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Bizarre Results of Suppressing Our History

William Krehm

The Western world had learned the lessons of the Great Depression the hard way. The banks had brought on the hungry 1950s in most instances allowing stepped-up financial gambles until the whole structure caved in, and it required a world war, and the reform movements that rose out of it, to compel the banks to stick to banking, and leaving major banking to government controlled banks that would be barred from engaging in other financial pillars: these were brokerage firms, insurance and mortgage companies. Canada and New Zealand, in particular, having nationalized their central banks, did a praiseworthy job of seeing that a more democratic financial arrangement was made.

That and the Second World War taught governments the hard way what banks should be allowed to do, and what should be forbidden them. Above all to convince the millions of workers – in armed forces – that the post-war world had to be something worth risking their lives to defend. In leading Western countries, drastic restraints were imposed on what banks could be allowed to do. They were not to be allowed to take over the non-banking financial pillars – to wit, stock, brokerages, insurance, and mortgage companies. In the absence of such restraints, banks would buy those “other financial pillars” and make a beeline for the funds they used for their own businesses, and with them gamble ever more daringly if not more wisely.

So what resulted was that governments turned their backs on the grim lessons of the 1930s, and set about to bring back the conditions that had produced the 1930s. Finding a way to resume the highly speculative banking of the 1920s that had brought on the depression of the 1930s had to be an outside job. It was undertaken by the International Monetary Fund – that had originally been set up to handle the syndication of the reparations demanded from the defeated German government who offered to send workers into France and Belgium to make good the war damage, but the French and Belgians insisted that it be paid in a strong currency.

Hence, the International Monetary Fund was entrusted with the exchange of the German reparations into a strong currency. That happened in no great hurry, but meanwhile the Bank for International Settlements had rendered the Hitler government some chosen services. When the German army entered Prague shortly before WII, the BIS surrendered the gold deposited with it by the Czechoslovak government precisely to keep it from the Germans.

Source: COMER Journal, vol 23, issue no 6 (June 2011)

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