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For The Record  

FTR #671 Update on the Meltdown, Part 4: Germany, the Underground Reich and the Global Financial Crisis

MP3: Side 1 | Side 2

The pro­gram begins with an arti­cle not­ing Ger­man fore­shad­ow­ing of the present glob­al finan­cial cri­sis more than 60 years ago. In a 1950 Cir­cu­lar Let­ter, Under­ground Reich func­tionar­ies not­ed that a U.S. eco­nom­ic col­lapse would open up great oppor­tu­ni­ties for a “new world order,” led by a new­ly ascen­dant Ger­many. Devel­op­ing the the­sis that the events fore­seen in 1950 may have actu­al­ly been engi­neered by the Fed­er­al Repub­lic [of Ger­many], much of the broad­cast fea­tures analy­sis attribut­ing the finan­cial col­lapse of 2008 to delib­er­ate fis­cal pol­i­cy enact­ed by the Ger­man dom­i­nat­ed Euro­pean Cen­tral Bank.

Com­par­ing Ger­man eco­nom­ic pol­i­cy in the imme­di­ate pre-Hitler peri­od with that pur­sued by Ger­many dur­ing the first decade of the Euro­pean Mon­e­tary Union, author Sara Moore sees par­al­lel and delib­er­ate defla­tion­ary stances as cen­tral to both the onset of the Great Depres­sion and the 2008 glob­al finan­cial col­lapse. Moore’s the­sis main­tains that delib­er­ate­ly low ECB inter­est rates insti­tut­ed after the incep­tion of the Euro led to a glob­al cap­i­tal flow to the U.S. Fol­low­ing the ECB’s mul­ti­ple rate increas­es in the mid­dle of this decade, Moore sees that cap­i­tal flow revers­ing, help­ing to pre­cip­i­tate the cur­rent deba­cle.

After analy­sis of par­al­lels between 1930 Ger­many and the con­tem­po­rary Fed­er­al Repub­lic, we review the con­ti­nu­ity between the eco­nom­ic pol­i­cy advo­cat­ed by Pan-Ger­man the­o­reti­cian Friedrich List and those pur­sued by the Third Reich and the “new” Ger­many. Specif­i­cal­ly, the pro­gram notes that List’s the­o­ry for a Ger­man-dom­i­nat­ed cen­tral Euro­pean eco­nom­ic union was imple­ment­ed by the Third Reich and then insti­tu­tion­al­ized by the Fed­er­al Repub­lic in the form of the Euro­pean Mon­e­tary Union.

Not­ing jour­nal­ist Dorothy Thomp­son’s 1940 account of Ger­many’s plans for a Nazi-con­trolled U.S. fea­tur­ing liaisons with key U.S. indus­tri­al fig­ures, the broad­cast then reviews the Nazis 1944 plan­ning for the post­war, includ­ing their high regard for Bush fam­i­ly-con­trolled busi­ness­es.

Of par­tic­u­lar inter­est for read­ers of this descrip­tion is an arti­cle not includ­ed in the orig­i­nal pro­gram. A recent Dai­ly Mail sto­ry chron­i­cles the August 10, 1944 meet­ing at which Third Reich indus­tri­al­ists and SS offi­cers set forth the Nazi plans to go under­ground and per­pet­u­ate their empire through eco­nom­ic, not mil­i­tary, dom­i­nance. Not­ing the polit­i­cal con­ti­nu­ity between the Third Reich and the “new” Fed­er­al Repub­lic, the arti­cle sup­ple­ments For The Record’s analy­sis that the EMU and the EU are the actu­al real­iza­tion of the Third Reich’s post­war con­tin­gency plan­ning.

The pro­gram con­cludes by not­ing the role that key per­son­nel from major Ger­man cor­po­ra­tions played in advo­cat­ing the bailout pro­grams that the Oba­ma admin­is­tra­tion has imple­ment­ed. This should be under­stood in the con­text of the Bor­mann cap­i­tal net­work’s con­trol of cor­po­rate Ger­many. Sig­nif­i­cant­ly, many of AIG’s bailout pay­ments went to finan­cial insti­tu­tions con­trolled by the Under­ground Reich and the Bor­mann net­work.

Pro­gram High­lights Include: Sim­i­lar­i­ty between the tax­a­tion, wage reg­u­la­tion and indus­tri­al export pol­i­cy pur­sued by Ger­man Chan­cel­lor Brun­ing in the imme­di­ate pre-Hitler peri­od and those insti­tut­ed by the Fed­er­al Repub­lic in the ear­ly part of this decade; review of the links between the SS and Lud­wig Erhard (who became Eco­nom­ics Min­is­ter and then Chancellor–widely cred­it­ed as the author of the “Ger­man eco­nom­ic mir­a­cle”); AIG’s bailout pay­ments to Deutsche Bank and UBS (both key Bor­mann cap­i­tal net­work affil­i­ates).

NOTE: A respect­ed source attrib­ut­es the cri­sis to the flow of cap­i­tal from com­mer­cial banks to invest­ment banks.

1. The pro­gram begins with an arti­cle not­ing Ger­man fore­shad­ow­ing of the present glob­al finan­cial cri­sis more than 60 years ago. Note that the Trum­pet is a Chris­t­ian mag­a­zine that [among oth­er things] ref­er­ences bib­li­cal proph­esy. The analy­sis pre­sent­ed here is sol­id, pre­scient and should not be dis­missed because of the periph­er­al the­o­log­i­cal ref­er­ences, nei­ther used nor endorsed in For The Record.

“The Trum­pet keeps a keen eye on Ger­many. For near­ly two decades, the Trum­pet staff has wait­ed, watched and writ­ten about the emer­gence of a glob­al­ly dom­i­nant, Ger­man-led bloc of Euro­pean states. We have warned specif­i­cal­ly that a spec­tac­u­lar glob­al finan­cial cri­sis, cen­tered in the Unit­ed States, will like­ly bring this event to fruition.

We are not entire­ly alone in this expec­ta­tion.

The fol­low­ing is a snip­pet from a secret mem­o­ran­dum writ­ten by high-rank­ing Ger­man offi­cers and dis­trib­uted among an elite group of Ger­man lead­ers in Bonn and oth­er parts of the world. It is an elec­tri­fy­ing pic­ture of cur­rent events.

Eco­nom­ic dif­fi­cul­ties will one day plunge the Unit­ed States down from its present dizzy heights. Such a cat­a­stro­phe can be brought about through crafty manip­u­la­tions and through arti­fi­cial­ly engen­dered crises. Such maneu­vers are rou­tine mea­sures which have already been employed in inter­na­tion­al pow­er strug­gle and will be used again and again as long as eco­nom­ic rivals fight for pow­er posi­tions and mar­kets in the world.

It is quite con­ceiv­able that Amer­i­ca, weak­ened by a depres­sion, will one day seek sup­port from a res­ur­rect­ed Ger­many. Such a prospect would open tremen­dous pos­si­bil­i­ties for the future pow­er posi­tion of a bloc intro­duc­ing a new order in the world.

That was writ­ten in 1950. It can be found in T.H. Tetens’ 1953 book, Ger­many Plots With the Krem­lin.

Its pre­science is chill­ing.

Sur­vey the cur­rent glob­al finan­cial cri­sis and the changes it is pre­cip­i­tat­ing. Eco­nom­ic dif­fi­cul­ties [have] plunge[d] the Unit­ed States down from its present dizzy heights. Check. Such a cat­a­stro­phe [was] brought about through crafty manip­u­la­tions and through arti­fi­cial­ly engen­dered crises. Check. Amer­i­ca, weak­ened by a depres­sion, [is seek­ing] sup­port from a res­ur­rect­ed Ger­many. Check. Such a prospect [is] open[ing] tremen­dous pos­si­bil­i­ties for the future pow­er posi­tion of a bloc intro­duc­ing a new order in the world. Check.

With its eco­nom­ic land­scape strewn with surg­ing unem­ploy­ment lines, writhing stocks, and rot­ting corpses of banks, finan­cial insti­tu­tions and busi­ness­es, it’s hard to deny “eco­nom­ic dif­fi­cul­ties” have brought Amer­i­ca down from its dizzy­ing heights. Sim­i­lar­ly, piles of evi­dence-think Bernie Mad­off, Lehman Broth­ers and lib­er­al bank lend­ing stan­dards-tes­ti­fy to “crafty manip­u­la­tion” as a root cause of this cri­sis.

What about the notion that “arti­fi­cial­ly engen­dered crises” pre­cip­i­tat­ed by for­eign forces are also part­ly to blame for the col­lapse of the Amer­i­can finan­cial sys­tem?

British author and his­to­ri­an Sara Moore recent­ly delved into this his­tor­i­cal­ly sig­nif­i­cant, eeri­ly famil­iar trend. Armed with facts and his­tor­i­cal prece­dent, Moore details in the Euro­pean Jour­nal how Ger­many, employ­ing a sim­i­lar for­mu­la to what it used in the 1930s, is crafti­ly manip­u­lat­ing EU eco­nom­ic pol­i­cy in an effort to under­mine the U.S.

One fun­da­men­tal cause of the cred­it cri­sis in Amer­i­ca, Moore sug­gests, was Ger­many’s exploita­tion of the euro (May 2008).

This inter­est­ing argu­ment deserves close scruti­ny (January/February 2009). When the euro first came online in Jan­u­ary 1999, the Euro­pean Cen­tral Bank (ecb)-headquartered in Frank­furt, pat­terned after Ger­many’s Bun­des­bank and heav­i­ly influ­enced by Ger­mans-ensured inter­est rates remained at or around 2 per­cent. This was done, in part, to help sta­bi­lize and pro­mote the growth of the Ger­man econ­o­my. By main­tain­ing low inter­est rates, Moore says, the Ger­man-led ecb caused glob­al investors to flock to high­er-yield­ing U.S. trea­suries, dis­tort­ing mon­ey mar­kets and facil­i­tat­ing easy cred­it in Amer­i­ca.

The ecb’s pol­i­cy, Moore says, helped prime Amer­i­can cred­it mar­kets for rup­ture.

This became inevitable after Decem­ber 2005, when the ecb, hav­ing main­tained low inter­est rates for years, raised inter­est rates sev­en times in a row. By late 2007, with Europe offer­ing high­er, increas­ing­ly attrac­tive inter­est rates, cash was flow­ing briskly into Europe, and less briskly into Amer­i­ca. Togeth­er with the hous­ing cri­sis, the ecb’s cal­cu­lat­ed diver­sion of mon­ey away from Amer­i­ca and into Europe was at least part­ly respon­si­ble for the Amer­i­can cred­it cri­sis. Accord­ing to Moore, it was when the ecb raised its inter­est rates for the eighth con­sec­u­tive time in July 2008, that “stock mar­kets round the world col­lapsed.”

The idea that Ger­many pre­cip­i­tat­ed the cur­rent glob­al eco­nom­ic cri­sis is intrigu­ing. It’s an argu­ment that grows stronger if you fac­tor in the doc­u­ment­ed proof show­ing Ger­man lead­ers planned 60 years ago that an “arti­fi­cial­ly [German-]engendered” cri­sis would one day bring the U.S. econ­o­my down, and send Amer­i­ca scram­bling to Ger­many for assis­tance.

Bare­ly a day pass­es with­out a cho­rus of Amer­i­can voic­es-jour­nal­ists, econ­o­mists, busi­ness lead­ers, politi­cians and even the Amer­i­can pres­i­dent-request­ing Europe, par­tic­u­lar­ly Ger­many, to do more to res­cue Europe and the rest of the world from the eco­nom­ic chaos. The lat­est brouha­ha between Amer­i­ca and Europe, for exam­ple, was sparked by Pres­i­dent Barack Oba­ma’s most recent request that Europe, and espe­cial­ly Ger­many, light­en the bur­den of the glob­al eco­nom­ic cri­sis by enact­ing larg­er stim­u­lus pack­ages for flail­ing Euro­pean economies. Lament­ing in the New York Times on Mon­day, promi­nent econ­o­mist Paul Krug­man said he feels Europe is not doing near enough to com­bat the glob­al eco­nom­ic down­turn. It is not uncom­mon to hear world lead­ers talk­ing about the need for a new world order-one, many agree, that needs to be cen­tered in Europe.

Amer­i­ca’s plea to Europe, and Ger­many in par­tic­u­lar, is des­per­ate and defin­i­tive: The world needs you to do more to res­cue it from eco­nom­ic calami­ty!

As this predica­ment inten­si­fies, it will con­tin­ue to cre­ate “tremen­dous pos­si­bil­i­ties” for Ger­many. Watch Ger­many intent­ly. We don’t know if the men who wrote that secret mem­o­ran­dum in 1950 are still alive today. That is incon­se­quen­tial. The more impor­tant ques­tion is: Is their strat­e­gy for a Ger­man new world order still being pur­sued?

It is becom­ing hard­er to deny that it is!

There will be some who will look at the glob­al eco­nom­ic melt­down and the fact that it is caus­ing both Europe and Amer­i­ca to rely more on Ger­many, admit that this aligns per­fect­ly with doc­u­ment­ed Ger­man­ic designs, and con­sid­er it an unusu­al coin­ci­dence. But does­n’t Ger­many’s age-old pen­chant for glob­al domin­ion, its provoca­tive role in the two largest wars in his­to­ry, the fact that it is doc­u­ment­ed that after World War ii Nazis planned to do it again, the cur­rent explo­sive and uncer­tain world con­di­tions, and the night­mare sce­nario of anoth­er holo­caust, make this a sub­ject wor­thy of deep inves­ti­ga­tion?. . . ”

“Ger­many Antic­i­pat­ed this Finan­cial Crisis–60 Years Ago” by Brad Mac­Don­ald; thetrumpet.com; 3/19/2009.

2. The Mac­Don­ald piece draws on infor­ma­tion from an arti­cle by author Sara Moore, the author of two books. Specif­i­cal­ly, she com­pares the defla­tion­ary pol­i­cy fol­lowed by Ger­many under Chan­cel­lor Brun­ing in the pre-Hitler peri­od with the defla­tion­ary pol­i­cy pur­sued by the [Ger­man con­trolled] Euro­pean Cen­tral Bank in the mid­dle of this decade. Moore feels that it was the sharp increas­es (in the mid­dle of this decade) from the rel­a­tive­ly low inter­est rates the bank insti­tut­ed after the incep­tion of the Euro that helped pro­duce the cur­rent cri­sis.

“A reassess­ment of how Ger­many’s defla­tion­ary poli­cies con­tributed to the Great Depres­sion in the 1930s and to her rise to pow­er is over­due. When in 1930 Hein­rich Brün­ing
became Chan­cel­lor of Ger­many he told his friends in the unions that his chief aim was to lib­er­ate Ger­many from pay­ing war repa­ra­tions and for­eign debt. He felt that if he divert­ed all Ger­many’s efforts into exports it would weak­en the abil­i­ty of Amer­i­ca and the Allies to force
Ger­many to pay her IOUs if she chose not to. The Ger­man unions there­fore agreed to Brün­ing
reduc­ing wages, rais­ing tax­es and divert­ing all indus­tri­al activ­i­ty into exports so as to bring pres­sure on the West­ern pow­ers, not real­iz­ing to what extent this would mean mis­ery,
unem­ploy­ment and a diminu­tion of pow­er for the work­ers. Brün­ing’s ini­tia­tive was suc­cess­ful. Mil­lions of peo­ple abroad were fooled into believ­ing that Ger­many her­self was real­ly poor not just her hap­less cit­i­zens, even though Ger­many was the great­est exporter in the world,
with a moun­tain of cash in the bank.

Sev­en­ty years after the Treaty of Ver­sailles con­sen­sus has at last been reached that the leg­end of the ‘vin­dic­tive’ Treaty was a fable. Yet his­to­ri­ans have hes­i­tat­ed to draw new con­clu­sions about the Great Depres­sion, name­ly if Ger­man politi­cians escape cen­sure for their actions in the twen­ti­eth Cen­tu­ry will they be tempt­ed to use defla­tion for polit­i­cal pur­pos­es in the twen­ty-first
Cen­tu­ry?. . . .”

“Germany–An Emerg­ing Super Power?–Comparisons with the 1930’s by Sara Moore; Euro­pean Jour­nal; May/2009.

3.  Moore feels that the ini­tial­ly low inter­est rates ini­ti­at­ed by the ECB after the Euro’s cre­ation led to a cash flow to Amer­i­ca, where rel­a­tive­ly high inter­est rates were attrac­tive to investors.

“. . . The world econ­o­my is huge com­pared to the 1930s but if Ger­many impos­es a defla­tion­ary pol­i­cy on Europe it can have an effect world­wide because the Euro­pean Union com­pris­es near­ly 500 mil­lion peo­ple with mon­ey to save or spend.

The Euro­pean Cen­tral Bank (ECB) is locat­ed in Frank­furt and mod­eled on the Ger­man Bun­des­bank. When the euro was first intro­duced inter­est rates were kept at 2 per cent, caus­ing a slump in the val­ue of the euro and a mass exo­dus of sur­plus funds. How­ev­er since 2005 Euro­pean inter­est rates have risen 8 times, caus­ing the euro to rise over 50 per cent against the dol­lar by 2007, both because of the dol­lar’s weak­ness and to the rise in Europe’s inter­est rates.

For­eign­ers’ faith in the euro rests pri­mar­i­ly with Ger­many. Oth­er euroland coun­tries economies are not so strong. Indeed Ger­many’s Euro­pean neigh­bors have sud­den­ly dis­cov­ered that Ger­many effec­tive­ly imposed a ‘wage freeze’ on its work­ers after the adop­tion of the euro in 1999, claw­ing back 40 per cent in labour com­pet­i­tive­ness against Italy, 30 per cent against Spain and 20 per cent against France by 2007. Britain’s bankers shed few tears over France and Italy when they com­plained of the ECB inter­est rate ris­es mak­ing their busi­ness­es uncom­pet­i­tive, or even Spain, hit by ‘an ECB-cre­at­ed prop­er­ty bub­ble.’ Britain’s pound was strong in the spring of 2007. It had moved ‘tight­ly with the euro’ for the last three years but as it always paid a lit­tle more in inter­est than the euro many Euro­pean coun­tries held their bal­ances in pounds. How­ev­er, in July 2007 the Bank of Eng­land decid­ed, in view of Britain’s ris­ing infla­tion, that it would raise British inter­est rates too, one month after the ECB. Unfor­tu­nate­ly the com­bi­na­tion of the Amer­i­can sub-prime cri­sis, an over-lever­aged home mar­ket and the final Euro­pean inter­est rate rise, was too much to bear — the mort­gage lender North­ern Rock cracked and Britain itself sud­den­ly seemed frag­ile too. . . .”


4. More of Sara Moore’s analy­sis, not­ing her empha­sis on ini­tial­ly low ECB inter­est rates:

“. . . . In a way one could say that the present cred­it cri­sis is the delayed result of the euro’s arrival. Ger­many was the strongest coun­try in euroland at its incep­tion but out­siders wor­ried that she was still nurs­ing a hang­over from her reuni­fi­ca­tion par­ty in 1990. She was allowed to breach EU rules that stip­u­lat­ed that annu­al gov­ern­ment deficits must not exceed 3 per cent of GDP and the ECB also promised to keep Euro­pean inter­est rates at 2 per cent to help the Ger­man econ­o­my. This encour­aged the world’s spare cash to avoid the euro and seek high­er returns in the US. The Asian economies accu­mu­lat­ed vast sums from exports and piled them into dol­lars. So the bankers had the bright idea of lend­ing mon­ey to the under­priv­i­leged so they too could share in the Amer­i­can dream. . . The trou­ble was that the sub­prime mort­gages start­ed with low inter­est rates, which soon became high­er. Mon­ey began to ebb away from the US attract­ed by ris­ing inter­est rates in Europe. In 2008 the sub­prime mort­gage cri­sis threat­ens to be one of the largest loss­es of Amer­i­can wealth ever seen, wip­ing out a gen­er­a­tion of home wealth build­ing.”


5. Con­tin­u­ing her com­par­i­son of 1930’s Ger­many under Brun­ing with the Fed­er­al Repub­lic today, Moore notes that analy­sis of that coun­try as eco­nom­i­cal­ly weak [in the late ’90’s] was pre­ma­ture, as was the 1930 assess­ment of Ger­many as eco­nom­i­cal­ly weak.

“Despite Ger­many’s impres­sive export per­for­mance in 1930/31 most peo­ple believed her protes­ta­tions of pover­ty in the Great Depres­sion because of the mis­ery and unem­ploy­ment of the Ger­man peo­ple. When the euro was intro­duced in 1999 the Ger­man econ­o­my’s health was also in ques­tion. Yet in 2003 Katin­ka Barysch of the Cen­tre for Euro­pean Reform wrote an arti­cle called ‘Ger­many — the sick man of Europe?’ which assert­ed that Ger­many with its flour­ish­ing high­tech sec­tor was not as infirm as many made out. Once more the world’s largest exporter she was also the prin­ci­pal trad­ing part­ner for most East­ern Euro­pean coun­tries join­ing the EU.

Katin­ka Barysch declared that what dis­tin­guished Ger­many — ‘from most of its peers’ — was the weak­ness of domes­tic demand. Indeed after the arrival of the euro Ger­man work­ers suf­fered years of stag­nant or declin­ing wages. Then the Ger­man gov­ern­ment, in an admit­ted­ly pale com­par­i­son with 1930, decid­ed to cut cor­po­ra­tion tax and give oth­er advan­tages to indus­try, and to raise VAT, bring­ing pain to the work­ers, in order to pay for it. Nat­u­ral­ly, in Jan­u­ary 2007, the Ger­man unions asked for more mon­ey to com­pen­sate them for the increase in tax­es. Yet after wage increas­es of 4.1 per cent were agreed with Ger­many’s most pow­er­ful union I G Met­all, the head of the Ger­man Bun­des­bank Axel Weber declared that wage infla­tion was get­ting out of con­trol, there was a growth in the mon­ey sup­ply, and the ECB need­ed to raise inter­est rates to curb it. On 18 May 2007, France’s bank chief, Chris­t­ian Noy­er, flat­ly con­tra­dict­ed Weber’s com­ments on infla­tion. Yet euroland inter­est rates were still raised to 4 per cent — with the expec­ta­tion of more — caus­ing mon­ey to pour out of the dol­lar into the euro and an esca­la­tion of the Amer­i­can sub-prime cri­sis. The ECB has since flood­ed mar­kets with short-term mon­ey but despite the rules being bent when the euro was first intro­duced to aid the Ger­man econ­o­my, Bun­des­bank chief Axel Weber and ECB chief econ­o­mist Jur­gen Stark have remained deaf to pleas, which would real­ly help the world in 2008, to bend the rules and allow ECB inter­est rates to fall.”


6. After dis­cus­sion of the effect of ECB rate increas­es on the U.S. sub­prime hold­ers, Moore com­pares trans-Atlantic cap­i­tal flows with those in the 1929–1930 peri­od.

“If one is look­ing at pre-war par­al­lels one could chart the ebb and flow of mon­ey across the Atlantic Ocean. In the late 1920s because of her stri­dent pro­pa­gan­da Ger­many was viewed as poor and less guilty of the war in 1914, but mod­ern his­to­ri­ans and econ­o­mists now believe her to have been pri­mar­i­ly respon­si­ble for the Great War and by 1928 more pow­er­ful than in 1914. Euro­pean mon­ey, includ­ing an unspec­i­fied amount of Ger­man cash, flowed into Wall Street in 1928/29. At the end of April 1929, with a new deal beck­on­ing over the pay­ment of war repa­ra­tions, Ger­many put her inter­est rates up by a full 1 per cent to 7 per cent, prompt­ing inter­est rate ris­es in Aus­tria, Poland and Hun­gary. From June 1929 Ger­many was report­ed pur­chas­ing sub­stan­tial quan­ti­ties of gold, an alarmed France fol­low­ing one month lat­er. Ger­many and France’s gold pur­chas­es were so large that they even­tu­al­ly prompt­ed expec­ta­tions of a rise in the British bank rate as all the major coun­tries were on the Gold Stan­dard. Mon­ey
became tight and in that envi­ron­ment finan­cial scan­dals hap­pen. Clarence Hatry’s fraud­u­lent empire col­lapsed. Soon after­ward Wall Street crashed. In essence the Wall Street crash was a polit­i­cal event, caused by wor­ries whether Ger­man war repa­ra­tions and debt would ever get repaid, but tight mon­ey mar­ket con­di­tions also helped. In 2007 mon­ey in Britain and the US also sud­den­ly became scarce. One hopes that the final par­al­lel with the Great Depres­sion — a stock mar­ket crash — is avert­ed. . . Ger­many’s defla­tion so far is only a faint shad­ow of her defla­tion in the 1930s but we can sur­mise that she has aspi­ra­tions.”


7. Moore con­cludes her argu­ment with a look at the his­to­ry of impe­r­i­al Pan-Ger­man­ism. Obvi­ous­ly, she sees the EU and the Euro­pean Mon­e­tary Union as a poten­tial ful­fill­ment of Pan-Ger­man­ic aspi­ra­tions.

“In 1994 Pres­i­dent Clin­ton proph­e­sied that Ger­many would be Europe’s future leader. In the Mid­dle Ages she had been leader of the Holy Roman Empire, which encom­passed much of Europe. Lat­er, before the First World War, the Pan Ger­man League aimed at cre­at­ing an empire of all the Ger­man­ic peo­ples under Pruss­ian lead­er­ship, which would include all the nations in the Aus­tro-Hun­gar­i­an Empire, also Switzer­land, Hol­land and Bel­gium and Roma­nia because of her strate­gic posi­tion at the mouth of the Danube. The empire would be bound togeth­er first by a cus­toms union, which would pre­pare the way for the cre­ation of com­mu­ni­ty-wide legal and polit­i­cal insti­tu­tions. Even­tu­al­ly a Nation­al­staat would come into being ‘impelled by the log­ic
of eth­nic sol­i­dar­i­ty, eco­nom­ic pres­sure, and should it prove nec­es­sary, mil­i­tary force’.

In the First and Sec­ond World Wars Ger­many became Europe’s mas­ter by dri­ving tanks into Europe’s cities. How­ev­er after the Sec­ond World War she turned into a very dif­fer­ent coun­try, a bas­tion of democ­ra­cy. Lat­er the Euro­pean Union evolved but it was not viewed as Ger­many’s empire, either with­in Ger­many or in the rest of Europe. Although France and Ger­many were orig­i­nal mem­bers, the EU is for­mal­ly run by the Coun­cil of Min­is­ters, the Euro­pean Par­lia­ment and by bureau­crats in Brus­sels, rather than by a sin­gle state. Democ­ra­cy is enshrined in the EU and the voice of each tiny coun­try car­ries weight. Yet it is becom­ing increas­ing­ly clear that it has a dom­i­nant Fran­co-Ger­man axis and that Ger­many is the prin­ci­pal pay­mas­ter. So the old adage — he who pays the piper calls the tune — may even­tu­al­ly be appro­pri­ate even in the Euro­pean Union.

Angela Merkel, declared that the time of reflec­tion about anew form of gov­ern­ment was over. By March 2007 the Berlin Dec­la­ra­tion was adopt­ed which declared the inten­tion of all mem­ber states to have rat­i­fied a new Treaty for the gov­ern­ment of the enlarged Euro­pean Union by the 2009 elec­tions. Beyond the Treaty, Ger­many, who stayed firm­ly in the dri­ving seat dur­ing the dis­cus­sions lead­ing up to the Lis­bon Treaty, is now alleged to have ambi­tions to cre­ate a
super­pow­er in Europe, with mil­i­tary pow­er and con­trol over tax­a­tion. One wor­ries that if things do not go her way she could revert to her old idea of a Ger­man­ic empire, which would divide Europe and frag­ment nations.

One also frets about the future eco­nom­ic out­look of the Euro­pean Union. . . With the help of the
Euro­pean Union and its most pow­er­ful provider of funds, Ger­many, the coun­tries of the for­mer Sovi­et Union in East­ern Europe are becom­ing rich­er, demo­c­ra­t­ic and self-con­fi­dent. Ger­many has a right to have an impor­tant say in the ECB to ensure that her mon­ey is well spent. Yet we
live in a glob­al econ­o­my. Pow­er must be used with care. We must not under­es­ti­mate Ger­many’s strength because of her cit­i­zens’ pover­ty or unem­ploy­ment. Her defla­tion, and push for the ECB to adopt a high inter­est rate pol­i­cy, besides affect­ing Britain and Amer­i­ca, will slow growth for the whole of the Euro­pean Union and cre­ate prob­lems for the weak­est states,  whilst strength­en­ing her rel­a­tive posi­tion. How Ger­many will use this posi­tion is of fun­da­men­tal inter­est and the par­al­lels up to the present time with the 1930s expe­ri­ence rais­es cause for con­cern.”


8. Review­ing the tem­plate for the Euro­pean Mon­e­tary Union, the pro­gram reca­pit­u­lates the plans for­mu­lat­ed by Friedrich List for Ger­man world dom­i­na­tion. Writ­ing in 1943, Win­kler fore­saw that the Prus­so-Teu­ton­ics would real­ize their goals through the cre­ation of a Ger­man-dom­i­nat­ed cen­tral Euro­pean eco­nom­ic union (bear­ing a strik­ing resem­blance to today’s Euro­pean Mon­e­tary Union.) One of the prin­ci­pal influ­ences on List’s think­ing was the “con­ti­nen­tal” con­cept of Napoleon, who attempt­ed to eco­nom­i­cal­ly unite Europe under French influ­ence.

“Charles Andler, a French author, summed up cer­tain ideas of List in his work, The Ori­gins of Pan-Ger­man­ism, (pub­lished in 1915.) ‘It is nec­es­sary to orga­nize con­ti­nen­tal Europe against Eng­land. Napoleon I, a great strate­gist, also knew the meth­ods of eco­nom­ic hege­mo­ny. His con­ti­nen­tal sys­tem, which met with oppo­si­tion even from coun­tries which might have prof­it­ed from such an arrange­ment should be revived, but, this time, not as an instru­ment of Napoleon­ic dom­i­na­tion. The idea of unit­ed Europe in a closed trade bloc is no longer shock­ing if Ger­many assumes dom­i­na­tion over such a bloc-and not France. [Ital­ics are Mr. Emory’s.] Bel­gium, Hol­land, Switzer­land, will­ing­ly or by force, will enter this ‘Cus­toms Fed­er­a­tion.’ Aus­tria is assumed to be won over at the out­set. Even France, if she gets rid of her notions of mil­i­tary con­quest, will not be exclud­ed. The first steps the Con­fed­er­a­tion would take to assure uni­ty of thought and action would be to estab­lish a joint rep­re­sen­ta­tive body, as well as to orga­nize a com­mon fleet. But of course, both the head­quar­ters of the Fed­er­a­tion and its par­lia­men­tary seat would be in Ger­many. [Ital­ics mine–D.E.]”

The Thou­sand-Year Con­spir­a­cy; by Paul Win­kler; Charles Scrib­n­er’s Sons [HC]; 1943; pp. 15–16.

4. Dorothy Thomp­son not­ed that the Third Reich’s plans for Ger­man-dom­i­nat­ed Europe entailed a real­iza­tion of the List blue­print. A stun­ning mea­sure of the suc­cess of the Under­ground Reich and Ger­man Ost­poli­tik can be obtained by read­ing Dorothy Thomp­son’s analy­sis of Ger­many’s plans for world dom­i­na­tion by a cen­tral­ized Euro­pean eco­nom­ic union. (In this, we can see the plans of pan-Ger­man the­o­reti­cian Friedrich List, as real­ized by the Euro­pean Mon­e­tary Union.) Ms. Thomp­son was writ­ing in The New York Her­ald Tri­bune on May 31, 1940! Her com­ments are repro­duced by Tetens on page 92. Check out the cur­rent Euro­pean Mon­e­tary Union and the “bor­der­less” EU against the back­ground of what Ms. Thomp­son fore­cast in 1940 and Mr. Tetens repro­duced in 1953.

“The Ger­mans have a clear plan of what they intend to do in case of vic­to­ry. I believe that I know the essen­tial details of that plan. I have heard it from a suf­fi­cient num­ber of impor­tant Ger­mans to cred­it its authen­tic­i­ty . . . Ger­many’s plan is to make a cus­toms union of Europe, with com­plete finan­cial and eco­nom­ic con­trol cen­tered in Berlin. This will cre­ate at once the largest free trade area and the largest planned econ­o­my in the world. In West­ern Europe alone . . . there will be an eco­nom­ic uni­ty of 400 mil­lion per­sons . . . To these will be added the resources of the British, French, Dutch and Bel­gian empires. These will be pooled in the name of Europa Ger­man­i­ca . . .”

“The Ger­mans count upon polit­i­cal pow­er fol­low­ing eco­nom­ic pow­er, and not vice ver­sa. Ter­ri­to­r­i­al changes do not con­cern them, because there will be no ‘France’ or ‘Eng­land,’ except as lan­guage groups. Lit­tle imme­di­ate con­cern is felt regard­ing polit­i­cal orga­ni­za­tions . . . . No nation will have the con­trol of its own finan­cial or eco­nom­ic sys­tem or of its cus­toms. The Naz­i­fi­ca­tion of all coun­tries will be accom­plished by eco­nom­ic pres­sure. In all coun­tries, con­tacts have been estab­lished long ago with sym­pa­thet­ic busi­ness­men and indus­tri­al­ists . . . . As far as the Unit­ed States is con­cerned, the plan­ners of the World Ger­man­i­ca laugh off the idea of any armed inva­sion. They say that it will be com­plete­ly unnec­es­sary to take mil­i­tary action against the Unit­ed States to force it to play ball with this sys­tem. . . . Here, as in every oth­er coun­try, they have estab­lished rela­tions with numer­ous indus­tries and com­mer­cial orga­ni­za­tions, to whom they will offer advan­tages in co-oper­a­tion with Ger­many. . . .”

Ger­many Plots with the Krem­lin; T.H. Tetens; Hen­ry Schu­man [HC]; 1953; p. 92.

5. In order to enhance under­stand­ing of the con­ti­nu­ity between the Third Reich and the “eco­nom­ic mir­a­cle” of the “New” Ger­many, the pro­gram reviews the gen­e­sis of the Bor­mann flight cap­i­tal net­work. On August 10, 1944, SS gen­er­al Dr. Scheid chaired a secret meet­ing of key indus­tri­al­ists and financiers at which he laid out the blue­print for the Nazi flight cap­i­tal pro­gram that matured into the Bor­mann cap­i­tal net­work. The pur­pose of the Bor­mann flight cap­i­tal pro­gram was set forth by Paul Man­ning, the hero­ic author who wrote the sto­ry of the Bor­mann orga­ni­za­tion.

“Mar­tin Bor­mann, forty-one at the fall of Berlin, and strong as a bull, was at all times at Hitler’s side, impas­sive and cool. His be-all and end-all was to guide Hitler, and now to make the deci­sions that would lead to the even­tu­al rebirth of his coun­try. Hitler; his intu­itions at peak lev­el despite his crum­bling phys­i­cal and men­tal health in the last year of the Third Reich, real­ized this and approved of it. ‘Bury your trea­sure,’ he advised Bor­mann, ‘for you will need it to begin a Fourth Reich.’ [Empha­sis added.] That is pre­cise­ly what Bor­mann was about when he set in motion the ‘flight cap­i­tal’ scheme August 10, 1944, in Stras­bourg. The trea­sure, the gold­en ring, he envi­sioned for the new Ger­many was the sophis­ti­cat­ed dis­tri­b­u­tion of nation­al and cor­po­rate assets to safe havens through­out the neu­tral nations of the rest of the world.”

(Mar­tin Bor­mann: Nazi in Exile; Paul Man­ning; Copy­right 1981 [HC]; Lyle Stu­art Inc.; ISBN 0–8184-0309–8; pp. 29–30.)

6. Held in Stras­bourg, France, the meet­ing is described in detail:

“The Staff car had left Col­mar at first light for Stras­bourg, car­ry­ing SS Ober­grup­pen­fue­herer Scheid, who held the rank of lieu­tenant gen­er­al in the Waf­fen SS, as well as the title of Dr. Scheid, direc­tor of the indus­tri­al firm of Her­madorff & Schen­burg Com­pa­ny. While the beau­ty of the rolling coun­try­side was not lost on Dr. Scheid, his thoughts were on the meet­ing of impor­tant Ger­man busi­ness­men to take place on his arrival at the Hotel Mai­son Rouge in Stras­bourg. Reich­sleit­er Mar­tin Bor­mann him­self had ordered the con­fer­ence, and although he would not phys­i­cal­ly be present he had con­fid­ed to Dr. Scheid, who was to pre­side, ‘The steps to be tak­en as a result of this meet­ing will deter­mine the post­war future of Ger­many.’ The Reish­sleit­er had added, ‘Ger­man indus­try must real­ize that the war can­not now be won, and must take steps to pre­pare for a post­war com­mer­cial cam­paign which will in time insure the eco­nom­ic resur­gence of Ger­many.’ It was August 10, 1944. The Mer­cedes-Benz bear­ing SS Ober­grup­pen­fuer­her Scheid moved slow­ly now through the nar­row streets of Stras­bourg. Dr. Scheid noticed that this was a most agree­able city, one to return to after the war.”

(Ibid.; pp. 23–24.)

6. Scheid briefed the lead­ers of Ger­man indus­try on Bor­man­n’s plan, and gave them con­tacts-many of them in New York.

“Dr. Scheid, papers from his brief­case arranged neat­ly on the table before him, stat­ed that all indus­tri­al materiel in France was to be evac­u­at­ed to Ger­many imme­di­ate­ly. ‘The bat­tle of France is lost to Ger­many,’ he admit­ted, quot­ing Reich­sleit­er Bor­mann as his author­i­ty, ‘and now the defense of the Siegfried Line (and Ger­many itself) is the main prob­lem. . . . From now on, Ger­many indus­try must take steps in prepa­ra­tion for a post­war com­mer­cial cam­paign, with each indus­tri­al firm mak­ing new con­tacts and alliances with for­eign firms. This must be done indi­vid­u­al­ly and with­out attract­ing any sus­pi­cion. How­ev­er, the par­ty and the Third Reich will stand behind every firm with per­mis­sive and finan­cial sup­port.’ He assured those present that the fright­en­ing law of 1933 known as Trea­son Against the Nation, which man­dat­ed the death penal­ty for vio­la­tion of for­eign exchange reg­u­la­tions or con­ceal­ing of for­eign cur­ren­cy, was now null and void, on direct order of Reich­sleit­er Bor­mann.”

(Ibid.; p. 25.)

7. The pro­gram notes that the Bush fam­i­ly were among the col­lab­o­ra­tionist indus­tri­al­ists referred to by Ms. Thomp­son in the Her­ald Tri­bune arti­cle men­tioned in para­graph 4. Ham­burg-Ameri­ka Line’s oper­a­tions in the U.S. were con­trolled by the grand­fa­ther and great grand­fa­ther of George W. Bush.

“Dr. Scheid also affirmed, ‘The ground must now be laid on the finan­cial lev­el for bor­row­ing con­sid­er­able sums from for­eign coun­tries after the war.’ As an exam­ple of the kind of sup­port that had been most use­ful to Ger­many in the past, Dr. Scheid cit­ed the fact that ‘patents for stain­less steel belonged to the Chem­i­cal Foun­da­tion, Inc. New York, and the Krupp Com­pa­ny of Ger­many, joint­ly, and that of the Unit­ed States Steel Cor­po­ra­tion, Carnegie, Illi­nois, Amer­i­can Steel & Wire, Nation­al Tube, etc., were there­by under an oblig­a­tion to work with the Krupp con­cern.’ He also cit­ed the Zeiss Com­pa­ny, the Leica Com­pa­ny, and the Ham­burg-Ameri­ka line as typ­i­cal firms that had been espe­cial­ly effec­tive in pro­tect­ing Ger­man inter­ests abroad. He gave New York address­es to the twelve men.”


8. An arti­cle not includ­ed in the orig­i­nal broad­cast sup­ple­ments Man­ning’s writ­ing and also rein­forces the the­sis that, in many ways, the EU and the Euro­pean Mon­e­tary Union rep­re­sent the par­tial ful­fill­ment of the Nazi plans for dom­i­na­tion of post­war Europe.

“The paper is aged and frag­ile, the type­writ­ten let­ters slow­ly fad­ing. But US Mil­i­tary Intel­li­gence report EW-Pa 128 is as chill­ing now as the day it was writ­ten in Novem­ber 1944.

The doc­u­ment, also known as the Red House Report, is a detailed account of a secret meet­ing at the Mai­son Rouge Hotel in Stras­bourg on August 10, 1944. There, Nazi offi­cials ordered an elite group of Ger­man indus­tri­al­ists to plan for Ger­many’s post-war recov­ery, pre­pare for the Nazis’ return to pow­er and work for a ‘strong Ger­man empire’. In oth­er words: the Fourth Reich.

The three-page, close­ly typed report, marked ‘Secret’, copied to British offi­cials and sent by air pouch to Cordell Hull, the US Sec­re­tary of State, detailed how the indus­tri­al­ists were to work with the Nazi Par­ty to rebuild Ger­many’s econ­o­my by send­ing mon­ey through Switzer­land.

They would set up a net­work of secret front com­pa­nies abroad. They would wait until con­di­tions were right. And then they would take over Ger­many again.

The indus­tri­al­ists includ­ed rep­re­sen­ta­tives of Volk­swa­gen, Krupp and Messer­schmitt. Offi­cials from the Navy and Min­istry of Arma­ments were also at the meet­ing and, with incred­i­ble fore­sight, they decid­ed togeth­er that the Fourth Ger­man Reich, unlike its pre­de­ces­sor, would be an eco­nom­ic rather than a mil­i­tary empire — but not just Ger­man.

The Red House Report, which was unearthed from US intel­li­gence files, was the inspi­ra­tion for my thriller The Budapest Pro­to­col.

The book opens in 1944 as the Red Army advances on the besieged city, then jumps to the present day, dur­ing the elec­tion cam­paign for the first pres­i­dent of Europe. The Euro­pean Union super­state is revealed as a front for a sin­is­ter con­spir­a­cy, one root­ed in the last days of the Sec­ond World War.

But as I researched and wrote the nov­el, I realised that some of the Red House Report had become fact.

Nazi Ger­many did export mas­sive amounts of cap­i­tal through neu­tral coun­tries. Ger­man busi­ness­es did set up a net­work of front com­pa­nies abroad. The Ger­man econ­o­my did soon recov­er after 1945.

The Third Reich was defeat­ed mil­i­tar­i­ly, but pow­er­ful Nazi-era bankers, indus­tri­al­ists and civ­il ser­vants, reborn as democ­rats, soon pros­pered in the new West Ger­many. There they worked for a new cause: Euro­pean eco­nom­ic and polit­i­cal inte­gra­tion.

Is it pos­si­ble that the Fourth Reich those Nazi indus­tri­al­ists fore­saw has, in some part at least, come to pass?

The Red House Report was writ­ten by a French spy who was at the meet­ing in Stras­bourg in 1944 — and it paints an extra­or­di­nary pic­ture.

The indus­tri­al­ists gath­ered at the Mai­son Rouge Hotel wait­ed expec­tant­ly as SS Ober­grup­pen­fuhrer Dr Scheid began the meet­ing. Scheid held one of the high­est ranks in the SS, equiv­a­lent to Lieu­tenant Gen­er­al. He cut an impos­ing fig­ure in his tai­lored grey-green uni­form and high, peaked cap with sil­ver braid­ing. Guards were post­ed out­side and the room had been searched for micro­phones.

There was a sharp intake of breath as he began to speak. Ger­man indus­try must realise that the war can­not be won, he declared. ‘It must take steps in prepa­ra­tion for a post-war com­mer­cial cam­paign.’ Such defeatist talk was trea­so­nous — enough to earn a vis­it to the Gestapo’s cel­lars, fol­lowed by a one-way trip to a con­cen­tra­tion camp.

But Scheid had been giv­en spe­cial licence to speak the truth — the future of the Reich was at stake. He ordered the indus­tri­al­ists to ‘make con­tacts and alliances with for­eign firms, but this must be done indi­vid­u­al­ly and with­out attract­ing any sus­pi­cion’.

The indus­tri­al­ists were to bor­row sub­stan­tial sums from for­eign coun­tries after the war.

They were espe­cial­ly to exploit the finances of those Ger­man firms that had already been used as fronts for eco­nom­ic pen­e­tra­tion abroad, said Scheid, cit­ing the Amer­i­can part­ners of the steel giant Krupp as well as Zeiss, Leica and the Ham­burg-Amer­i­ca Line ship­ping com­pa­ny.

But as most of the indus­tri­al­ists left the meet­ing, a hand­ful were beck­oned into anoth­er small­er gath­er­ing, presided over by Dr Bosse of the Arma­ments Min­istry. There were secrets to be shared with the elite of the elite.

Bosse explained how, even though the Nazi Par­ty had informed the indus­tri­al­ists that the war was lost, resis­tance against the Allies would con­tin­ue until a guar­an­tee of Ger­man uni­ty could be obtained. He then laid out the secret three-stage strat­e­gy for the Fourth Reich.

In stage one, the indus­tri­al­ists were to ‘pre­pare them­selves to finance the Nazi Par­ty, which would be forced to go under­ground as a Maquis’, using the term for the French resis­tance.

Stage two would see the gov­ern­ment allo­cat­ing large sums to Ger­man indus­tri­al­ists to estab­lish a ‘secure post-war foun­da­tion in for­eign coun­tries’, while ‘exist­ing finan­cial reserves must be placed at the dis­pos­al of the par­ty so that a strong Ger­man empire can be cre­at­ed after the defeat’.

In stage three, Ger­man busi­ness­es would set up a ‘sleep­er’ net­work of agents abroad through front com­pa­nies, which were to be cov­ers for mil­i­tary research and intel­li­gence, until the Nazis returned to pow­er.

‘The exis­tence of these is to be known only by very few peo­ple in each indus­try and by chiefs of the Nazi Par­ty,’ Bosse announced.

‘Each office will have a liai­son agent with the par­ty. As soon as the par­ty becomes strong enough to re-estab­lish its con­trol over Ger­many, the indus­tri­al­ists will be paid for their effort and co-oper­a­tion by con­ces­sions and orders.’

The export­ed funds were to be chan­nelled through two banks in Zurich, or via agen­cies in Switzer­land which bought prop­er­ty in Switzer­land for Ger­man con­cerns, for a five per cent com­mis­sion.

The Nazis had been covert­ly send­ing funds through neu­tral coun­tries for years.

Swiss banks, in par­tic­u­lar the Swiss Nation­al Bank, accept­ed gold loot­ed from the trea­suries of Nazi-occu­pied coun­tries. They accept­ed assets and prop­er­ty titles tak­en from Jew­ish busi­ness­men in Ger­many and occu­pied coun­tries, and sup­plied the for­eign cur­ren­cy that the Nazis need­ed to buy vital war mate­ri­als.

Swiss eco­nom­ic col­lab­o­ra­tion with the Nazis had been close­ly mon­i­tored by Allied intel­li­gence.

The Red House Report’s author notes: ‘Pre­vi­ous­ly, exports of cap­i­tal by Ger­man indus­tri­al­ists to neu­tral coun­tries had to be accom­plished rather sur­rep­ti­tious­ly and by means of spe­cial influ­ence.

‘Now the Nazi Par­ty stands behind the indus­tri­al­ists and urges them to save them­selves by get­ting funds out­side Ger­many and at the same time advance the par­ty’s plans for its post-war oper­a­tions.’

The order to export for­eign cap­i­tal was tech­ni­cal­ly ille­gal in Nazi Ger­many, but by the sum­mer of 1944 the law did not mat­ter.

More than two months after D‑Day, the Nazis were being squeezed by the Allies from the west and the Sovi­ets from the east. Hitler had been bad­ly wound­ed in an assas­si­na­tion attempt. The Nazi lead­er­ship was ner­vous, frac­tious and quar­relling.

Dur­ing the war years the SS had built up a gigan­tic eco­nom­ic empire, based on plun­der and mur­der, and they planned to keep it.

A meet­ing such as that at the Mai­son Rouge would need the pro­tec­tion of the SS, accord­ing to Dr Adam Tooze of Cam­bridge Uni­ver­si­ty, author of Wages of Destruc­tion: The Mak­ing And Break­ing Of The Nazi Econ­o­my.

He says: ‘By 1944 any dis­cus­sion of post-war plan­ning was banned. It was extreme­ly dan­ger­ous to do that in pub­lic. But the SS was think­ing in the long-term. If you are try­ing to estab­lish a work­able coali­tion after the war, the only safe place to do it is under the aus­pices of the appa­ra­tus of ter­ror.’

Shrewd SS lead­ers such as Otto Ohlen­dorf were already think­ing ahead.

As com­man­der of Ein­satz­gruppe D, which oper­at­ed on the East­ern Front between 1941 and 1942, Ohlen­dorf was respon­si­ble for the mur­der of 90,000 men, women and chil­dren.

A high­ly edu­cat­ed, intel­li­gent lawyer and econ­o­mist, Ohlen­dorf showed great con­cern for the psy­cho­log­i­cal wel­fare of his exter­mi­na­tion squad’s gun­men: he ordered that sev­er­al of them should fire simul­ta­ne­ous­ly at their vic­tims, so as to avoid any feel­ings of per­son­al respon­si­bil­i­ty.

By the win­ter of 1943 he was trans­ferred to the Min­istry of Eco­nom­ics. Ohlen­dor­f’s osten­si­ble job was focus­ing on export trade, but his real pri­or­i­ty was pre­serv­ing the SS’s mas­sive pan-Euro­pean eco­nom­ic empire after Ger­many’s defeat.

Ohlen­dorf, who was lat­er hanged at Nurem­berg, took par­tic­u­lar inter­est in the work of a Ger­man econ­o­mist called Lud­wig Erhard. Erhard had writ­ten a lengthy man­u­script on the tran­si­tion to a post-war econ­o­my after Ger­many’s defeat. This was dan­ger­ous, espe­cial­ly as his name had been men­tioned in con­nec­tion with resis­tance groups.

But Ohlen­dorf, who was also chief of the SD, the Nazi domes­tic secu­ri­ty ser­vice, pro­tect­ed Erhard as he agreed with his views on sta­bil­is­ing the post-war Ger­man econ­o­my. Ohlen­dorf him­self was pro­tect­ed by Hein­rich Himm­ler, the chief of the SS.

Ohlen­dorf and Erhard feared a bout of hyper-infla­tion, such as the one that had destroyed the Ger­man econ­o­my in the Twen­ties. Such a cat­a­stro­phe would ren­der the SS’s eco­nom­ic empire almost worth­less.

The two men agreed that the post-war pri­or­i­ty was rapid mon­e­tary sta­bil­i­sa­tion through a sta­ble cur­ren­cy unit, but they realised this would have to be enforced by a friend­ly occu­py­ing pow­er, as no post-war Ger­man state would have enough legit­i­ma­cy to intro­duce a cur­ren­cy that would have any val­ue.

That unit would become the Deutschmark, which was intro­duced in 1948. It was an aston­ish­ing suc­cess and it kick-start­ed the Ger­man econ­o­my. With a sta­ble cur­ren­cy, Ger­many was once again an attrac­tive trad­ing part­ner.

The Ger­man indus­tri­al con­glom­er­ates could rapid­ly rebuild their eco­nom­ic empires across Europe.

War had been extra­or­di­nar­i­ly prof­itable for the Ger­man econ­o­my. By 1948 — despite six years of con­flict, Allied bomb­ing and post-war repa­ra­tions pay­ments — the cap­i­tal stock of assets such as equip­ment and build­ings was larg­er than in 1936, thanks main­ly to the arma­ments boom.

Erhard pon­dered how Ger­man indus­try could expand its reach across the shat­tered Euro­pean con­ti­nent. The answer was through supra­na­tion­al­ism — the vol­un­tary sur­ren­der of nation­al sov­er­eign­ty to an inter­na­tion­al body.

Ger­many and France were the dri­vers behind the Euro­pean Coal and Steel Com­mu­ni­ty (ECSC), the pre­cur­sor to the Euro­pean Union. The ECSC was the first supra­na­tion­al organ­i­sa­tion, estab­lished in April 1951 by six Euro­pean states. It cre­at­ed a com­mon mar­ket for coal and steel which it reg­u­lat­ed. This set a vital prece­dent for the steady ero­sion of nation­al sov­er­eign­ty, a process that con­tin­ues today.

But before the com­mon mar­ket could be set up, the Nazi indus­tri­al­ists had to be par­doned, and Nazi bankers and offi­cials rein­te­grat­ed. In 1957, John J. McCloy, the Amer­i­can High Com­mis­sion­er for Ger­many, issued an amnesty for indus­tri­al­ists con­vict­ed of war crimes.

The two most pow­er­ful Nazi indus­tri­al­ists, Alfried Krupp of Krupp Indus­tries and Friedrich Flick, whose Flick Group even­tu­al­ly owned a 40 per cent stake in Daim­ler-Benz, were released from prison after serv­ing bare­ly three years.

Krupp and Flick had been cen­tral fig­ures in the Nazi econ­o­my. Their com­pa­nies used slave labour­ers like cat­tle, to be worked to death.

The Krupp com­pa­ny soon became one of Europe’s lead­ing indus­tri­al com­bines.

The Flick Group also quick­ly built up a new pan-Euro­pean busi­ness empire. Friedrich Flick remained unre­pen­tant about his wartime record and refused to pay a sin­gle Deutschmark in com­pen­sa­tion until his death in July 1972 at the age of 90, when he left a for­tune of more than $1billion, the equiv­a­lent of £400million at the time.

‘For many lead­ing indus­tri­al fig­ures close to the Nazi regime, Europe became a cov­er for pur­su­ing Ger­man nation­al inter­ests after the defeat of Hitler,’ says his­to­ri­an Dr Michael Pin­to-Duschin­sky, an advis­er to Jew­ish for­mer slave labour­ers.

‘The con­ti­nu­ity of the econ­o­my of Ger­many and the economies of post-war Europe is strik­ing. Some of the lead­ing fig­ures in the Nazi econ­o­my became lead­ing builders of the Euro­pean Union.’

Numer­ous house­hold names had exploit­ed slave and forced labour­ers includ­ing BMW, Siemens and Volk­swa­gen, which pro­duced muni­tions and the V1 rock­et.

Slave labour was an inte­gral part of the Nazi war machine. Many con­cen­tra­tion camps were attached to ded­i­cat­ed fac­to­ries where com­pa­ny offi­cials worked hand-in-hand with the SS offi­cers over­see­ing the camps.

Like Krupp and Flick, Her­mann Abs, post-war Ger­many’s most pow­er­ful banker, had pros­pered in the Third Reich. Dap­per, ele­gant and diplo­mat­ic, Abs joined the board of Deutsche Bank, Ger­many’s biggest bank, in 1937. As the Nazi empire expand­ed, Deutsche Bank enthu­si­as­ti­cal­ly ‘Aryanised’ Aus­tri­an and Czechoslo­vak banks that were owned by Jews.

By 1942, Abs held 40 direc­tor­ships, a quar­ter of which were in coun­tries occu­pied by the Nazis. Many of these Aryanised com­pa­nies used slave labour and by 1943 Deutsche Bank’s wealth had quadru­pled.

Abs also sat on the super­vi­so­ry board of I.G. Far­ben, as Deutsche Bank’s rep­re­sen­ta­tive. I.G. Far­ben was one of Nazi Ger­many’s most pow­er­ful com­pa­nies, formed out of a union of BASF, Bay­er, Hoechst and sub­sidiaries in the Twen­ties.

It was so deeply entwined with the SS and the Nazis that it ran its own slave labour camp at Auschwitz, known as Auschwitz III, where tens of thou­sands of Jews and oth­er pris­on­ers died pro­duc­ing arti­fi­cial rub­ber.

When they could work no longer, or were ver­braucht (used up) in the Nazis’ chill­ing term, they were moved to Birke­nau. There they were gassed using Zyk­lon B, the patent for which was owned by I.G. Far­ben.

But like all good busi­ness­men, I.G. Far­ben’s boss­es hedged their bets.

Dur­ing the war the com­pa­ny had financed Lud­wig Erhard’s research. After the war, 24 I.G. Far­ben exec­u­tives were indict­ed for war crimes over Auschwitz III — but only twelve of the 24 were found guilty and sen­tenced to prison terms rang­ing from one-and-a-half to eight years. I.G. Far­ben got away with mass mur­der.

Abs was one of the most impor­tant fig­ures in Ger­many’s post-war recon­struc­tion. It was large­ly thanks to him that, just as the Red House Report exhort­ed, a ‘strong Ger­man empire’ was indeed rebuilt, one which formed the basis of today’s Euro­pean Union.

Abs was put in charge of allo­cat­ing Mar­shall Aid — recon­struc­tion funds — to Ger­man indus­try. By 1948 he was effec­tive­ly man­ag­ing Ger­many’s eco­nom­ic recov­ery.

Cru­cial­ly, Abs was also a mem­ber of the Euro­pean League for Eco­nom­ic Co-oper­a­tion, an elite intel­lec­tu­al pres­sure group set up in 1946. The league was ded­i­cat­ed to the estab­lish­ment of a com­mon mar­ket, the pre­cur­sor of the Euro­pean Union.

Its mem­bers includ­ed indus­tri­al­ists and financiers and it devel­oped poli­cies that are strik­ing­ly famil­iar today — on mon­e­tary inte­gra­tion and com­mon trans­port, ener­gy and wel­fare sys­tems.

When Kon­rad Ade­nauer, the first Chan­cel­lor of West Ger­many, took pow­er in 1949, Abs was his most impor­tant finan­cial advis­er.

Behind the scenes Abs was work­ing hard for Deutsche Bank to be allowed to recon­sti­tute itself after decen­tral­i­sa­tion. In 1957 he suc­ceed­ed and he returned to his for­mer employ­er.

That same year the six mem­bers of the ECSC signed the Treaty of Rome, which set up the Euro­pean Eco­nom­ic Com­mu­ni­ty. The treaty fur­ther lib­er­alised trade and estab­lished increas­ing­ly pow­er­ful supra­na­tion­al insti­tu­tions includ­ing the Euro­pean Par­lia­ment and Euro­pean Com­mis­sion.

Like Abs, Lud­wig Erhard flour­ished in post-war Ger­many. Ade­nauer made Erhard Ger­many’s first post-war eco­nom­ics min­is­ter. In 1963 Erhard suc­ceed­ed Ade­nauer as Chan­cel­lor for three years.

But the Ger­man eco­nom­ic mir­a­cle — so vital to the idea of a new Europe — was built on mass mur­der. The num­ber of slave and forced labour­ers who died while employed by Ger­man com­pa­nies in the Nazi era was 2,700,000.

Some spo­radic com­pen­sa­tion pay­ments were made but Ger­man indus­try agreed a con­clu­sive, glob­al set­tle­ment only in 2000, with a £3billion com­pen­sa­tion fund. There was no admis­sion of legal lia­bil­i­ty and the indi­vid­ual com­pen­sa­tion was pal­try.

A slave labour­er would receive 15,000 Deutschmarks (about £5,000), a forced labour­er 5,000 (about £1,600). Any claimant accept­ing the deal had to under­take not to launch any fur­ther legal action.

To put this sum of mon­ey into per­spec­tive, in 2001 Volk­swa­gen alone made prof­its of £1.8billion.

Next month, 27 Euro­pean Union mem­ber states vote in the biggest transna­tion­al elec­tion in his­to­ry. Europe now enjoys peace and sta­bil­i­ty. Ger­many is a democ­ra­cy, once again home to a sub­stan­tial Jew­ish com­mu­ni­ty. The Holo­caust is seared into nation­al mem­o­ry.

But the Red House Report is a bridge from a sun­ny present to a dark past. Joseph Goebbels, Hitler’s pro­pa­gan­da chief, once said: ‘In 50 years’ time nobody will think of nation states.’

For now, the nation state endures. But these three type­writ­ten pages are a reminder that today’s dri­ve towards a Euro­pean fed­er­al state is inex­orably tan­gled up with the plans of the SS and Ger­man indus­tri­al­ists for a Fourth Reich — an eco­nom­ic rather than mil­i­tary imperi­um.”

“Revealed:The Secret Report That Shows How the Nazis Planned a Fourth Reich . . . in the EU” by Adam Lebor; Mail Online; 5/9/2009.

9. Deutsche Bank’s chief econ­o­mist fore­shad­owed and per­haps helped pre­cip­i­tate the admin­is­tra­tion’s plan to buy up banks’ bad debt. Note that Deutsche Bank is a key ele­ment of the Bor­mann net­work.

“Joe LaVorgna, Chief US Econ­o­mist at Deutsche Bank Secu­ri­ties has writ­ten a research note as part of the U.S. Dai­ly Eco­nom­ic Notes titled “Falling Short : The gov­ern­ment needs to buy tox­ic assets”. It says that ulti­mate­ly the tax­pay­er will pay, one way or anoth­er, either through great­ly dimin­ished job prospects and / or sig­nif­i­cant­ly high­er tax­es down the line. We think the gov­ern­ment should do the fol­low­ing — Esti­mate the high­est price it can pay for the var­i­ous tox­ic assets resid­ing on finan­cial insti­tu­tion bal­ance sheets, which would still return the prin­ci­ple to the tax­pay­ers. So, it’s basi­cal­ly say­ing — either you’ll have 20% unem­ploy­ment, unless you buy tox­ic assets, not for what they are worth, not for what their mar­ket val­ue is, but as much as you can pay.

Joe LaVorgna, who wrote the note talked to Simon John­son and Adam David­son, reporters from NPR and said that the bot­tom­line is that some­one has to pay for the mess cre­at­ed and there’s no escap­ing that the tax­pay­er is on the hook.

The gov­ern­ment and the banks have been say­ing that there’s some mag­i­cal recipe where the gov­ern­ment bails out the banks , the banks do bet­ter and the tax­pay­ers end up mak­ing mon­ey. Every­one wins.

Simon John­son post­ed the note on his blog and one the read­ers on his blog para­phrased the note say­ing, “that sure is a nice glob­al econ­o­my you’ve got there. Be a shame if any­thing were to hap­pen to it.”

Joe LaVorgna has called it a real­i­ty check and said that the approach has not been aggres­sive enough. That there’s no point in delay­ing the pain. He says, “let’s just get to it.”

Why though can’t the tax­pay­er be made share­hold­ers in the banks? Why weren’t the tax­pay­ers made stake­hold­ers in TARP1 and TARP2? This is the nation­al­iza­tion option. Under this option, the gov­ern­ment has to tell the banks to rec­og­nize their loss­es and then the gov­ern­ment cov­ers the loss­es and lia­bil­i­ties of the banks. But the gov­ern­ment now owns the bank. As much as this option seems like social­ism, in this option, the tax­pay­er has an own­er­ship stake in the banks (instead of an own­er­ship stake in tox­ic assets) and once the gov­ern­ment cleans up the bank and sells it off down the road, the tax­pay­ers will get some of their mon­ey back. Besides, this is the tra­di­tion­al way that gov­ern­ments usu­al­ly fix banks.

Simon John­son, for­mer­ly Chief Econ­o­mist at the Inter­na­tion­al Mon­e­tary Fund and he warns that there are many prac­ti­cal chal­lenges relat­ed to nation­al­i­sa­tion of banks and that’s why the gov­ern­ment does­n’t want to talk about this.When Adam David­son inter­viewed the Sec­re­tary of the Trea­sury, Tim­o­thy Gei­th­n­er, Gei­th­n­er refused to use the word “nation­al­iza­tion”. In TARP1 and TARP2, the gov­ern­ment is not forc­ing the banks to sell their assets or mark-it-to-mar­ket and it has gone out of its way to give banks bailout mon­ey with­out tak­ing con­trol. They’ve giv­en banks over $240 bil­lion (includ­ing $45 bil­lion to Citibank alone) and struc­tured the deal in a spe­cial way, specif­i­cal­ly designed so it was not a nation­al­iza­tion and when Citibank’s trou­bles got worse, the gov­ern­ment had to go through these amaz­ing con­tor­tions to help the bank with­out becom­ing the own­er.

How­ev­er, Nouriel Roubi­ni, Pro­fes­sor of Eco­nom­ics at NYU tells CNBC that AIG is already nation­al­ized and it is not a ques­tion of whether banks should be nation­al­ized but if the banks should be par­tial­ly or whol­ly nation­al­ized. It remains to be seen how the polit­i­cal the­ater sur­round­ing the eco­nom­ic issues plays out. But the fact that the major banks, includ­ing Bank of Amer­i­ca and Citibank, are insol­vent, is utter­ly obvi­ous.”

“Nation­al­iza­tion of U.S. Banks is Immi­nent”; www.nowpublic.com; 3/3/2009.

10. Among the appar­ent prime movers for Oba­ma’s bailout plan for the major banks was Bill Gross, man­ag­ing direc­tor of PIMCO, a sub­sidiary of Allianz and, as one of the Ger­man core cor­po­ra­tions, part of the Bor­mann cap­i­tal net­work (Like Deutsche Bank.)

“In today’s flur­ry of pos­i­tive press about the stock mar­ket’s 7% uptick in response to Trea­sury Sec­re­tary Tim Gei­th­n­er’s bank res­cue plan, one name stands out: Bill Gross, chair­man of the vast PIMCO bond fund.

Bloomberg, Time mag­a­zine, the Finan­cial Times, and oth­er out­lets all picked up Gross’ punchy dec­la­ra­tion that the Gei­th­n­er plan is “win-win-win.” Reuters even tout­ed as an “exclu­sive” its report that Pim­co would be par­tic­i­pat­ing in Gei­th­n­er’s pub­lic-pri­vate ini­tia­tive to buy up tox­ic mort­gage-backed assets.

There’s only one prob­lem with this: Gross is prac­ti­cal­ly duty-bound to love the plan, since it was part­ly his idea. As the WaPo report­ed on Sun­day: (empha­sis mine)

Last fall, bil­lion­aire investor War­ren E. Buf­fett, Gold­man Sachs chief exec­u­tive Lloyd Blank­fein and William H. Gross, the man­ag­ing direc­tor of PIMCO, the largest bond fund in the world, approached Trea­sury offi­cials about an idea to cre­ate invest­ment funds, using pub­lic and pri­vate mon­ey, to buy tox­ic assets from banks, accord­ing to for­mer senior Trea­sury offi­cials. Buf­fett is a direc­tor of The Wash­ing­ton Post Co.The Oba­ma admin­is­tra­tion fur­ther devel­oped that pro­pos­al to address the two main prob­lems banks are fac­ing: trou­bled debt such as mort­gages that insti­tu­tions are hold­ing until the loans are paid off, plus the com­plex secu­ri­ties and deriv­a­tives that were invent­ed to finance those loans.

Why is Gross allowed to be quot­ed wax­ing rhap­sod­ic about the Gei­th­n­er pub­lic-pri­vate part­ner­ship, with­out any added con­text to illu­mi­nate his role in the plan’s devel­op­ment? One pos­si­ble answer: it’s no longer con­sid­ered newsy that the Trea­sury is open­ly crav­ing Wall Street’s approval of its moves. Josh post­ed on this tru­ism last night.

Late Update:
Some com­menters sug­gest that I’m unfair­ly malign­ing Gross, who offered to man­age the gov­ern­men­t’s bailout for free and deliv­ered cogent ear­ly warn­ings last year on the grow­ing risk of mort­gage-backed secu­ri­ties.

Let me be clear: Gross’ praise for the plan he helped devel­op is all well and good. It would just be nice if main­stream out­lets pro­vid­ed con­text to help under­stand the cen­tral role that Gross, Gold­man CEO Lloyd Blank­fein, and oth­er invest­ment chiefs are play­ing in Gei­th­n­er’s plan. . . .”

Shock­er: Media Let Wall Street Chief­tain Praise His Own Idea” by Elana Schor; Talk­ing Points Memo; 3/24/2009

11. Large Euro­pean banks–many of them also part of the Bor­mann cap­i­tal network–received bil­lions of dol­lars in pay­outs as part of the res­cue of A.I.G. In the Man­ning text, the Bor­mann net­work links to UBS and Deutsche Bank are set forth at length. Man­ning also dis­cuss­es the con­tin­ued post­war con­trol of the French econ­o­my by the Ger­man eco­nom­ic pow­er struc­ture and the Bor­mann net­work. It is in that con­text that the U.S. bailout (through A.I.G.) of Soci­ete Gen­erale should be under­stood.

“. . . Big for­eign banks also received large sums from the res­cue, includ­ing Société Générale of France and Deutsche Bank of Ger­many, which each received near­ly $12 bil­lion; Bar­clays of Britain ($8.5 bil­lion); and UBS of Switzer­land ($5 bil­lion). . . .”

A.I.G. Lists Banks It Paid with U.S. Bailout Funds” by Mary Williams Walsh; New York Times; 3/15/2009.


6 comments for “FTR #671 Update on the Meltdown, Part 4: Germany, the Underground Reich and the Global Financial Crisis”

  1. [...] FTR #671 Ger­many, The Under­ground Reich and The Glob­al Finan­cial Cri­sis Cette entrée a été pub­liée dans Inter­na­tion­al Cor­po­rate Finance, Media, Nazism, avec comme mot(s)-clef(s) 1950 Cir­cu­lar Let­ter, 1984, 2008 Finan­cial Cri­sis, Ber­tels­mann, Bor­mann Cap­i­tal Net­work, Brave New World, EU, Euro, Ger­many, Great Depres­sion, Israel, Jew­ish Lob­by, Ran­dom House, Sara Moore, Ser­pen­t’s Walk, South Amer­i­ca, Turn­er Diaries, Under­ground Reich, Unit­ed States, WWII, Zion­ism. Vous pou­vez la met­tre en favoris avec ce permalien. ← We Con the World: A song about these poor Pales­tini­ans who suf­fer so much… [...]

    Posted by German corporate control of American media and the meltdown | lys-dor.com | August 28, 2011, 1:54 pm
  2. It’s inter­est­ing to note that Bill Gross, head of one of the biggest bailout boost­ers, archi­tects, and ben­e­fi­cia­ries, recent­ly called for a rejec­tion of Key­ne­sian­ism and is now endors­ing Ron Paul.

    Posted by Pterrafractyl | February 4, 2012, 7:46 pm
  3. There’s a lot of great back­ground info in Pim­co in this arti­cles. Some of the fun facts include Pim­co’s dou­bling in size since 2008 and its poten­tial new sta­tus as a “sys­tem­i­cal­ly impor­tant finan­cial insti­tu­tion” that would imper­il the US econ­o­my if it ever implod­ed. If Pim­co gets this sta­tus it comes under new sets of reg­u­la­tions but also becomes “too big to fail” (And anoth­er immor­tal is born!). The arti­cle also includes an inter­est­ing twist on “too big too fail”...because Pim­co’s “Total Return Fund” is such a mas­sive play­er in the bond mar­kets and has such high investor expec­ta­tions due to past suc­cess­es, its man­agers are forced to “swing for the fences” using deriv­a­tives to obtain those yields, and thus the “Total Return Fund” may be sub­ject to the same lever­ag­ing and deriv­a­tive counter-par­ty risks that took down Lehman Broth­ers in 2008:

    Spe­cial report: The twi­light of the Bond King

    By Jen­nifer Ablan and Matthew Gold­stein

    NEWPORT BEACH, Cal­i­for­nia | Thu Feb 9, 2012 3:52pm EST

    (Reuters) — He is the man who made bond invest­ing sort of sexy — and now he may pay the price.

    Over more than three decades, Bill Gross, co-founder of asset-man­age­ment giant PIMCO, has made so much mon­ey for clients that he has become the barom­e­ter by which oth­er bond traders are judged. His West Coast perch, pre­scient calls on the U.S. econ­o­my and devo­tion to yoga only added to the mys­tique.

    But the very recipe that enabled Gross to dom­i­nate his indus­try may now be con­spir­ing against him.

    He’s com­ing off his worst year in the busi­ness after mak­ing a huge bet against U.S. Trea­suries that back­fired. Last year, for the first time in near­ly two decades, investors pulled more mon­ey out of PIM­CO’s flag­ship fund than they put in.

    More trou­bling, U.S. reg­u­la­tors are now con­sid­er­ing whether PIMCO should be deemed a “sys­tem­i­cal­ly impor­tant finan­cial insti­tu­tion” — that is, too big to fail, and thus sub­ject to tighter reg­u­la­to­ry over­sight. The con­cern: The jug­ger­naut man­ages so much mon­ey for pen­sion funds that it could ham­mer the econ­o­my if it ever went under. The firm has dou­bled in size to $1.36 tril­lion in assets since the col­lapse of Lehman Broth­ers in 2008.

    The firm is lob­by­ing hard to fend off the “sys­tem­i­cal­ly impor­tant” des­ig­na­tion, accord­ing to reg­u­la­to­ry dis­clo­sures. Like oth­er finan­cial firms, it also objects to impend­ing rules that could make some of its deriv­a­tives trad­ing more cost­ly.

    Indus­try ana­lysts also won­der whether PIM­CO’s $250 bil­lion Total Return Fund, the world’s largest bond fund, is such a behe­moth that Gross some­times has to swing for the fences to gen­er­ate the kind of returns investors have come to expect. Because PIM­CO’s flag­ship fund relies heav­i­ly on deriv­a­tives to bet on bonds, some ana­lysts say it’s unnec­es­sar­i­ly com­plex and poten­tial­ly at risk should one of its trad­ing par­ties fail.



    Gross brought in for­mer Fed chair­man Alan Greenspan as a con­sul­tant in 2007. Also grac­ing PIM­CO’s ranks are for­mer top advi­sors to the Bush admin­is­tra­tion: Joshua Bolten, a for­mer White House chief of staff, Richard Clar­i­da, assis­tant sec­re­tary of Trea­sury, and Neel Kashkari, who ran the Wall Street bailout pro­gram bet­ter known as TARP.

    Cur­rent­ly, Stephen Rodosky, a top port­fo­lio man­ag­er at PIMCO, sits on the 13-mem­ber Trea­sury Bor­row­ing Advi­so­ry Com­mit­tee, an impor­tant advis­er to the gov­ern­ment.

    PIMCO even came close to get­ting one of its own on the Fed­er­al Reserve. Pres­i­dent Oba­ma in 2010 con­sid­ered Paul McCul­ley, a port­fo­lio man­ag­er and the fir­m’s defac­to Fed watch­er, for a Fed gov­er­nor­ship. But McCul­ley did­n’t make the final cut. He left PIMCO in Decem­ber 2010 and is now a direc­tor of the Glob­al Inter­de­pen­dence Cen­ter pub­lic pol­i­cy group.

    Gross bris­tles at talk among some com­peti­tors, finan­cial colum­nists and blog­gers that PIMCO is too close to U.S. mon­e­tary pol­i­cy mak­ers. He says the firm does­n’t get spe­cial treat­ment. In fact, Gross says, the first time he met Trea­sury Sec­re­tary Tim­o­thy Gei­th­n­er “or any of them” in per­son was Octo­ber 2010.

    “It’s just a sus­pi­cion” to char­ac­ter­ize PIMCO as being cozy with the gov­ern­ment, he added.

    The PIMCO sub­sidiary oper­a­tions that were help­ing the Trea­sury and the Fed buy mort­gages and run their com­mer­cial paper pro­grams were com­plete­ly detached from the firm, he added in an inter­view. “They were in a sep­a­rate build­ing, and when Mohamed and I want­ed to wish (traders) a Mer­ry Christ­mas, we need­ed two lawyers and a spe­cial key to get in the door,” Gross said.



    Gross and PIMCO are fac­ing ques­tions from indus­try ana­lysts over the Total Return Fund’s wide use of deriv­a­tives — finan­cial instru­ments that derive their val­ue from anoth­er secu­ri­ty — to gen­er­ate some of the fund’s returns.

    For years now, a num­ber of indus­try experts have warned pen­sion investors that the PIMCO Total Return Fund relies heav­i­ly on deriv­a­tives to gain expo­sure to bonds and makes lever­aged bets using bor­rowed mon­ey — ones that allow it to buy more bonds with less cash as the fund gets big­ger.

    “This is a fund that is a real chal­lenge for us, espe­cial­ly when you look at its under­ly­ing hold­ings, because of all the deriv­a­tives,” says Todd Rosen­bluth, a senior direc­tor and ana­lyst with S&P Cap­i­tal IQ. “They are access­ing parts of the mar­ket with­out hav­ing to put as much mon­ey up.” The catch for investors is that it is dif­fi­cult to ful­ly fath­om the risk of what is in the port­fo­lio.

    In a 2009 report, pen­sion con­sult­ing firm Ennis Knupp found that the Total Return Fund used hun­dreds of deriv­a­tives, includ­ing futures con­tracts and cred­it-default swaps — a type of insur­ance con­tract writ­ten on cor­po­rate bonds. The con­sul­tants said that by using deriv­a­tives, Gross had man­aged to some­times out­per­form com­peti­tors.


    Posted by Pterrafractyl | February 12, 2012, 6:56 pm
  4. @Pterrafractyl–

    Of course, view­ers should always remem­ber that Pim­co is the bond divi­sion of Allianz, the Ger­man insur­ance com­pa­ny.

    The focal point of law­suits by sur­vivors of Holo­caust vic­tims, Allianz is one of the Ger­man core cor­po­ra­tions and, there­fore, under the direct con­trol of the Bor­mann cap­i­tal net­work and Under­ground Reich.

    Recall your ear­li­er con­tri­bu­tion, in which Pim­co’s Bill Gross is quot­ed as say­ing he’s “kind of Ron Paul-ish” in response to the ques­tion who he likes for Pres­i­dent.

    Sort of makes sense, does­n’t it?

    Peo­ple think I’m obsess­ing when I speak about the top­ic of the Bor­mann net­work.

    It is, as one banker quot­ed in FTR #152 put it, the “largest con­cen­tra­tion of mon­ey pow­er under a sin­gle con­trol in all of world his­to­ry.”

    Looks like they’ve got the U.S. by the short hairs.

    I’m proud to fol­low in the noble, though VERY lone­ly foot­steps of Paul Man­ning and Edward R. Mur­row in cov­er­ing this top­ic.

    Posted by Dave Emory | February 12, 2012, 7:41 pm
  5. Dave, it’s as if a huge mete­or were head­ing for the plan­et and the few peo­ple who knew of it were try­ing to warn the rest. They’d be called obses­sive. In a few cas­es obses­sion is called for.

    Posted by Dwight | February 13, 2012, 11:11 am
  6. @Dave: “I’m proud to fol­low in the noble, though VERY lone­ly foot­steps of Paul Man­ning and Edward R. Mur­row in cov­er­ing this top­ic.” And I hope that you may one day final­ly be rec­og­nized for the valiant voice of rea­son and truth that you real­ly are. =)

    Posted by Steven L. | February 13, 2012, 4:04 pm

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