Why Us, Why Now, What Now?
posted 6th October 2000

The shadow cast by the Global Economy is a long one and it falls first on the small. As stockmarket indicators fall and with them many local currency values, small countries like New Zealand with small economies are suffering. The international money managers whose speculative activities have heavily contributed to this development, have been abetted by the IMF with its push for the deregulation of international capital flows. After having whittled away the capacity of national governments to effectively respond to such 'financial warfare' - aided and abetted in New Zealand's case by 15 years of political bowing and scrapping to foreign interests - these powerful forces are working to secure even greater control of the Bretton Woods institutions and a more direct role in the shaping of the international financial and economic environment. Bretton Woods is where, in 1971, the main currency countries of the West agreed to remove the gold standard under currencies and replaced it with the US dollar, but in 1944 Bretton Woods was a beacon of hope for a new global order.

The plunge of national currencies in virtually all major regions of the world outside the big seven, has contributed to destabilising national economies while precipitating entire countries into economic destabilisation. Manipulation of market forces by powerful corporate-bank groupings constitutes a form of financial and economic colonisation. No need to recolonise lost territory or send in invading armies. Recolonisation also applies to complex speculative instruments, including the gamut of derivative trade, forward foreign exchange transactions, currency options, hedge funds, index funds, etc. Speculative instruments have been used with the ultimate purpose of capturing financial wealth and acquiring control over productive assets. In the words of Malaysia's Prime Minister Mahathir Mohamad: 'This deliberate devaluation of the currency of a country by currency traders purely for profit is a serious denial of the rights of independent nations.' The appropriation of global wealth through this manipulation of market forces is routinely supported by the IMF's macro-economic interventions which act almost concurrently to disrupt national economies all over the world. Added to this is the virtual demise of central banking, the erosion of national economic sovereignty and the inability of the national State to control money creation on behalf of society. In other words, privately held money reserves in the hands of institutional speculators far exceed the limited capabilities of even central banks.

The latter acting individually or collectively are no longer able to fight the tide of speculative activity. Monetary policy is in the hands of private creditors who have the ability to freeze State budgets, paralyse the payments process, thwart the regular disbursement of wages and precipitate the collapse of production and social programmes. Speculative raids on central banks are even extending into China, Latin America and the Middle East. The pillage of central bank reserves, however, is by no means limited to developing countries. It has also hit several Western currencies, the Euro, the Canadian, Australian and New Zealand dollar. Monetary authorities have been incapable of stemming the slide of national currencies. In Canada, billions of dollars were borrowed from private financiers to prop up central bank reserves in the wake of speculative assaults. The European Union central bank has been unable to do other than stop the slide of the Euro, not reverse it. The world's largest banks and brokerage houses are both creditors and institutional speculators. In the present context, they contribute (through their speculative assaults) to destabilising national currencies, thereby boosting the volume of dollar denominated debts. They then reappear as creditors with a view to collecting these debts. Finally, they are called in as 'policy advisers' or consultants in the IMF- World Bank-sponsored 'bankruptcy programmes' of which they are the ultimate beneficiaries. In Indonesia, for instance, amidst street rioting and in the wake of Suharto's resignation, the privatisation of key sectors of the Indonesian economy ordered by the IMF was entrusted to eight of the world's largest merchant banks, including Lehman Brothers, Credit Suisse-First Boston, Goldman Sachs and UBS/SBC Warburg Dillon Read. The world's largest money managers set countries on fire and are then called in as firemen (under the IMF 'rescue plan') to extinguish the blaze.

They ultimately decide which enterprises are to be closed down and which are to be auctioned off to foreign investors at bargain prices. The global banks have a direct stake in the decline of national currencies. The international rules regulating the movements of money and capital (across international borders) contribute to shaping the 'financial battlefields' on which banks and speculators play the currency game. Multinational corporations have actively pressured for the outright deregulation of international capital flows, including the movement of 'hot' and 'dirty' money. Caving in to these demands (after hasty consultations with G7 finance ministers), a formal verdict to deregulate capital movements was taken by the IMF Interim Committee in Washington in April 1998. The official communique stated that the IMF will proceed with the amendment of its Articles with a view to 'making the liberalisation of capital movements one of the purposes of the Fund and extending, as needed, the Fund's jurisdiction for this purpose'. The IMF managing director, Mr Michel Camdessus, nonetheless conceded in a dispassionate tone that 'a number of developing countries may come under speculative attacks after opening their capital account' while reiterating (ad nauseam) that this can be avoided by the adoption of 'sound macroeconomic policies and strong financial systems in member countries' (ie. the IMF's standard 'economic cure for disaster'). What is needed is a global financial watchdog to watch the global economists. But who owns the dog directs the bite. International corporations, investors, banks and speculators are anxious to play a more direct role in shaping financial structures to their advantage as well as policing country-level economic reforms. Free-market conservatives in the United States want greater US control over the IMF.

They have also hinted that the IMF should henceforth perform a more placid role (similar to that of the bond-rating agencies such as Moody's or Standard and Poor's) while consigning the financing of the multi-billion-dollar bailouts to the private banking sector. Discussed behind closed doors in April 1998, a more perceptive initiative (couched in softer language) was put forth by the world's largest banks and investment houses through their Washington mouthpiece (the Institute of International Finance). The banks' proposal consists in the creation of a 'Financial Watchdog' - a so-called 'Private Sector Advisory Council'- with a view to routinely supervising the activities of the IMF. 'The Institute [of International Finance], with its nearly universal membership of leading private financial firms, stands ready to work with the official community to advance this process.' Responding to the global banks' initiative, the IMF has called for concrete 'steps to strengthen private sector involvement' in crisis management - what might be interpreted as a 'power-sharing arrangement' between the IMF and the global banks. The international banking community has also set up its own high-level 'Steering Committee on Emerging Markets Finance' integrated by some of the World's most powerful financiers, including William Rhodes, Vice Chairman of Citibank, and Sir David Walker, Chairman of Morgan Stanley.

The hidden agenda behind these various initiatives is to gradually transform the IMF from its present status as an intergovernmental body into a full-fledged bureaucracy which more effectively serves the interests of the global banks. More importantly, the banks and speculators want access to the details of IMF negotiations with member governments, which will enable them to carefully position their assaults in financial markets both prior to and in the wake of an IMF bailout agreement. The ongoing currency problems are not only conducive to the demise of national State institutions all over the world, it also consists in the step-by-step dismantling (and possible privatisation) of the post-war institutions established by the founding fathers at the Bretton Woods Conference in 1944. In striking contrast with the IMF's present-day destructive role, these institutions were intended by their architects to safeguard the stability of national economies. In the words of Henry Morgenthau, US Secretary of the Treasury, in his closing statement to the Conference (22 July 1944): 'We came here to work out methods which would do away with economic evils - the competitive currency devaluation and destructive impediments to trade - which preceded the present war. We have succeeded in this effort. New Zealand stood up to USA over nuclear energy and nuclear weapons, and survived to show the world it can be done. Time now for the New Zealand Government to take another stand in defense of people who live and work in New Zealand. The $NZ must be held onto and state banking and all state agencies coordinated in moves to secure the New Zealand economy from further recolonisation. Tough call, but we're up against the wall. .