BIS: Currency Collapse May Stimulate Economic Expansion


The BIS was formed in 1930, the main actors in the establishment of the BIS were the then Governor of The Bank of England, Montague Norman and his German colleague Hjalmar Schacht, later Adolf Hitler’s finance minister.

During the period 1933 – 1945, the board of directors of the BIS included Walter Funk a prominent Nazi official, and Emil Puhl, who were both convicted at the Nuremberg trials after World War II, as well as Herman Schmitz the director of IG Farben and Baron von Schroeder, the owner of the J.H.Stein Bank, the bank that held the deposits of the Gestapo. There were allegations that the BIS had helped the Germans loot assets from occupied countries during World War II.

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Wikipedia (German):

In der Zeit des Nationalsozialismus von 1933 bis 1945 galt die BIZ als sehr „nazifreundlich“ mit einer einflussreichen „deutschen Gruppe“ innerhalb des Unternehmens. Zum Beispiel war Emil Puhl (der geschäftsführende Vizepräsident der Reichsbank) einer der BIZ-Präsidenten. Die BIZ übernahm 1938 nach dem „Anschluss“ Österreichs das österreichische Gold und war 1939 nach der NS-Besetzung der Tschechei auch bei der Überweisung eines Teils des tschechischen Goldes zugunsten der NS-Seite behilflich. Lord Montagu Norman, einer der Präsidenten der BIZ und gleichzeitig Leiter der Bank of England, verhinderte die Überweisung nicht. Ab April 1939 wurde der amerikanische Anwalt Thomas McKittrick in die BIZ eingegliedert, um eine demokratische Fassade vorzutäuschen. Während der Kriegszeit 1939 bis 1945 wickelte die BIZ alle notwendigen Devisengeschäfte für das Deutsche Reich ab. Es kam deshalb später zu dem offenen Vorwurf des Handels mit Raubgold (looted gold) der vom Deutschen Reich übernommenen Zentralbanken. Die Bestrebungen des US-Finanzministers Morgenthau und der norwegischen Exilregierung ab 1943, die BIZ wegen ihrer Nazifreundlichkeit aufzulösen, waren vergeblich. Der britische Finanzexperte Keynes argumentierte u.a. gegen Morgenthau, die BIZ werde für den „Wiederaufbau“ nach dem Krieg gebraucht. Erst im März 1945 wurden die Devisengeschäfte mit dem Deutschen Reich eingestellt, weil der amerikanische Druck auf die Schweiz nicht mehr abzuwenden war. Diese Nazi-Vergangenheit der BIZ wurde bis in die 1990er Jahre verschwiegen.

Show the following article to your economics Prof. and watch his facial expression!

More complete elite bullshit we can take a bath in!

(Read about the solution for Greece here. Instead this is what is really happening.)

Currency Collapse May Stimulate Economic Expansion, BIS Says

The BIS is the Central Bank of Central Banks and answers to no government on planet earth.

June 14 (Bloomberg) — Currency collapses tend to spur a resumption of economic growth rather than fueling a decline in gross domestic product, according to the Bank for International Settlements.

Currency collapses are associated with permanent output losses of about 6 percent of GDP, on average, though the drop tends to appear beforehand, the Basel, Switzerland-based BIS said in its quarterly review yesterday.

“This suggests that it may not be the currency collapse that reduces output, but rather the factors that led to the depreciation,” Camilo E. Tovar wrote in the study. “To gain a full understanding of the implications of currency collapses on economic activity it is important to carefully examine the full circle of events surrounding the episode.”

The positive effects of a weaker currency on GDP, including making local products cheaper than imported goods, may outweigh the negative ones, such as rising inflation. Currency collapses occur when the annual exchange rate drops by about 22 percent, according to the BIS, which identified 79 such episodes, “more commonly in Africa than in Asia or Latin America,” since 1960, Tovar said.

“They also occurred under all types of currency regimes, except possible floating-exchange-rate regimes, where there are simply too few observations to obtain meaningful estimates,” the BIS said.

Economic Contraction

The euro tumbled about 20 percent against the dollar between Nov. 25, 2009, and last week as investor concern over record budget deficits in countries including Greece spurred speculation the 16-nation currency union may split. The European Union in May crafted a 750 billion-euro ($908 billion) rescue package to stem the crisis.

Greece’s economy will contract 3.9 percent this year and 1.2 percent in 2011, after shrinking 2 percent in 2009, according to the median of eight economist estimates compiled by Bloomberg. The euro-region will expand by 1.1 percent this year and 1.5 percent in 2011, after falling 4.1 percent last year, median forecasts show.

Hans-Werner Sinn, president of Germany’s Ifo economic institute, said on June 3 that it would be best for Greece to leave the euro instead of implementing an austerity program to reduce its deficit. Greek Prime Minister George Papandreou pledged budget cuts worth almost 14 percent of GDP to bring the deficit within the EU limit of 3 percent by the end of 2014.

“The real solution for Greece would be to leave the euro followed by a depreciation” of the new currency, Sinn said in an interview at a conference in Interlaken, Switzerland.

Growth May ‘Dominate’

European Central Bank Executive Board member Lorenzo Bini Smaghi said on May 28 that there are “no alternatives” for Greece beyond following the austerity program.

“Before drawing policy conclusions we should emphasise that these results are subject to a number of caveats,” the BIS said in the report. “Most importantly, the analysis does not address the reasons why currency collapses occur in the first place. Our analysis also has little to say about the mechanisms involved after the currency collapse takes place. While we cannot disentangle the various factors, our results do suggest that expansionary mechanisms tend to dominate.”

Last Updated: June 13, 2010 19:00 EDT
Matthew Brown

Source: Bloomberg

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