German Savings Bank Association Head: Put Money in the Service of the Real Economy
October 13, 2014 • 9:09AM

The head of the German Savings Bank Association (DSGV), Georg Fahrenschon, used his appearance at an Oct. 11 press conference at the annual IMF/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 [ECB's Draghi and the Fed] 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 Coop banks). Fahrenschon is clearly trying to swim in the shadow of the publicly acknowledged efforts of FDIC #2 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!