The Bank for International Settlements (BIS) is an intergovernmental organization of central banks which:
“fosters international monetary and financial cooperation and serves as a bank for central banks.”
The bank of international settlements is independent – it is not accountable to any national government.
The BIS provides banking services to central banks. The “central banks” are international organizations.
The BIS is based in Basel, Switzerland.
The BIS was first established by the Hague agreements of 1930.
Throughout the world, the name of the organization may change – for instance – the name of the BIS in German: Bank für Internationalen Zahlungsausgleich (BIZ), in French: Banque des Règlements Internationaux (BRI), in Italian: Banca dei Regolamenti Internazionali (BRI).
A “well-designed financial safety net, supported by strong prudential regulation and supervision, effective laws that are enforced, and sound accounting and disclosure regimes,” are among the Bank’s goals.
“A stable currency is a stable economy.”
Purpose of the Bank of International Settlements – Monetary Policy
The goals of the BIS is to make monetary policy more predictable and transparent among its 57 member central banks.
Keep in mind that currently, monetary policy is determined by each sovereign nation.
However, the policy of each nation is subject to much scrutiny.
The scrutiny has never been greater than now with the advent of greater global interaction and export.
As we speak the Chinese are concerned IF the value of the dollar declines, if the standard of living in China rises and the US purchases less products from China, what will become the economic fate of China?
Foreign exchange rates, the fate of export economies affects each and every one of us – both with our interest rates and our with our employment.
A stable currency is a stable economy.
The Bank of International Settlements is a key player in the global economy.
( The Corbett Reports – Economics 101 – Bank of International Settlements )
Extraterritoriality is the state of being exempt from the jurisdiction of local law, usually as the result of diplomatic negotiations.
Extraterritoriality is often associated with physical places. Examples of physical extraterritorial states are military bases of foreign countries, or offices of the United Nations.
Ships in foreign waters are another example.
Extraterritoriality extends to diplomatic agents such as foreign heads of state, and the “persons and belongings” of foreign heads of state.
Basel I is the round of deliberations by central bankers from around the world, and in 1988, the Basel Committee (BCBS) in Basel, Switzerland, published a set of minimal capital requirements for banks.
Basel I for the first time, established a global standard for capitalization – 8%.
In 2004, they passed Basel II, which kept the 8% collateral bench mark but developed a “mark to the market” standard so that the valuation would reflect the true value of the collateral. The standard of excellence remained at 8%, yet it means a change when the value of the currency changes.
Mark-to-Market = Fair Value Accounting
Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the current market price of the asset or liability.
Fractional Reserve Banking
The portion (expressed as a percent) of depositors’ balances banks must have on hand as cash. This is a requirement determined by the country’s central bank, which in the U.S. is the Federal Reserve. The reserve ratio affects the money supply in a country.
This is also referred to as the “cash reserve ratio” (CRR).
Properties and Operation of the Bank of International Settlements
Stock of the BIS is held by private banks. BIS is essentially replicating what the Bank of England instituted in 1694, to exert national control over the financial system and the United States Federal Reserve Act here in 1913.
What does the BIS decide? It determines collateral, bank collateral and how the bank collateral is valued. It has a major impact upon global economics.
The 57 nations represented by the BIS are essentially a representation of the world economy.
BIS is exempt from Swiss law. It is akin to an extraterritorial entity within Switzerland.
In 1988 (aka Basel I) and in 2004 (Basel II), the BIS initiated policy and regulation that had significant impact upon global economics.
The change in 2004 of mark-to-market is especially significant when real estate prices change dramatically.
In 2007, when housing prices started to fall, the true impact of the mark-to-market showcased the many downfalls in our economics.
The power of the BIS is global.
It is the same power that the Federal Reserve has on a national level here in the United States, except the BIS is a global power.
Parts of BIS’s operations are transparent and yet the meeting in Australia was secret.
The meetings of the BIS are often stated to be held in secrecy.
There is no external audit of the BIS.
The fundamental principles of the BIS are sound. The only question that arises is the amount of power and the balance of power.
A key to economics as we have discussed is supply and demand. Understanding the forces that affect economics is important from both a micro and a macro standpoint.
A sound and stable currency and consistent policy standards and benchmarks is what makes both a national and global economy work.
Is the BIS needed? Most certainly. Is the power of the BIS a concern – most certainly. Just as we did not see the mammoth financial giants emerging, we must be on guard and take notice for significant monetary policy changes made by Federal Reserve or the BIS.
Currency is not a thread of the economy – currency is the foundation to all economies. War and absolute power can affect the value of currency.
Absolute Power Origins of Meaning
This arose as a quotation by John Emerich Edward Dalberg Acton, first Baron Acton (1834–1902). The historian and moralist, who was otherwise known simply as Lord Acton, expressed this opinion in a letter to Bishop Mandell Creighton in 1887:
“Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”
Another English politician with no shortage of names – William Pitt, the Elder, The Earl of Chatham and British Prime Minister from 1766 to 1778, is sometimes wrongly attributed as the source. He did say something similar, in a speech to the UK House of Lords in 1770:
“Unlimited power is apt to corrupt the minds of those who possess it”
John F. Kennedy’s Inaugeral Address
“The world is very different now. For man holds in his mortal hands the power to abolish all forms of human poverty and all forms of human life. And yet the same revolutionary beliefs for which our forebears fought are still at issue around the globe—the belief that the rights of man come not from the generosity of the state but from the hand of God.”
Read more: answers.com
Moral of the Story
Just as the location of the BIS is within 2.5 hours drive from the resting place of Charlie Chaplin, a scant 140 miles apart, so too the story of the exile of Charlie Chaplin and the possibility of absolute power corrupting absolutely is a real concern.
Changes in monetary policy MUST be closely monitored. To have fast and furious changes is always ill advised. The fear of economic hardship strikes to the core of every family – both here in America and across the globe. Fighting for freedom is not just supporting our troops, fighting for freedom also means understanding global economics and the true value of currency. Take the time to learn about global finance. Understand supply and demand. Learn the real meaning of stagflation and be an informed citizen of the world.
* Stagflation What You Need to Know
What is stagflation and why is it a terror? What you need to know from an economics standpoint – how can knowledge help you. Learn the real reasons behind stagflation. Learn the real future concerns we all must face.
* BIS Super Secret Meeting Of Top Central Bankers | Culture of Life News
Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with high-level security believed to have been invoked by law enforcement agencies.
* U.S. risks stagflation: BIS chief| Reuters
BASEL, Switzerland (Reuters) – Stagflation is an increasingly plausible prospect in the United States and weak economic growth could last well into 2009, if not longer, the head of the Bank for International
* Criticism of fractional-reserve banking – Wikipedia, the free encyclopedia
Criticisms of fractional-reserve banking have been put forward from a variety of perspectives. Critics have included mainstream economists such as Irving Fisher, Frank Knight and Milton Friedman. Within the economics profession today, most c
* BIS – Bank of International Settlement: the Mother o…
The BIS was originally established in May 1930 by bankers and diplomats of Europe and the United States to collect and disburse Germany’s World War I reparation payments (hence its name). It was truly an…