Central Banks: The Untouchables
Valentin KATASONOV 15.07.2016 07:45

Central banks are key institutions responsible for issuing currency, monitoring private banks and carrying out a country’s monetary policy. In terms of their influence on a country’s economy, central banks may surpass all the economic agencies of an executive branch, including ministries of finance (treasuries). Central banks are not a part of any of the three branches of government (legislative, executive and judicial). Their special status, which makes them independent from the state, is set out in constitutions and special laws. It is believed that such independence is necessary to pursue a balanced monetary policy and prevent the government from abusing the printing press and covering its expenses by printing unsecured currency. These days, however, there are many who would prefer this argument to be forgotten seeing as the US Federal Reserve System (the central bank of the US), the Bank of England, the Bank of Japan, the European Central Bank and many other central banks in the Western world switched their printing presses to full power and masked what was going on with references to ‘quantitative easing programmes’.

The pyramid of financial power

It is clear today that a new structure is being built in the world alongside the state machine that has existed for centuries and represents national sovereignty, and this structure is designed to gradually replace nation states. It is called a world government and the supports of the structure are central banks. The structure is in the form of a pyramid. At the top is the US Federal Reserve System, which issues dollars that acquired the status of a global currency 72 years ago at the Bretton Woods Conference.

The next layer of the pyramid is made up of central banks that issue reserve currencies. These are first and foremost the European Central Bank (ECB), the Bank of England, and the Bank of Japan. The layer below consists of central banks in the eurozone, which kind of act as ECB shareholders (chief among these is the Bundesbank and the Bank of France). It also includes the central banks of Canada, Australia, New Zealand and some Scandinavian countries. At the base of the pyramid are the vast majority of the other central banks in the world, which are such in name only. In practice, they are ‘currency boards’ that issue national currencies by purchasing US dollars or other reserve currencies. These ‘national’ currencies are really just repainted Federal Reserve dollars. This entire network of central banks is presided over by the US Federal Reserve System and the Bank for International Settlements (BIS) in Basel. The BIS is a kind of private club for central banks that was established back in 1930 and played a not insignificant role in the build up to and unleashing of the Second World War. 

Central banks may have the status of public sector organisations, private or mixed (public-private). The form of ownership has absolutely no effect on their ‘independence’. The US Federal Reserve System, for example, is a closed corporation. The Bank of England and the Bank of France used to be privately owned, but were later nationalised. The central banks of Japan and Italy are organisations with mixed ownership. Every year, the central banks expand their range of functions and powers. Many of them are becoming ‘financial mega-regulators’ that are usurping control over the economy. 

Some of the events taking place in the world can only be understood in light of the fact that central banks have immunity that protects them from any attempts by the state to encroach upon their ‘special’ status.

Slovenia puts the ECB in its place

On 7 July, global news agencies circulated two stories. The first came from the BBC and the second from Reuters. The headline of the BBC news item was «Argentina: Former leader Cristina Fernandez has assets frozen», while Reuters published its article under the headline: «ECB threatens legal action against Slovenia after police raid». At first glance, there does not seem to be any connection between the two stories, but a connection does nevertheless exist.

In 2013, one of the leading private banks in Slovenia found itself on the verge of bankruptcy. There was a possibility that the bank’s collapse would bring down the country’s entire banking system. The government of Slovenia, which is a member of both the European Union and the Eurozone, did not receive adequate financial support from Brussels and was forced to bail out its own banks, giving them more than €3 billion from the state budget. The distribution of public money took place on the basis of recommendations and suggestions prepared by the Central Bank of Slovenia. And now three years later, compelling evidence has emerged that casts doubt on whether the Central Bank provided the government with an objective picture of the financial position of individual banks in the country’s credit system. There is a suspicion that some of the information the Central Bank of Slovenia gave to the government was corrupt. Slovenian police have searched the offices of the Central Bank and seized a number of documents that compromise the governor and senior officials of the Bank of Slovenia.

And all of a sudden, the actions of the Slovenian police have sparked a violent reaction from the European Central Bank. ECB President Mario Draghi said that he deplored the seizure of property and information, referring to it as a violation of the ECB’s legal privileges and immunities and calling on European Commission President Jean-Claude Juncker to look into the situation. Mario Draghi has also sent a letter to the Slovenian State Prosecutor General that says: «Seized equipment contains ECB information and such information is protected under directly applicable primary EU law». The European Central Bank also threatened Slovenia with legal action (although the case will obviously be filed with the supranational European Court of Justice rather than the national court of Slovenia). It turns out that any attempts by national authorities to monitor and control their central banks are considered to be an encroachment upon the ‘independence’ of the European Central Bank. The incident in Slovenia has made it clear to the authorities of all Eurozone countries that their ‘national’ central banks are actually nothing more than subsidiaries of the supranational ECB.

The money bosses take revenge on a woman

Now let us look at events in Argentina. A court in Buenos Aires has decided to freeze the assets of former Argentine President Cristina Fernández de Kirchner, who has been accused of artificially propping up the exchange rate of the Argentine peso in the final months of her presidency. Following orders from Kirchner, the central bank allegedly sold US dollars on the futures market at «an artificially low price to the detriment of the country’s financial system». The tailor-made nature of the affair is beyond doubt. For many years, this tenacious woman has withstood the onslaught from the US and the money bosses in order to protect Argentina’s sovereignty.

Firstly, she resisted the attempts of ‘financial vultures’ to undermine the debt restructuring agreements that Argentina reached with its main creditors in the early 2000s. The ‘financial vultures’ (several speculative investment funds) that had not signed restructuring agreements began to take action through the courts of New York, achieving full repayment of Argentine debt securities that they had been able to buy on the market for next to nothing. This created a precedent allowing global sovereign debt restructuring agreements to be undermined. It also created a precedent for the blatant pressuring of foreign states using the decisions of courts belonging to other jurisdictions (courts that do not even formally have the status of an international court). Here Cristina Fernández de Kirchner found herself on the frontline of the battle against legal imperialism.

Secondly, Cristina Kirchner created a precedent a few years ago that was not to the money bosses’ liking. As head of state, she decided to place the Central Bank of Argentina under her control. In 2010, she needed the central bank’s currency reserves to pay the country’s external debt. The amount needed was $6.6 billion, which was about a seventh of the central bank’s international reserves and half of the total amount of external sovereign debt. Covering government debts by obtaining foreign loans would make the country even more dependent on global moneylenders, but by using the central bank’s reserves, Argentina would be able to completely rid itself of its foreign debt burden in a relatively short space of time. It is not difficult to guess how the money bosses reacted to this brave woman’s endeavour. The then president of the Central Bank of Argentina, Martin Redrado, refused to obey Kirchner’s orders and she signed a decree for his dismissal. In response, Redrado appealed to the court in Buenos Aires and just a few days later (what efficiency!), the Argentine justice system annulled the president’s decree. The judge who presided over the case justified his decision by saying that «the president does not have the authority to dismiss the head of the Central Bank».

Surprisingly, as well as deciding to reinstate Redrado as central bank president, the court also demanded that the Argentine President’s decision to use the central bank’s international reserves to pay the country’s debt be revoked. 

Central Bank President Martin Redrado was finally dismissed, but the decision prohibing the use of the central bank’s international reserves was upheld. It is interesting that in January 2010, accounts held by Argentina’s Central Bank in US banks were frozen by a court in New York. The decision was made based on the requirements of the holders of Argentina’s external debt. Officially, the decision of the New York court was not linked to Kirchner’s decision, but experts familiar with the rules of the game in the global financial system believe it was a warning to the Argentine president. It is only in light of this story that one can understand why former Argentine President Cristina Fernández de Kirchner is now being persecuted. The money bosses are trying to completely destroy all traces of the ‘Argentine precedent’ that allows for a central bank to be removed from under the control of the global financial International.