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WEDNESDAY MAY 20, 2009
Bank Of International Settlements wants to control global currency

Another great email from listener Keri who continually puts me to share when it comes to research. If you're a regular listener, you know we've been talking a lot about my feelings that we're moving toward a global currency-- maybe by year's end. We'll still call it the dollar, euro, yen, what have you, but the control will be planet-wise originating most likely at the Bank of International Settlements in Basel, Switzerland. It's one thing to think of a global entity controlling all government financing. It's another to think of it controlling every citizen on earth. But is it a stretch, or a natural obvious outcome?

Keri was on a routine patrol of the BIS website this weekend, and she noticed a new front-page link just inserted this Wednesday. It says "BIS, ECB, IMF publish Handbook on Securities Statistics." The usual suspects...but a very new activity.

Available at the IMF website, the 70-page Handbook on Securities Statistics is on statistics, not of statistics. It is not actually filled with securities statistics, but instead is a handbook and sort of guidebook for the future collection of such securities data on an international level. This is something the G20 Communique addressed when it vastly increased the power of the Committee on the Global Financial System and changed the FSF to the FSB. Specifically, this precursory document is a blueprint for the establishment of a new global securities database, and the methodology for categorizing securities within it. So perhaps we should define "securities" as per the BIS.

"Securities" to the BIS, IMF, ECB is not just government and corporate issued bonds, as most people would guess, but any "negotiable financial instrument," which it says is "identical to (a) financial claim," which includes "financial assets that have corresponding financial liabilities" (pg 15, and footnote). This obviously includes everything from regular government bonds (debt securities) to regular stock (equity securities). As you know, the securities market in this country is already heavily regulated by the SEC (weeeell, when they want to, that is, and if you're not Stephen Friedman from the FRBNY/Goldman Sachs). According to the Securities Exchange Act of 1934, the definition of "security" is even longer than the BIS's rather concise one:

Section 3A, Line 10: The term "security" means any note, stock, treasury stock, security future, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a "security"; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.

Now, take the "Securities" out of the Handbook on Securities Statistics, and insert Section 3A, line 10! Now you know why the BIS "only" wants to gather statistics on "securities." Orwell would be proud. We should totally let them do it.

Do you think that people who have stock (say in pets.com, Enron, or GM) would consider they have a "security"? Do you think the average Joe with a $20 note in his pocket thinks he has a "security"? Perhaps not, but of course they do according to the BIS, and since it's a security, it's something the the BIS needs to know about. And why do they need to know about it? Well, apparently they are just answering a noble "call." From the Handbook:

The call for better data on securities includes those from the Committee on the Global Financial System (CGFS) and Finance Ministers of the G-8. In particular the Report on Financial Stability and Local Currency Bond Markets by the CGFS highlighted the "lack of good, comparable data on local currency bond markets." More recently, one of the Group of Twenty (G20) working groups recommended to fill data gaps and strengthen data collection on securities statistics. (pg 8)

So therefore.... this Handbook on Securities Statistics (the Handbook) has been prepared jointly by the Bank for International Settlements (BIS), the European Central Bank (ECB) and the International Monetary Fund (IMF) in response to calls by different international groups, including the Committee on the Global Financial System, the Group of Eight (G8), the Irving Fisher Committee on Central Bank Statistics and the Working Group on Securities Databases to develop methodological standards for securities statistics. The preparation of the Handbook was initiated in mid-2008 and has been guided by the broad range of expertise in our organisations, as well as by close consultation with national experts on financial statistics. It also addresses a concern voiced by the Group of Twenty (G20) to fill data gaps and to strengthen data collection where needed. (pf 8)

So, isn't that nice--the BIS, IMF and ECB are responding to "calls by different international groups" to do something about securities. Hum. Okay, so lets look at these apparently independent "international groups" that so impress the opinion of the BIS, IMF and ECB.

1.) The Committee on the Global Financial System. Please forgive me for italicizing the inclusion of the Committee on the Global Financial System, but I cannot make it flash bright yellow and quack, or else I would. They cite the CGFS as an "international group" as if it has nothing to do with the BIS? Excuse me...the CGFS is part of the BIS! This is the same CGFS that used to be the Euro Currency Standing Committee. This is the same CGFS that is headed by the #2 man at the Federal Reserve System, Mr. Donald Kohn. This is the same CGFS that was given vast new authority by the G20 to collect all forms of data on all aspects of the "international" financial system, the "global" system, including everything from central bank issuance, to currency circulation, to public and private interest rates, to the entire OTC derivative market, to even private, non-bank, and non-financial groups, and even private funds (such as hedge funds and pension funds others). Imagine they would want a document like this...

2.) The Group of Eight (G8). Well, now this is just ridiculous. The whole "Group plus-some-number" (the G20 was cited just above that) was formulated by the IMF and BIS in the first place. The IMF, BIS, ECB, and OECD are the "official observers" of the "Groups," as seen on the IMF's own website. They are hardly benign and unbiased "international groups."

3.) The Irving Fisher Committee on Central Bank Statistics. Oh, this is like shooting fish in a barrel. I wonder where the Irving Fisher Committee is from? Boy that's a hard one...Wild guess...the BIS? Ding, ding, ding! The IFC is BIS. From the BIS's website:

"With the help of a core group of central banks participating in key BIS meetings, the Chair and Executive of the IFC developed draft statutes for the Committee at the end of 2005. These foresaw that the Committee would continue to operate under the ISI but would also become a BIS-based group, with its Secretariat provided by the BIS. In early January 2006 the BIS agreed that it would be pleased to host the IFC and its Secretariat." (And another BIS page for more info.)

4.) The Working Group on Securities Databases. Surely, one of these four "international groups" must be at least somewhat independent from the IMF, BIS, or ECB, right? Wrong. I'll let the IMF website explain the Working Group on Securities Databases, as it is their group: "The members of the WGSD are the IMF (chair), the Bank for International Settlements (BIS), the European Central Bank (ECB), and the World Bank." I knew we'd get the World Bank in there somehow.

There you have it, there's the "calls" for the new framework, and hence this precursory document to outline it. I wasn't exactly expecting to see the Ludwig von Mises Institute as calling for this new super-database, but, c'mon BIS, can you at least try to seem unbiased? I mention the Austrian economists because, of course, they herald something inherently evil in the eyes of so many globalists, and especially central banksters--they herald privacy. Privacy as simple as the right of individuals to operate their financial lives without central bank-imposed governmental intervention. I'm preaching to the choir saying this to many of you, but suddenly I'm getting flashbacks of the 1933 Gold Confiscation Order that saw an utter end to privacy in personal wealth holding for all individuals in this nation. Saving became "hoarding" by the stroke of Roosevelt's pen. Under that Draconian order, innocent savers became felons overnight as they had what the government instantly declared contraband, never mind it was their own personal property. That personal property was seized and replaced with promissory notes of zero worth. Still, even under that circumstance, some courageously (though necessarily secretly) defended their Fourth Amendment rights to private property, even as the Supreme Court itself failed to defend the Constitution. And now we face not a domestic threat to privacy, but the supranational monster that is globalized central banking, the BIS.

The informational, statistical databasing that the BIS is accomplishing through the Committee on the Global Financial System indeed does appear quite similar to the databasing of national currency information and interest rate manipulation that its predecessor, the Euro Currency Standing Committee, needed to launch its successful creation, the anti-sovereign, supranational Euro. This marks a seriously ampmed up approach to databasing. Everything is fair game, not just the central bank statistics that the BIS is supposed to limit itself it to. The BIS considers everything a "security." Refresh my memory...what are 401(K)'s made of? I'm sure that has nothing to do with anything, but...I wonder how easy it would be in impose global taxes once you have that information, too...

But back to the BIS super database, and the database will, indeed, be super. Supra, actually. Recalling the G20 Communique from the latest meeting, the Financial Stability Forum was mandated to become more powerful and the member nations to become yet more subservient to it, as it was renamed the Financial Stability Board. The G20 likewise elevated the CGFS, which is, of course, the BIS group responsible for the collection of all this national policy information, central bank activity, circulation data, rate data, private OTC data, "securities" data...and any other statistical data you of I can think of. ("Over-the-Counter"? Ha, try, "Through-the-Database.") As daunting as that sounds, it has been done before--not surprisingly, by the central bank of the Euro, the very ECB. Please note that the ECB is cited alongside the BIS and IMF in this new document. It should be--it has experience in such centralization of "securities" data, as it was essential to the Euro Standing Committee's establishment of the Euro.

The ECB operates the precursor of what BIS wants globally, and this creature has been working since about 2006. Its called the Centralised Securities Database, CSDB. The CSDB monitors all debt forms from securities, public and private, to bank bonds, to private bonds, to equities (stocks). And it keeps track of who has them. And when they bought them. And when they sold them. And what else they have in their portfolios, be they banks or funds....or individuals. Its all databased. Would you guess that, oh, I don't know, maybe INTERPOL has seen the law enforcement aspect of this? Maybe to combat counterfeiting and money laundering? You would be right. They have actually established a group called INTERPOL CSDB that is very happy with the results. And would you guess that INTERPOL would not like to stop at the Euro Community? Again, you would be right. From INTERPOL, in spring of 2008:

"The CSDB Team Leader met with senior leadership from the US Secret Service, as well as staff members from the US Senate Appropriations Committee, the US Senate Judiciary Committee, and the US Congress Judiciary Committee, visiting from Washington, DC. The meeting provided an excellent forum to discuss the role of INTERPOL CSDB regarding counterfeit currency and counterfeit payment cards, as well as to stress the need for continued support and cooperation within the international community."

Stressing the need for international cooperation? I'm sure that a master database like the CSDB would greatly help INTERPOL in tracking illegal activity. And I'm sure that unique RFID markers in currency notes would greatly help them too. So when the ECB decides to put RFID tags in currencies to "combat counterfeiting," will the US? The plan had been ongoing since 2003, when an ECB Spokesman in Frankfurt confirmed the plan as under review and Hitachi confirmed they were in such talks with the ECB to make the chips, with the deadline at 2005. Okay, I won't leave you in suspense any longer--the plan was dead in 2005...and magically came to fruition in 2007. Yes, indeed, in 2007, all euro notes over 20 (probably ALL notes by now) have imbedded RFID chips so small they can nearly fit in a fingerprint groove. Check out the picture on that article. And consider this from the article: "The RFID allows money to carry its own history," by recording information about where it has been.' I'm sure INTERPOL loves that. (There are anecdotal stories of US notes acting strange in microwaves, but if they are in US notes, it has not been announced as far as I can tell, and so I wouldn't be surprised if they are.)

Again back to the Handbook, bragging about its novelty: It is the first publication of its kind to focus exclusively on debt securities statistics. Recent turmoil in global financial markets has confirmed the importance of timely, relevant, coherent and internationally comparable data on debt securities issues, from the perspective of both monetary policy and financial stability analysis. The Handbook provides a conceptual framework for the compilation and presentation of statistics on different types of debt securities, including those derived from the securitisation of assets, and is consistent with the recently reviewed international statistical standards. (pg 8)

and... 1.3 Because debt securities carry obligations to make future payments, they have the potential to render an economy, or sectors of an economy, vulnerable to solvency and liquidity problems, as seen during various periods of financial turmoil. These problems can have adverse effects on the real economy, with implications for financial stability and monetary policy. Hence, debt securities markets clearly need to be monitored and measured. (pg 12)

Read that last paragraph again slooowly please. What it says is the BIS wants to keep track of all the various components of our economic system, to prevent those components from affecting the real economy. What the... the "real" economy?! They're admitting everything that makes up our financial system is not real? Yes. But I digress.....

One of things detectable with such "clear" monitoring is exactly what's happening with currencies and governmental debt, and exactly how to manipulate or arbitrage them (Keri will soon send an email on arbitrage and Basel II, and you'll love it--the people strike back!). So, perhaps we should, at this point, enter into the equation of government-backed non-governmental securities issuance, something that, before November 2008 did not exist! Specifically, I am talking about FDIC-backed and insured corporate bonds. These are securities as well, and as you know, in November the FDIC initiated a program to guarantee non-governmental corporate bond issuance. As I write that, I still cannot believe it, but it is true. Private risk magically transferred to the public via a government guarantee. In other words, private securities as "financial assets that have corresponding liabilities" not to the private issuers, but to the government!

The FDIC's Temporary Liquidity Guarantee Program has proved, in its short 6 or 7 month life, to be a true treasure for the 97 issuers that took it up. Holy smokes, has it ever. Not only are the issuers capable of selling their own debt as government backed, but they can charge a premium for the guarantee over the non-guaranteed debt, which in the world of securities simply means that they can sell at a lower yield for the buyer, who is happy to have government backing. As an additional little perk, the securities are sold with the US government's credit rating attached, and are therefore AAA. Since the program opened in November, the private debt from banks that has been sold with full FDIC backing totals $336,302,000,000. That's no typo, that's over $336 Billion. That's the latest I got from the FDIC's site, but Bloomberg must have more data, because they cite the FDIC at over $343 Billion (but hey, what's a measly $7,000,000,000 difference?) Lets just hope they stop soon before they reach the cap, which is over ONE TRILLION DOLLARS. Remember, this is to just 97 firms, government-backed private debt. The FDIC won't release their names, but they do release a list of 6500 banks that opted-out of the program (Good for them!) As for the firms we know that are selling the FDIC-backed securities, its not hard to find them because they advertise the guarantee. They include such amazing "solvent" companies as, from CNBC:

Bank of America Corp -- $44,026,300,00
General Electric (GE Capital) -- $40,532,300,000
JPMorgan Chase & Co -- $40,458,900,00
Citigroup Inc -- $34,567,400,00
Morgan Stanley -- $23,794,500
Goldman Sachs Group $19,521,100,00
Wells Fargo -- $9,496,000,00
American Express Co -- $5,897,200,00
State Street Corp -- $3,947,400,00
PNC Bank Corp, Pittsburgh -- $3,896,800,000
Regions Financial Corp -- $3,497,700,00
SunTrust Banks -- $3,319,900,00
HSBC Holdings PLC -- $2,673,900,00
Deere & Co 12/16/2008 $1,995,400,00
KeyCorp -- $1,936,600,00
Sovereign Bancorp -- $1,597,900,00
US Bancorp Inc -- $1,597,000,000
Union Bankshares -- $1,000,000,00
BNP Paribas SA -- $999,000,000
Bank of New York Mellon -- $603,500,00
New York Community Bancorp -- $601,600,00
Huntington Bancshares-- $600,000,000
MetLife Inc -- $397,400,000
Zions Bancorp -- $254,900,00
Oriental Bank & Trust Co, Puerto Rico $105,000,000

BNP Paribas gets italicized, because that is NOT EVEN A US BANK. BNP Paribas, according to its own website, it the largest bank in France. Of course, I know them from the Primary Dealers list at the Federal Reserve, and they are also stock holders in the FRS dating very far back. They own three US subsidiaries: BancWest, Bank of the West, and First Hawaiian Bank. That's just insulting, as if the whole idea of tax-payers backing private debt isn't bad enough. And I'm not acting like Citi and JPMorgan are exactly "American" banks, or that American Express and Goldman Sachs are banks at all, but c'mon. BNP Paribas get to sell almost $1 Billion in tax-payer backed debt?

As for the FDIC's fees in selling that much in security coverage? Try $6.87 Billion, or about 2%. So, they can cover $6.87 Billion of $343 Billion before they are back into tax-payer territory. The good new is, they seems to have at least halted the program. And it is also good that they have not yet extended the privilege to GMAC, who has been begging for it for months since becoming a bank in December. GMAC is, of course, in serious trouble. Try to go to GMAC's site, www.gmacbank.com and you'll be surprised. GMAC is now Ally Bank. It just happened this weekend, as they are struggling to rebrand themselves away from anything with GM in the name. According to the WSJ, GMAC needs $11.5 Billion in new capital as per the stress test results. This is a rather interesting number to me, because back in April, Moody's estimated that if the FDIC's TLG was opened to GMAC, the bank could generate $12 Billion on debt sales. Of course, it already got $5 Billion from TARP, and a $4 Billion credit line from the Federal Reserve, which it has used $10 million of. Please don't do it, FDIC, please....there goes that $6.87 Billion if you do.

So, to come full circle on the original scope of "securities," imagine the securities issuance of the United States government. Every red penny that has been guaranteed: the nearly $13 Trillion since the fall. And need I mention the $1 Trillion dollar Public-Private Investment Program, which is not included in that number? That's a lot of issuing of a lot of securities. We better watch out: the BIS might just charge us for a new database when we blow up their old one. But in all seriousness, that is just the out-right dollar denominated total. I mentioned before that the Federal Reserve has established a whole new series of Swap lines with the ECB to supply the dollar market in Europe, and so the FRBNY is, every day, engaged in pumping US dollars to the European commerical banks and taking euro in return or as collateral for future repayment in dollars. As you know, these things start to link together when you look at them. Just this past fall, we had the Federal Reserve announcing for the first time ever--and in total conformity with the IMF Article IV Consultations and as a complete policy reversal--an official target inflation rate, a rate of 2%. Well, the ECB has had an official target rate, or threshold, of inflation for years. And guess what it is? Yeah, 2%. Of course, I don't think either bank is going to be able to accomplish this, but they are obviously trying to "harmonize" things, aren't they? I will obviously be monitoring this Securities Statistics databasing project, and I won't have to wait long to see the fruits, because the BIS itself has imposed many deadlines by the end of 2009. It will be interesting.

The Committee on Payment and Settlement Systems and the Committee on the Global Financial System are gonna be very interested in these securities, I'm sure. And by the way, there's no longer a vacancy at the BIS's CPSS. Remember, the post was vacant after the last chairman, Mr Timothy Giethner, was moved from the FRBNY to Treasury. Well, there's a new Chairman at the CPSS now: his name is William Dudley, and he just so happens to also be the replacement for Geithner as President and CEO of the FRBNY. Funny how that works.

Many many thanks again to Keri for taking the time to lay that out. Great to have verifiable proof of my long held economic beliefs, though in truth I'd rather (and I'm sure Keri would rather) she be able to prove me wrong.