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How The Eurodollar Brought About The Rise Of London Banking
The following is an excerpt from ALL THE PRESIDENTS’ BANKERS: The Hidden Alliances that Drive American Power by Nomi Prins. Reprinted with permission from Nation Books.
How the Eurodollar brought about the Rise of London Banking
Under the Marshall Plan, the US government had posted $13 billion to facilitate Europe’s recovery. Given that extra backing for their client countries, American bankers were assured that this time, unlike after World War I, their loans would be repaid. That was one of the main reasons they were so keen on the Marshall Plan. Additionally, the Truman and Eisenhower Doctrines extended US economic support to nations that adopted US ideology and were military allies. This meant more potential customers who would require private bank loans in their own drives to grow.
By the late 1950s, the inevitable clash between rich and poor nations was intensifying, and international inequality was growing. Developing nations didn’t want their prosperity dependent on western aid but on fair trade and prices and open markets for their raw materials (the pure definition of a “free market”). That was not what the Marshall Plan, the IMF, or the World Bank had accomplished for them. So many of these nations made the grave decision to secure private loans from the international banking community, from which they believed less policy strings would be attached. This action would generate its own problems—uncontrollable lending terms—that would prove devastating in other ways. Meanwhile, the number of National City Bank offices overseas tripled to 208, as the bank expanded from twenty-seven to sixty-one countries to accommodate the private loan demand. Other major banks followed suit.
National City’s W. Randolph Burgess had left his post in the Treasury Department when he was appointed US permanent representative to NATO in 1956; he served in that role until 1961, noting that “the shine of postwar NATO was getting a little dull.” By the turn of the decade, the stronger European countries felt less threatened by Soviet aggression. This made them less pliable to US policies. As a result, their banks began spreading their wings globally again.
Burgess moved to take a position at the Organization for European Economic Cooperation (which he later renamed the Organization for Economic Cooperation and Development), with the aim of “maximizing its service to the Atlantic community.” From that vantage point, he was instrumental in developing the “common market” to bring in the British, under a common financial umbrella to augment NATO. This focus on a new world order common market platform was a boon to US banks and helped bring British and other European banks back into the global financial fold.
London hadn’t yet become a major international financial center again, but Eurodollars (dollars outside America) were on their way to becoming a dominant global trading and lending currency. As a result, London was resuming its position as the epicenter of global finance, the trading hub of Eurodollar-backed loans.
In the late 1950s, the entrenchment of NATO and beginnings of the European Community encouraged Burgess’s alma mater, National City Bank, to lead the big banks back to Europe alongside a host of enthusiastic American multinationals. In 1958, most western countries (except Britain) had agreed to allow their currencies to be convertible into dollars for the first time since the war, which provided freer flow across borders. But because dollars were converted into gold at the fixed rate of $35 an ounce, foreigners began dumping dollars and extracting gold, causing a massive outflow of US gold reserves and raising US interest rates.
As interest rates rose, they exceeded the rates banks could pay on demand deposits. Under the Depression-era Federal Reserve Regulation Q, interest rates on those savings accounts were capped. As a result New York banks lost more than $1 billion in deposits as depositors rushed to the Eurodollar market, where rates could be as high as the market dictated. The United States lurched into a deficit. Dollars flowed quickly into Europe, as Eurodollars could earn higher interest. That’s what brought London back as a financial banking center.
Bankers who took up their business in the Square Mile of London’s banking heart could smell the Eurodollars in the air. As Anthony Sampson wrote, “Young British bankers and their foreign counterparts began to earn higher salaries than other bankers. Skyscrapers shot up by the old classic architecture near St. Paul’s Cathedral. Far Eastern and Arabic banks appeared, as did Mercedes and Cadillacs to cart bankers around the thin London streets.”
The US bankers still called the shots, not least because the US government did too. As Eisenhower approached his final year in office, the core power emanating from New York City remained backed by US foreign and military policy.
But the bankers would have to find new ways to compete with a strengthening European banking network by opening more offices there and by eliminating New Deal regulatory restrictions on their operations, so they could grow domestically and use their larger size as a global competitive weapon. Those campaigns would come.
* * *
In the early 1960s, there were two main sources of growth bankers could tap: the growing certificate of deposit market and the Eurodollar market. Chase did both. Chase’s asset base tripled through the 1960s, as did its domestic loans and deposits.
Domestically, CDs provided huge pools of domestic money for banks. Introduced by First National City Bank of New York (now Citigroup) in 1961, CDs enabled banks to raise money from investors, thereby circumventing Regulation Q, the Federal Reserve’s restriction on interest rate payments. Since the late 1950s, corporate and individual depositors had been transferring money from banks into higher-yielding investments, such as commercial paper (for business borrowing) and bankers’ acceptances (used in international trade). Since banks were prohibited under Regulation Q from paying interest on checking and savings accounts held for less than thirty days and limited in their ability to pay interest on accounts held for more than thirty days, CDs provided a way to get money in the door at market interest rates and lend it to keep foreign expansion buzzing.
Companies didn’t mind tying up their capital for the longer periods these forms of deposits required, provided they enjoyed higher interest rates. But there was a roadblock: new unrestricted money market funds could pay higher rates and drain deposits from commercial banks. This troubled Chase’s George Champion and all his banker compatriots.
There was a solution though. Across the Atlantic, the Eurodollar market was a more dependable source of funds. The Cold War provided an extra kick to US banks in London. The Soviet Union and other Eastern Bloc countries needed dollars for trade but wanted to avoid adverse US policy by not keeping or borrowing money in the United States. So they stuck funds in the London offices of British and American banks, causing the City of London to grow as a banking center and recoup some prewar financial glory.
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Summary: Banking is a giant scam perpetrated on humankind.
But, but... growth and shit.
EVERYONE who has read The Creature From Jekyll Island needs to go get a copy of this BRILLIANT book NOW.
Nomi Prins knows her shit. 'All The Presidents' Bankers' is a must read. It even establishes as fact that which many sheeple still think of as conspiracies.
I wish that I had read it way before I did.
Sample of her knowledge base:
http://www.nomiprins.com/thoughts/2015/3/14/the-volatility-quantitative-...
"Obscene amounts of central bank liquidity applauded by government leaders that have protected the political-financial establishment with failed oversight and lack of foresight, have coalesced to form one of the most unequal, unstable economic environments in modern history. The ongoing availability of cheap capital for big bank solvency, growth and leverage purposes, as well as stock and bond market propulsion has fostered a false sense of economic security that bears little resemblance to most personal realities.
We are entering the seventh year of US initiated zero-interest-rate policy. Biblically, Joseph only gathered wheat for seven years before seven years of famine. Quantitative easing, or central bank bond buying from banks and the governments that sustain them, has enjoyed its longest period of existence ever. If these policies were about fortifying economic conditions from the ground up, fostering equality as a force for future stability, they would have worked by now. We would have moved on from them sooner.
But they aren’t. Never were. Never will be. They were designed to aid big banks and capital markets, to provide cover to feeble leadership. They are policies of capital creation, dispersion and global reallocation. The markets have acted accordingly.
What began with the US Federal Reserve became a global phenomenon of subsidizing the financial system and its largest players. Most real people - that don’t run hedge funds or big banks or leverage other peoples’ money in esoteric derivatives trades - have their own meager fortunes at risk. They don’t have the power of ECB head, Mario Draghi to issue the 'buy' order from atop the ECB mountain. Nor do they reap the benefits.
Retail sales are down because people have no extra money and can’t take on excess debt through credit cards forever. They aren’t governments or central banks that can print when they want to, or big private banks that can summon such assistance at will.
Federal Reserve Chair, Janet Yellen recently chastised these bankers. This, while the Fed has become their largest client and the world’s biggest hedge fund. While she wags her finger, the Fed is paying JPM Chase to manage the $1.7 trillion portfolio of mortgage related assets that it purchased from the largest banks. In other words, somewhere along the line, the public is both paying to buy nefarious assets from the big banks at full value, thereby supporting an artificially higher price and demand for these and similar assets, and paying the nation’s largest bank for managing them on behalf of the Fed. Yellen says things like “poor values may undermine bank safety” and all of a sudden she’s on an anti-bank rampage? What about the fact that just six banks control 97% of all trading assets in the US banking system and 95% of derivatives? Or that 30 banks control 40% of lending and 52% of assets worldwide?"
She's brilliant. Here is a recent interview with her -
https://www.youtube.com/watch?v=ARHyKCbSrNY
It's only common sense. Government is a tool used by various groups to steal and bankers are a group.
So the symptom is bankster theft and the cause is government, but the reality is that most people are incapable of seeing that.
If the dupes lived under a theocracy, military dictatorship, environmentalocracy, or whatever, they would still not blame government.
Dupes stay dupes like fish stay fish.
Retail sales aren't down. Stupid mistakes like that make you question all her other numbers
Retail sales ARE down in real AND EVEN NOMINAL numbers.
http://www.ibtimes.com/retail-sales-2015-winter-blues-weighs-us-retailer...
"U.S. consumers unexpectedly spent less at retailers last month despite a steep drop in gasoline prices across America, marking the first time since 2012 that sales have dropped for three consecutive months. Retail sales is a key economic indicator, since consumer spending accounts for nearly two-thirds of U.S. economic activity.
Retail sales dropped 0.6 percent in February after declining 0.8 percent in January, the Commerce Department said Thursday. Analysts had expected retail sales to rise 0.3 percent last month, according to analysts polled by Thomson Reuters. Sales also fell 0.3 percent in December."
Summary: I have probably seen 4 Cadillacs on the streets of the city during the last 20 years......(excluding the strech ones with the steering wheel on the wrong side)....if you want to sound intelligents please get ALL the details right!!!
She's talking about the 1960s, dude.
Cadillacs (and Lincolns, MBs, etc.) were the fleet/limo cars of the elite on Finance Ave in London at that time.
She's not speaking of "the last 20 years."
It wouldn't hurt if you and babaloo would read/research things more carefully before commenting.
strech? intelligents? If I were you I'd keep my mouth shut regarding the IQ of other people.
The book looks like an interesting read.
now in paperback .... plug.
don't forget those petrodollars: https://youtu.be/NaLAMxOHv-k?t=16m
the whole EU was designed to turn the european nations into lands of mongrel eurasian people who are easy to be controlled.
there was a reason why hitler didnt want the good peope of germany intermixing with the eastern europeans, they are not pure white.
ALL WARS ARE BANKERS WARS
"the whole EU was designed to turn the european nations into lands of mongrel eurasian people who are easy to be controlled"
No, it wasn't; get your facts straight. It is well known that Adenauer, de Gasperi and Schuman, the founding fathers of the European Coal and Steel Community (what is now the EU), had a broadly Catholic vision for Europe, which they envisaged as a bulwark once and for all against the depredations of Anglo-America's long-held Mackinder doctrine to keep Europe split down the middle and prevent it from threatening Pax Britannica, Pax Americana. That is why European leaders like de Gaulle were insistent that Britain should never be allowed to join; they saw it as a trojan horse in their midst, as indeed it has transpired.
I take it you are aware the flag of the European Union was modelled on the Catholic image of Mary with a crown of twelve stars?
Anglo-America never wanted Europe to come together in this way, and they have been working furiously to scupper Europe's prospects ever since. Isn't it funny how so many of the "plants" working as EU spokespersons today have English or American surnames? And/or an Anglo "education"? Tusk for example. And half the new Greek cabinet. (I often wonder just who Zerohedge are working for themselves when they come down so heavily on Germany in its quarrel with Greece. As an Irishman I'm all for German austerity. The more the better, and the sooner we get out of the Anglo-American death-grip.)
What we are seeing today is an EU that has been thoroughly destroyed from within by the Anglo trojan horse. That will not last. Slowly but surely pressure is being brought to bear on the City of London. The EU will emerge an extremely strong entity from this, a community prepared to protect its citizens, and in so doing, it will return to the vision of its original founders, who saw a politically and economically united Europe as the only way out of the Anglo-American trap that had sprung two world wars on Europe in the space of 30 years.
One day soon Europe is going to wake up and realise for good that Britain and the States are interested only in keeping it divided. That will be "the Babylon moment" when Britain and the US fall off the world radar in spectacular fashion.
My advice: don't bet against the EU. Yes, a declining Anglo-American Empire is extremely dangerous, and I am certain they will throw everything they have at it to prevent the consolidation of a European political and economic union from Connemara in the West to Vladivostok in the East. They will probably succeed for a short while, but I would bet my life on it that Europe and Europeans will emerge the winner in that particular contest. If it looks otherwise today, that's because Europe is still Anglo-America's bitch. Witness Brussels coming to America's rescue recently with that huge influx of dollar funds.
People across the continent have woken up to that reality now, and it's only a matter of time before the perpetrators pay the price for their treachery and Europe becomes what it was intended to be.
http://tinyurl.com/oc9552t
http://tinyurl.com/o7xs7lv
http://tinyurl.com/lsn3xrg
Must read: Collapsed Currencies by Barry Eichengreen Foreign Affairs
http://www.foreignaffairs.com/articles/136779/barry-eichengreen/when-currencies-collapse
Prins is one of the best minds in finance. Best to get to know her.
Funny, I thought the Eurodollar Market emerged when Moscow Narodny, nowadays VTB Bank, preferred to invest its dollar holdings outside the scope of US Treasury control and deposited them in Europe. In which case it showed hoew similiar US policies today are with those of 50 years ago when the alphabet codes of plans to attack the USSR were abundant
http://en.wikipedia.org/wiki/Operation_Unthinkable
http://www.digitaljournal.com/article/338909
this article should read : How the PETRODOLLAR brought about the rise of London banking... back in 1971.
And of course once Maggie had made London capital of Oligarchy scam, latching on the Euro market financial scam was no act of Beau Brummel type entrepreneurship, it was inevitable.
That's how look at it too.
Very interesting that Tom Clancy's take on how World War III would begin would be with the COLLAPSE in oil...not "peak energy."
In other words the capital structure would collapse marking a need for Russia to attack in order to maintain the political structure.
If you actually looks at the consequence of Putin's actions they are very much maintaining a "status quo."
In no way does his actions threaten the West nor vice versa...yet both sides seem intent on War anyways.
Makes sense if you look at the bankruptcy of both sides' capital structure though.