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All Roads Lead to Basel

Before we begin, let me be perfectly clear.  This post is not about conspiracy theories.  Although there is a clear consolidation of power at the top, it is not a conspiracy.  It simply is what it is.

The short version is this: Virtually every aspect of our public lives is affected by decisions made in Basel, Switzerland.

We all know that there is a hierarchy to government, beginning at the local level then moving upward to county, State, Federal, and ultimately internationally (United Nations).  However, there is also a similar hierarchy involved in every aspect of commerce and finance.

Companies are subject to regulations, and the larger they are the more heavily they are regulated.  From city zoning and tax codes to State, Federal, and international trade guidelines (WTO and GATT), regulations rule.

Financial institutions are no different.  The regulations they are subject to do not stop at the Federal level.  In our interconnected world, independent sovereign States are truly a thing of the past.  Due to willing adherence to treaties, sovereign States have surrendered their will to the international community.  In addition, after considerable research, I have come to realize that many multi-national corporations (with the cooperation of the IMF and World Bank) wield far greater power than many sovereign governments.

Money and Banks

We all know central banks create the fiat currencies we use in commerce, and those currencies funnel down to the community through the banking system.  However, the ability of central banks to print money has limits, despite the perception of free reign.

First, there has to be a market for the financial instruments supporting the currency (even if it is created by the agency printing the money…think Federal Reserve).

Second, the international community must have an appetite – or at least a tolerance – for all the currency printed.

Why?  It all comes down to the exchange of goods and services via currency exchange rates and settling the transactions.  Everything has a balance…  Exchange rates are heavily influenced by the International Monetary Fund (IMF), and virtually all world trade is settled through the Bank for International Settlements (BIS)…in Basel, Switzerland.

The insurance and brokerage industries are equally globally connected.

Financial Markets and Insurance Companies

Brokers rely on broker/dealers to facilitate their trades, which are subsequently placed through various exchanges.  However, brokers, B/Ds, and exchanges are all regulated via their respective regulatory organizations.  As you may suspect, it doesn’t stop there…  The independent exchanges are part of a larger World Federation of Exchanges (WFE), while the regulatory bodies are subject to the oversight of The International Organization of Securities Commissions (IOSCO).

Similarly, insurance agents rely on national marketing organizations to facilitate their business with the insurance companies, all of which are regulated by State Insurance Commissioners and the National Association of Insurance Commissioners (NAIC).  But wait, there’s more…  Globally, the insurance regulators are subject to the International Association of Insurance Supervisors (IAIS).

All of the regulations we muddle through in our industry extend beyond our borders, even anti-money laundering.  We cannot simply blame the Securities and Exchange Act, Patriot Act, Frank-Dodd, Volcker Rule, Glass-Steagall, etc…  It goes much, much deeper than any of those.

So, who ultimately establishes the guidelines for all these global financial institutions and regulators?  The Financial Stability Board (FSB) is the ultimate center of influence, and they just happen to be an affiliate of the Bank for International Settlements in Basel, Switzerland.  Reading their report concerning ‘too big to fail‘ institutions is very enlightening.  For more information read my blog titled Why You Should Care About “Too Big to Fail.”  I especially like the part that sets insurance companies apart.

Like I said, all roads lead to Basel…

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2 Comments

  1. I wonder how much influence the authority in Basel had in letting Lehman Brothers fail, while the US government fully funded AIG, and the other financial institutions in the US?

    1. I would suggest they (IMF, BIS, and FSB) were the ultimate authorities steering the entire international glut of quantitative easing. The trillions created by the Federal Reserve, followed by all the major central banks, would never have been allowed unilaterally. It would have caused an incredible imbalance in both trade and currency valuations since most (>80%) of the world trade is transacted – on one side or the other – in US dollars. They all had to print money in tandem to sustain the appearance of parity.

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