stephen Jarislowsky, also a member of the board of the C.D. Howe Institute, told a Canadian Parliamentary committee that, “Canada should replace its dollar with a North American currency, or peg it to the U.S. greenback, to avoid the exchange rate shifts the loonie has experienced,” and that, “I think we have to really seriously start thinking of the model of a continental currency just like Europe.”[30]

Former Mexican President Vicente Fox, while appearing on Larry King Live in 2007, was asked a question regarding the possibility of a common currency for Latin America, to which he responded by saying, “Long term, very long term. What we propose together, President Bush and myself, it’s ALCA, which is a trade union for all of the Americas. And everything was running fluently until Hugo Chavez came. He decided to isolate himself. He decided to combat the idea and destroy the idea.” Larry King then asked, “It’s going to be like the euro dollar, you mean?” to which Fox responded, “Well, that would be long, long term. I think the processes to go, first step into is trading agreement. And then further on, a new vision, like we are trying to do with NAFTA.”[31]

In January of 2008, Herbert Grubel, the author who coined the term “amero” for the Fraser Institute report, wrote an article for the Financial Post, in which he recommends fixing the Canadian loonie to the US dollar at a fixed exchange rate, but that there are inherent problems with having the US Federal Reserve thus control Canadian interest rates. He then wrote that, “there is a solution to this lack of credibility. In Europe, it came through the creation of the euro and formal end of the ability of national central banks to set interest rates. The analogous creation of the amero is not possible without the unlikely co-operation of the United States. This leaves the credibility issue to be solved by the unilateral adoption of a currency board, which would ensure that international payments imbalances automatically lead to changes in Canada’s money supply and interest rates until the imbalances are ended, all without any actions by the Bank of Canada or influence by politicians. It would be desirable to create simultaneously the currency board and a New Canadian Dollar valued at par with the U.S. dollar. With longer-run competitiveness assured at US90¢ to the U.S. dollar.”[32]

In January of 2009, an online publication of the Wall Street Journal, called Market Watch, discussed the possibility of hyperinflation of the United States dollar, and then stated, regarding the possibility of an amero, “On its face, while difficult to imagine, it makes intuitive sense. The ability to combine Canadian natural resources, American ingenuity and cheap Mexican labor would allow North America to compete better on a global stage.” The author further states that, “If forward policy attempts to induce more debt rather than allowing savings and obligations to align, we must respect the potential for a system shock. We may need to let a two-tier currency gain traction if the dollar meaningfully debases from current levels,” and that, “If this dynamic plays out — and I’ve got no insight that it will — the global balance of powers would fragment into four primary regions: North America, Europe, Asia and the Middle East. In such a scenario, ramifications would manifest through social unrest and geopolitical conflict.”[33]

A Global Currency

The Phoenix

In 1988, The Economist ran an article titled, Get Ready for the Phoenix, in which they wrote, “THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the late twentieth century.”

The article stated that, “The market crash [of 1987] taught [governments] that the pretence of policy cooperation can be worse than nothing, and that until real co-operation is feasible (ie, until governments surrender some economic sovereignty) further attempts to peg currencies will flounder.” Amazingly the article states that, “Several more big exchange-rate upsets, a few more stockmarket crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice. This points to a muddled sequence of emergency followed by patch-up followed by emergency, stretching out far beyond 2018-except for two things. As time passes, the damage caused by currency instability is gradually going to mount; and the very trends that will make it mount are making the utopia of monetary union feasible.”

Further, the article stated that, “The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate-and hence, within narrow margins, each national inflation rate-would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit.” The author admits that, “This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.”

The article concludes in stating that, “The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.” The last sentence states, “Pencil in the phoenix for around 2018, and welcome it when it comes.”[34]


Recommendations for a Global Currency

In 1998, the IMF Survey discussed a speech given by James Tobin, a prominent American economist, in which he argued that, “A single global currency might offer a viable alternative to the floating rate.” He further stated that, “there was still a great need” for “lenders of last resort.”[35]

In 1999, economist Judy Shelton addressed the US House of Representatives Committee on Banking and Financial Services. In her testimony, she stated that, “The continued expansion of free trade, the increased integration of financial markets and the advent of electronic commerce are all working to bring about the need for an international monetary standard—a global unit of account.” She further explained that, “Regional currency unions seem to be the next step in the evolution toward some kind of global monetary order. Europe has already adopted a single currency. Asia may organize into a regional currency bloc to offer protection against speculative assaults on the individual currencies of weaker nations. Numerous countries in Latin America are considering various monetary arrangements to insulate them from financial contagion and avoid the economic consequences of devaluation. An important question is whether this process of monetary evolution will be intelligently directed or whether it will simply be driven by events. In my opinion, political leadership can play a decisive role in helping to build a more orderly, rational monetary system than the current free-for-all approach to exchange rate relations.”

She further stated that, “As we have seen in Europe, the sequence of development is (1) you build a common market, and (2) you establish a common currency. Indeed, until you have a common currency, you don’t truly have an efficient common market.” She concludes by stating, “Ideally, every nation should stand willing to convert its currency at a fixed rate into a universal reserve asset. That would automatically create a global monetary union based on a common unit of account. The alternative path to a stable monetary order is to forge a common currency anchored to an asset of intrinsic value. While the current momentum for dollarization should be encouraged, especially for Mexico and Canada, in the end the stability of the global monetary order should not rest on any single nation.”[36]

Paul Volcker, former Governor of the Federal Reserve Board, stated in 2000, that, “If we are to have a truly global economy, a single world currency makes sense.” In a speech delivered by a member of the Executive Board of the European Central Bank, it was stated that Paul Volcker “might be right, and we might one day have a single world currency. Maybe European integration, in the same way as any other regional integration, could be seen as a step towards the ideal situation of a fully integrated world. If and when this world will see the light of day is impossible to say. However, what I can say is that this vision seems as impossible now to most of us as a European monetary union seemed 50 years ago, when the process of European integration started.”[37]

In 2000, the IMF held an international conference and published a brief report titled, One World, One Currency: Destination or Delusion?, in which it was stated that, “As perceptions grow that the world is gradually segmenting into a few regional currency blocs, the logical extension of such a trend also emerges as a theoretical possibility: a single world currency. If so many countries see benefits from currency integration, would a world currency not maximize these benefits?”

It outlines how, “The dollar bloc, already underpinned by the strength of the U.S. economy, has been extended further by dollarization and regional free trade pacts. The euro bloc represents an economic union that is intended to become a full political union likely to expand into Central and Eastern Europe. A yen bloc may emerge from current proposals for Asian monetary cooperation. A currency union may emerge among Mercosur members in Latin America, a geographical currency zone already exists around the South African rand, and a merger of the Australian and New Zealand dollars is a perennial topic in Oceania.”

The summary states that, “The same commercial efficiencies, economies of scale, and physical imperatives that drive regional currencies together also presumably exist on the next level—the global scale.” Further, it reported that, “The smaller and more vulnerable economies of the world—those that the international community is now trying hardest to help—would have most to gain from the certainty and stability that would accompany a single world currency.”[38] Keep in mind, this document was produced by the IMF, and so its recommendations for what it says would likely “help” the smaller and more vulnerable countries of the world, should be taken with a grain – or bucket – of salt.

Economist Robert A. Mundell has long called for a global currency. On his website, he states that the creation of a global currency is “a project that would restore a needed coherence to the international monetary system, give the International Monetary Fund a function that would help it to promote stability, and be a catalyst for international harmony.” He states that, “The benefits from a world currency would be enormous. Prices all over the world would be denominated in the same unit and would be kept equal in different parts of the world to the extent that the law of one price was allowed to work itself out. Apart from tariffs and controls, trade between countries would be as easy as it is between states of the United States.”[39]

Renewed Calls for a Global Currency

On March 16, 2009, Russia suggested that, “the G20 summit in London in April should start establishing a system of managing the process of globalization and consider the possibility of creating a supra-national reserve currency or a ‘super-reserve currency’.” Russia called for “the creation of a supra-national reserve currency that will be issued by international financial institutions,” and that, “It looks expedient to reconsider the role of the IMF in that process and also to determine the possibility and need for taking measures that would allow for the SDRs (Special Drawing Rights) to become a super-reserve currency recognized by the world community.”[40]

On March 23, 2009, it was reported that China’s central bank “proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.” The goal would be for the world reserve currency that is “disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.” The chief China economist for HSBC stated that, “This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money.” The Governor of the People’s Bank of China, the central bank, “suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.” Currently, “the value of SDRs is based on a basket of four currencies – the US dollar, yen, euro and sterling – and they are used largely as a unit of account by the IMF and some other international organizations.”

However, “China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions. Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.”[41]

On March 25, Timothy Geithner, Treasury Secretary and former President of the New York Federal Reserve, spoke at the Council on Foreign Relations, when asked a question about his thoughts on the Chinese proposal for the global reserve currency, Geithner replied that, “I haven’t read the governor’s proposal.  He’s a remarkably — a very thoughtful, very careful, distinguished central banker.  Generally find him sensible on every issue.  But as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights.  And we’re actually quite open to that suggestion.  But you should think of it as rather evolutionary, building on the current architectures, than — rather than — rather than moving us to global monetary union [Emphasis added].”[42]

In late March, it was reported that, “A United Nations panel of economists has proposed a new global currency reserve that would take over the US dollar-based system used for decades by international banks,” and that, “An independently administered reserve currency could operate without conflicts posed by the US dollar and keep commodity prices more stable.”[43]

A recent article in the Economic Times stated that, “The world is not yet ready for an international reserve currency, but is ready to begin the process of shifting to such a currency. Otherwise, it would remain too vulnerable to the hegemonic nation,” as in, the United States.[44] Another article in the Economic Times started by proclaiming that, “the world certainly needs an international currency.” Further, the article stated that, “With an unwillingness to accept dollars and the absence of an alternative, international payments system can go into a freeze beyond the control of monetary authorities leading the world economy into a Great Depression,” and that, “In order to avoid such a calamity, the international community should immediately revive the idea of the Substitution Account mooted in 1971, under which official holders of dollars can deposit their unwanted dollars in a special account in the IMF with the values of deposits denominated in an international currency such as the SDR of the IMF.”[45]

Amidst fears of a falling dollar as a result of the increased open discussion of a new global currency, it was reported that, “The dollar’s role as a reserve currency won’t be threatened by a nine-fold expansion in the International Monetary Fund’s unit of account, according to UBS AG, ING Groep NV and Citigroup Inc.” This was reported following the recent G20 meeting, at which, “Group of 20 leaders yesterday gave approval for the agency to raise $250 billion by issuing Special Drawing Rights, or SDRs, the artificial currency that the IMF uses to settle accounts among its member nations. It also agreed to put another $500 billion into the IMF’s war chest.”[46] In other words, the large global financial institutions came to the rhetorical rescue of the dollar, so as not to precipitate a crisis in its current standing, so that they can continue with quietly forming a new global currency.

Creating a World Central Bank

In 1998, Jeffrey Garten wrote an article for the New York Times advocating a “global Fed.” Garten was former Dean of the Yale School of Management, former Undersecretary of Commerce for International Trade in the Clinton administration, previously served on the White House Council on International Economic Policy under the Nixon administration and on the policy planning staffs of Secretaries of State Henry Kissinger and Cyrus Vance of the Ford and Carter administrations, former Managing Director at Lehman Brothers, and is a member of the Council on Foreign Relations. In his article written in 1998, he stated that, “over time the United States set up crucial central institutions — the Securities and Exchange Commission (1933), the Federal Deposit Insurance Corporation (1934) and, most important, the Federal Reserve (1913). In so doing, America became a managed national economy. These organizations were created to make capitalism work, to prevent destructive business cycles and to moderate the harsh, invisible hand of Adam Smith.”

He then explained that, “This is what now must occur on a global scale. The world needs an institution that has a hand on the economic rudder when the seas become stormy. It needs a global central bank.” He explains that, “Simply trying to coordinate the world’s powerful central banks — the Fed and the new European Central Bank, for instance — wouldn’t work,” and that, “Effective collaboration among finance ministries and treasuries is also unlikely to materialize. These agencies are responsible to elected legislatures, and politics in the industrial countries is more preoccupied with internal events than with international stability.”

He then postulates that, “An independent central bank with responsibility for maintaining global financial stability is the only way out. No one else can do what is needed: inject more money into the system to spur growth, reduce the sky-high debts of emerging markets, and oversee the operations of shaky financial institutions. A global central bank could provide more money to the world economy when it is rapidly losing steam.” Further, “Such a bank would play an oversight role for banks and other financial institutions everywhere, providing some uniform standards for prudent lending in places like China and Mexico. [However, t]he regulation need not be heavy-handed.” Garten continues, “There are two ways a global central bank could be financed. It could have lines of credit from all central banks, drawing on them in bad times and repaying when the markets turn up. Alternately — and admittedly more difficult to carry out — it could be financed by a very modest tariff on all trade, collected at the point of importation, or by a tax on certain global financial transactions.”

Interestingly, Garten states that, “One thing that would not be acceptable would be for the bank to be at the mercy of short-term-oriented legislatures.” In essence, it is not to be accountable to the people of the world. So, he asks the question, “To whom would a global central bank be accountable? It would have too much power to be governed only by technocrats, although it must be led by the best of them. One possibility would be to link the new bank to an enlarged Group of Seven — perhaps a ”G-15” [or in today’s context, the G20] that would include the G-7 plus rotating members like Mexico, Brazil, South Africa, Poland, India, China and South Korea.” He further states that, “There would have to be very close collaboration” between the global bank and the Fed, and that, “The global bank would not operate within the United States, and it would not be able to override the decisions of our central bank. But it could supply the missing international ingredient — emergency financing for cash-starved emerging markets. It wouldn’t affect American mortgage rates, but it could help the profitability of American multinational companies by creating a healthier global environment for their businesses.”[47]

In September of 2008, Jeffrey Garten wrote an article for the Financial Times in which he stated that, “Even if the US’s massive financial rescue operation succeeds, it should be followed by something even more far-reaching – the establishment of a Global Monetary Authority to oversee markets that have become borderless.” He emphasized the “need for a new Global Monetary Authority. It would set the tone for capital markets in a way that would not be viscerally opposed to a strong public oversight function with rules for intervention, and would return to capital formation the goal of economic growth and development rather than trading for its own sake.”

Further, the “GMA would be a reinsurer or discounter for certain obligations held by central banks. It would scrutinise the regulatory activities of national authorities with more teeth than the IMF has and oversee the implementation of a limited number of global regulations. It would monitor global risks and establish an effective early warning system with more clout to sound alarms than the BIS has.” Moreover, “The biggest global financial companies would have to register with the GMA and be subject to its monitoring, or be blacklisted. That includes commercial companies and banks, but also sovereign wealth funds, gigantic hedge funds and private equity firms.” He recommends that its board “include central bankers not just from the US, UK, the eurozone and Japan, but also China, Saudi Arabia and Brazil. It would be financed by mandatory contributions from every capable country and from insurance-type premiums from global financial companies – publicly listed, government owned, and privately held alike.”[48]

In October of 2008, it was reported that Morgan Stanley CEO John Mack stated that, “it may take continued international coordination to fully unlock the credit markets and resolve the financial crisis, perhaps even by forming a new global body to oversee the process.”[49]

In late October of 2008, Jeffrey Garten wrote an article for Newsweek in which he stated that, “leaders should begin laying the groundwork for establishing a global central bank.” He explained that, “There was a time when the U.S. Federal Reserve played this role [as governing financial authority of the world], as the prime financial institution of the world’s most powerful economy, overseeing the one global currency. But with the growth of capital markets, the rise of currencies like the euro and the emergence of powerful players such as China, the shift of wealth to Asia and the Persian Gulf and, of course, the deep-seated problems in the American economy itself, the Fed no longer has the capability to lead single-handedly.”

He explains the criteria and operations of a world central bank, saying that, “It could be the lead regulator of big global financial institutions, such as Citigroup or Deutsche Bank, whose activities spill across borders,” as well as “act as a bankruptcy court when big global banks that operate in multiple countries need to be restructured. It could oversee not just the big commercial banks, such as Mitsubishi UFJ, but also the “alternative” financial system that has developed in recent years, consisting of hedge funds, private-equity groups and sovereign wealth funds—all of which are now substantially unregulated.” Further, it “could have influence over key exchange rates, and might lead a new monetary conference to realign the dollar and the yuan, for example, for one of its first missions would be to deal with the great financial imbalances that hang like a sword over the world economy.”

He further postulates that, “A global central bank would not eliminate the need for the Federal Reserve or other national central banks, which will still have frontline responsibility for sound regulatory policies and monetary stability in their respective countries. But it would have heavy influence over them when it comes to following policies that are compatible with global growth and financial stability. For example, it would work with key countries to better coordinate national stimulus programs when the world enters a recession, as is happening now, so that the cumulative impact of the various national efforts do not so dramatically overshoot that they plant the seeds for a crisis of global inflation. This is a big threat as government spending everywhere goes into overdrive.”[50]

In January of 2009, it was reported that, “one clear solution to avoid a repeat of the problems would be the establishment of a “global central bank” – with the IMF and World Bank being unable to prevent the financial meltdown.” Dr. William Overholt, senior research fellow at Harvard’s Kennedy School, formerly with the Rand Institute, gave a speech in Dubai in which he said that, “To avoid another crisis, we need an ability to manage global liquidity. Theoretically that could be achieved through some kind of global central bank, or through the creation of a global currency, or through global acceptance of a set of rules with sanctions and a dispute settlement mechanism.”[51]

Guillermo Calvo, Professor of Economics, International and Public Affairs at Columbia University wrote an article for VOX in late March of 2009. Calvo is the former Chief Economist of the Inter-American Development Bank, and is currently a Research Associate at the National Bureau of Economic Research (NBER) and President of the International Economic Association and the former Senior Advisor in the Research Department of the IMF.

He wrote that, “Credit availability is not ensured by stricter financial regulation. In fact, it can be counterproductive unless it is accompanied by the establishment of a lender of last resort (LOLR) that radically softens the severity of financial crisis by providing timely credit lines. With that aim in mind, the 20th century saw the creation of national or regional central banks in charge of a subset of the capital market. It has now become apparent that the realm of existing central banks is very limited and the world has no institution that fulfils the necessary global role. The IMF is moving in that direction, but it is still too small and too limited to adequately do so.”

He advocates that, “the first proposal that I would like to make is that the topic of financial regulation should be discussed together with the issue of a global lender of last resort.” Further, he proposed that, “international financial institutions must be quickly endowed with considerably more firepower to help emerging economies through the deleveraging period.”[52]

A “New World Order” in Banking

In March of 2008, following the collapse of Bear Stearns, Reuters reported on a document released by research firm CreditSights, which said that, “Financial firms face a ‘new world order’,” and that, “More industry consolidation and acquisitions may follow after JPMorgan Chase & Co.” Further, “In the event of future consolidation, potential acquirers identified by CreditSights include JPMorganChase, Wells Fargo, US Bancorp, Goldman Sachs and Bank of America.”[53]

In June of 2008, before he was Treasury Secretary in the Obama administration, Timothy Geithner, as head of the New York Federal Reserve, wrote an article for the Financial Times following his attendance at the 2008 Bilderberg conference, in which he wrote that, “Banks and investment banks whose health is crucial to the global financial system should operate under a unified regulatory framework,” and he said that, “the US Federal Reserve should play a “central role” in the new regulatory framework, working closely with supervisors in the US and around the world.”[54]

In November of 2008, The National, a prominent United Arab Emirate newspaper, reported on Baron David de Rothschild accompanying Prime Minister Gordon Brown on a visit to the Middle East, although not as a “part of the official party” accompanying Brown. Following an interview with the Baron, it was reported that, “Rothschild shares most people’s view that there is a new world order. In his opinion, banks will deleverage and there will be a new form of global governance.”[55]

In February of 2009, the Times Online reported that a “New world order in banking [is] necessary,” and that, “It is increasingly evident that the world needs a new banking system and that it should not bear much resemblance to the one that has failed so spectacularly.”[56] But of course, the ones that are shaping this new banking system are the champions of the previous banking system. The solutions that will follow are simply the extensions of the current system, only sped up through the necessity posed by the current crisis.

An Emerging Global Government

A recent article in the Financial Post stated that, “The danger in the present course is that if the world moves to a “super sovereign” reserve currency engineered by experts, such as the “UN Commission of Experts” led by Nobel laureate economist Joseph Stiglitz, we would give up the possibility of a spontaneous money order and financial harmony for a centrally planned order and the politicization of money. Such a regime change would endanger not only the future value of money but, more importantly, our freedom and prosperity.”[57]

Further, “An uncomfortable characteristic of the new world order may well turn out to be that global income gaps will widen because the rising powers, such as China, India and Brazil, regard those below them on the ladder as potential rivals.” The author further states that, “The new world order thus won’t necessarily be any better than the old one,” and that, “What is certain, though, is that global affairs are going to be considerably different from now on.”[58]

In April of 2009, Robert Zoellick, President of the World Bank, said that, “If leaders are serious about creating new global responsibilities or governance, let them start by modernising multilateralism to empower the WTO, the IMF, and the World Bank Group to monitor national policies.”[59]

David Rothkopf, a scholar at the Carnegie Endowment for International Peace, former Deputy Undersecretary of Commerce for International Trade in the Clinton administration, and former managing director of Kissinger and Associates, and a member of the Council on Foreign Relations, recently wrote a book titled, Superclass: The Global Power Elite and the World They are Making, of which he is certainly a member. When discussing the role and agenda of the global “superclass”, he states that, “In a world of global movements and threats that don’t present their passports at national borders, it is no longer possible for a nation-state acting alone to fulfill its portion of the social contract.”[60]

He writes that, “even the international organizations and alliances we have today, flawed as they are, would have seemed impossible until recently, notably the success of the European Union – a unitary democratic state the size of India. The evolution and achievements of such entities against all odds suggest not isolated instances but an overall trend in the direction of what Tennyson called “the Parliament of Man,” or ‘universal law’.” He states that he is “optimistic that progress will continue to be made,” but it will be difficult, because it “undercuts many national and local power structures and cultural concepts that have foundations deep in the bedrock of human civilization, namely the notion of sovereignty.”[61]

He further writes that, “Mechanisms of global governance are more achievable in today’s environment,” and that these mechanisms “are often creative with temporary solutions to urgent problems that cannot wait for the world to embrace a bigger and more controversial idea like real global government.”[62]

In December of 2008, the Financial Times ran an article written by Gideon Rachman, a past Bilderberg attendee, who wrote that, “for the first time in my life, I think the formation of some sort of world government is plausible,” and that, “A ‘world government’ would involve much more than co-operation between nations. It would be an entity with state-like characteristics, backed by a body of laws. The European Union has already set up a continental government for 27 countries, which could be a model. The EU has a supreme court, a currency, thousands of pages of law, a large civil service and the ability to deploy military force.”

He then asks if the European model could “go global,” and states that there are three reasons for thinking that may be the case. First, he states, “it is increasingly clear that the most difficult issues facing national governments are international in nature: there is global warming, a global financial crisis and a ‘global war on terror’.” Secondly, he states that, “It could be done,” largely as a result of the transport and communications revolutions having “shrunk the world.” Thirdly, this is made possible through an awakening “change in the political atmosphere,” as “The financial crisis and climate change are pushing national governments towards global solutions, even in countries such as China and the US that are traditionally fierce guardians of national sovereignty.”

He quoted an adviser to French President Nicolas Sarkozy as saying, “Global governance is just a euphemism for global government,” and that the “core of the international financial crisis is that we have global financial markets and no global rule of law.” However, Rachman states that any push towards a global government “will be a painful, slow process.” He then states that a key problem in this push can be explained with an example from the EU, which “has suffered a series of humiliating defeats in referendums, when plans for “ever closer union” have been referred to the voters. In general, the Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective, only when it is anti-democratic. [Emphasis added]”[63]

In November of 2008, the United States National Intelligence Council (NIC), the US intelligence community’s “center for midterm and long-term strategic thinking,” released a report that it produced in collaboration with numerous think tanks, consulting firms, academic institutions and hundreds of other experts, among them are the Atlantic Council of the United States, the Wilson Center, RAND Corporation, the Brookings Institution, American Enterprise Institute, Texas A&M University, the Council on Foreign Relations and Chatham House in London.[64]

The report, titled, Global Trends 2025: A Transformed World, outlines the current global political and economic trends that the world may be going through by the year 2025. In terms of the financial crisis, it states that solving this “will require long-term efforts to establish a new international system.”[65] It suggests that as the “China-model” for development becomes increasingly attractive, there may be a “decline in democratization” for emerging economies, authoritarian regimes, and “weak democracies frustrated by years of economic underperformance.” Further, the dollar will cease to be the global reserve currency, as there would likely be a “move away from the dollar.”[66]

It states that the dollar will become “something of a first among equals in a basket of currencies by 2025. This could occur suddenly in the wake of a crisis, or gradually with global rebalancing.”[67] The report elaborates on the construction of a new international system, stating that, “By 2025, nation-states will no longer be the only – and often not the most important – actors on the world stage and the ‘international system’ will have morphed to accommodate the new reality. But the transformation will be incomplete and uneven.” Further, it would be “unlikely to see an overarching, comprehensive, unitary approach to global governance. Current trends suggest that global governance in 2025 will be a patchwork of overlapping, often ad hoc and fragmented efforts, with shifting coalitions of member nations, international organizations, social movements, NGOs, philanthropic foundations, and companies.” It also notes that, “Most of the pressing transnational problems – including climate change, regulation of globalized financial markets, migration, failing states, crime networks, etc. – are unlikely to be effectively resolved by the actions of individual nation-states. The need for effective global governance will increase faster than existing mechanisms can respond.”[68]

The report discusses the topic of regionalism, stating that, “Greater Asian integration, if it occurs, could fill the vacuum left by a weakening multilaterally based international order but could also further undermine that order. In the aftermath of the 1997 Asian financial crisis, a remarkable series of pan-Asian ventures—the most significant being ASEAN + 3—began to take root.  Although few would argue that an Asian counterpart to the EU is a likely outcome even by 2025, if 1997 is taken as a starting point, Asia arguably has evolved more rapidly over the last decade than the European integration did in its first decade(s).” It further states that, “movement over the next 15 years toward an Asian basket of currencies—if not an Asian currency unit as a third reserve—is more than a theoretical possibility.”

It elaborates that, “Asian regionalism would have global implications, possibly sparking or reinforcing a trend toward three trade and financial clusters that could become quasi-blocs (North America, Europe, and East Asia).” These blocs “would have implications for the ability to achieve future global World Trade Organization agreements and regional clusters could compete in the setting of trans-regional product standards for IT, biotech, nanotech, intellectual property rights, and other ‘new economy’ products.”[69]

Of great importance to address, and reflecting similar assumptions made by Rachman in his article advocating for a world government, is the topic of democratization, saying that, “advances are likely to slow and globalization will subject many recently democratized countries to increasing social and economic pressures that could undermine liberal institutions.” This is largely because “the better economic performance of many authoritarian governments could sow doubts among some about democracy as the best form of government.  The surveys we consulted indicated that many East Asians put greater emphasis on good management, including increasing standards of livings, than democracy.” Further, “even in many well-established democracies, surveys show growing frustration with the current workings of democratic government and questioning among elites over the ability of democratic governments to take the bold actions necessary to deal rapidly and effectively with the growing number of transnational challenges.”[70]

Conclusion

Ultimately, what this implies is that the future of the global political economy is one of increasing moves toward a global system of governance, or a world government, with a world central bank and global currency; and that, concurrently, these developments are likely to materialize in the face of and as a result of a decline in democracy around the world, and thus, a rise in authoritarianism. What we are witnessing is the creation of a New World Order, composed of a totalitarian global government structure.

In fact, the very concept of a global currency and global central bank is authoritarian in its very nature, as it removes any vestiges of oversight and accountability away from the people of the world, and toward a small, increasingly interconnected group of international elites.

As Carroll Quigley explained in his monumental 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. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”[71]

Indeed, the current “solutions” being proposed to the global financial crisis benefit those that caused the crisis over those that are poised to suffer the most as a result of the crisis: the disappearing middle classes, the world’s dispossessed, poor, indebted people. The proposed solutions to this crisis represent the manifestations and actualization of the ultimate generational goals of the global elite; and thus, represent the least favourable conditions for the vast majority of the world’s people.

It is imperative that the world’s people throw their weight against these “solutions” and usher in a new era of world order, one of the People’s World Order; with the solution lying in local governance and local economies, so that the people have greater roles in determining the future and structure of their own political-economy, and thus, their own society. With this alternative of localized political economies, in conjunction with an unprecedented global population and international democratization of communication through the internet, we have the means and possibility before us to forge the most diverse manifestation of cultures and societies that humanity has ever known.

The answer lies in the individual’s internalization of human power and destination, and a rejection of the externalization of power and human destiny to a global authority of which all but a select few people have access to. To internalize human power and destiny is to realize the gift of a human mind, which has the ability to engage in thought beyond the material, such as food and shelter, and venture into the realm of the conceptual. Each individual possesses – within themselves – the ability to think critically about themselves and their own life; now is the time to utilize this ability with the aim of internalizing the concepts and questions of human power and destiny: Why are we here? Where are we going? Where should we be going? How do we get there?

The supposed answers to these questions are offered to us by a tiny global elite who fear the repercussions of what would take place if the people of the world were to begin to answer these questions themselves. I do not know the answers to these questions, but I do know that the answers lie in the human mind and spirit, that which has overcome and will continue to overcome the greatest of challenges to humanity, and will, without doubt, triumph over the New World Order.

Endnotes

[1] Ambrose Evans-Pritchard, The G20 moves the world a step closer to a global currency. The Telegraph: April 3, 2009: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5096524/The-G20-moves-the-world-a-step-closer-to-a-global-currency.html

[2] Robert Winnett, Financial Crisis: Gordon Brown calls for ‘new Bretton Woods’. The Telegraph: October 13, 2008: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3189517/Financial-Crisis-Gordon-Brown-calls-for-new-Bretton-Woods.html

[3] Gordon Brown, Out of the Ashes. The Washington Post: October 17, 2008: http://www.washingtonpost.com/wp-dyn/content/article/2008/10/16/AR2008101603179.html

[4] Gordon Rayner, Global financial crisis: does the world need a new banking ‘policeman’? The Telegraph: October 8, 2008: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3155563/Global-financial-crisis-does-the-world-need-a-new-banking-policeman.html

[5] Benn Steil, The End of National Currency. Foreign Affairs: Vol. 86, Issue 3, May/June 2007: pages 83-96

[6] Jonathan Tirone, ECB’s Nowotny Sees Global `Tri-Polar’ Currency System Evolving. Bloomberg: October 19, 2008: http://www.bloomberg.com/apps/news?pid=20601087&sid=apjqJKKQvfDc&refer=home

[7] BBC, South America nations found union. BBC News: May 23, 2008: http://news.bbc.co.uk/2/hi/americas/7417896.stm

[8] CNews, South American nations to seek common currency. China View: May 26, 2008: http://news.xinhuanet.com/english/2008-05/27/content_8260847.htm

[9] AME Info, GCC: Full steam ahead to monetary union. September 19, 2005: http://www.ameinfo.com/67925.html

[10] John Irish, GCC Agrees on Monetary Union but Signals Delay in Common Currency. Reuters: June 10, 2008: http://www.arabnews.com/?page=6&section=0&article=110727&d=10&m=6&y=2008

[11] Forbes, TIMELINE-Gulf single currency deadline delayed beyond 2010. Forbes: March 23, 2009: http://www.forbes.com/feeds/afx/2009/03/24/afx6204462.html

[12] Agencies, ‘GCC need not rush to form single currency’. Business 24/7: March 26, 2009: http://www.business24-7.ae/articles/2009/3/pages/25032009/03262009_4e19de908b174f04bfb3c37aec2f17b3.aspx

[13] Barry Eichengreen, International Monetary Arrangements: Is There a Monetary Union in Asia’s Future? The Brookings Institution: Spring 1997: http://www.brookings.edu/articles/1997/spring_globaleconomics_eichengreen.aspx

[14] atimes.com, After European now Asian Monetary Union? Asia Times Online: September 8, 2001: http://www.atimes.com/editor/CI08Ba01.html

[15] ASEAN, China, Japan, SKorea, ASEAN Makes Moves for Asian Monetary Fund. Association of Southeast Asian Nations: May 6, 2005: http://www.aseansec.org/afp/115.htm

[16] Reuven Glick, Does Europe’s Path to Monetary Union Provide Lessons for East Asia? Federal Reserve Bank of San Francisco: August 12, 2005: http://www.frbsf.org/publications/economics/letter/2005/el2005-19.html

[17] AFP, Asian Monetary Fund may be needed to deal with future shocks. Channel News Asia: July 2, 2007: http://www.channelnewsasia.com/stories/afp_world_business/view/285700/1/.html

[18] AFX News Limited, East Asia monetary union ‘feasible’ but political will lacking – ADB. Forbes: September 19, 2007: http://www.forbes.com/feeds/afx/2007/09/19/afx4133743.html

[19] Lin Li, ASEAN discusses financial, monetary integration. China View: April 2, 2008: http://news.xinhuanet.com/english/2008-04/02/content_7906391.htm

[20] Paul De Grauwe, Economics of Monetary Union. Oxford University Press, 2007: pages 109-110

[21] Heather Milkiewicz and Paul R. Masson, Africa’s Economic Morass—Will a Common Currency Help? The Brookings Institution: July 2003: http://www.brookings.edu/papers/2003/07africa_masson.aspx

[22] John Gahamanyi, Rwanda: African Central Bank Governors Discuss AU Financial Institutions. The New Times: August 23, 2008: http://allafrica.com/stories/200808230124.html

[23] Eric Ombok, African Union, Nigeria Plan Accord on Central Bank. Bloomberg: March 2, 2009: http://www.bloomberg.com/apps/news?pid=20601116&sid=afoY1vOnEMLA&refer=africa

[24] Ministry of Foreign Affairs, AFRICA IN THE QUEST FOR A COMMON CURRENCY. Republic of Kenya: March 2009: http://www.mfa.go.ke/mfacms/index.php?option=com_content&task=view&id=346&Itemid=62

[25] Herbert Grubel, The Case for the Amero. The Fraser Institute: September 1, 1999: Page 4: http://www.fraserinstitute.org/Commerce.Web/publication_details.aspx?pubID=2512

[26] Herbert Grubel, The Case for the Amero. The Fraser Institute: September 1, 1999: Page 17: http://www.fraserinstitute.org/Commerce.Web/publication_details.aspx?pubID=2512

[27] Thomas Courchene and Richard Harris, From Fixing to Monetary Union: Options for North American Currency Integration. C.D. Howe Institute, June 1999: Page 22:

http://www.cdhowe.org/display.cfm?page=research-fiscal&year=1999

[28] Thomas Courchene and Richard Harris, From Fixing to Monetary Union: Options for North American Currency Integration. C.D. Howe Institute, June 1999: Page 23:

http://www.cdhowe.org/display.cfm?page=research-fiscal&year=1999

[29] Barrie McKenna, Dodge Says Single Currency ‘Possible’. The Globe and Mail: May 21, 2007

[30] Consider a Continental Currency, Jarislowsky Says. The Globe and Mail: November 23: 2007:

http://www.theglobeandmail.com/servlet/story/LAC.20071123.RDOLLAR23/TPStory/?query=%22Steven%2BChase%22b

[31] CNN, CNN Larry King Live. Transcripts: October 8, 2007:  http://transcripts.cnn.com/TRANSCRIPTS/0710/08/lkl.01.html

[32] Herbert Grubel, Fix the Loonie. The Financial Post: January 18, 2008:

http://www.nationalpost.com/opinion/story.html?id=245165

[33] Todd Harrison, How realistic is a North American currency? Market Watch: January 28, 2009: http://www.marketwatch.com/news/story/Do-we-need-a-North/story.aspx?guid={D10536AF-F929-4AF9-AD10-250B4057A907}

[34] Get ready for the phoenix. The Economist: Vol. 306: January 9, 1988: pages 9-10

[35] IMF, IMF Survey. Volume 27, No. 9: May 11, 1998: pages 146-147:

http://www.imf.org/external/pubs/ft/survey/pdf/051198.pdf

[36] Judy Shelton, Hearing on Exchange Rate Stability in International Finance. Testimony of Judy Shelton Before the United States House of Representatives Committee on Banking and Financial Services: May 21, 1999: http://financialservices.house.gov/banking/52199she.htm

[37] ECB, The euro and the dollar – new imperatives for policy co-ordination. Speeches and Interviews: September 18, 2000: http://www.ecb.int/press/key/date/2000/html/sp000918.en.html

[38] IMF, One World, One Currency: Destination or Delusion? Economic Forums and International Seminars: November 8, 2000: http://www.imf.org/external/np/exr/ecforums/110800.htm

[39] Robert A. Mundell, World Currency. The Works of Robert A. Mundell:  http://www.robertmundell.net/Menu/Main.asp?Type=5&Cat=09&ThemeName=World%20Currency

[40] Itar-Tass, Russia proposes creation of global super-reserve currency. ITAR-TASS News Agency: March 16, 2009: http://www.itar-tass.com/eng/level2.html?NewsID=13682035&PageNum=0

[41] Jamil Anderlini, China calls for new reserve currency. The Financial Times: March 23, 2009: http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html

[42] CFR, A Conversation with Timothy F. Geithner. Council on Foreign Relations Transcripts: March 25, 2009: http://www.cfr.org/publication/18925/

[43] news.com.au, UN backs new new global currency reserve. The Sunday Telegraph: March 29, 2009: http://www.news.com.au/business/story/0,27753,25255091-462,00.html

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