The Global Money Changers
Jane H. Ingraham | The New American
January 4, 1999
Did it have to happen? How did the firestorm that has consumed much of the world’s currencies come about? Who or what is responsible? Could it have been avoided? Or is the whole world being betrayed into some sort of cataclysmic disaster?
Tracing the steps of this unprecedented global financial meltdown takes us back not to the most recent crisis in Thailand, but to Mexico. In 1994, with the peso quasi-pegged to the dollar, Mexico was booming with the Bolsa (its stock market) at an all-time high. Behind the scenes, however, a different act was going forward. As central banks always do, the Bank of Mexico had been quietly expanding the peso supply, decreasing its value, and causing a slippage from the pegged exchange rate. U.S. Treasury Secretary Robert Rubin, a member of the Insider Council on Foreign Relations (CFR), secretly began intense pressure on Mexico to devalue — that is, to cut the peso’s tie to the dollar and allow it to go into free fall (floating exchange rate). Such a move seemed so disastrous and unnecessary to Mexico’s Finance Minister Pedro Aspe that he threatened to resign from the Salinas government. But a few months later, with the new Zedillo government in place, Rubin prevailed. Mexico unexpectedly devalued in a move that stunned the world and plunged Mexico into its worst economic crisis in modern history.
Lawrence Summers (CFR), Deputy Treasury Secretary and Rubin’s right-hand man, masterminded the 1995 $50 billion International Monetary Fund/U.S. Mexican bailout, incidentally arranging for the Wall Street money-center banks to fully collect on their Mexican government bonds at 15 percent interest while ordinary investors went down the drain. Why was this scheming to push Mexico over the brink and pour in a previously unheard of number of billions of first importance? Because it caused an enormous escalation in moral hazard — that is, it signaled to politicians and big investors that they would not suffer losses if their own risky or foolish ventures turned sour. In other words, the presumption was that they would not be playing with their own money. With fear removed, it is only logical that recklessness took over. As the Wall Street Journal put it, the lesson given the markets was, “Whee! Cross-border loans are a one-way bet. Throw money at the world. Russia, even.” So the stage was set.
We all know what happened next. Western money, fueled in the U.S. by the Federal Reserve’s exuberant creation of dollars in the early l990s, streamed into Southeast Asia creating the seemingly invincible “Asian Tigers.” But underneath it all, normal credit standards were being abandoned and prudence thrown to the wind. It was a repeat performance of the principle underlying our own S&L extravaganza, with the IMF becoming a kind of international federal deposit insurance. Where is the banker or investor who would turn his back on a government-guaranteed profit?
Meanwhile, the politicians and central bankers of the Asian nations, like the Mexicans, were unable to resist the temptation to create increasing amounts of domestic currency, a simple procedure when the currency is paper, as all currencies are now. As this drift continued, it was inevitable that the day of reckoning would come when the Asian-pegged exchange rates no longer reflected reality. The first to show signs of trouble was Thailand, a tiny country with an economy the size of New York’s.
Although Michel Camdessus, a Frenchman, is the director of the IMF, in reality he is a front man for the real IMF bosses, the Treasury officials of the G-7 industrialized nations that fund the IMF. It is no secret that these top officials are members of either the CFR or Trilateral Commission, nor do we have to wonder who the most powerful of these members is. Therefore it is accurate to say that Camdessus and Treasury Secretary Robert Rubin act in tandem. We were not allowed to know that when Camdessus moved in to “advise” Thailand, he repeatedly argued against getting banks to cut back on money creation, the source of the problem. Over a period of more than a year, Camdessus privately exhorted Thai officials to sever their currency’s tie to the dollar, exclaiming: “You must get rid of this very dangerous peg to the dollar!” Publicly, he predicted for Asia at worst “a cyclical correction that is not expected to be deep or prolonged.” Camdessus’ condition of aid was the same disastrous strategy that had ruined Mexico: devaluation. When Camdessus got his way, the current crisis dawned. Let us remember that Camdessus could not have acted without the approval of Rubin.
Although $18 billion of Western wealth has been transferred to tiny Thailand, its per capita income has fallen to $1,800 from $3,000, its economy is contracting at a five percent annual rate, inflation is in double digits, and the country is now on its fifth IMF program revision. Yet with two calamitous failures to its “credit,” the Camdessus-Rubin world management team continued to insist, against all evidence, that devaluations can rebalance economies. Not only has this been proven the most destructive way to handle a currency crisis, but even worse, devaluations, like a contagious disease, always spread. This is because other countries fear losing out in international trade to cheaper goods from competitors if they themselves don’t also devalue.
This fear helped Rubin and Summers (in the name of the IMF) to force the same fatal prescription of devaluation and bailout upon South Korea, Malaysia, Indonesia, and the Philippines. One after the other, these economies were broken by high interest rates, widespread bankruptcies, severe recession, and devastating inflation, with negligible benefits from cheapened exports.
Only one country attempted to break away from the Insiders’ kiss of death. That was Indonesia, where President Suharto was ready to establish a currency board until Camdessus, Summers, Paul Volker, and James Wolfensohn, all big Insider guns, descended on Jakarta and blasted that idea to smithereens. These seasoned Insiders personally strong-armed Suharto into a disastrous devaluation that resulted in widespread impoverishment, property destruction, and mass riots, including the pitiful killing of Chinese merchants that the ignorant mob blamed for the country’s downfall. Indonesia got by far the harshest treatment of any of the countries, for the Insiders had more on their minds than devaluation; in an exercise of raw power, they succeeded in forcing Suharto out (for details, see “Bailout Bonanza” in our March 16, 1998 issue). Why? Simply to break the grip of Suharto’s family, friends, and outsider Freeport-McMoRan Copper and Gold on Indonesia’s tremendous potential wealth in natural resources, for the Insiders intend to muscle in on these, and on the cheap.
In fact, corporations with CFR connections buying up bankrupt assets for peanuts is an important corollary of ruining economies. In Asia, U.S. investors have been swooping in and digging through the rubble to buy everything from distressed hotels, golf courses, office buildings, and condominiums to troubled manufacturers, as well as buying out their local partners in existing joint ventures or increasing their stakes. Over the past year, U.S. investors poured an estimated $10 billion into Asian property investments, which is five times the $2 billion in U.S. property that the Japanese bought in 1985, the first year of the so-called Japanese invasion of the U.S. market. Logically enough, some of the hardest hit countries are seeing the biggest rush of foreign investment. South Korea is expected to receive $4.7 billion, up from $3.1 billion last year. Thailand will receive $5.9 billion, a huge jump from $3.6 billion in 1997.
The Asian meltdown, disastrous for Asians, has turned out to be a pot of gold for U.S. corporations. Among the slew of big U.S. buyers are investment banks such as Bankers Trust, Goldman Sachs, Morgan Stanley Dean Witter, and Merrill Lynch, which are buying up Asian property for as little as ten cents on the dollar.
The story of the Russian collapse has a twist all its own. There a $200 billion Western “bailout” has been in progress ever since the Insiders manipulated Boris Yeltsin into dictatorial power seven years ago. The ruble’s “soft peg” to the dollar had been allowing its exchange rate to fluctuate within a predictable “corridor,” but by June the “corridor” had become a swamp. The Russian central bank was beginning to spend what eventually amounted to $17 billion in hard currency reserves to “defend” the depreciated ruble (that is, to try to undo its self-inflicted damage by sopping up rubles).
Yet, with the ruble under siege and the Russian stock market collapsing, Goldman Sachs hosted a glamourous party with George Bush (CFR/Trilateral) in attendance and put across a $1.25 billion Russian bond sale (with an interest rate of approximately 100 percent) in a matter of hours, thus signaling that Russia was too big to fail.
In mid-July, with the Russian central bank vowing it would never devalue, the IMF (Rubin) and World Bank (James Wolfensohn) orchestrated yet another “bailout” of $22.6 billion, conditioned, of course, on the usual worthless Russian promises of “reform.” Curiously, Camdessus announced that the IMF was now trying to stave off devaluation, whereas in Asia he had demanded it. Two weeks later, Russia received a $4.8 billion tranche (a French word meaning portion, now in vogue at the IMF) with the soothing promise that as long as Russia continued to make progress on reforms the next tranche would be handed over in September. Stanley Fischer (CFR), first deputy managing director of the IMF, assured investors that “the main danger has passed,” while Rubin, abruptly changing his tune, declared that Russia had been “well advised by the IMF not to devalue.”
The world was still breathing a sigh of relief over this new-found wisdom when on August 18th Russia suddenly let the ruble fall 34 percent and declared a moratorium (default) on $30 billion of debt, $14 billion of it foreign. The question is, were Rubin, Fischer, and Camdessus deceived, or were they deceiving others? Considering this team’s record of deceptive maneuverings, plus the Insiders’ grip on Boris Yeltsin (through our tax dollars), the conclusion seems obvious. A week later the Russian central bank stopped its intervention in defense of the ruble and released it into free fall.
By the end of August when Clinton took off for his meeting in Moscow with Yeltsin, investors who had been sucked into lapping up Russian government bonds at 120 percent interest in a display of moral hazard run wild, had every reason to believe their shirts would be saved by Clinton’s support for the next bailout installment of $4.3 billion due September 15th. But there was shocking news for them. Far from bearing aid to a nation in economic collapse, Mr. Clinton incredibly announced that Russia was on its own. The $22.6 billion rescue package of July, we learned, would have to be renegotiated because Russia had broken its terms by devaluing and defaulting. Besides, murmured Mr. Clinton, there was this thing about reform: If Russia would only “do the disciplined, hard things” and “get through this dark night,” all would be roses again. The IMF joined the charade, refusing more aid until Russia redoubles its reform efforts. A few weeks later it pulled out of Moscow, indignant that Russia had not yet formulated an economic program. As the Wall Street Journal observed, for the first time in its 54-year history, the IMF had refused to bail out a country.
Although Russia’s economy accounts for less than one percent of the world’s domestic product (its export volume is about that of little Denmark) and the value of the ruble is of no importance for world commerce, its devaluation at this particular time set off a panic flight from financial risk of all kinds that swamped markets worldwide, created shock waves that still threaten South America, and ended the euphoria in the U.S. stock market.
But let us pause for a moment and ask what has happened to those hundreds of billions of taxpayer dollars that these CFR operators entrenched at the top have filched from us? They certainly haven’t financed any Russian reforms or “transition” to a free market as we have been repeatedly told for years. Over 80 percent of the Russian economy is still barter. Seven years after the Soviet “downfall,” land is still collectivized. Mass privatization is a lie. The public got worthless paper, while the “former” Communists are now “capitalist” oligarchs along with their American corporate partners. The $200 billion was the entrance fee paid by the West for CFR-connected corporations. But the money itself ended up outside Russia, in Geneva, London, or New York bank accounts. The head auditor of the Russian upper house of parliament recently confirmed that the billions were simply stolen, while the Wall Street Journal described the process as pouring water on glass.
But the Russian elite aren’t the only ones collecting the spoils. As in Asia, the American elite are cashing in, too. The financial blow-up has resulted in extensive claims of American investors on Russian assets which had been pledged as collateral for millions of dollars in loans. Just one of these is Yukos, Russia’s second-biggest oil company, which has lost at least 35 percent of its shares to creditors such as Amoco and Goldman Sachs. These claims, many on strategic enterprises, are broad enough to actually reshape corporate ownership in Russia. Not only is the entire Russian banking system probably insolvent, but foreign investors have a claim on a large part of it, putting them in line for taking equity stakes in Russian banks as payment for the latter’s debts. Let us never underestimate the acumen of the Insiders!
So far we have been recounting only recent Insider manipulations, mostly those that can be seen on the surface. But we must look deeper to understand how these manipulations became possible in the first place. The primary villain is fiat, or unbacked printing press paper money, a marvelous invention beloved of governments everywhere for making perpetual spending possible. But financing deficits by inflating the money supply at differing rates in country after country has had, of course, unpleasant consequences, such as an international monetary system that is a mess. What we have been witnessing is a total lack of global systemic monetary stability. To be sure, this has not always been the case. The prosperous era of a gold standard before World War I came close to the ideal of certainty about the relative values of monies. Exchange rates were “fixed” by the price of an ounce of gold in each nation’s currency; the problem with this beautifully simple system was that it could not be manipulated.
Gold had to go, and it was ushered to its death for Americans by FDR in 1933. Since 1971 when the international gold exchange standard was crushed by Nixon, the world has had a melange of fiat currencies managed by central banks in the business of perpetuating manic government spending, as we have just outlined. Small wonder that exchange rates have been enormously volatile and easy prey for manipulators. It could not be otherwise. It has made no difference whether exchange rates have floated or been fixed to the dollar either rigidly or within trading bands, usually according to a “crawling peg” (always downward). Currency crashes have been equally likely and will continue to be as long as central bankers are human. As reported by the October 16th Wall Street Journal, of 116 crashes between 1975 and 1996 when currencies plunged 25 percent or more, half were pegged and half were floating.
Lengthy debates by economists over which system is preferable or where the peg should be set are an utter waste of time. The point is that today’s exchange rates are managed by mere mortals subject to grievous temptations or a hidden agenda that has left whole populations impoverished. Basically, the world has fallen victim to managed money, and the money has been mismanaged on a grand scale. This is called the law of intended consequences.
Let us suppose for a moment that the present consequences were not intended. What could our Rubin-Camdessus money management team have done, or do now, to help countries that have fallen into the trap of watering down their currencies and destroying their exchange rates? Given the reality that a link to gold will hardly materialize in the foreseeable future, the next best remedy is a currency board. Steve Hanke, professor of applied economics at Johns Hopkins University, writing in the Cato Institute’s Foreign Policy Briefing for October 14, 1998, describes how such a board could readily establish monetary stability in Russia (or any country), provided that such a board was strictly removed from the deadly hands of politicians and bankers. For a currency board to work successfully, it must be ultraorthodox — that is, untouchable. This is not the case with existing boards in Hong Kong or Argentina, which have not been set up on an inviolable basis and therefore are not fully protective. However, they are better than having none at all, as we are seeing in those two places.
An orthodox currency board, Hanke explains, is a monetary institution that issues a domestic currency (such as rubles) backed 100 percent by a foreign reserve currency (the U.S. dollar). The domestic currency is fully convertible into the reserve currency at a fixed exchange rate on demand (e.g., one ruble to one dollar). The board follows a strict monetary policy and is protected from political pressure by a monetary constitution. Its legal seat, says Hanke, should be in Switzerland, with three of five directors appointed by the Bank for International Settlements in Basel. Failure to maintain the fixed exchange rate with the reserve currency would make the board subject to legal action for breach of contract according to the laws of Switzerland.
Such a genuine commitment to monetary stability would make Russia (or any country) immune from foreign exchange crises. Furthermore, there would be no role for any kind of international government money-lending agency. In short, the IMF, the World Bank, and the rest of their ilk would be out of a job. Central banks would be emasculated, their power over money transferred to the board, which could not inflate. Thus could human beings be protected from themselves.
But of course such a non-interventionist system is exactly what the CFR Insiders had to prevent from happening, as we saw in Indonesia where they showed up frantic that Suharto was about to set up a board under the tutelage of Steve Hanke, who had traveled to Jakarta for that purpose. In fact, the Indonesian rupiah had already begun to show signs of robust recovery simply on the rumor of a board. We can only imagine what threats of perdition forced Suharto to abandon Hanke and accept the IMF. Professor Hanke must have left town a sadder and wiser man; he now knows who is really running the world.
How did the IMF get to be what it is? By what authority have the Insiders managed to enmesh the world in its coils? How does it happen that although the IMF precludes much more effective market solutions, it is perceived as a savior? Anna Schwartz, research associate at the National Bureau of Economic Research, examines the IMF in the Cato Institute’s Foreign Policy Briefing for August 26, 1998. Created by the Insiders’ infamous Bretton Woods Conference in 1944, the IMF’s original purpose was to adjust a country’s exchange rate according to rules of the gold exchange standard then in force. After 1971 when Nixon broke this last link to gold, the IMF, instead of dying as it should have, reinvented itself on its own authority as a so-called international “lender of last resort,” a fallacious concept now widely used in its defense. Schwartz not only blasts this assumption, but also makes the powerful point that “the power to make loans to foreign governments belongs to Congress. That power should not be shifted … to an international agency.” But obviously, reason and sovereign rights have nothing to do with the IMF’s existence.
Toward its newly assumed end, the IMF announced in 1997 that it must have — apart from its Asian bailout — a stockpile of cash in order to quickly “rescue” countries in distress, even though its $118 billion Asian handout failed to rescue anyone except foreign bank lenders. Nevertheless, the IMF has reached agreements with 25 countries for a $47 billion (recently revised to $72 billion) line of credit. The U.S. quota amounted to $18 billion. It is this $18 billion that congressional Republicans swore for months they absolutely never would pony up — or at least not without radical reforms. In the end, the Republicans were overruled by their fearless leader, Speaker Newt Gingrich. Congress cravenly handed over the loot, even in the face of the fact that the IMF itself owns $30 billion in gold, second only to the U.S.
It is essential to understand that the IMF is a crucial tool of the Insiders’ objective of global government. Critics who complain that IMF prescriptions lead to disaster are missing the point. From the Insiders’ point of view, the IMF is eminently successful in its mission, which is to seize control of the economies of sovereign nations. Martin Feldstein, a professor of economics at Harvard, exposes this mission in a remarkable article in the Wall Street Journal for October 10, 1998. Feldstein observes that the massive Asian bailout funds were not used to prevent currency runs (as we supposed), but were provided “only if the countries accepted … radical restructuring of their entire domestic economies … labor rules, corporate governance, tax systems and other matters not germane to the financial crisis.” Since the funds were given out only gradually, speculators were not repulsed, which in turn caused excessive declines of currency values.
Feldstein then quotes Camdessus as having said that if the IMF had wanted to deal only with the countries’ liquidity and debt problems, it would have succeeded, but, happily, the Asian crisis gave the IMF the leverage to force structural policy changes that national governments would not otherwise adopt.
Writes Feldstein:
Feldstein wraps up his condemnation of the IMF by pointing out that the Asian economies were fundamentally sound and, with modest adjustments, could easily have earned extra foreign exchange to repay foreign debts. Instead, the IMF falsely “criticized them as incompetent, corrupt countries.... In doing so, it not only discouraged further lending or investment in these countries, but also undermined the confidence of global lenders in emerging markets generally, thereby contributing to the contagion.”
Here we have a precise analysis of the IMF’s real intentions from an expert in the field. Yet as far as we can tell, Feldstein apparently fails to realize the full import of his own words. This is not surprising. The very perniciousness and wickedness of the Insiders’ objectives and methods are their greatest protection, so divorced are they from even the most elementary sense of decency. But without asking why the IMF is intent on controlling economies, we cannot get to the bottom of its actions. To say that it is simply arrogant or mistaken is sadly naïve. The hard truth is that the only interpretation that makes sense is the fact that economic control, at whatever price in human suffering, is an essential step toward world merger — the Insiders’ new world order.
Taking over economies is, of course, nothing new for the IMF, which already controlled numerous economies in Africa, South America, and places most of us have never heard of. But this time something new was added. This is the first time a whole area of the globe has been seized and economically maltreated at the same time with such shattering results worldwide. Individually, these various meltdowns would have amounted to very little.
As the Asian picture became ever more dismal, Japan (our Trilateral partner) strangely refused to take steps toward recovery, the seven-year roll of the U.S. stock market slumped distressingly, and the stage was set for the heart of the matter. The first shot came from George Soros, one of the world’s wealthiest men and a member of the CFR.
Although this master currency speculator understands IMF machinations full well, he lays the blame for Asia’s downfall on capitalism, which is supposedly coming apart at the seams because the international monetary authorities are unable to hold the system together. IMF programs are not working. The response of the G-7 to the Russian crisis, he says, was woefully inadequate, shaking the belief that authorities will step in when conditions get rough. In finding a remedy, market discipline is not enough. In the September 15th Wall Street Journal, Soros writes that stability must be maintained in another way:
Soros had hardly paid his dues when he was followed much more boldly by Jeffrey E. Garten (CFR), dean of the Yale School of Management and another member of the CFR. Writing in the New York Times for September 23rd, Garten demonstrates his full commitment to a centrally managed economy and his unqualified support for the Insiders’ ultimate international financial takeover instrument. What is needed in the present crisis, Garten says, is a Fed for the world — a global central bank:
Next to be heard from was Gordon Brown, Britain’s Chancellor of the Exchequer, who wrote in the October 6th Wall Street Journal:
Meanwhile, Bill Clinton, as the guest of David Rockefeller, addressed the Council on Foreign Relations in New York City in a mode reeking with chumminess as he acknowledged the presence of Insider big-wigs by their first names. Mr. Clinton’s remarks, larded with fraud, sought to establish once again the lie that the CFR has nothing to do with setting policy, but is just a bunch of innocent onlookers. Ever since Mexico, Mr. Clinton said, he had “reached out across the country and, indeed, across the world for any new ideas from any source” as to how to handle “the biggest financial challenge facing the world in half a century.” He then implored his listeners (the most powerful men in the world), “If you have any ideas, for goodness sake, share them.... If you think we’re right, we want to encourage you to support us.” (If David Rockefeller laughed at this point, it was not recorded).
The President then got down to listing “his” ideas for preserving the “political and economic freedom the Council on Foreign Relations has always stood for,” all of them prefaced by “what we need to do” which turned out to mean throwing billions more — always with controls attached — around the world. Leaving a clear call for a global Federal Reserve to others, Mr. Clinton sidestepped with language such as “adapt international financial architecture to the 21st century,” or “reform the international financial system.”
The same sort of obfuscation marked Clinton’s remarks to “the world’s top financial officials” (collectivists and scoundrels all) at the annual IMF/World Bank conference in Washington on October 6th. Once again, soothing words such as “free markets,” “open borders,” and “free capital flows” tripped easily from Clinton’s tongue at the same time he called for a “comprehensive new international regulatory regime,” fuzzily called a “mechanism.” Considering what Clinton knows was orchestrated by his Insider bosses, his remarks were a contemptible sham designed to fool the public into welcoming the advent of a global Fed with worldwide control over money and credit as “preserving our freedom.”
Whatever small comfort there is in saying “I told you so,” John Birch Society President John McManus is fully entitled to say it. In 1993, his ground-breaking book Financial Terrorism not only warned about the coming of a contrived financial panic which would be used as justification for a global central bank, but also foretold what the consequences would be for each of us. This reality is now staring us in the face.
Jane H. Ingraham | The New American
January 4, 1999
Did it have to happen? How did the firestorm that has consumed much of the world’s currencies come about? Who or what is responsible? Could it have been avoided? Or is the whole world being betrayed into some sort of cataclysmic disaster?
Tracing the steps of this unprecedented global financial meltdown takes us back not to the most recent crisis in Thailand, but to Mexico. In 1994, with the peso quasi-pegged to the dollar, Mexico was booming with the Bolsa (its stock market) at an all-time high. Behind the scenes, however, a different act was going forward. As central banks always do, the Bank of Mexico had been quietly expanding the peso supply, decreasing its value, and causing a slippage from the pegged exchange rate. U.S. Treasury Secretary Robert Rubin, a member of the Insider Council on Foreign Relations (CFR), secretly began intense pressure on Mexico to devalue — that is, to cut the peso’s tie to the dollar and allow it to go into free fall (floating exchange rate). Such a move seemed so disastrous and unnecessary to Mexico’s Finance Minister Pedro Aspe that he threatened to resign from the Salinas government. But a few months later, with the new Zedillo government in place, Rubin prevailed. Mexico unexpectedly devalued in a move that stunned the world and plunged Mexico into its worst economic crisis in modern history.
Lawrence Summers (CFR), Deputy Treasury Secretary and Rubin’s right-hand man, masterminded the 1995 $50 billion International Monetary Fund/U.S. Mexican bailout, incidentally arranging for the Wall Street money-center banks to fully collect on their Mexican government bonds at 15 percent interest while ordinary investors went down the drain. Why was this scheming to push Mexico over the brink and pour in a previously unheard of number of billions of first importance? Because it caused an enormous escalation in moral hazard — that is, it signaled to politicians and big investors that they would not suffer losses if their own risky or foolish ventures turned sour. In other words, the presumption was that they would not be playing with their own money. With fear removed, it is only logical that recklessness took over. As the Wall Street Journal put it, the lesson given the markets was, “Whee! Cross-border loans are a one-way bet. Throw money at the world. Russia, even.” So the stage was set.
We all know what happened next. Western money, fueled in the U.S. by the Federal Reserve’s exuberant creation of dollars in the early l990s, streamed into Southeast Asia creating the seemingly invincible “Asian Tigers.” But underneath it all, normal credit standards were being abandoned and prudence thrown to the wind. It was a repeat performance of the principle underlying our own S&L extravaganza, with the IMF becoming a kind of international federal deposit insurance. Where is the banker or investor who would turn his back on a government-guaranteed profit?
Meanwhile, the politicians and central bankers of the Asian nations, like the Mexicans, were unable to resist the temptation to create increasing amounts of domestic currency, a simple procedure when the currency is paper, as all currencies are now. As this drift continued, it was inevitable that the day of reckoning would come when the Asian-pegged exchange rates no longer reflected reality. The first to show signs of trouble was Thailand, a tiny country with an economy the size of New York’s.
Although Michel Camdessus, a Frenchman, is the director of the IMF, in reality he is a front man for the real IMF bosses, the Treasury officials of the G-7 industrialized nations that fund the IMF. It is no secret that these top officials are members of either the CFR or Trilateral Commission, nor do we have to wonder who the most powerful of these members is. Therefore it is accurate to say that Camdessus and Treasury Secretary Robert Rubin act in tandem. We were not allowed to know that when Camdessus moved in to “advise” Thailand, he repeatedly argued against getting banks to cut back on money creation, the source of the problem. Over a period of more than a year, Camdessus privately exhorted Thai officials to sever their currency’s tie to the dollar, exclaiming: “You must get rid of this very dangerous peg to the dollar!” Publicly, he predicted for Asia at worst “a cyclical correction that is not expected to be deep or prolonged.” Camdessus’ condition of aid was the same disastrous strategy that had ruined Mexico: devaluation. When Camdessus got his way, the current crisis dawned. Let us remember that Camdessus could not have acted without the approval of Rubin.
Although $18 billion of Western wealth has been transferred to tiny Thailand, its per capita income has fallen to $1,800 from $3,000, its economy is contracting at a five percent annual rate, inflation is in double digits, and the country is now on its fifth IMF program revision. Yet with two calamitous failures to its “credit,” the Camdessus-Rubin world management team continued to insist, against all evidence, that devaluations can rebalance economies. Not only has this been proven the most destructive way to handle a currency crisis, but even worse, devaluations, like a contagious disease, always spread. This is because other countries fear losing out in international trade to cheaper goods from competitors if they themselves don’t also devalue.
This fear helped Rubin and Summers (in the name of the IMF) to force the same fatal prescription of devaluation and bailout upon South Korea, Malaysia, Indonesia, and the Philippines. One after the other, these economies were broken by high interest rates, widespread bankruptcies, severe recession, and devastating inflation, with negligible benefits from cheapened exports.
Only one country attempted to break away from the Insiders’ kiss of death. That was Indonesia, where President Suharto was ready to establish a currency board until Camdessus, Summers, Paul Volker, and James Wolfensohn, all big Insider guns, descended on Jakarta and blasted that idea to smithereens. These seasoned Insiders personally strong-armed Suharto into a disastrous devaluation that resulted in widespread impoverishment, property destruction, and mass riots, including the pitiful killing of Chinese merchants that the ignorant mob blamed for the country’s downfall. Indonesia got by far the harshest treatment of any of the countries, for the Insiders had more on their minds than devaluation; in an exercise of raw power, they succeeded in forcing Suharto out (for details, see “Bailout Bonanza” in our March 16, 1998 issue). Why? Simply to break the grip of Suharto’s family, friends, and outsider Freeport-McMoRan Copper and Gold on Indonesia’s tremendous potential wealth in natural resources, for the Insiders intend to muscle in on these, and on the cheap.
In fact, corporations with CFR connections buying up bankrupt assets for peanuts is an important corollary of ruining economies. In Asia, U.S. investors have been swooping in and digging through the rubble to buy everything from distressed hotels, golf courses, office buildings, and condominiums to troubled manufacturers, as well as buying out their local partners in existing joint ventures or increasing their stakes. Over the past year, U.S. investors poured an estimated $10 billion into Asian property investments, which is five times the $2 billion in U.S. property that the Japanese bought in 1985, the first year of the so-called Japanese invasion of the U.S. market. Logically enough, some of the hardest hit countries are seeing the biggest rush of foreign investment. South Korea is expected to receive $4.7 billion, up from $3.1 billion last year. Thailand will receive $5.9 billion, a huge jump from $3.6 billion in 1997.
The Asian meltdown, disastrous for Asians, has turned out to be a pot of gold for U.S. corporations. Among the slew of big U.S. buyers are investment banks such as Bankers Trust, Goldman Sachs, Morgan Stanley Dean Witter, and Merrill Lynch, which are buying up Asian property for as little as ten cents on the dollar.
The story of the Russian collapse has a twist all its own. There a $200 billion Western “bailout” has been in progress ever since the Insiders manipulated Boris Yeltsin into dictatorial power seven years ago. The ruble’s “soft peg” to the dollar had been allowing its exchange rate to fluctuate within a predictable “corridor,” but by June the “corridor” had become a swamp. The Russian central bank was beginning to spend what eventually amounted to $17 billion in hard currency reserves to “defend” the depreciated ruble (that is, to try to undo its self-inflicted damage by sopping up rubles).
Yet, with the ruble under siege and the Russian stock market collapsing, Goldman Sachs hosted a glamourous party with George Bush (CFR/Trilateral) in attendance and put across a $1.25 billion Russian bond sale (with an interest rate of approximately 100 percent) in a matter of hours, thus signaling that Russia was too big to fail.
In mid-July, with the Russian central bank vowing it would never devalue, the IMF (Rubin) and World Bank (James Wolfensohn) orchestrated yet another “bailout” of $22.6 billion, conditioned, of course, on the usual worthless Russian promises of “reform.” Curiously, Camdessus announced that the IMF was now trying to stave off devaluation, whereas in Asia he had demanded it. Two weeks later, Russia received a $4.8 billion tranche (a French word meaning portion, now in vogue at the IMF) with the soothing promise that as long as Russia continued to make progress on reforms the next tranche would be handed over in September. Stanley Fischer (CFR), first deputy managing director of the IMF, assured investors that “the main danger has passed,” while Rubin, abruptly changing his tune, declared that Russia had been “well advised by the IMF not to devalue.”
The world was still breathing a sigh of relief over this new-found wisdom when on August 18th Russia suddenly let the ruble fall 34 percent and declared a moratorium (default) on $30 billion of debt, $14 billion of it foreign. The question is, were Rubin, Fischer, and Camdessus deceived, or were they deceiving others? Considering this team’s record of deceptive maneuverings, plus the Insiders’ grip on Boris Yeltsin (through our tax dollars), the conclusion seems obvious. A week later the Russian central bank stopped its intervention in defense of the ruble and released it into free fall.
By the end of August when Clinton took off for his meeting in Moscow with Yeltsin, investors who had been sucked into lapping up Russian government bonds at 120 percent interest in a display of moral hazard run wild, had every reason to believe their shirts would be saved by Clinton’s support for the next bailout installment of $4.3 billion due September 15th. But there was shocking news for them. Far from bearing aid to a nation in economic collapse, Mr. Clinton incredibly announced that Russia was on its own. The $22.6 billion rescue package of July, we learned, would have to be renegotiated because Russia had broken its terms by devaluing and defaulting. Besides, murmured Mr. Clinton, there was this thing about reform: If Russia would only “do the disciplined, hard things” and “get through this dark night,” all would be roses again. The IMF joined the charade, refusing more aid until Russia redoubles its reform efforts. A few weeks later it pulled out of Moscow, indignant that Russia had not yet formulated an economic program. As the Wall Street Journal observed, for the first time in its 54-year history, the IMF had refused to bail out a country.
Although Russia’s economy accounts for less than one percent of the world’s domestic product (its export volume is about that of little Denmark) and the value of the ruble is of no importance for world commerce, its devaluation at this particular time set off a panic flight from financial risk of all kinds that swamped markets worldwide, created shock waves that still threaten South America, and ended the euphoria in the U.S. stock market.
But let us pause for a moment and ask what has happened to those hundreds of billions of taxpayer dollars that these CFR operators entrenched at the top have filched from us? They certainly haven’t financed any Russian reforms or “transition” to a free market as we have been repeatedly told for years. Over 80 percent of the Russian economy is still barter. Seven years after the Soviet “downfall,” land is still collectivized. Mass privatization is a lie. The public got worthless paper, while the “former” Communists are now “capitalist” oligarchs along with their American corporate partners. The $200 billion was the entrance fee paid by the West for CFR-connected corporations. But the money itself ended up outside Russia, in Geneva, London, or New York bank accounts. The head auditor of the Russian upper house of parliament recently confirmed that the billions were simply stolen, while the Wall Street Journal described the process as pouring water on glass.
But the Russian elite aren’t the only ones collecting the spoils. As in Asia, the American elite are cashing in, too. The financial blow-up has resulted in extensive claims of American investors on Russian assets which had been pledged as collateral for millions of dollars in loans. Just one of these is Yukos, Russia’s second-biggest oil company, which has lost at least 35 percent of its shares to creditors such as Amoco and Goldman Sachs. These claims, many on strategic enterprises, are broad enough to actually reshape corporate ownership in Russia. Not only is the entire Russian banking system probably insolvent, but foreign investors have a claim on a large part of it, putting them in line for taking equity stakes in Russian banks as payment for the latter’s debts. Let us never underestimate the acumen of the Insiders!
So far we have been recounting only recent Insider manipulations, mostly those that can be seen on the surface. But we must look deeper to understand how these manipulations became possible in the first place. The primary villain is fiat, or unbacked printing press paper money, a marvelous invention beloved of governments everywhere for making perpetual spending possible. But financing deficits by inflating the money supply at differing rates in country after country has had, of course, unpleasant consequences, such as an international monetary system that is a mess. What we have been witnessing is a total lack of global systemic monetary stability. To be sure, this has not always been the case. The prosperous era of a gold standard before World War I came close to the ideal of certainty about the relative values of monies. Exchange rates were “fixed” by the price of an ounce of gold in each nation’s currency; the problem with this beautifully simple system was that it could not be manipulated.
Gold had to go, and it was ushered to its death for Americans by FDR in 1933. Since 1971 when the international gold exchange standard was crushed by Nixon, the world has had a melange of fiat currencies managed by central banks in the business of perpetuating manic government spending, as we have just outlined. Small wonder that exchange rates have been enormously volatile and easy prey for manipulators. It could not be otherwise. It has made no difference whether exchange rates have floated or been fixed to the dollar either rigidly or within trading bands, usually according to a “crawling peg” (always downward). Currency crashes have been equally likely and will continue to be as long as central bankers are human. As reported by the October 16th Wall Street Journal, of 116 crashes between 1975 and 1996 when currencies plunged 25 percent or more, half were pegged and half were floating.
Lengthy debates by economists over which system is preferable or where the peg should be set are an utter waste of time. The point is that today’s exchange rates are managed by mere mortals subject to grievous temptations or a hidden agenda that has left whole populations impoverished. Basically, the world has fallen victim to managed money, and the money has been mismanaged on a grand scale. This is called the law of intended consequences.
Let us suppose for a moment that the present consequences were not intended. What could our Rubin-Camdessus money management team have done, or do now, to help countries that have fallen into the trap of watering down their currencies and destroying their exchange rates? Given the reality that a link to gold will hardly materialize in the foreseeable future, the next best remedy is a currency board. Steve Hanke, professor of applied economics at Johns Hopkins University, writing in the Cato Institute’s Foreign Policy Briefing for October 14, 1998, describes how such a board could readily establish monetary stability in Russia (or any country), provided that such a board was strictly removed from the deadly hands of politicians and bankers. For a currency board to work successfully, it must be ultraorthodox — that is, untouchable. This is not the case with existing boards in Hong Kong or Argentina, which have not been set up on an inviolable basis and therefore are not fully protective. However, they are better than having none at all, as we are seeing in those two places.
An orthodox currency board, Hanke explains, is a monetary institution that issues a domestic currency (such as rubles) backed 100 percent by a foreign reserve currency (the U.S. dollar). The domestic currency is fully convertible into the reserve currency at a fixed exchange rate on demand (e.g., one ruble to one dollar). The board follows a strict monetary policy and is protected from political pressure by a monetary constitution. Its legal seat, says Hanke, should be in Switzerland, with three of five directors appointed by the Bank for International Settlements in Basel. Failure to maintain the fixed exchange rate with the reserve currency would make the board subject to legal action for breach of contract according to the laws of Switzerland.
Such a genuine commitment to monetary stability would make Russia (or any country) immune from foreign exchange crises. Furthermore, there would be no role for any kind of international government money-lending agency. In short, the IMF, the World Bank, and the rest of their ilk would be out of a job. Central banks would be emasculated, their power over money transferred to the board, which could not inflate. Thus could human beings be protected from themselves.
But of course such a non-interventionist system is exactly what the CFR Insiders had to prevent from happening, as we saw in Indonesia where they showed up frantic that Suharto was about to set up a board under the tutelage of Steve Hanke, who had traveled to Jakarta for that purpose. In fact, the Indonesian rupiah had already begun to show signs of robust recovery simply on the rumor of a board. We can only imagine what threats of perdition forced Suharto to abandon Hanke and accept the IMF. Professor Hanke must have left town a sadder and wiser man; he now knows who is really running the world.
How did the IMF get to be what it is? By what authority have the Insiders managed to enmesh the world in its coils? How does it happen that although the IMF precludes much more effective market solutions, it is perceived as a savior? Anna Schwartz, research associate at the National Bureau of Economic Research, examines the IMF in the Cato Institute’s Foreign Policy Briefing for August 26, 1998. Created by the Insiders’ infamous Bretton Woods Conference in 1944, the IMF’s original purpose was to adjust a country’s exchange rate according to rules of the gold exchange standard then in force. After 1971 when Nixon broke this last link to gold, the IMF, instead of dying as it should have, reinvented itself on its own authority as a so-called international “lender of last resort,” a fallacious concept now widely used in its defense. Schwartz not only blasts this assumption, but also makes the powerful point that “the power to make loans to foreign governments belongs to Congress. That power should not be shifted … to an international agency.” But obviously, reason and sovereign rights have nothing to do with the IMF’s existence.
Toward its newly assumed end, the IMF announced in 1997 that it must have — apart from its Asian bailout — a stockpile of cash in order to quickly “rescue” countries in distress, even though its $118 billion Asian handout failed to rescue anyone except foreign bank lenders. Nevertheless, the IMF has reached agreements with 25 countries for a $47 billion (recently revised to $72 billion) line of credit. The U.S. quota amounted to $18 billion. It is this $18 billion that congressional Republicans swore for months they absolutely never would pony up — or at least not without radical reforms. In the end, the Republicans were overruled by their fearless leader, Speaker Newt Gingrich. Congress cravenly handed over the loot, even in the face of the fact that the IMF itself owns $30 billion in gold, second only to the U.S.
It is essential to understand that the IMF is a crucial tool of the Insiders’ objective of global government. Critics who complain that IMF prescriptions lead to disaster are missing the point. From the Insiders’ point of view, the IMF is eminently successful in its mission, which is to seize control of the economies of sovereign nations. Martin Feldstein, a professor of economics at Harvard, exposes this mission in a remarkable article in the Wall Street Journal for October 10, 1998. Feldstein observes that the massive Asian bailout funds were not used to prevent currency runs (as we supposed), but were provided “only if the countries accepted … radical restructuring of their entire domestic economies … labor rules, corporate governance, tax systems and other matters not germane to the financial crisis.” Since the funds were given out only gradually, speculators were not repulsed, which in turn caused excessive declines of currency values.
Feldstein then quotes Camdessus as having said that if the IMF had wanted to deal only with the countries’ liquidity and debt problems, it would have succeeded, but, happily, the Asian crisis gave the IMF the leverage to force structural policy changes that national governments would not otherwise adopt.
Writes Feldstein:
This is a remarkable confession of the arrogance and inappropriateness of IMF policies. Even apart from whether the IMF has any legitimate right to usurp these sovereign responsibilities, the attempt to remake an economy in the midst of a currency crisis makes it likely that there would be neither fundamental restructuring nor a rapid resolution of the currency crisis itself. By putting every aspect of these economies into flux, the IMF made it more difficult to make the changes needed to regain access to international capital. Creating massive bankruptcies and widespread political unrest is not conducive to attracting a return of foreign investors.
Feldstein wraps up his condemnation of the IMF by pointing out that the Asian economies were fundamentally sound and, with modest adjustments, could easily have earned extra foreign exchange to repay foreign debts. Instead, the IMF falsely “criticized them as incompetent, corrupt countries.... In doing so, it not only discouraged further lending or investment in these countries, but also undermined the confidence of global lenders in emerging markets generally, thereby contributing to the contagion.”
Here we have a precise analysis of the IMF’s real intentions from an expert in the field. Yet as far as we can tell, Feldstein apparently fails to realize the full import of his own words. This is not surprising. The very perniciousness and wickedness of the Insiders’ objectives and methods are their greatest protection, so divorced are they from even the most elementary sense of decency. But without asking why the IMF is intent on controlling economies, we cannot get to the bottom of its actions. To say that it is simply arrogant or mistaken is sadly naïve. The hard truth is that the only interpretation that makes sense is the fact that economic control, at whatever price in human suffering, is an essential step toward world merger — the Insiders’ new world order.
Taking over economies is, of course, nothing new for the IMF, which already controlled numerous economies in Africa, South America, and places most of us have never heard of. But this time something new was added. This is the first time a whole area of the globe has been seized and economically maltreated at the same time with such shattering results worldwide. Individually, these various meltdowns would have amounted to very little.
As the Asian picture became ever more dismal, Japan (our Trilateral partner) strangely refused to take steps toward recovery, the seven-year roll of the U.S. stock market slumped distressingly, and the stage was set for the heart of the matter. The first shot came from George Soros, one of the world’s wealthiest men and a member of the CFR.
Although this master currency speculator understands IMF machinations full well, he lays the blame for Asia’s downfall on capitalism, which is supposedly coming apart at the seams because the international monetary authorities are unable to hold the system together. IMF programs are not working. The response of the G-7 to the Russian crisis, he says, was woefully inadequate, shaking the belief that authorities will step in when conditions get rough. In finding a remedy, market discipline is not enough. In the September 15th Wall Street Journal, Soros writes that stability must be maintained in another way:
This principle [of stability] has already been implemented on a national scale in the form of the Federal Reserve. But similar financial organizations are lacking in the international arena. The IMF and WB [World Bank] have tried valiantly to adapt to such a role, but additional institutions may be necessary.... We shall have to establish some kind of international supervision over the national supervisory authorities.
Soros had hardly paid his dues when he was followed much more boldly by Jeffrey E. Garten (CFR), dean of the Yale School of Management and another member of the CFR. Writing in the New York Times for September 23rd, Garten demonstrates his full commitment to a centrally managed economy and his unqualified support for the Insiders’ ultimate international financial takeover instrument. What is needed in the present crisis, Garten says, is a Fed for the world — a global central bank:
Over time the U.S. set up crucial central institutions … most important, the Federal Reserve. In so doing America became a managed national economy. These organizations were created to make capitalism work … and to moderate the harsh, invisible hand of Adam Smith. This is what must now occur on a global scale.... The IMF knows how to deal with one or a few countries at a time, but not an international phenomenon in which all countries’ problems occur at once and are linked.
Next to be heard from was Gordon Brown, Britain’s Chancellor of the Exchequer, who wrote in the October 6th Wall Street Journal:
We need a new coordinating mechanism to ensure proper standards and provide regular and timely international surveyance of all countries’ financial systems and of international capital flows.... [W]e must establish a new permanent Standing Committee for Global Financial Regulation....
Meanwhile, Bill Clinton, as the guest of David Rockefeller, addressed the Council on Foreign Relations in New York City in a mode reeking with chumminess as he acknowledged the presence of Insider big-wigs by their first names. Mr. Clinton’s remarks, larded with fraud, sought to establish once again the lie that the CFR has nothing to do with setting policy, but is just a bunch of innocent onlookers. Ever since Mexico, Mr. Clinton said, he had “reached out across the country and, indeed, across the world for any new ideas from any source” as to how to handle “the biggest financial challenge facing the world in half a century.” He then implored his listeners (the most powerful men in the world), “If you have any ideas, for goodness sake, share them.... If you think we’re right, we want to encourage you to support us.” (If David Rockefeller laughed at this point, it was not recorded).
The President then got down to listing “his” ideas for preserving the “political and economic freedom the Council on Foreign Relations has always stood for,” all of them prefaced by “what we need to do” which turned out to mean throwing billions more — always with controls attached — around the world. Leaving a clear call for a global Federal Reserve to others, Mr. Clinton sidestepped with language such as “adapt international financial architecture to the 21st century,” or “reform the international financial system.”
The same sort of obfuscation marked Clinton’s remarks to “the world’s top financial officials” (collectivists and scoundrels all) at the annual IMF/World Bank conference in Washington on October 6th. Once again, soothing words such as “free markets,” “open borders,” and “free capital flows” tripped easily from Clinton’s tongue at the same time he called for a “comprehensive new international regulatory regime,” fuzzily called a “mechanism.” Considering what Clinton knows was orchestrated by his Insider bosses, his remarks were a contemptible sham designed to fool the public into welcoming the advent of a global Fed with worldwide control over money and credit as “preserving our freedom.”
Whatever small comfort there is in saying “I told you so,” John Birch Society President John McManus is fully entitled to say it. In 1993, his ground-breaking book Financial Terrorism not only warned about the coming of a contrived financial panic which would be used as justification for a global central bank, but also foretold what the consequences would be for each of us. This reality is now staring us in the face.
