Libya not only has oil. According to the IMF, its central bank has nearly 144 tons of gold in its vaults. With that sort of asset base, who needs the BIS, the IMF and their rules?
All of which prompts a closer look at the BIS rules and their effect on local economies. An article on the BIS website states that central banks in the Central Bank Governance Network are supposed to have as their single or primary objective "to preserve price stability." They are to be kept independent from government to make sure that political considerations don't interfere with this mandate. "Price stability" means maintaining a stable money supply, even if that means burdening the people with heavy foreign debts. Central banks are discouraged from increasing the money supply by printing money and using it for the benefit of the state, either directly or as loans.
In a 2002 article in Asia Times titled "The BIS vs National Banks," Henry Liu maintained:
BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies. The BIS does to national banking systems what the IMF has done to national monetary regimes. National economies under financial globalization no longer serve national interests.
. . . FDI [foreign direct investment] denominated in foreign currencies, mostly dollars, has condemned many national economies into unbalanced development toward export, merely to make dollar-denominated interest payments to FDI, with little net benefit to the domestic economies.
He added, "Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation." The "state theory of money" refers to money created by governments rather than private banks.
The presumption of the rule against borrowing from the government's own central bank is that this will be inflationary, while borrowing existing money from foreign banks or the IMF will not. But all banks actually create the money they lend on their books, whether publicly-owned or privately-owned. Most new money today comes from bank loans. Borrowing it from the government's own central bank has the advantage that the loan is effectively interest-free. Eliminating interest has been shown to reduce the cost of public projects by an average of 50%.
And that appears to be how the Libyan system works. According to Wikipedia, the functions of the Central Bank of Libya include "issuing and regulating banknotes and coins in Libya" and "managing and issuing all state loans." Libya's wholly state-owned bank can and does issue the national currency and lend it for state purposes.
That would explain where Libya gets the money to provide free education and medical care, and to issue each young couple $50,000 in interest-free state loans. It would also explain where the country found the $33 billion to build the Great Man-Made River project. Libyans are worried that NATO-led air strikes are coming perilously close to this pipeline, threatening another humanitarian disaster.
So is this new war all about oil or all about banking? Maybe both -- and water as well. With energy, water, and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible. Most countries don't have oil, but new technologies are being developed that could make non-oil-producing nations energy-independent, particularly if infrastructure costs are halved by borrowing from the nation's own publicly-owned bank. Energy independence would free governments from the web of the international bankers, and of the need to shift production from domestic to foreign markets to service the loans.
If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and health care continue to be free.
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