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Banking in Venezuela

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Banking in Venezuela - by Stephen Lendman

The Banco Central de Venezuela's web site (Venezuela's Central Bank) relates BCV history from its September 8, 1939 inception. At the time, conservative forces feared monetary instability under uncontrolled Central Bank spending. As a result, opponents (unsuccessfully) said giving it exclusive money creation power was unconstitutional. 

Thereafter BCV reforms occurred in 1943, 1960, 1974, 1983, 1984, 1987, 1992, 2001, and most recently making banking a "public service" in 2010. More on that below.

In 1992, legislation established "administrative autonomy," in part transforming the bank into a "public legal entity. Until then, (it was solely) corporate in nature." Thereafter, Venezuela's president appointed "a collegiate body of seven members, a president and six directors," requiring two-thirds Senate approval for a six-year term. Its mandate is "monetary stability, economic balance and well-ordered economic development."

Under Article 156 (11) of Venezuela's 1999 Constitution, National Public Power controls:

"Regulation of central banking, the monetary system, foreign currency, the financial and capital market system and the issuance and mintage of currency."

Under Section Three: National Monetary System, Article 318:

"The monetary competence of National Authority shall necessarily be exercised exclusively by the Venezuelan Central Bank (BCV). (Its) fundamental objective....is to achieve price stability and preserve the internal and foreign exchange value of the monetary unit....The Venezuelan Central Bank is a public-law juridical person with autonomy to formulate and implement policies within its sphere of competence."

Article 319 says it "shall be governed by the principle of public responsibility." Failure to do so "shall result in removal of the Board of Directors....(It) shall be subject to oversight by the Office of the General Comptroller of the Republic..."

Under Venezuela's 2010 Organic Law on the Domestic Financial System, banks, insurance companies, brokerage firms, and other financial institutions "have the obligation of collaborating with sectors of the productive, popular communal economy through healthy financial intermediation, inspired by the spirit of productive transformation."

In other words, their mandate includes funding traditional economic sectors as well as social and communal production entities and related organizations. In addition, advancing collective savings and promoting alternative communal investments is required.

Moreover, a recent Law of the Central Bank of Venezuela amendment abolished its autonomy, mandating a new financial structure to include adapting its "legal, administrative and functional structure to the goals of the production model, and the Central Bank may not be detached from the actual needs of the economy."

BCV operations must also conform to the National Development Plan "to meet the objectives of a socialist state," even though Venezuela's economy is more private than public. The amended law, however, states that "changes shall be construed as part of a progressive and timely reform to the financial system and as an opportunity to enhance the role of the institution in the transformation process of the social production model."

Monetary Control in America

Under the Constitution's Article 1, Section 8, only Congress has power "To coin Money (and) regulate the Value thereof...." 

Most often, however, throughout America's history, banks, not the government, controlled the nation's money. For two centuries, private banks fought for what they only partly had before success under the 1913 Federal Reserve Act. Earlier, Thomas Jefferson opposed the first Bank of the United States, Andrew Jackson the second for similar reasons:

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I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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Thank you. I am encouraged that a progressive writ... by Robert Tracey on Monday, Jan 17, 2011 at 6:20:45 PM