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One Bank to Rule Them All: The Bank for International Settlements

Bank for International Settlements

The Bank for International Settlements (BIS) is an organization that is shrouded in mystery, mainly due to the fact that the majority of people don’t even know of its existence. According to the BIS itself, the main purpose of the Bank is to “to promote the cooperation of central banks and to provide additional facilities for international financial operations” and “act as trustee or agent in regard to international financial settlements entrusted to it under agreements of the parties concern.”[1] This means that the BIS is to have the central banks work with one another to facilitate international operations and to oversee any international financial settlements.

The Bank has a Board of Directors, which “may have up to 21 members, including six ex officio directors, comprising the central bank Governors of Belgium, France, Germany, Italy, the United Kingdom and the United States. Each ex officio member may appoint another member of the same nationality. Nine Governors of other member central banks may be elected to the Board.”[2] BIS also has a management wing in the form of a General and Deputy General Manager, both of whom are responsible to the board and supported by Executive, Finance, and Compliance and Operational Risk Committees.[3]

However, its purpose has changed and evolved over the decades, however, it has always been a club for central bankers, yet in many ways it can aid some countries more than others.

The origins of the BIS lie in the United States, specifically New York City. The individuals involved were international bankers who, despite past differences, “worked together to establish a world financial order that would incorporate the federal principle of the American central banking system.”[4] Specifically among them were people such as “Owen D. Young, J. Pierpont Morgan, Thomas W. Lamont, S. Parker Gilbert, Gates W. McGarrah, and Jackson Reynolds, who, in conjunction with the Federal Reserve Bank of New York, sought to extend the principle of central bank cooperation to the international sphere.”[5]Before delving any further into the creation of the Bank, it is necessary to examine some of the more notable of these individuals to better understand why they would be involved in the creation of an international bank.

Owen D. Young was already in good with the US government as he, “with the cooperation of the American government and the support of GE, organized and became chairman of the board of the Radio Corporation of America” and “in subsequent years he engineered a series of agreements with foreign companies that divided the world into radio zones and facilitated worldwide wireless communication”[6] Young had a strong belief that global radio service and broadcasting were important for the advancement of civilization. In 1922, Young became chairman of General Electric, and along with GE President Gerard Swope, “urged closer business-government cooperation and corporate self-regulation under government supervision.”[7]

During the 1920s, Young became involved in international diplomacy as the foreign affairs spokesman for the Democratic Party. At the behest of then-Secretary of State, Charles Evan Hughes, Young and Charles Dawes, a banker, were recommended to the Allied Reparations Commission in order to deal with the breakdown in Germany’s reparations payments following the First World War.The Commission resulted in the Dawes Plan which allowed for “Germany’s annual reparation payments would be reduced, increasing over time as its economy improved; the full amount to be paid, however, was left undetermined. Economic policy making in Berlin would be reorganized under foreign supervision and a new currency, the Reichsmark, adopted.”[8] Young viewed improving the world financial structure as important to “the very survival of capitalism” and furthermore he “sought rather the ‘economic integration’ of the world which would prepare the way for ‘political integration’ and lasting peace.”[9]

John Piermont Morgan, Jr. was already ensconced in the world of international banking, having inherited the JP Morgan Company from his father. During World War One, the House of Morgan worked hand-in-hand with the British and French governments, engaging in a number of tasks such as floating loans for the two countries, handling foreign exchange operations, and advising officials of each respective country.[10]

Both these individuals were heavily involved in politics and banking therefore had a personal interest in the creation of a global bank. It should be noted, this fits into the US government’s own policies as they wanted to “[keep] aloof from the political entanglements in Europe while safeguarding vital American interests by means of unofficial observers or participants.”[11] The Federal Reserve also was interested in the creation of the BIS as it would “[promote] both the ascendancy of New York City in world banking and the reconstruction of a stable and prosperous Europe able to absorb American exports.”[12]

This idea of an international bank didn’t occur in a vacuum. The creation of the bank “was inextricably tied to the problem of German reparations in the context of Germany’s overall debt burden during the 1920s.”[13] A slowdown in international lending to Germany began in 1928 as markets became extremely worried about the internal politics of the Weimar Republic. Due to the breakup of a center coalition government and the Social Democrats needing support from right-wing parties, the political situation began to fall apart with “government stability [being] threatened whenever budget debates exposed the basic social divide of unemployment insurance and increased industrial taxation on the one hand versus spending austerity and tax cuts on the other.”[14] The budget problems came on the heels of the Reparations Committee having determined that Germany’s total reparations came to $33 billion, which was twice the size of the country’s total economy in 1925. As long as foreign capital kept coming into Germany, things were fine, however as was aforementioned, that situation changed in 1928.

Between February 1929 and January 1930, negotiations were made to reschedule Germany’s reparations payments. “These negotiations were initiated by central bankers and private actors, who were the first to link problems in the capital market with the need to reorganize Germany’s financial obligations.”[15] Thus, it should be no surprise that many of the main individuals involved in the creation of the BIS were central bankers or engaged in international affairs/finance to some extent.

The idea for an international bank had already been explored to some extent by people such as John Mayard Keynes[16], however the idea truly took off during the Young Conference in 1929 when the Allies were attempting to deal with Germany’s reparations debts for World War One. Belgian delegate Emile Franqui bought up the possibility of having a settlement organization to administer the reparations agreement and the very next day, Hjalmar Schacht, president of the Reichsbank and chief German representative at the conference, presented a proposal to establish such an organization to as a direct financier of global economic development and trade. The bank would act as a lender to the German central bank in case the Germany currency weakened and the government found itself unable to make the reparations payment. In addition, it would give steps for how to proceed in the case of German default as if “Germany did not resume payments within two years, the BIS would propose revisions collectively for the creditor governments (which would only go into effect with their approval)” and “the bank was responsible for surveillance and informing the creditor countries about economic and financial conditions in Germany.”[17]

 

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Finance

The War on Cash: A Country by Country Guide

The war has been waged through mainstream propaganda outlets, TV advertisements and even children’s games.

We’ve heard cash is dirtied by drug dealing, tarnished by terrorism, tainted by tax evasion (heaven forbid!) and just plain dirty. Not to mention sooooo outdated.

Just this week Norway has jumped aboard the cashless society agenda with DNB, the country’s largest bank, calling for a total end to cash. The story only sounds shocking only to people who haven’t heard the similar stories from Sweden or Denmark or India or Israel or any of the dozens of other countries whose banksters and (bankster-controlled) governments have openly lusted after a world of completely trackable, completely bank-controlled transactions.

But all of these stories, reported piecemeal here and there over the years, don’t give the full story about how this “war on cash” is being waged on every continent and in every country by the same banksters that stand to benefit from a cashless world. Let’s fix that by compiling a list of examples from around the world of how cash payments are being regulated, restricted and phased out. The list below will be updated as new stories come in.

The Cashless Society List

ARGENTINA – Argentina’s currency crisis has been known for some time. In short, Argentinians don’t trust the peso and are willing to pay premium for any currency they perceive as “more stable,” especially US dollars which are traded on the black market as “blue dollars” at prices far exceeding the official exchange rate. That’s why Argentina has been tipped for some time as a country that is likely to go cashless sooner than later, with a 2014 report from the Bitcoin Market Opportunity Index ranking Argentina as the most likely jurisdiction to replace sovereign currency with bitcoin. Argentinians have reason to be wary about this New Monetary Order, however; in a move described as “an eerie glimpse of what a cashless society enables” the Argentinian government mandated that banks report every credit card purchase made in the country directly to the tax authorities and added a 15 percent tax surcharge every time a purchase is made outside the country using a credit card issued by an Argentine bank.

AUSTRALIA – Late last year the Westpac banking group issued a “Cash Free Report” touting the highly self-serving finding that “Over half (53 per cent) of payments currently made in Australia are cashless” (using Westpac online banking services like their cardless ATMs, no doubt). The report goes on to predict that Australia will be cash free by 2022. Meanwhile, the government is readying a cashless welfare system that will allow the government to control what the money is spent on. What could possibly go wrong?

BELGIUM – In 2014 the Belgian government passed new restrictions on cash payments: cash can no longer be used to pay for real estate, and there is a 3000 euro limit on cash payments for other assets (unless purchase second hand).

CANADA – In 2007 the Canadian government stopped allowing payment of taxes in cash at government service centers. In 2010 Passport Canada followed suit. In 2011 56% of Canadians polled said they were happy to live in a bankster-controlled cashless society so the country killed the penny in 2012 and the Royal Canadian Mint started pimping the “MintChip” as a new form of electronic payment that will be “better than cash.” The Mint ended the program in 2014 but the Great White North is still on track to be a cashless society in the coming years.

CHINA – The People’s Bank of China, citing the need to “reduce costs, curb crimes and money laundry, facilitate transactions and boost central bank’s control on money supply and circulation” set up a research team in 2014 “to study application scenarios for digital currency and strive for an early rollout.”

DENMARK – In the 1990s about 80% of Danish retail purchases were made with cash, but these days it’s more like 25%. But if the Danish government has its way, that number will be 0% by 2030. That’s the year the Danish government has set for the complete elimination of paper money in Denmark.

ECUADOR – Last year Ecuador became the first government to launch a digital currency completely administered and controlled by a central bank. Called the Dinero Electronico, the currency can be purchased with cash, stored in electronic wallets on a phone, and can be exchanged by text message.

EU – The head of the EU Anti-Fraud Office Giovanni Kessler, came out earlier this year to call for abolishing the 500 euro note because they “can make the life of fraudsters much easier.” He also noted that a more widespread adoption of electronic payment systems would be better for his office because “Traceability is paramount in fighting corruption and fraud.”

FRANCE – In the wake of the Charlie Hebdo attacks last year, the French government stepped up its war on cash. In March of last year, French Finance Minister Michel Sapin declared it necessary to “fight against the use of cash and anonymity in the French economy” in order to combat “low-cost terrorism.” As of September 2015 it is illegal for French citizens to make purchases exceeding 1000 euros in cash.

GERMANY – In a rather abrupt turnaround from a 2014 Bundesbank paper on “The Irreplaceability of Cash,” the German Finance Ministry (perhaps egged on by the country’s leading Keynesian economist) is looking into a 5000 euro cap on all cash payments. And although Germany is still a cash-based society, things are changing; a 2014 survey found that 34% of the population makes purchases electronically already and 20% can envision making all their purchases via smartphone payment systems in the future.

HONG KONG – When it launched in 1997, the Hong Kong Mass Transit Railway’s Octopus Card was just the second contactless smart card system in the world (after South Korea’s UPass). Although originally used to pay for journeys on public transit, it can now be used at convenience stores, vending machines, supermarkets, photo booths and other retail outlets. In 2004 all metered parking spaces in Hong Kong were converted to cashless meters that required Octopus Cards for payment.

INDIA – India is one of the most cash-dependent economies in the world with a cash-to-GDP ratio of 12%, almost four times that of fellow BRICS nations Brazil and South Africa.  But it won’t be for long if the Indian government has its way. Last June the Indian Ministry of Finance posted a draft proposal to its website for facilitating the rise of cashless payments in the country. In his 2015 budget speech the Finance Minister declared: “One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians has or can have, a RUPAY debit card. I therefore, proposes to introduce soon several measure that will incentivize credit or debit card transactions and disincentivize cash transaction.”

IRELAND – A 2013 paper from the Central Bank of Ireland lamented Ireland’s slow adoption of electronic payments and over-reliance on cheques, noting “Ireland could save up to €1bn per year by migrating to more efficient [i.e. electronic] payment instruments.” Later that year, the Central Bank launched a National Payments plan to help facilitate the transition and kicked off a €1m national marketing campaign to encourage the migration to electronic payments. The scale of the campaign surprised many, with the Irish Independent pointing out that “It’s a major advertising spend in the current climate, where a big-promotion budget spend is considered to be in the region of €500,000 outside of the big global blue-chips.” Late last year the Cork City Centre Forum attempted to take the lead in the cashless transition by launching the “Cork Cash Out” campaign aiming “to encourage consumers to ween off cash and opt-in for electronic-only transactions instead.”

ISRAEL – In 2014 a special committee headed by Israeli Prime Minister Benjamin Netanyahu’s Chief of Staff Harel Locker released a report examining how to reduce the use of cash in the country. The report advocates reforms (including restrictions and limits on cash transactions) as part of a strategy whose aim is “reduced use of cash, reduced use of endorsed checks, and increased use of electronic means of payment.”

ITALY – In 2011 newly appointed Italian Prime Minister Mario Monti made cash payments over 1000 euro illegal. “What we need is a revolution in Italians’ thinking” Monti told reporters as he announced the emergency decree which was put into law before it was even formally voted on in parliament.

KENYA – Last year the Kenyan government awarded a contract to MasterCard to administer a smart card that can be used to pay for government services and receive welfare payments. Anne Waiguru of the Ministry of Devolution and Planning explained: “Uwezo Fund beneficiaries, Youth and Women Funds disbursements, National Youth Service, Social welfare government cash transfers to families, government food subsidies, hunger safety net cash transfers and cash transfers to orphaned children will be disbursed through the cards,” neglecting to add that the card also gives MasterCard access to the biometric details of 170 million potential customers.

MEXICO – In 2013 the Mexican government banned cash payments of more than 500,000 pesos for real estate and more than 200,000 pesos for cars, jewelry or lottery tickets.

NETHERLANDS – In 2013 the mayors of Almere, Rotterdam and Maastricht engaged in a publicity stunt to promote a campaign encouraging the public to abandon cash. They spent a week without spending any cash, relying solely on debit cards for purchases. The campaign is part of a long term trend away from cash and toward debit payments in many supermakets and other businesses around the country.

NORWAY – Late last week Trond Bentestuen, a senior executive at Norway’s largest bank, complained to the VG Newspaper that the Norwegian central bank “can only account for 40 percent” of the Norwegian kroner in circulation, meaning “that 60 percent of money usage is outside of any control.” There’s only one conclusion, according to Bentestuen: “There are so many dangers and disadvantages associated with cash, we have concluded that it should be phased out.” Don’t worry, though, the nation’s Finance Ministry says it has “no plans to change the law in this area”…for now.

PHILIPPINES – In the Phillippines, the government has launched an “E-Peso” project with the explicit aim of “transforming communities into cashless societies.” Touted as “a digital/virtual currency based on the Philippine Peso” its main selling point (according to the E-Peso’s own website) is that: “Since E-Peso transactions are completely digital, everything will automatically be recorded onto the customer’s account activity log.” The initiative is funded by infamous CIA front USAID, which “has awarded a US$25-million, five-year project to a company called Chemonics to support the Philippine government in the promotion and adoption of e-payments in the Philippines.”

SAUDI ARABIA – A MasterCard report on “The Cashless Journey” noted that by increasing the share of debit card transactions in the economy between 2006 and 2011, Saudi Arabia was moving at a faster than average pace toward a cashless society. Commenting on the report, Khalid Hariry of MasterCard noted: “Saudi Arabia is indeed moving at a better than average pace on its cashless journey, which has been significantly spurred along by government leadership. Regulation mandating wages assignment of employees’ to bank accounts has vastly increased access to electronic payment methods for the Saudi population over a short period of time. These changes, coming alongside initiatives to spur acceptance, and a push to migrate payments made during the Hajj and Umrah pilgrimages, can be expected to shift substantial share of consumer payments away from cash in the coming years.”

SPAIN – Citing budgetary austerity and the need to clamp down on tax fraud the Spanish government banned cash payments of more than 2,500 euros in 2012.

SWEDEN – Last year Stockholm’s KTH Royal Institute of Technology released a report stating that the country is on track to completely eliminating cash transactions in the foreseeable future. Noting that there are now only 80 billion Swedish crowns in circulation in the economy (down from 106 just six years ago), the report highlights how digital person-to-person payment technology “Swish” (developed in collaboration with Danish banks) is already transforming the country’s banking sector, where there are now entire banks that do not accept cash. Meanwhile, the Swedish public is being urged to stop using cash by no less a cultural icon than ABBA’s Björn Ulveaus, who brags that the ABBA museum is now a cashless institution.

URUGUAY – Under the “Financial Inclusion Law” which took effect in May 2015 the Uruguayan government has banned all cash payments over $5,000, thus requiring all property and vehicle purchases to go through the banking system. This is part of a wave of such legislation throughout Latin America hailed as a way of “giving the people what they need” (i.e. access to banking) even when (as the very same report notes) “those on the edges of the financial system are distrustful of banks” especially in Uruguay.

UK – In 2014 cashless payments surpassed cash payments for the first time in the UK, with research (from cashless payment provider Kalixo Pro) suggesting that the average Brit only carries £17.79 in cash at any time and 1 in 4 will walk away if a business doesn’t accept card payment. London buses went cashless in 2014 and just last year the Bank of England’s chief economist made the case for negative interest rates and abolishing cash.

daily alternative | alternative news – The War on Cash: A Country by Country Guide

via The War on Cash: A Country by Country Guide : The Corbett Report.

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