JOAN VEON INTERVIEWS U.S. TREASURY DEPUTY ASSISTANT SECRETARY FOR PUBLIC AFFAIRS, TONY FRATTO
BACKGROUND TO THE INTERVIEW:
Many Americans are not aware that a whole new level of government has been set in place above the national level. There are many players in this new structure. I believe that the Bank for International Settlements which is the apex of all of the world's central banks is at the top since they control and dictate monetary policy worldwide. Accountable to no one, they have been expanding their "reach" in the last twenty years. In the late 1990s they set up a new structure called the Financial Stability Forum. In my opinion it is the world's "plug protection team" as it brings together the G7 Central Bank ministers, G7 Finance Ministers, their respective Securities and Exchange Commissions, the Comptroller of the Currency and FDIC, along with the IMF and World Bank. This represents a further integration of the economies, policies and movement of monies and investments.
Furthermore, in addition to the Central Banks, there is the Group of Eight which is comprised of the heads of state from the United States, Canada, Germany, Japan, Italy, France, Great Britain and Russia. They have been meeting since 1975 when there were only five countries. Russia is the most recent country to join. They participate fully in every area with the exception of finance where they only participate in financial terrorism. For 22 years, the G7 finance ministers met alone. Then in 1998 they were joined by the central bank ministers. I view this a correction of the power of the central banks. Since they are private corporations established in every country to manage and control that country's monetary system, that really makes the Treasury Secretary of the United States a puppet of the Federal Reserve, a private corporation.
What I did was ask key questions with regard to structure of the new international financial architecture. The reason why the U.S. Treasury does not know how much money was pumped into the system is because they do not control it.
I believe it is very telling that it is the UNITED STATES that is in charge of establishing the new global landscape-a world without borders.
Over the years, it has been the U.S. that was the first to change the structure of our banking system by repealing the Glass-Steagall Act in 1999 that allowed banks to buy brokerage firms and insurance companies. This set the tone for other countries to follow suit. Furthermore, with the establishment of the World Trade Organization Financial Services Agreement which demands that all countries allow foreign banks, brokerage firms and insurance companies to enter their markets, they chipped away at national financial sovereignty. After extensive research, I truly believe the Asian Crisis was precipitated. Malaysia, Thailand, Korea and Japan DID NOT WANT TO PARTICIPATE OR ALLOW FOREIGN BANKS, BROKERAGE FIRMS AND INSURANCE COMPANIES TO BUY UP THEIR BANKS, ETC. Since all the central banks hold the currency of other countries, all that has to be done in order to destroy a country is to sell their currency at the same time. Therefore, as a result of the global volatility which I believe was a result of central bank's selling the aforementioned countries currencies, the Financial Stability Forum was set up - a further layer and deeper integration of the global economies.
Also contributing to the new financial architecture is the rise of multi-national and transnational corporations, mergers and acquisitions, country privatization of its assets such as railroads, agriculture, banks, airlines, telephone companies, etc. Furthermore, the rise of public-private partnerships which is a merger between government and business, also known as fascism, has contributed to a changed financial landscape. In addition, there is the move towards a global stock exchange, the establishment of a Worlds Customs Organization and "open skies" between countries.
VEON: If Snow is chairing this meeting with Greenspan, how come he is not participating in the press briefing?
FRATTO: You have to ask Greenspan. He normally does not do press briefings.
VEON: Can you tell me how much the G7 countries have increased the money supply in the past two years?
FRATTO: No. Check the New York Fed, European Central Bank, Bank Of Japan, Bank Of England. We don't publish those numbers at treasury but they are available at the central bank.
VEON: Given the drop in the economic, financial and trade barriers and as America moves into a global economy, what else needs to be done to complete this global economy?
FRATTO: There is still a lot more that needs to be done. There are many countries around the world with trade barriers affecting financial services, affecting capital flows, allowing for financial services firms to invest and be welcomed into their countries and we are going to see a lot more of that and is part of the free trade agreement/negotiations, regionally and at the Doha Round as well and is a very important part of our trade effort. Treasury plays a major role in negotiating the investment chapters and the chapters that concern financial flow and we will see a lot more of that.
We also want to see the emergency of better domestic banking and financial services in many, many countries around the world. The most developed are still in Japan and North America and Europe with some exceptions around the world, but certainly Latin American and absolutely countries of South East Asia could benefit financial services.
VEON: The Bank for International Settlements set up the Financial Stability Forum-FSF - how important is that in today's economy to manage a global system without borders?
FRATTO: It is very important. We participate in the FSF regularly and its very important to help ensure that markets across the world are operating properly and that financial services firms are coping with regulation and changing landscape and financial services, so it is very, very important.
VEON: Given the fact that the economic, trade, financial, political and information barriers between the nation-states have fallen, is there a deadline-2014 or 2020 for the completion of the global financial architecture?
FRATTO: No one has put a specific date on it. From our perspective, we don't want to be bound by deadlines but we want to see progress-steady and everyday on these issues. Things like Basel II, we are moving that forward. The liberalization of rules for capital flows-you will see more that. Just raise a general commitment to the importance of investment in economic growth around the world because there is no question that you cannot throw heat into today's global economy without mature modern financial services so it is vital to development and emerging markets and it remains vital to industrial countries as well.
VEON: Foreigners have been willing to hold U.S. debt because it is a reserve currency, is there any discussion of a shift to the dollar sharing the reserve currency with the euro?
FRATTO: I will not comment on currency but we will see what the ministers have to say at the end of the day on Saturday.
VEON: After 16 years of just the G7 Finance Ministers, the Central Bank Ministers joined in 1998 and became part of the G7 Finance Ministers process, when they are all sitting around the table, since the central banks lend money to the countries who has the power, who makes the final decision?
FRATTO: It's not that kind of body. It is a very collaborative, congenial group with some of the brightest minds in the world in economics and finance and they have very spirited discussions about economic policy and the international architecture for finance and trade and so they find ways to come to agreement. It is not that kind of body where one person or individual dominates. They try to find consensus
We have the privilege this year which happens on a rotating basis of hosting the G7 and setting the agenda and that is about the extent of any kind of power plays that take place in the G7. These are men - and women-VEON: you don't have to say that for my account. FRATTO: men who are dealing every day with the same kind of pressures and issues both domestic and international. For them to get in a room and talk face to face brings out the best in them and in their interests in representing their nations also.
VEON: If 65% of Central Bank foreign exchange reserves are in dollars, will you be discussing how much more they will be willing to hold of dollars?
FRATTO: I will let the ministers address those kinds of questions
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"I believe it is very telling that it is the UNITED STATES that is in charge of establishing the new global landscape-a world without borders."