Thursday 14th July 2005AD
"A BANKERS WAR"

The world was at war. On all sides of this struggle, boys in uniforms were dying in the line of duty. Civilians added to the numbers of dead as bombing from the skies over populated cities of Europe escalated. It has been estimated that greater than 60 million souls died in the Second World War. This monumental conflict had polarized the entire world turning country against country, governments against their citizens, friend against friend, neighbor against neighbor and brother against brother. 

During this chapter of geo-political hostility and uncertainty, for the Central Banks of fighting nations it was business as usual. In the offices of the Bank of International Settlements (BIS) trade was brisker than ever. Safely domiciled within the borders of Switzerland, this "Central Bank's Private Bank" could rely on protection and neutrality, allowing it to attend to more important banking matters without interruption. Further, at its inception in 1930, the founding nations had included in its charter that the BIS "should be immune from seizure, closure or censure, whether or not its owners (a) were at war". 

WWII had quickly become like every other war in history. Regardless of whether hostilities began over borders, religion or straight national envy, all wars end up being fought over money - or more correctly "gold". 

Several problems face warring nations; 

1) Wars cost money - usually a lot more than originally budgeted for. 
2) Individual national currencies quickly become unacceptable outside their country, therefore nations at war need to pay their external costs of war in gold (or hard currency). 3) The deeper nations become embroiled in the conflict, the greater their requirements for external gold. It is not too long before their monetary motivations in the struggle are exceeding their original motivations. 

By the mid 1930's large sums of US dollars had been flowing from London and New York to the account of the Reichsbank at BIS. Gold likewise had started to flow to BIS from London and Berlin to the accounts of both Bank of England and Reichsbank. In 1938 Austrian gold was mobilized, followed by Czechoslovakia's and Poland's in 1939. By 1940 gold flows in and out of BIS were reaching massive levels. Gold flows coming in were accounted to Denmark, France, Belgium and Holland, while flows continued out various directions. From 1940 to 1944 an estimated $378 million in gold (at $35 per oz) would make its way to BIS for the safe keeping of various nations central banks.

By 1944 it had been estimated that Switzerland's gold reserves had risen from $503 million to $1,040 million (at $35 per oz), meanwhile gold flowing through Switzerland amounted to a further $491 million. 

It seems incongruous that at a time when nations and families were being torn apart, the Central Banks of these same war torn nations were functioning in a spirit of co-operation, agreement and accord, transacting huge sums of currencies and physical gold backwards and forwards though their accounts within their own private bank, the Bank of International Settlements.

Best Regards 
Philip Judge
pjudge@anglofareast.com 

(a) original shareholders of BIS included First National Bank of New York (a Morgan affiliate bank), Bank of England, the Reichsbank, the Bank of Italy, the Bank of France, and several other European central banks.