Mount Cambitas
No matter the German political landscape it had been agreed in 1924 when the Dawes Plan was agreed that the plan would be revisited after five years.
The meeting began in February 1929 in Paris, and like the previous meeting of experts in 1924 each government sent its representatives, but no one among the experts was a government official per se. Among the countries represented at the gathering were France, Germany, Belgium, Italy, the United States, and Japan. Among the representatives were included several central bankers such as Hjalmar Schacht (1877-1970) of the Reichsbank, Émile Moreau (1868-1950) of the Banque de France, and, of course, Owen D. Young, Federal Reserve System of the United States. By excluding government officials it was hoped that the negotiations would not be troubled by the internal politics of each of the represented nations.
Although the stated purpose of the meeting was to regulate the payment of German war reparations, there was much more lurking in the background that was not obvious to the casual observer. For, when the matter of reparations was finally settled, and the meeting placed shifted in early June 1929 from Paris, France to The Hague, Netherlands for government approval, an entire new round of negotiations began that focused alone on the creation of the Bank for International Settlements. Indeed, a new committee was formed on June 7, 1929 called the COBRI (Comité d’Organization de la Banque des Règlements Internationaux or Committee for the Organization of the Bank for International Settlements).
In the committee’s own words,
“Nous estimons que, par un développement financier judicieux et exempt d’esprit de concurrence, la banque constituera un instrument utile pour ouvrir de nouveaux débouchés au commerce et aux échange internationaux et contribuera ainsi à résoudre le problème de l’Allemagne sans empiéter sur l’activité des établissements existants.”
André Pepy. 1930. Le plan Young. Paris: Éditions internationales. Rapport des experts, Partie IV, p. 123.
Translation: We believe that the bank [Bank for International Settlements], through just financial development in the absence of competition, will constitute a useful instrument for the creation of new commercial and trade opportunities that will contribute to the resolution of the German problem without trampling the activity of existing institutions.
So that we are not beguiled by the fine words and expressed good intentions of these illustrious diplomats of international high finance, let us emphasize once again what is among the matters foremost in the mind of every competitive banker (central banker or ordinary banker with or without a central banker) who deals in statutory counterfeit — namely, control over the relative supply of his bank’s own notes of issue and the divvying of the spoils obtained from the issue of counterfeit currency by all who engage in the procedure.
Let us also keep in mind that in the early 20th century there was still, among these thieves, an appreciation for the need of cambitas reserves, whose value is subject to the natural forces of supply and demand, and that served as a check — however, inefficient — on those “unscrupulous” competitors who would flood the market place with their own, precious, state-sanctioned, counterfeit to the conscious or unconscious dismay of most everyone else. Once again, the economic boom-and-bust cycle occur no more naturally than war, and if anything much less.
In his home country the central banker could rely on the power of the state to enforce the rules that propped up the central banker’s counterfeit currency. For example, in the United States this role was played by the Comptroller of the Currency after 1863 and by the various federal courts. From where was the enforcement arm of this newly envisioned international bank of central banks to arise?
There were two legal problems that needed to be resolved: one, the formation of a trust that would attend to the matter of the reparation payments; and two, the creation of an international legal person — namely, an international bank — that was not a sovereign power, but whose affairs could be treated in the courts of law of the nations of the various member-bankers.
In liberty, or not at all,
Roddy A. Stegemann, First Hill, Seattle 98104
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