Executive Intelligence Review
Subscribe to EIR


German Savings Bank Association Head: Put Money in the Service of the Real Economy

Oct. 12, 2014 (EIRNS)—The head of the German Savings Bank Association (DSGV), Georg Fahrenschon, used his appearance at an Oct. 11 press conference at the annual International Monetary Fund/World Bank confab in Washington to say things there, which he should in fact be campaigning about in Germany: "We need a better binding of monetary and currency policy to the real economy."

"Forty-one years after the end of the Bretton Woods System [created by Franklin Delano Roosevelt in 1944] and the introduction of floating currency exchange rates, we must come to the conclusion: the rules of the game of the world currency system are not coherent,"

Fahrenschon said.

"Since 1985 the volume of annual capital flows has increased by 20 times from $500 billion to $10 trillion. The financial economy has decoupled itself from the real economy—and the irrationalities resulting, the excesses and volatilities, were part the core cause for the last economic and financial crisis."

But despite this judgement, he says he doesn’t want capital controls, fixed exchange rates, nor a gold standard, merely limits on money expansion that go beyond the needs of the real economy. "Despite the experience of the financial crisis, financial markets have moved further away from the need of millions of people for economic participation." "The Shadow Banking System" [money market funds, hedge funds] is more powerful than before, and thus central banks [the European Central Bank’s president Mario Draghi and the U.S. Federal Reserve] shouldn’t be printing money.

As to how credit could be directed in the real economy, he doesn’t say, but merely points out, truthfully, how important are the "regional banks," community banks in the U.S., the public banks (Sparkassen, Volksbanken—Savings and Co-op banks). Fahrenschon is clearly trying to swim in the shadow of the publicly acknowledged efforts of Federal Deposit Insurance Corp.'s Number-two man Thomas Hoenig, who is scheduled to appear in Berlin at the end of October at a highly technical conference on bank supervision. Within Germany, the Savings Banks and Coops still submit to the influence of London’s Fifth Column in Germany, "universal bank" Deutsche Bank, through its operations in The City, a leader in currency speculation, and worldwide number 1 in derivatives—$75 trillion!

Last month, an aide to Fahrenschon told this news service he didn’t need to talk to us to know about the Glass-Steagall debate in the U.S. In fact, the Frankfurt "investment arm" bank of the German Savings Banks, which pools excess deposits in the large savings bank group (almost as large as Deutsche Bank), opposes a Glass-Steagall system (Trennbankensystem) and offers its depositors derivative-like gambling certificates, betting on financial indexes as an alternative to the de facto negative earnings on savings deposits. These are "German" derivatives-bets, designed to exploit the psychological anxieties of Germany’s still large strata of middle-aged and retired savers: protect my money, but give me something that makes me richer.