It did not take long for the markets to react to rumors that Wiki leaks founder, Julian Assange, who released cables of diplomatic communications among American Embassy officials and Washington DC was about to release intricate business decisions taken by Bank of America, before the bank officials began to deny claims. Bank of American shares were falling like a yo-yo in early trading on the New York Stock exchange. The fear of opaque transactions in a prominent American Bank translated into fears among investors. The markets became bogged down by rumors that Mr. Julian Assange was about to call the shots on the way banking transaction across the globe were carried out. And, just as hell was about to break loose, some government officials both here and overseas were putting out interpol arrest warrant for the new internet crusader.
The thought of having deals manipulations between commercial banks' heavyweights made public the way the embassy officials communications were released in recent days, made some bank officials go into fit at the headquarters of the Bank of America. According to Bank of America, the probability that its institution’s records, including documents, emails databases and internal websites may have been compromised, is very remote. While the founder of Wiki leaks promised that his 5GB of Bank of America’s profile with his organization will expose an ecosystem of corruption and could take down a couple of banks, made this claim rather intimidating and would probably make doing businesses with banks and investors difficult. While officials at Bank of America are crossing their hands and hoping for the best, our blog today is looking at the implication for monetary regimes and national sovereignty of the new development in the releases of private communications between institutions, government and banking.
By this afternoon, it was public knowledge that, the Federal Reserve Bank of United States had loaned money to commercial banks in Europe and probably some other countries in Asia and South America about two years ago, just about the time the whole global economy was precipitating into a free fall. The singular action by the Federal Reserve Bank brought a new dimension into the understanding of monetary integration and legal sovereignty. Commercial banks in foreign countries are known to conduct business independently with the support of their nation’s central bank, not with the central bank of other countries. However, with the step taken by the Feds to loan money to banks in foreign countries, it was becoming clear that monetary regimes are hardly as isolated as once thought; and, that a foreign commercial bank is beholden to the US Federal Reserve Bank, from that singular loan of about 50 billion dollars to say UBS, a Swiss Bank, it will be difficult to continue to ascertain national sovereignty with respect to monetary regimes. The issue of pride in national currency is probably now secondary, if the United State Federal Reserve Bank can have the back of a foreign commercial bank, in the middle of a global recession.
If most independent countries cannot continue to ascertain their nationality through management of currencies and commerce between or among financial entities within their boundaries, it hardly makes any sense to be talking about legal sovereignty. As defined by the 1999 Nobel Laureate in Economics, Robert Mundell, Legal Sovereignty refers to the ability of a state to make its own laws without limitations imposed by any other outside authority. Could the Swiss government make laws that would impinge on the decision of his central bank officials to seek fund from the US Federal Reserve Bank? Probably yes, however, the commitment of funds from the United States Central Bank may make the Swiss government think twice, considering the implication for their national economy and currency. Here lies the joker: the implication of say UBS abandoning its national currency and bank to go seek financial help from the US Federal Reserve Banks, puts a damper on the crave for legal sovereignty; it also creates a difficult environment for the assertion of national sovereignty by the Swiss.
The reality that the United States Dollars has grown up from a national currency to an international medium of exchange with the status of truly being the number one currency of international transaction, now puts into the tanker the argument of the independence of national currencies. The integration of the world’s currencies is getting to be a reality and the de-facto argument of associated national sovereignty and independent currency is gradually becoming a thing of the past. With the US Federal Reserve Bank loaning money to the Lloyds of London, the United States Dollars is virtually becoming something of a profound commodity, being sought by every financial institutions all over the globe. Citizens of the world now depend on the United States’ Currency to dictate the pace of commerce, even within boundaries of countries far remote from the United States. With the Feds loaning money out, comes the landmark concession of national sovereignty with respect to monetary policy. Does this give a bragging right to Washington DC? Probably not, considering that the nature of this type of transaction may be available on tapes, emails and documents that can be released on the WEB by Wiki Leaks, today or tomorrow!
If European commercial Banks agree to seek money from the national bank of the United States, the Federal Reserve Bank, this choice leaves room for monetary expansion policy implication within the European Union. Further, if the Lloyds of London can draw on a short-term Bank Note from the US Federal Reserve Bank, the question of a system of fixed currency exchange rates and the central control over the British Pound by No. 10 Downing Street or the Buckingham Palace, is probably about to become history. Since Britain and United states are not known to have a joint currency, the issue of independence and sovereignty of the nation state, United Kingdom, can be readily called to question. With the singular act of the feds loaning money to European Banks, the kind of legal tender power that is often associated with independent nation’s currency can now come into play, even within those nations boundaries. Since the Swedish bank, UBS, did not seek the replacement of its nation’s currency in its deal with the US Federal Reserve Bank, the implication of its transaction may have a political under tone. here again lies the challenge that Wiki Leaks can drop on the laps of European and American politicians. No wonder, France is out with a similar warrant to the United States for the founder of Wiki Leaks!
The potential that Wiki leaks may get its hand on tapes and documents of say Bank of America and probably the UBS or any other bank out there, may actually introduce a fatal weakness into the international banking system. Imagine that during the turbulent early period of the global recession two years ago, a bank official from UBS and another from the US Federal Reserve Bank had entered into a deal that may impinge on either nation’s monetary regime, then there is obviously a concern that such information is available to a third party like Mr. Assange. The fact that Assange can then turn around and make this type of transaction available on the WEB, can actually destabilize international banking system. Further, it may have an added destruction to the independence of a nation state and its ability to have control over transactions taking place within its borders. The national security implications of the new development in the cyberspace is now a thing that is best imagined than coming to reality. If Wiki Leaks make good on its promise to release the commercial banking transactions on the WEB, you can bet, more than hell will break loose!
It is possible for countries' embassy tape discussions to be made public. It is also admissible that such communications between embassy staff may be cause for alarm by the State Department or Washington DC. However, when the real backbone of many economies are probably going to be at stake, well your imagination is as good as mine. When European Commercial Banks interest are being beholden to the U.S. national Bank, what is the sense of talking about national currencies and pride. It's all about to go into the air: puff! The notion that bank officials are incompetent or cannot manage risk, becomes secondary at this point. The embarrassments for many more national government is the issue now at stake. As we continue to watch events unfold on the WEB, I can imagine Bill Gates, Steve Jobs and Paul Allen asking each other: what in the world did we let loose in New Mexico and California three decades ago?
American Foreign Relations has definitely taken a hit from the Wiki Leaks releases. The State Department is busy scrambling around to mend fences with foreign government and national security assets all over the world are probably being moved around and educated about new strategies of communication between their outpost and Washington DC. Unfortunately as one individual said early in the week, we have entered that era in which the facades are being removed from the face of the people: welcome to WEB 4.0! The collective impact of the Wiki Leaks releases on national governments and commercial bankings is probably good for those who have chosen to pursue this route for achieving fairness in the world; however, is this what we really need? I don't know, but what I realize from this new frontier, is that America must continue to look out for Americans and other nations, theirs. We are now in a time zone, where the word Armageddon, is taking a new interpretation in foreign and monetary policies implementation around the globe.
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