Friday, May 10, 2013

The Basel Committee and the Global Banking Mafia

The Basel Committee on Banking Supervision (hereinafter – the Committee) is closely associated with supranational organisations like the Bank for International Settlements in Basel (BIS), which is often called the «club», the «headquarters» of central banks or the «Central Bank of Last Resort». The Committee’s office is situated in the BIS building. At the end of 1974, following the disequilibrium of international currencies and banking markets caused by the collapse of the Herstatt Bank in West Germany, the heads of central banks in the G10 countries established the Committee under the auspices of the BIS to develop common international rules with regard to banking supervision. The Committee formulates common standards for banking supervision and recommendations for their implementation, on the assumption that national authorised bodies (first and foremost central banks) will push them forwards in their own countries. With regard to G10, this is the group of countries that signed a general agreement on borrowing with the IMF in 1962 (Belgium, Great Britain, West Germany, Italy, Canada, the Netherlands, France, Sweden, the USA and Japan). Switzerland, which was not a member of the IMF, joined in 1964, but the name of the group remained as before. Representatives from Luxembourg were also included in the Basel Committee from the very beginning and, from 2001, the Committee has included representatives from Spain. At present, the Committee includes representatives from central banks and national authorities on banking supervision from 27 countries (the 13 countries already mentioned along with Argentina, Australia, Brazil, China, Hong Kong, India, Indonesia, Korea, Mexico, Russia, Saudi Arabia, Singapore, South Africa and Turkey, which all joined the Committee in 2009). Over almost four decades of its activities, the Committee has published tens of documents on different areas of activity, including general issues on the organisation of supervision, capital adequacy, all kinds of risk, the corporate governance of lending and borrowing organisations and so on.

The Committee’s key area of activity is the definition of standards on capital adequacy for banks. All of the Committee’s documentation is centred around an incredibly simple ratio: equity : a bank’s capital = capital adequacy ratio.

Kabbalists of the money world are looking for this ratio’s magic number, which would guarantee the stability of the banking system. In fact, the Committee is seeking to legitimise what is a crime. In Europe, a system of so-called partial, or incomplete, coverage of obligations by banks as borrowing and lending organisations has already existed for a long time (at least since the 18th century). Figuratively speaking, this system allows banks to make money «out of thin air». For example, for every 1 dollar of lawful money that depositors place in a deposit account, banks are allowed to release 5 or 10 dollars of non-cash (credit) money by way of credit. This used to be called counterfeiting and was strictly punishable by law. Nowadays, it is called the «norm» or «principle» of banking, legalised by national laws, and in economic textbooks it is known as the «money multiplier». The principle of «partial» coverage (reservation) is «protected» by a supranational structure called the «Basel Committee on Banking Supervision», which lends the principle an appearance of respectability.

No cunning standards and formulae will remove the main effect of the «partial» coverage (reservation) of obligations – the banking crises. In the almost four decades that the Committee has existed, the world has been witness to a countless number of banking failures and crises. In order to prevent such problems, obligations need to be covered 100 percent, but then banks would be deprived of the opportunity to engage in their own «financial alchemy». There is a strict taboo on the honest and frank discussion of «partial» reservation both in central banks and the Committee: they are trying to convince the public that it is possible to invent a «magical formula» for capital adequacy so that banks can continue to make money «out of thin air» as before. This is outright deception.

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