Posted by: Dirk | August 1, 2013

Central bank independence: BoE helped to tranfer Nazi gold

Apparently, the publication of new documents of the Bank of England has revealed a dark spot there. The Guardian reports:

Bank of England records detailing its involvement in the transfer and sale of gold stolen by Nazis after the invasion of Czechoslovakia were revealed online on Tuesday.

The gold had been deposited during the 1930s with the Bank of International Settlements (BIS), the so-called Central Banker’s bank, as the Czechoslovak government faced a growing threat from Germany.

While the Bank for International Settlements had already been implicated in serious misbehavior (see the Volcker Commission) it has been unknown whether other central banks cooperated with the Nazis as well. The last paragraph in the article is very interesting because of the explanation given:

Sources at the Bank of England on Tuesday drew attention to a section in the official history, containing comments by the chancellor to the House of Commons in June 1939, when he stated that Law Officers had advised him that the British government was precluded by protocols from preventing the BoE from obeying instructions given to it by the BIS to transfer the gold.

So, the elected democratic government could not stop the Bank of England from money laundering for the nation’s major rival. This reminds me of the book Lords of Finance, which follows the lives of four central bankers in the period leading to the Great Depression. Central banking was a very personal affair and built on personal relationships. The recent findings in conjunction with what has been known already puts into doubt the idea of central bank independence. Increasing transparency, like the ECB seems to be willing to do by publishing its meeting minutes, is a step in the right direction but still the board members are not accountable for their actions.

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