The Economic Recovery Is an Illusion The Bank for International Settlements (BIS) Warns of Future Crises

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Recently
by Andrew Gavin Marshall: Entering
the Greatest Depression in History

War
Is Peace, Freedom Is Slavery, Ignorance Is Strength, and Debt Is
Recovery

In light of
the ever-present and unyieldingly persistent exclamations of “an
end” to the recession, a “solution” to the crisis,
and a “recovery” of the economy; we must remember that
we are being told this by the very same people and institutions
which told us, in years past, that there was “nothing to worry
about,” that “the fundamentals are fine,” and that
there was “no danger” of an economic crisis.

Why do we continue
to believe the same people that have, in both statements and choices,
been nothing but wrong? Who should we believe and turn to for more
accurate information and analysis? Perhaps a useful source would
be those at the epicenter of the crisis, in the heart of the shadowy
world of central banking, at the global banking regulator, and the
u201Cmost prestigious financial institution in the world,u201D which accurately
predicted the crisis thus far: The Bank for International Settlements
(BIS). This would be a good place to start.

The economic
crisis is anything but over, the u201Csolutionsu201D have been akin to putting
a band-aid on an amputated arm. The Bank for International Settlements
(BIS), the central bank to the world's central banks, has warned
and continues to warn against such misplaced hopes.

What
is the Bank for International Settlements (BIS)?

The BIS emerged
from the Young Committee set up in 1929, which was created to handle
the settlements of German reparations payments outlined in the Versailles
Treaty of 1919. The Committee was headed by Owen D. Young, President
and CEO of General Electric, co-author of the 1924 Dawes Plan, member
of the Board of Trustees of the Rockefeller Foundation and was Deputy
Chairman of the Federal Reserve Bank of New York. As the main American
delegate to the conference on German reparations, he was also accompanied
by J.P. Morgan, Jr.[1] What emerged was the Young Plan for German
reparations payments.

The Plan went
into effect in 1930, following the stock market crash. Part of the
Plan entailed the creation of an international settlement organization,
which was formed in 1930, and known as the Bank for International
Settlements (BIS). It was purportedly designed to facilitate and
coordinate the reparations payments of Weimar Germany to the Allied
powers. However, its secondary function, which is much more secretive,
and much more important, was to act as u201Ca coordinator of the operations
of central banks around the world.u201D Described as u201Ca bank for central
banks,u201D the BIS u201Cis a private institution with shareholders but
it does operations for public agencies. Such operations are kept
strictly confidential so that the public is usually unaware of most
of the BIS operations.u201D[2]

The BIS was
founded by u201Cthe central banks of Belgium, France, Germany, Italy,
the Netherlands, Japan, and the United Kingdom along with three
leading commercial banks from the United States, including J.P.
Morgan & Company, First National Bank of New York, and First
National Bank of Chicago. Each central bank subscribed to 16,000
shares and the three U.S. banks also subscribed to this same number
of shares.u201D However, u201COnly central banks have voting power.u201D[3]

Central bank
members have bi-monthly meetings at the BIS where they discuss a
variety of issues. It should be noted that most u201Cof the transactions
carried out by the BIS on behalf of central banks require the utmost
secrecy,u201D[4] which is likely why most people have not even heard
of it. The BIS can offer central banks u201Cconfidentiality and secrecy
which is higher than a triple-A rated bank.u201D[5]

The BIS was
established u201Cto remedy the decline of London as the world's financial
center by providing a mechanism by which a world with three chief
financial centers in London, New York, and Paris could still operate
as one.u201D[6] As Carroll Quigley explained:

[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.[7]

The BIS, is,
without a doubt, the most important, powerful, and secretive financial
institution in the world. It's warnings should not be taken lightly,
as it would be the one institution in the world that would be privy
to such information more than any other.

Derivatives
Crisis Ahead

In September
of 2009, the BIS reported that, u201CThe global market for derivatives
rebounded to $426 trillion in the second quarter as risk appetite
returned, but the system remains unstable and prone to crises.u201D
The BIS quarterly report said that derivatives rose 16% u201Cmostly
due to a surge in futures and options contracts on three-month interest
rates.u201D The Chief Economist of the BIS warned that the derivatives
market poses u201Cmajor systemic risksu201D in the international financial
sector, and that, u201CThe danger is that regulators will again fail
to see that big institutions have taken far more exposure than they
can handle in shock conditions.u201D The economist added that, u201CThe
use of derivatives by hedge funds and the like can create large,
hidden exposures.u201D[8]

The day after
the report by the BIS was published, the former Chief Economist
of the BIS, William White, warned that, u201CThe world has not tackled
the problems at the heart of the economic downturn and is likely
to slip back into recession,u201D and he further u201Cwarned that government
actions to help the economy in the short run may be sowing the seeds
for future crises.u201D He was quoted as warning of entering a double-dip
recession, u201CAre we going into a W[-shaped recession]? Almost certainly.
Are we going into an L? I would not be in the slightest bit surprised.u201D
He added, u201CThe only thing that would really surprise me is a rapid
and sustainable recovery from the position we're in.u201D

An article
in the Financial Times explained that White's comments are
not to be taken lightly, as apart from heading the economic department
at the BIS from 1995 to 2008, he had, u201Crepeatedly warned of dangerous
imbalances in the global financial system as far back as 2003 and
— breaking a great taboo in central banking circles at the time
— he dared to challenge Alan Greenspan, then chairman of the Federal
Reserve, over his policy of persistent cheap money.u201D

The Financial
Times continued:

Worldwide,
central banks have pumped thousands of billions of dollars of
new money into the financial system over the past two years in
an effort to prevent a depression. Meanwhile, governments have
gone to similar extremes, taking on vast sums of debt to prop
up industries from banking to car making.

White warned
that, u201CThese measures may already be inflating a bubble in asset
prices, from equities to commodities,u201D and that, u201Cthere was a small
risk that inflation would get out of control over the medium term.u201D
In a speech given in Hong Kong, White explained that, u201Cthe underlying
problems in the global economy, such as unsustainable trade imbalances
between the US, Europe and Asia, had not been resolved.u201D[9]

On September
20, 2009, the Financial Times reported that the BIS, u201Cthe
head of the body that oversees global banking regulation,u201D while
at the G20 meeting, u201Cissued a stern warning that the world cannot
afford to slip into a u2018complacent' assumption that the financial
sector has rebounded for good,u201D and that, u201CJaime Caruana, general
manager of the Bank for International Settlements and a former governor
of Spain's central bank, said the market rebound should not be misinterpreted.u201D[10]

This follows
warnings from the BIS over the summer of 2009, regarding misplaced
hope over the stimulus packages organized by various governments
around the world. In late June, the BIS warned that, u201Cfiscal stimulus
packages may provide no more than a temporary boost to growth, and
be followed by an extended period of economic stagnation.u201D

An article
in The Australian reported that, u201CThe only international
body to correctly predict the financial crisis … has warned the
biggest risk is that governments might be forced by world bond investors
to abandon their stimulus packages, and instead slash spending while
lifting taxes and interest rates,u201D as the annual report of the BIS
u201Chas for the past three years been warning of the dangers of a repeat
of the depression.u201D Further, u201CIts latest annual report warned that
countries such as Australia faced the possibility of a run on the
currency, which would force interest rates to rise.u201D The BIS warned
that, u201Ca temporary respite may make it more difficult for authorities
to take the actions that are necessary, if unpopular, to restore
the health of the financial system, and may thus ultimately prolong
the period of slow growth.u201D

Further, u201CAt
the same time, government guarantees and asset insurance have exposed
taxpayers to potentially large losses,u201D and explaining how fiscal
packages posed significant risks, it said that, u201CThere is a danger
that fiscal policy-makers will exhaust their debt capacity before
finishing the costly job of repairing the financial system,u201D and
that, u201CThere is the definite possibility that stimulus programs
will drive up real interest rates and inflation expectations.u201D Inflation
u201Cwould intensify as the downturn abated,u201D and the BIS u201Cexpressed
doubt about the bank rescue package adopted in the US.u201D[11]

The BIS further
warned of inflation, saying that, u201CThe big and justifiable worry
is that, before it can be reversed, the dramatic easing in monetary
policy will translate into growth in the broader monetary and credit
aggregates.u201D That will u201Clead to inflation that feeds inflation expectations
or it may fuel yet another asset-price bubble, sowing the seeds
of the next financial boom-bust cycle.u201D[12] With the latest report
on the derivatives bubble being created, it has become painfully
clear that this is exactly what has happened: the creation of another
asset-price bubble. The problem with bubbles is that they burst.

The Financial
Times reported that William White, former Chief Economist at the
BIS, also u201Cargued that after two years of government support for
the financial system, we now have a set of banks that are even bigger – and more dangerous – than ever before,u201D which also, u201Chas been
argued by Simon Johnson, former chief economist at the International
Monetary Fund,u201D who u201Csays that the finance industry has in effect
captured the US government,u201D and pointedly stated: u201Crecovery
will fail unless we break the financial oligarchy that is blocking
essential reform.u201D[13] [Emphasis added].

At the beginning
of September 2009, central bankers met at the BIS, and it was reported
that, u201Cthey had agreed on a package of measures to strengthen the
regulation and supervision of the banking industry in the wake of
the financial crisis,u201D and the chief of the European Central Bank
was quoted as saying, u201CThe agreements reached today among 27 major
countries of the world are essential as they set the new standards
for banking regulation and supervision at the global level.u201D[14]

Among the agreed
measures, u201Clenders should raise the quality of their capital by
including more stock,u201D and u201CBanks will also have to raise the amount
and quality of the assets they keep in reserve and curb leverage.u201D
One of the key decisions made at the Basel conference, which is
named after the Basel Committee on Banking Supervision, set up under
the BIS, was that, u201Cbanks will need to raise the quality of their
so-called Tier 1 capital base, which measures a bank's ability to
absorb sudden losses,u201D meaning that, u201CThe majority of such reserves
should be common shares and retained earnings and the holdings will
be fully disclosed.u201D[15]

In mid-September,
the BIS said that, u201CCentral banks must coordinate global supervision
of derivatives clearinghouses and consider offering them access
to emergency funds to limit systemic risk.u201D In other words, u201CRegulators
are pushing for much of the $592 trillion market in over-the-counter
derivatives trades to be moved to clearinghouses which act as the
buyer to every seller and seller to every buyer, reducing the risk
to the financial system from defaults.u201D The report released by the
BIS asked if clearing houses u201Cshould have access to central bank
credit facilities and, if so, when?u201D[16]

A Coming
Crisis

The derivatives
market represents a massive threat to the stability of the global
economy. However, it is one among many threats, all of which are
related and intertwined; one will set off another. The big elephant
in the room is the major financial bubble created from the bailouts
and u201Cstimulusu201D packages worldwide. This money has been used by major
banks to consolidate the economy; buying up smaller banks and absorbing
the real economy; productive industry. The money has also gone into
speculation, feeding the derivatives bubble and leading to a rise
in stock markets, a completely illusory and manufactured occurrence.
The bailouts have, in effect, fed the derivatives bubble to dangerous
new levels as well as inflating the stock market to an unsustainable
position.

However, a
massive threat looms in the cost of the bailouts and so-called u201Cstimulusu201D
packages. The economic crisis was created as a result of low interest
rates and easy money: high-risk loans were being made, money was
invested in anything and everything, the housing market inflated,
the commercial real estate market inflated, derivatives trade soared
to the hundreds of trillions per year, speculation ran rampant and
dominated the global financial system. Hedge funds were the willing
facilitators of the derivatives trade, and the large banks were
the major participants and holders.

At the same
time, governments spent money loosely, specifically the United States,
paying for multi-trillion dollar wars and defense budgets, printing
money out of thin air, courtesy of the global central banking system.
All the money that was produced, in turn, produced debt. By 2007,
the total debt — domestic, commercial and consumer debt — of the
United States stood at a shocking $51 trillion.[17]

As if this
debt burden was not enough, considering it would be impossible to
ever pay back, the past two years has seen the most expansive and
rapid debt expansion ever seen in world history — in the form of
stimulus and bailout packages around the world. In July of 2009,
it was reported that, u201CU.S. taxpayers may be on the hook for as
much as $23.7 trillion to bolster the economy and bail out financial
companies, said Neil Barofsky, special inspector general for the
Treasury's Troubled Asset Relief Program.u201D[18]

Bilderberg
Plan in Action?

In May of 2009,
I wrote an article covering the Bilderberg meeting of 2009, a highly
secretive meeting of major elites from Europe and North America,
who meet once a year behind closed doors. Bilderberg acts as an
informal international think tank, and they do not release any information,
so reports from the meetings are leaked and the sources cannot be
verified. However, the information provided by Bilderberg trackers
and journalists Daniel Estulin and Jim Tucker have proven surprisingly
accurate in the past.

In May, the
information that leaked from the meetings regarded the main topic
of conversation being, unsurprisingly, the economic crisis. The
big question was to undertake u201CEither a prolonged, agonizing depression
that dooms the world to decades of stagnation, decline and poverty
… or an intense-but-shorter depression that paves the way for
a new sustainable economic world order, with less sovereignty but
more efficiency.u201D

Important to
note, was that one major point on the agenda was to u201Ccontinue to
deceive millions of savers and investors who believe the hype about
the supposed up-turn in the economy. They are about to be set up
for massive losses and searing financial pain in the months ahead.u201D

Estulin reported
on a leaked report he claimed to have received following the meeting,
which reported that there were large disagreements among the participants,
as u201CThe hardliners are for dramatic decline and a severe, short-term
depression, but there are those who think that things have gone
too far and that the fallout from the global economic cataclysm
cannot be accurately calculated.u201D However, the consensus view was
that the recession would get worse, and that recovery would be u201Crelatively
slow and protracted,u201D and to look for these terms in the press over
the next weeks and months. Sure enough, these terms have appeared
ad infinitum in the global media.

Estulin further
reported, u201Cthat some leading European bankers faced with the specter
of their own financial mortality are extremely concerned, calling
this high-wire act u2018unsustainable,' and saying that US budget and
trade deficits could result in the demise of the dollar.u201D One Bilderberger
said that, u201Cthe banks themselves don’t know the answer to when (the
bottom will be hit).u201D Everyone appeared to agree, u201Cthat the level
of capital needed for the American banks may be considerably higher
than the US government suggested through their recent stress tests.u201D
Further, u201Csomeone from the IMF pointed out that its own study on
historical recessions suggests that the US is only a third of the
way through this current one; therefore economies expecting to recover
with resurgence in demand from the US will have a long wait.u201D One
attendee stated that, u201CEquity losses in 2008 were worse than those
of 1929,u201D and that, u201CThe next phase of the economic decline will
also be worse than the ’30s, mostly because the US economy carries
about $20 trillion of excess debt. Until that debt is eliminated,
the idea of a healthy boom is a mirage.u201D[19]

Could the general
perception of an economy in recovery be the manifestation of the
Bilderberg plan in action? Well, to provide insight into attempting
to answer that question, we must review who some of the key participants
at the conference were.

Central
Bankers

Many central
bankers were present, as per usual. Among them, were the Governor
of the National Bank of Greece, Governor of the Bank of Italy, President
of the European Investment Bank; James Wolfensohn, former President
of the World Bank; Nout Wellink, President of the Central Bank of
the Netherlands and is on the board of the Bank for International
Settlements (BIS); Jean-Claude Trichet, the President of the European
Central Bank was also present; the Vice Governor of the National
Bank of Belgium; and a member of the Board of the Executive Directors
of the Central Bank of Austria.

Finance
Ministers and Media

Finance Ministers
and officials also attended from many different countries. Among
the countries with representatives present from the financial department
were Finland, France, Great Britain, Italy, Greece, Portugal, and
Spain. There were also many representatives present from major media
enterprises around the world. These include the publisher and editor
of Der Standard in Austria; the Chairman and CEO of the Washington
Post Company; the Editor-in-Chief of The Economist; the
Deputy Editor of Die Zeit in Germany; the CEO and Editor-in-Chief
of Le Nouvel Observateur in France; the Associate Editor
and Chief Economics Commentator of the Financial Times; as
well as the Business Correspondent and the Business Editor of The
Economist. So, these are some of the major financial publications
in the world present at this meeting. Naturally, they have a large
influence on public perceptions of the economy.

Bankers

Also of importance
to note is the attendance of private bankers at the meeting, for
it is the major international banks that own the shares of the world's
central banks, which in turn, control the shares of the Bank for
International Settlements (BIS). Among the banks and financial companies
represented at the meeting were Deutsche Bank AG, ING, Lazard Freres
& Co., Morgan Stanley International, Goldman Sachs, Royal Bank
of Scotland, and of importance to note is David Rockefeller,[20]
former Chairman and CEO of Chase Manhattan (now J.P. Morgan Chase),
who can arguably be referred to as the current reigning “King
of Capitalism.”

The
Obama Administration

Heavy representation
at the Bilderberg meeting also came from members of the Obama administration
who are tasked with resolving the economic crisis. Among them were
Timothy Geithner, the US Treasury Secretary and former President
of the Federal Reserve Bank of New York; Lawrence Summers, Director
of the White House’s National Economic Council, former Treasury
Secretary in the Clinton administration, former President of Harvard
University, and former Chief Economist of the World Bank; Paul Volcker,
former Governor of the Federal Reserve System and Chair of Obama's
Economic Recovery Advisory Board; Robert Zoellick, former Chairman
of Goldman Sachs and current President of the World Bank.[21]

Unconfirmed
were reports of the Fed Chairman, Ben Bernanke being present. However,
if the history and precedent of Bilderberg meetings is anything
to go by, both the Chairman of the Federal Reserve and the President
of the Federal Reserve Bank of New York are always present, so it
would indeed be surprising if they were not present at the 2009
meeting. I contacted the New York Fed to ask if the President attended
any organization or group meetings in Greece over the scheduled
dates that Bilderberg met, and the response told me to ask the particular
organization for a list of attendees. While not confirming his presence,
they also did not deny it. However, it is still unverified.

Naturally,
all of these key players wield enough influence to alter public
opinion and perception of the economic crisis. They also have the
most to gain from it. However, whatever image they construct, it
remains just that; an image. The illusion will tear apart soon enough,
and the world will come to realize that the crisis we have gone
through thus far is merely the introductory chapter to the economic
crisis as it will be written in history books.

Conclusion

The warnings
from the Bank for International Settlements (BIS) and its former
Chief Economist, William White, must not be taken lightly. Both
the warnings of the BIS and William White in the past have gone
unheralded and have been proven accurate with time. Do not allow
the media-driven hope of “economic recovery” to sideline
the “economic reality.” Though it can be depressing to
acknowledge, it is a far greater thing to be aware of the ground
on which you tread, even if it is strewn with dangers, than to be
ignorant and run recklessly through a minefield. Ignorance is not
bliss; ignorance is delayed catastrophe.

A doctor must
first properly identify and diagnose the problem before he can offer
any sort of prescription as a solution. If the diagnosis is inaccurate,
the prescription won't work, and could in fact, make things worse.
The global economy has a large cancer in it: it has been properly
diagnosed by some, yet the prescription it was given was to cure
a cough. The economic tumor has been identified; the question is:
do we accept this and try to address it, or do we pretend that the
cough prescription will cure it? What do you think gives a stronger
chance of survival? Now try accepting the idea that “ignorance
is bliss.”

As Gandhi said,
u201CThere is no god higher than truth.u201D

Endnotes

[1] Time, HEROES:
Man-of-the-Year. Time Magazine: Jan 6, 1930: http://www.time.com/time/magazine/article/0,9171,738364-1,00.html

[2] James Calvin
Baker, The Bank for International Settlements: evolution and evaluation.
Greenwood Publishing Group, 2002: page 2

[3] James Calvin
Baker, The Bank for International Settlements: evolution and evaluation.
Greenwood Publishing Group, 2002: page 6

[4] James Calvin
Baker, The Bank for International Settlements: evolution and evaluation.
Greenwood Publishing Group, 2002: page 148

[5] James Calvin
Baker, The Bank for International Settlements: evolution and evaluation.
Greenwood Publishing Group, 2002: page 149

[6] Carroll
Quigley, Tragedy and Hope: A History of the World in Our Time (New
York: Macmillan Company, 1966), 324-325

[7] Carroll
Quigley, Tragedy and Hope: A History of the World in Our Time (New
York: Macmillan Company, 1966), 324

[8] Ambrose
Evans-Pritchard, Derivatives still pose huge risk, says BIS. The
Telegraph: September 13, 2009: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6184496/Derivatives-still-pose-huge-risk-says-BIS.html

[9] Robert
Cookson and Sundeep Tucker, Economist warns of double-dip recession.
The Financial Times: September 14, 2009: http://www.ft.com/cms/s/0/e6dd31f0-a133-11de-a88d-00144feabdc0.html

[10] Patrick
Jenkins, BIS head worried by complacency. The Financial Times: September
20, 2009: http://www.ft.com/cms/s/0/a7a04972-a60c-11de-8c92-00144feabdc0.html

[11] David
Uren. Bank for International Settlements warning over stimulus benefits.
The Australian: June 30, 2009:

http://www.theaustralian.news.com.au/story/0,,25710566-601,00.html

[12] Simone
Meier, BIS Sees Risk Central Banks Will Raise Interest Rates Too
Late. Bloomberg: June 29, 2009:

http://www.bloomberg.com/apps/news?pid=20601068&sid=aOnSy9jXFKaY

[13] Robert
Cookson and Victor Mallet, Societal soul-searching casts shadow
over big banks. The Financial Times: September 18, 2009: http://www.ft.com/cms/s/0/7721033c-a3ea-11de-9fed-00144feabdc0.html

[14] AFP, Top
central banks agree to tougher bank regulation: BIS. AFP: September
6, 2009: http://www.google.com/hostednews/afp/article/ALeqM5h8G0ShkY-AdH3TNzKJEetGuScPiQ

[15] Simon
Kennedy, Basel Group Agrees on Bank Standards to Avoid Repeat of
Crisis. Bloomberg: September 7, 2009: http://www.bloomberg.com/apps/news?pid=20601087&sid=aETt8NZiLP38

[16] Abigail
Moses, Central Banks Must Agree Global Clearing Supervision, BIS
Says. Bloomberg: September 14, 2009: http://www.bloomberg.com/apps/news?pid=20601087&sid=a5C6ARW_tSW0

[17] FIABIC,
US home prices the most vital indicator for turnaround. FIABIC Asia
Pacific: January 19, 2009: http://www.fiabci-asiapacific.com/index.php?option=com_content&task=view&id=133&Itemid=41

Alexander Green,
The National Debt: The Biggest Threat to Your Financial Future.
Investment U: August 25, 2008: http://www.investmentu.com/IUEL/2008/August/the-national-debt.html

John Bellamy
Foster and Fred Magdoff, Financial Implosion and Stagnation. Global
Research: May 20, 2009: http://www.globalresearch.ca/index.php?context=va&aid=13692

[18] Dawn Kopecki
and Catherine Dodge, U.S. Rescue May Reach $23.7 Trillion, Barofsky
Says (Update3). Bloomberg: July 20, 2009: http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM

[19] Andrew
Gavin Marshall, The Bilderberg Plan for 2009: Remaking the Global
Political Economy. Global Research: May 26, 2009: http://www.globalresearch.ca/index.php?aid=13738&context=va

[20] Maja Banck-Polderman,
Official List of Participants for the 2009 Bilderberg Meeting. Public
Intelligence: July 26, 2009: http://www.publicintelligence.net/official-list-of-participants-for-the-2009-bilderberg-meeting/

[21] Andrew
Gavin Marshall, The Bilderberg Plan for 2009: Remaking the Global
Political Economy. Global Research: May 26, 2009: http://www.globalresearch.ca/index.php?aid=13738&context=va

This originally
appeared on Global Research.

October
5, 2009

Andrew Gavin
Marshall is a Research Associate with the Centre for Research on
Globalization (CRG). He is currently studying Political Economy
and History at Simon Fraser University.

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