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British banks are 'technically insolvent'

Britains biggest banks are "technically insolvent", Royal Bank of Scotland said yesterday...

The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet... which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy... some have warned that it means: "there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses."...

Although the amount of easing is likely to be limited, news of this increased secrecy will spark comparisons with Weimar Germany and Zimbabwe, where uncontrolled use of the central banks' printing presses ultimately caused hyperinflation...

The reforms, which are likely to be implemented later this year, will make the Bank of England by far the most secretive major central in the world, experts said...

"Quite why the Bank has to keep its operations so shrouded in secrecy is a mystery to me," said Simon Ward, economist at New Star. "This [reform] will make it much more difficult to track what the Bank is doing."...

Debating the issue in the House of Lords recently, Lord James of Blackheath, a Conservative peer, said: "Remove [this] control and there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.

"If we went down that path we would be following a road which starts in Weimar, goes on through Harare and must not end in Westminster and London. That is the great fear that the abolition of that section will bring about – but the Bill abolishes it."

VIENNA: The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.

Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year.

"In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor."

The United Nations Office on Drugs and Crime had found evidence that "interbank loans were funded by money that originated from drug trade and other illegal activities," Costa was quoted as saying. There were "signs that some banks were rescued in that way."

Profil said Costa declined to identify countries or banks which may have received drug money and gave no indication how much cash might be involved. He only said Austria was not on top of his list, Profil said.

(Reporting by Boris Groendahl; Editing by Charles Dick)

Michel Chossudovsky wrote:

• Causes and consequences of the financial meltdown;
• The speculative onslaught;
• Financial fraud and the "bank bailouts";
• Bankruptcy of the real economy;
• Impacts on employment, wages and social services;
• Towards a spiralling public debt;
• The economic crisis and its relationship to the Middle East war;
• The centralization of corporate power;
• The concentration of wealth;
• The globalization of poverty.

What are the policy alternatives?

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