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RE: LaRouche - moeenyaseen - 09-23-2007


Upon closer examination, complete trust in the decisions of the independent Old Lady of Threadneedle Street -- The Bank of England -- would appear to be the biggest casualty of the Northern Rock financial turmoil in the UK.  The hourly television bulletins reinforced the image of  a bank run via the queues which formed outside Northern Rock, up and down the country's fifth-biggest mortgage lend er.  This represented the first bank run in Britain since the 1860s, which was nearly one and a half centuries ago !

Most citizens in Western democracies have limited trust in politicians at the best of times. Regulators can sometimes be feared in open and despised behind-closed-doors. Central banks are held in high esteem; which is why the Bank of England (BoE), would appear to be the past week's main victim.  There is a palpable sense of loss of credibility in regard to the role of the BoE  -- and the FSA to some extent -- amongst many at the Palace of Westminster and across the country.  Central banking without the perception of serious credibility can itself be a moral hazard to a fiat currency.  Notice the falling value of Sterling against many major currencies including the Euro and Swiss Franc since the Northern Rock tremors.

Going back just one week, the panic was prompted by the announcement initially designed to achieve the exact opposite. Only when the B oE said that it would stand by the stricken Northern Rock last Thursday night did depositors start to run for the exit on Friday. Attempts by Alistair Darling, the Chancellor of the Exchequer -- the UK Finance Minister -- to reassure savers served only to lengthen the queues of people outside branches demanding their money. The run did not stop until Mr Darling gave a taxpayer-backed guarantee on Monday,  17th September, that for the moment all the existing deposits at Northern Rock were safe.

No sooner had the queues disappeared than the House of Commons ',  the UK Lower Chamber of Parliament's, inquest began. This was the first big test of Britain's new monetary and regulatory system introduced in 1997, when New Labour came to power and Gordon Brown, then Chancellor of the Exchequer, fundamentally altered the financial chess board by giving The Bank of England operational independence to set interest rates and handing banking supervision to the newly created Financial Services Authority (FSA).  HM Treasury, the central bank and the FSA reached a new understanding about how they should run the system together.  However, the new system was not really stress tested by the markets in the last ten years until September 2007.

Until the high LIBOR rates' differential of 100+ basis points with the base rate began to rear its uncertain head in August, as pointed out on ATCA, Mr Brown's much vaunted reforms of the UK financial system seemed to be working rather  elegantly.

The Bank of England enjoyed huge credibility for keeping inflation close to the government's target -- notwithstanding  Governor King's one letter to the Chancellor earlier this year in regard to an  inflation overshoot -- whilst ensuring steady growth of the UK economy. The FSA won  global praise for its capabilities, especially in regulating complex financial businesses, which  have helped strengthen London's  image as an international centre of  excellence, overtaking New York in many  key areas.  In just a few days a financial hurricane of "category five" has blown a hole in the hard-won reputations of the regulator and the central bank, as the new system of split responsibility between the BoE and the FSA has failed its first big stress test since its inception  10 years ago.

Moral Hazard

Whilst left with no choice, the Chancellor of the Exchequer -- UK Finance Minister -- Mr Darling's guarantee sets a dangerous precedent:  it threatens to encourage savers to put their money in high-rate accounts in shaky banks and shareholders to invest in "extreme" non-bank banks, comfortable in the knowledge that the government will be there for them when the going gets tough.

On the one hand, it would be fair to note that by the time the Chancellor acted, he had little choice but to save Northern Rock or risk a disastrous run on other British banks whose share price was coming under excessive pressure.  On the other hand, Northern Rock deserves condemnation for its dangerous non-bank banking business model. The Newcastle-based mortgage lender had grown too fast on the back of short term money markets rather than branch deposits. Clearly, this left it utterly defenceless against a shortfall in funding when easy credit  dried up in August and September.  Fault for that does lie first-and-foremost with Northern Rock's management , but it also looks as if the FSA was caught off guard. Sir Callum McCarthy, Chairman of the FSA, said this week that Northern Rock's business model was "extreme."  Referring to Andrew Hunt's ATCA submission, "The UK's Non-Bank Banks and High LIBOR," we would humbly suggest that the problems in the UK banking system have arisen because many banks in the UK -- not just Northern Rock -- have, in effect, been behaving in the same "extreme" way as though they were non-banks.  So, Northern Rock is not unique and therefore "extreme" could be defined as mainstream within certain boundary conditions .

Central bankers across the world had been warning about the likelihood of credit tightening for a while . The FSA ought to  have paid close attention and discouraged Northern Rock and other UK non-bank banks from pursuing their risky business models .  The FSA's vigilance is essential , because it is the guardian of the public scheme of deposit insurance. Last year, it said this scheme was working just fine. But when stress- tested in September 2007, in the extreme case of the Northern Rock bank run, the scheme failed: depositors neither understood nor trusted it at all.  And w hy should they have done so ?

Trust in Financial System 's Regulation

The FSA, BoE and HM Treasury are all likely to come out poorly from the Northern Rock episode.  At the outset, the BoE, talked tough and wanted to teach financiers a lesson that they should not expect the central bank to bail them out if they took on too much business risk. Unlike the European and American central banks, which injected copious liquidity repeatedly into the money markets, the BoE held back from pumping cash with a clear justification for its stated policy.  When it did intervene, it did so rather modestly, insisting on high quality collateral.  The BoE argued that central-bank money could do little to save the three-month LIBOR money market, which had reached a fever of a 100+ basis points  differential with the base rate.

In the end, t he BoE's tough line turned out to be unworkable, and events forced the BoE to change its declared policy. On September 19th, the day after the run on Northern Rock ended, the BoE performed a U-turn. It announced that over the next few weeks it would be providing extra liquidity  to try to sort out the three-month LIBOR market's high  differential. Furthermore, it said that it would lend against riskier collateral, including mortgages, which is precisely what other reputable c entral banks have been doing since the credit crunch emerged in early August.

The charge against the BoE appears to be  that its pretence turned the credit crisis into a farce. If the BoE had acted more promptly to provide a redressal for the high LIBOR rate, Northern Rock might have survived. Who knows and what good is speculation at this stage ?  The 180 degrees turn in the BoE's policy looks either as if the Old Lady of Threadneedle Street made a mistake, or as if the Lady cannot stand up for her strongly held principles and values . Neither characteristic is endearing in central banking.

As the Governor of the BoE, Mr King pointed out, defending his performance in front of a House of Commons committee on Thursday, 20th September, English law prevents the BoE either from staging a covert rescue operation or from engineering a swift takeover; and clear flaws in the protection of depositors mean that, once an overt rescue operation is under way, depositors are likely to flee -- as became the case  with Northern Rock.  The Governon  defended the separation of powers between the Treasury, the BoE and the FSA, but this may not be a solid line of defence . The split power has exacerbated the system's flaws: nobody was in charge of the operation when there was a desperate need for one leader to run the show .  Northern Rock fell in the wide cracks that appeared.

This debacle not only holds key lessons for the system which regulates UK financial institutions but also for the way in which the Euro-zone national financial institutions are regulated:  with the European Central Bank (ECB) at one end of the spectrum and old national central banks and finance ministries at the other end .  What of the chasm of poor de facto regulation in no-man's land which has opened up, post the ECB's creation and the Euro's inception in 1999?  When has the Euro-zone financial institutions' regulatory environment  been stress tested by the markets in the last decade?  How sound is it under extreme pressure?   Is the Euro-zone regulatory system 's stress testing going to begin soon as the global credit crunch continues?  What are the recent  sub-prime linked banking insolvencies  in Germany and elsewhere in the Euro-zone suggesting ?  Watch the Euro-zone carefully for unfolding answers to these key questions over the coming weeks and months.  

RE: LaRouche - Admin - 09-30-2007

John Hoefle

By now, most people are aware that former Federal Reserve chairman Alan Greenspan is on a "not my fault" tour, proclaiming to everyone who will listen that he is not to blame for the collapse of the financial system. By saying he "didn't really get it," Sir Alan is choosing to cloak himself in the mantle of incompetence, in the hope that he won't go down in history as the worst central banker of all time. Greenspan, to protect himself, is blaming President Bush, who is admittedly an easy target, while riding to Bush's defense is Vice President Dick Cheney, who wrote an op-ed in the Sept. 19 Wall Street Journal claiming that Greenspan was "off the mark."

Cheney insisted Bush's (and therefore his) record was "superb," adding that "no other president has spent more time or political capital trying to avert a fiscal disaster that everyone knows is coming."

At the same time, both Fed chairman Ben Bernanke and Bank of England governor Mervyn King are being criticized for flip-flopping in their handling of the financial crisis, with King in particular catching flack over the run at Britain's Northern Rock bank.

Why are such senior figures suddenly so concerned about their reputations? What do they see coming that causes them to go into a very public "not my fault" mode?

These comments are de facto admissions that the global financial system is bankrupt, and that the efforts of the central bankers to contain the collapse have failed. Something catastrophic this way comes, and the bankers know it.

Runs on the Banks
Northern Rock, a $230 billion British mortgage bank based in Newcastle, is emblematic of the problems facing financial institutions at this point. The bank ran into serious trouble in mid-September when it could not borrow the money to make new loans, and had to turn to the Bank of England for emergency funds. As word of the bank's problems spread, anxious depositors descended on the bank to withdraw their funds, sparking a panic. Few things scare bankers more than runs, which can easily spread as panic sets in. Even healthy banks can be destroyed by runs, and there are few, if any, major banks that are healthy these days.

The Bank of England, despite its recent assurances that it would not bail out faltering institutions, threw all its promises out the window to stop the runs from spreading. The Bank stepped in as lender of last resort, and the British government, through Chancellor of the Exchequer Alistair Darling, guaranteed the Northern Rock depositors that their money was safe. Subsequently, the Bank agreed to accept mortgages as collateral for loans. This move, like the decision of the Fed to buy mortgage-backed securities and accept asset-backed commercial paper as collateral for loans to the banks, reflects the desperation of the central banks to stop the collapse. Thus far, the Fed, the European Central Bank, the Bank of England, and other central banks have pumped hundreds of billions of dollars into the system in a vain attempt to control its collapse.

The run on Northern Rock in September followed a similar run against Countryside Bank in California in August, amid fears that its mortgage-lending parent Countrywide Financial would collapse. This run occurred in spite of the fact that the bank deposits were insured by the FDIC. Countrywide subsequently borrowed $11 billion from a line of credit set up before the crisis struck, and later received a $2 billion injection from Bank of America.

While the bankers have tried to portray these runs as isolated cases, they actually represent an important inflection point in the disintegration of the system. We have gone from denial, in which the problem was presented as too minor for serious concern, to attempts to dismiss it as a mere "subprime" crisis, to treating it as a larger but still manageable "credit crunch," to the point where panic is openly setting in, and the central banks are openly intervening, and the players are looking for ways to escape the blame for the growing catastrophe.

Gasoline on the Flames
Lyndon LaRouche has compared the central bankers' attempts to pump money into the system to keep it from seizing up as the equivalent of trying to put out a fire by pouring cold gasoline on the flames. By treating the crisis as a "credit crunch" which can be solved by lowering interest rates and providing liquidity for borrowing, the central banks are only making matters worse. The problem here is not a lack of credit, but far, far too much debt, which the central bank actions exacerbate.

The only rational approach to a debt crisis of this magnitude, is to address the economic policies which created it. The U.S. economy has been operating below breakeven for some
four decades, during which period the productive side of our economy has been systematically dismantled and replaced with casino-like speculation and Information Age paper-pushing. As a substitute for the wealth formerly generated by the productive sector, we have gone ever deeper into debt, to the point that we now have an increase in debt of nearly $5 for each $1 increase in GDP. The level of debt is crushing what remains of our economy, and adding more debt will not help.

What is needed is to return to a productive economy, led by manufacturing and supported by scientific and technological breakthroughs, investment in infrastructure and essential public services such as education and health care. The first step in that direction is to put the financial system through bankruptcy, while erecting firewalls to protect the welfare of ordinary citizens. Freeze the debt, stop foreclosures, protect the essential functions including banking; save the people and the economy, and let the speculators take their losses.

The alternative is a hyperinflationary blowout of the financial system, coupled with a savage deflation of living standards, and a descent into corporativist fascism.

Deregulation Is Sabotage
Deregulation has been an unmitigated disaster which has destroyed our economy. Our deregulated transportation system is a nightmare, from our cattle-car airlines to the disappearing rail grid, to the overloaded trucks tearing up our highways, and the decline of our inland waterways. Electricity deregulation, far from lowering prices, has raised them, in some cases to obscene levels. Health care, once the province of doctors, is now largely run by corporate bureaucrats under orders to protect profits, not patients. Financial deregulation, coupled with changes in tax policy designed to promote speculation at the expense of production, has turned our economy from an industrial powerhouse into a bankrupt casino.

Deregulation, to put it simply, was intended to destroy our economy, and we are now seeing the fruits of that effort. At every downward racheting of the system, we are told that further deregulation is required to deal with the problems. Hand in hand with this goes globalization. To make our companies more competitive, we are told, we must outsource our manufacturing to places where wages are lower. The result is that the Midwest, formerly the center of the industrial world, is now a rust-bucket. Our family farms are dying, our food supply increasingly imported by giant agri-business cartels. We are more dependent than ever before on these corporate cartels, which are increasingly global in scope and controlled by the international bankers.

Where we are headed, is a combination of a return to the feudalist/looting model of the British East India Company, paired with the surveillance and control capability of George Orwell's Big Brother.

Complete BS
Virtually everything we are told about the world situation today, is complete bullshit. What we are witnessing is a power grab by the British-centered international financial oligarchy, which wants to put the genie of human progress back in the bottle as a way of maintaining its miserable power over world affairs. The men of the empire have no intention of allowing the United States to fulfill its founding mission of leading the world out of colonialism, and have no intention of allowing the nations of Ibero-America, Africa, and Asia of developing into sovereign nation-states which put the welfare of their people ahead of the demands of the imperial parasites.

Globalization is a euphemism for imperialism, and deregulation is a euphemism for destroying the ability of a nation to protect itself from the empire. The target of the police-state measures put into place by the Bush Administration is not the oft-mentioned amorphous terrorists, but the American people. The war against Iraq was sold to the American establishment as a Malthusian move to secure our oil supplies, and to the public as a move to protect us from an imminent attack from Saddam's weapons of mass destruction, but the real reason was to destroy us as a nation. The beating of the war drums against Iran, and others, is more of the same.

Forget the financial system—it's gone. What we must defend is the concept of national sovereignty and the public welfare, as epitomized by the Declaration of Independence and the Constitution. This is a crisis of civilization itself, and we are the battleground. Save civilization, not speculation.

RE: LaRouche - Admin - 09-30-2007

Lyndon H. LaRouche, Jr

The task I have to perform here today, is unusual, and it's not necessarily by my choice. The choice has been made for us: We've now come to the point that civilization as a whole is in danger of collapse. We're not faced with merely a depression; we're far past that. We're at the point where a chain reaction, a collapse of the dollar value, which has already collapsed significantly in recent months, but a further, sudden collapse of the dollar, would ruin China, damage India inconceivably, and blow out Europe; that Europe, China, India and other countries could not survive a sudden collapse of the dollar, of the type which is about to take place. It is already in process of taking place.

So therefore, this is an unusual time. We're looking, not at the threat of a depression: We're looking at the threat of a global, prolonged, new dark age of humanity.

And the question before us is, can we overcome this threat at this stage. It should have been done before, but sometimes in the course of history, necessary decisions come very late. Only when conditions are absolutely impossible, will people give up the foolishness which they have contributed to causing the crisis to occur.

Now, in such a state, you do not go back and say, "We are going to reaffirm our traditions." Because, as I emphasize today, the tradition we have in the world today, is best understood by people about my age, or older, like Amelia [Boynton Robinson]. We were there when the change came. And the change, as I experienced it, started when I was in military service overseas. And I was in India for a time, at the close of my service there, when President Roosevelt died. And on that occasion, some soldiers came to me, and said, "Can we meet with you later tonight?" They did not say what the subject was, but I had a sneaking suspicion what it might be. And the question was put to me: "What, in your opinion, is our fate, now, with the death of Franklin Roosevelt? What's going to happen to us, now, that Roosevelt is dead?" And I told them, off-hand, I said, "Well, I can say that we have lived and fought war, under a great United States President. We are now left in the hands of a very little man—and I'm afraid for us."

Then, I came back out of Burma—I had been stationed in northern Burma in the closing period of the war—and came back, and at that point, what I had feared earlier with the death of Roosevelt, was already taking place. The United States, under Franklin Roosevelt, had a very unsteady alliance with the British Empire. The British Empire was the agency which put Hitler into power in Germany. Not just the kingdom, but the British Empire, typified by the Bank of England, and by the correlation of elements, financial elements which are the British Empire. The British Empire is modelled upon ancient Venice, medieval Venice, in which a group of bankers, like a cluster of parasites, forms an empire. And finds instruments of government to do its bidding.

Roosevelt vs. the British Empire
What happened is, Roosevelt had been committed to eliminating that. But, in order to defeat Hitler, he had to get into an alliance with Britain. And he had to force them into that alliance, because they didn't want to do it! They liked Hitler! They invented him! They created him! They put in him into power, with the help of some people in the United States: the Harriman bank, for example, known for its racist policies in an earlier period. It was the grandfather of the present President of the United States, Prescott Bush, who was general secretary for the firm of Brown Brothers Harriman, who wrote the check, in effect, the message to a German bank, at a point that the Nazi Party was bankrupt, and saved the Nazi Party! It was the British monarchy, and its representative, Hjalmar Schacht, who put Hitler into power.

We had to get rid of Hitler. We couldn't do it alone. We had an alliance with the Soviet Union on this issue. We had to have the British alliance. And we were dragged down during the war, by the fact that we had an untrustworthy ally, Britain.

I once had met a German general, who had been a colonel in North Africa; a distinguished fellow, a great man in international law. And at my first encounter with him, I said, "Well, General, would you agree with me that Montgomery was the worst commander in World War II?" And he answered me, and said, "Well, you can't say anything bad about Montgomery. He saved my life." He said, "I was commanding the rear guard for Rommel, in the retreat from Egypt, and if he had ever flanked me, I'd be dead!" [laughter]

Well, if you know what Montgomery was, you know what he was in "[Operation] Market Garden": He prolonged the war in Europe, for over a year, by moving a First Army operation through a field where the roads couldn't carry the supporting troops to rescue the parachuters that had jumped in there! And he continued the war for a year! The war would have been over, by the end of 1944, but for Montgomery. And he was stuck in there, not only because he was a very bad general, very incompetent, but he had provided precisely that margin of incompetence that Churchill wanted: Because Churchill took out competent commanders on the British side, for fear they would help to win the war too soon. So, this is the kind of problem we faced.

So, when Roosevelt died, what went into action? Roosevelt's program for the postwar world was something the British were determined would not occur: And that was, to eliminate colonialism, in all its manifestations. That all nations, and Roosevelt's speech in Casablanca, where he confronted Churchill on this, was explicit. He said, "Take this part of Africa! What can we do after the war? What can we do to rebuild this area?" And laid it out: Roosevelt's policy was elimination of the British Empire, elimination of colonialism.

And when I got back to Calcutta, from northern Burma, with Truman as President, rather than Roosevelt, I saw it in action. I saw it through Southeast Asia: The Japanese troops had surrendered to the forces of Ho Chi Minh, who had been a U.S. ally under Roosevelt. And the British ordered the Japanese troops to be taken out of the internment camps, given back their weapons, and reoccupy Indo-China. And you remember that history? What that led to? The wars of France in Indo-China, the other wars?

How about the Dutch, what the damned Dutch did in Indonesia, in the same way? A long war, to suppress where there should have been development. The promotion of the split, the civil war, in India. And all through Africa! Africa is the worst of all cases! What the British have done in Africa, is one of the worst crimes against humanity ever imagined. And that started back with Kitchener, not with someone later—Kitchener, in 1898.

So, what we have is that.

The UN Mission: To Liberate Colonial Nations
Now, Roosevelt's conception and alliance were based on a number of things, for the postwar period: The first thing was, bringing Russia and China—even though China was a shattered nation in part at that time—into a bloc to create the United Nations. And the United Nations was supposed to be a forum, for the liberation of areas which had been victims of colonialism, or similar kinds of things. To build up new nations, and to assist them in their development as new nations. And to build a community of sovereign nation-states on this planet, of perfect sovereignty of each nation-state, but bound together by an understanding of the lessons of the recent war: What we had to do, to live with one another, and to achieve the common aims of mankind—different cultures, but the result desired is the same: the common aims of mankind, from the top. To create a community of nations, which, as a force, would prevent anything contrary to that ever happening.

And under a British policy, dictated to the United States, by treasonous elements in New York City and elsewhere, we adopted the opposite policy.

Now, the first thing we did, under Churchill's prompting, was to virtually declare war on the Soviet Union. And Bertrand Russell, a great Liberal, proposed—actually earlier than he published it, but proposed it earlier—a preventive nuclear attack on the Soviet Union, even though the United States no longer had the weapons to do that, because we had used up our last two nuclear weapons as prototypes on Hiroshima and Nagasaki; a totally unnecessary attack. Japan was already defeated; and the terms of surrender had been negotiated through the Vatican, with Hirohito. But under Churchill's and British pressure, the Truman government did not accept the surrender of Japan. All they had to do, was what was negotiated with the Vatican office of special affairs—the man who later became Pope Paul VI [Cardinal Giovanni Montini]—all they had to do, the one condition in the agreement, was to negotiate the surrender with the office of the Emperor of Japan, the Mikado. That's all they had to do. Because, the Mikado otherwise would not have the authority to tell his own troops to stop the fighting.

Japan was hopelessly defeated! The main island of Japan was completely blockaded. U.S. air power and naval forces had them bottled up—they weren't going anywhere! Either out of there, or in there. Supplies weren't coming in; resources didn't exist; it was a defeated and crushed nation, with one island, with a fragile control there. And we prolonged the war unnecessarily, because the British wanted us to do it!

And then, in the process, we went ahead with this attack on the Soviet Union, because it was believed, that the Soviet Union didn't have the capability of developing nuclear weapons in time to counter the British. Once they discovered, about 1948, that the Soviet Union was developing weapons which could do that—then they changed their mind somewhat. And that was the end of Truman.

The United States Becomes a Great Power
But the rest of the policy was a return to the British Empire! And the British Empire was founded, actually, at the Treaty of Paris, the Peace of Paris, of 1763—the same Treaty of Paris which caused the patriots in the United States to realize they were going to have to fight to free themselves from the new British Empire, which led to the American Revolution. And only the traitors and scoundrels in our country still felt loyal to the British. The world has been living under a British empire! We threatened that British Empire, as a nation, as the United States, with a defeat of Britain's agents inside our own country: the Confederacy! The Confederacy was created by the British Empire, by Lord Palmerston.

We defeated that, and we developed a continental nation, which had been our policy always: to accept the Canadian border, accept the Mexican border, and have a border at the Atlantic and Pacific Oceans. We would develop ourselves as a continental, sovereign nation-state.

And we did it. We did it with the transcontinental railroads and other things. We did it with immigration from Europe and elsewhere. We took whole areas of land, brought Germans from various parts of Germany, and brought them into the United States, into the Dakotas and elsewhere, Nebraska. They were farmers. We gave them tracts of land, we gave them assistance. We built a supporting system. We became the most powerful nation of any individual nation-state on this planet—under the conditions of civil war!

What this did in Europe, this unleashed in Europe a desire for freedom from the British Empire. It occurred after the fall of Napoleon III in France, developments there. It occurred in Germany in a very significant way: Bismarck responded to the American success, and challenged the British Empire—not seeking war, but challenging it in terms of economic development. Mendeleyev, the great scientist, attended the 1876 Convention in Philadelphia, and went back and convinced the Czar to build the transcontinental railroad. Germany decided to build railroads from Berlin to Baghdad. Great railroad building occurred. Great changes in the laws occurred in Germany, the Bismarck reforms, 1877-79, were done directly in consultation with the United States, by leading circles in the United States—the Lincoln tradition.

And the British Empire didn't like it. Because, if the nations of Europe, the nations of Eurasia, were to develop their own land-area with railroads, especially of the type we had built as transcontinental railroads in the United States, then, by means of railroads, you could develop more economically efficient methods of transporting goods, over long distances, than you could by water, by sea! This was the issue. If you have internal control over your own territory, efficient internal control, and modern technology, and modern science, you do not use inefficient methods of transporting goods, which is by sea, because you can transport by land. And every inch of movement, on land, in mass transport, well organized, increases the productive power of the nation's economy! Movement by sea, does not, as a movement by sea, contribute anything to the economy. The geopolitical fraud.

And we've now entered a time, with magnetic levitation, and with the kinds of projects that Helga [Zepp-LaRouche] was reporting on earlier, we've reached the point, where we can develop systems to take what has been previously considered the undevelopable or undesirable areas of the world, where development is potential. We now have the means, on this planet as a whole, to transform the planet, to increase the productive powers of labor, the ability to survive, to earn a decent living, as never before in human history! With new forms of mass transit on land; with emphasis on nuclear power, on higher forms than nuclear fission, in terms of developing isotopes, and things like that; to open up the unreachable areas, where raw materials lie on this planet, with vast populations in China, India, and elsewhere, in great need of these kinds of technologies, these kinds of materials; we can now proceed to assure the provision of those materials for the development of people, even in the poorest areas of the world. We now have that potential. It lies before us.

What this represents: This represents a threat to Empire. The United States, which was the most powerful nation that ever existed in 1945, is now a piece of wreckage. And except for nuclear weapons, it does not have much power in the world. Ruined. The issue is, all the way, especially since 1648, since the Treaty of Westphalia, the issue has been the development of sovereign nation-states, according to the Peace of Westphalia, throughout the world. We have demonstrated in Europe, in the United States, and elsewhere, that that can be done. The thing is, to continue the job.

But! What that represents, the very objective of bringing about that kind of world, is a threat to the existence of empire in any form. And therefore, what the United States represented on the day that Roosevelt died, was the greatest threat the British Empire had ever faced. And everything bad, of importance, that's happened to the world, since Roosevelt died, has been the result of forces centered in the Anglo-Dutch Liberals of Europe, but with treasonous elements in my own country. Treasonous elements, like some of our past Presidents—and idiots like one of our present ones.

And therefore, the geopolitical issue remains the same. It's not geopolitics of land-area against sea. It's the fact that the time has come, the long period of time when power lay with maritime power, as opposed to land power—that has ended, technologically. We've now reached the point that we can provide, by land, in development of land-area, a much greater power, much greater efficiency, in economy, than we could by sea. Oh, we'll use the ocean! The ocean has a lot of minerals in it, we have to manage that. We'll use it in many other ways. But the basic power, of productive power, lies in that. And the productive power lies, not just in people; the productive power lies in the development of people: the development of their technologies, their freedom to invent, the power of discovery, the rejoicing in improvement.

And therefore, that's what the fight is.

And that has been the issue of wars! Ever since the Renaissance, the 15th-Century Renaissance: The issue of all major European wars has been that issue! Stop this system of imperialism—whether it's ancient Persian imperialism; whether it's the imperialism of the Roman Empire, or the Byzantine Empire, or the medieval Crusader/Venetian system, or the British Empire. The challenge to humanity is to become human: We must get rid of this factor of empire.

We must create a system of sovereign nation-states, which is based on using the culture of a people, and the development of that culture, to enable people to participate with parity, in the work of a community of nations, of sovereign nations, and to develop man as man can be developed.

And that's what this crisis is all about.

Long Wars to No Purpose
It didn't start recently. It didn't start with the death of Roosevelt. It was there, already. It was the great, long-sweeping crisis of humanity, from as far back as we know the inside of the history of any part of the world; back to about 700 B.C., for Europe.

So, what happened is, the crisis we're facing today, started as the Cold War. Now, the United States continued to prosper, with some ups and downs, until the assassination of John F. Kennedy; we continued to progress, but the evidence is all there. We don't need to discuss that. But the beginning of the so-called "Cold War," the war of recolonization, and the seeking of a war with the Soviet Union, for which there was no reason. Not on Stalin's side—only on the British side.

That is the beginning of the crisis, because, the geopolitical issue was the motive of both London, and also of those forces centered in New York City, which we associate with the financier oligarchy, the people who were behind Hitler, and the people who were behind this. At that point, it was impossible to shut down the United States, as what it had become under Roosevelt, because we had a great productive potential. The world had been shattered by war; Europe needed us to rebuild, the Soviet Union needed us to rebuild, China needed us to build, and so forth.

So therefore, we went along with fits and starts, until the assassination of John F. Kennedy. And that was not an Oswald mistake, nor was that a mistake of any side. It was intentional. The intention was to destroy the United States. John Kennedy, unlike his father, had come into the Presidency, under association with Franklin Roosevelt's tradition. He campaigned for the revival of the Roosevelt initiative.

So you have a phase which is from 1945 to 1964, the assassination of Kennedy and so forth—'63 and what happened afterward—you have a period in which the United States' economy is still powerful, and it's still growing; the standard of living of people is still increasing. Then something starts—and this is where the crisis begins. The crisis we're living through today, begins actually with the assassination of President John F. Kennedy. The roots of the crisis already existed. The roots of the crisis were the conflict between the United States and the British Empire, essentially since the time of Lincoln's victory over the British puppet called the Confederacy. But the ability to wreck the U.S. economy, wreck the U.S. system, began with the assassination of Kennedy.

What happened was, of course, as you know, we got into the war in Indo-China. There was never any damn good reason for getting into that war in Indo-China—none! We had the wrong policy, and we tried to shove the wrong policy down the throat of Ho Chi Minh. Ho Chi Minh was a man who was very favorably disposed toward the United States. He had been an ally of the United States, when Roosevelt was President! Any decent treatment of [Ho Chi Minh] by the United States would have been respected. It might have been difficult—but, diplomacy is always supposed to deal with difficulties. The fact that it's difficult is no reason to avoid it.

So, with this war, we did something which is the same thing that was done by the Persian Empire to Athens, when Athens committed a war crime against the people of Melos. And this led, through the introduction of sophistry by the Persian Empire; the Persian Empire had been defeated on the sea, it was outflanked, and therefore was defeated by land. But it conquered through the Cult of Delphi, through the corruption of the Sophistry, which destroyed the morality of Athens, and induced Athens to commit crimes against its neighbors and allies! Which continued as the Peloponnesian War. And Athens has not come back since then!

Over the history of mankind, since the rise of European civilization, from about 700 B.C., centered on Greece and Cyrenaica, as an ally of Egypt, and allied with the Ionians, and allied with the Etruscans, since that period of the birth of what is a distinctly European civilization—which is unique; there were traces of it from earlier times, but it was unique: This civilization has been constantly destroyed, in itself, by these kinds of methods.

The method that is most frequent is long wars, like the Peloponnesian War, a war with no purpose; that is, with no moral purpose; with no objective, with no strategic objective. A war, you get into with great reluctance and promptness, when you must do it: You get through and get out, as quickly as possible. You don't prolong a war. You don't want your nation fighting a war for two, three years. You want it short, snappy, and out! And the major weapon in warfare today, is, good diplomacy. There's no condition or conflict on this planet, that can not generally be handled with diplomacy, or aided by good diplomacy, including the whole mess in Southwest Asia.

All right, so we had that war.

The Destruction of the United States
Then, we had the 68ers—and this is something that's a very sensitive subject in Europe, as well as in the United States. What were the 68ers? Go back to the early 1950s and the middle of the 1950s; you take two books, which were rather popular in that period: One was called White Collar—the earlier one; the second was called The Organization Man. The U.S. population of my generation had children—they had children whom they taught a certain ideology, which they were conditioned to teach—which became known as the Baby-Boomer generation. It was not a biological generation, it was a cultural generation; or, I used to call it a cultural de-generation.

So, this generation has a peculiarity, strategically, which you will not find in history otherwise—not to my knowledge, not in the history of the United States since my first ancestor landed there in the early part of the 17th Century. Every cultural tradition in the United States, as generally in Europe, has been, the individual person thinks of themselves as an adult, as being an adult generation which is going to produce a generation of children, which are in turn going to produce a generation of grandchildren. So the normal sense of self-interest of a healthy person in a healthy culture: They know they're going to die; and therefore—obviously, the purpose of living is not to die—it's a contingency of life; it's not a purpose of life. The purpose of life is to use what you have, as a life, in your development, in your self-development, in what you think is good, in what you are going to contribute, to at least your children and grandchildren. That's elementary morality in virtually any part of the world, where there is morality.

The Baby-Boomer generation did not have morality. And that is not a biological generation; that is the so-called "white-collar generation" of a group of people who were educated in the same way that Sophistry was produced in Pericles' Athens. By a corruption, a cultural corruption, introduced—an existentialist corruption, of the type typified by Hannah Arendt and Theodor Adorno, and so forth in Germany; and also Bertholt Brecht. This corruption, this Dionysian, Nietzschean corruption of the culture, was induced as a method of education and family culture, in the United States. This was associated with a period of a reign of terror, which some people think of as the name "McCarthyism": That if you wanted to have a secure position, and gain an advantage, well, you had to get through a university, you had to get employed in a place where you could get a security clearance; otherwise, you could not get the kind of household you wanted. But as a condition of keeping your security clearance, on various levels, both formally and otherwise, you had to behave in a certain way. And the main thing was to instruct the children not to do anything that would get their parents, and their fathers' income, into trouble. Because all this juicy middle-class income would vanish!

This generation then went through the shock effect, as children—they were born largely between 1945 and 1958, because it was in the earlier period that the adult members of the family of the so-called white-collar class, developed this idea that "they had made it." They were not like the blue-collar people whom they treated as inferior—farmers, blue-collar workers, so forth, "Oh, they're inferior. We are the golden generation. We have the jobs in the corporations, where we're white collar. We're engineers, we're this, we're that! We've made it! We're the Golden Generation!" And they imbued this idea in their children's generation as an ideal standard of dynamics.

And so, thus, this thing came to an end, because the '57-'58 depression spoiled the party for the parents of the Baby-Boomer generation.

And we had the explosion in Europe, as in the United States, for the same general reasons: the so-called 68er explosion. The 68er explosion was pre-orchestrated, it was pre-orchestrated from the beginning of the postwar period, as an operation to destroy culture. As in the Paris Review, for example, which is one of the abominations which typifies this systemic destruction of culture, by people who remain my enemies today, like John Train, and his crowd there.

So, we were destroyed. Now, this is the generation which hated blue collar! The youth, the 68ers, they hated blue collar! They hated industry. They hated technology. They hated Classical culture. And from 1968 on, they did two things: They destroyed the Democratic Party inside the United States, because the division between blue collar and white collar inside the Democratic Party on the issue of the Vietnam War and so forth, that destroyed the Democratic Party! That brought us Nixon and the Nixon Administration. And the Nixon Administration was a vehicle to proceed with the actual destruction of the U.S. economy. From the day that Nixon entered office, virtually, and said that he was a man of Adam Smith, that was the beginning, that was the signal. And from there on, we went through this.

So, we went through several periods, and I'll go through this, identifying this. Remember, this is against the background of the prolonged Indo-China War, 1964-1975, approximately, this period, '72-'75. The Indo-China War was the marker which produced the Hate Generation, called the Baby-Boomer Generation. And that generation said, no nuclear power, no technology, no more investment in infrastructure. "We wanna smoke our pot, and take our LSD. We want our crazy sex life. We invented new sexes—we're going to try them all out."

So, what we went through, with the floating of the dollar, we broke up the Bretton Woods system, and we started a process of liberalization which is the root of the destruction of the economy and financial system of the world today, especially the United States and Europe. We went through a second phase, the destruction of the economy, the Trilateral Commission thing, of that crowd. What we did is, then we destroyed the structure of the economy: The first thing they did, they orchestrated Three Mile Island, and that was an orchestrated operation, and that was to get rid of nuclear power. That's how they did that.

They also destroyed every method of stabilization which had been set up by Roosevelt for the internal economy. They unleashed a reign of usury. They wiped off the books, all anti-usury laws in the United States. They destroyed the mortgage system, under which housing had been developed in the postwar period. And the banking system, the kind of banking, real estate banks which were associated with the promotion of the housing industry, and continued to loot it.

So, by 1981, we'd gone through two phases. We had destroyed the international monetary system on which our lives depended, and we had destroyed the internal integument of the political-economic culture of the United States.

In comes Reagan: And for peculiar reasons, you had a lot of Democrats who had left the Democratic Party and went over to Reagan, because they hated the Democratic Party so much, in what it had done in destroying the economy, and destroying the social life of the country.

So, this led into a period of continued collapse of the U.S. economy, over the period 1981 to 1987. In October of 1987, in the first two weeks of October, we had a 1929 depression, in terms of the markets. The collapse was that deep, just as deep as had occurred under Hoover. But what happened? A decision was made. Paul Volcker at that time was chairman of the Federal Reserve Board, and Paul was uncertain about what to do. But Alan Greenspan, who had been nominated to take the position, said, "Hold everything, I'm going to fix everything. I'm coming in." So we went through a monetary lunacy period, of 1988 to 2007, and to the present day, in which we have destroyed much of the world's economy.

For example, the physical economy of the United States, the industrial economy of the United States depends upon what? It depends upon military-related production: Halliburton, for example. The war in Iraq is a way of making money for firms which are producing military goods, and doing military things, in civilian guise, for that war. What we've done with these things: We have changed the character of the society.

The 'Revolution in Military Affairs'
And there's one thing that's most important through all of this process: Remember, there's a book by Samuel P. Huntington, called The Soldier and the State. And The Soldier and the State is actually an echo of not only the Nazi system, the Nazi SS system, but also, earlier, the Roman legions. This is called, in the United States today, the "Revolution in Military Affairs." This is what's being conducted: is to create private armies, that is, eliminating all military—that's why they're not too unhappy when the U.S. military goes down in Iraq, because they're eliminating every part of the military, except the Air Force, and related systems. Because, the objective, under this regime, if it continues, was to have space-based systems of delivery of weapons, so that you could, on some place on Earth, with a monopoly of weapons based in space, you could push a button and annihilate any part of the human race you chose to eliminate. So they want a space-based system, an international space-based system, which can exert tyranny over the world, in the way the Roman legions tried in the time when they were doing that sort of thing.

The policy of the United States has been, since the time that Dick Cheney was put into the position of Secretary of Defense, in the first Bush Administration, has been this policy: the Revolution in Military Affairs. People like George Shultz, are part of this; Felix Rohatyn, a real fascist little dictator in finance, is part of the same thing: Revolution in Military Affairs.

The other side of this thing, is globalization. A feature of globalization is this so-called global warming hoax, for which there is no competent scientist, who believes in global warming—unless he's a liar. He can't believe in it. It contradicts all science, and there's no evidence to support it. But the green philosophy, just as the green philosophy was used to destroy nuclear power and other things in Germany, this ideology is one of the weapons, together with the Revolution in Military Affairs, which characterizes a change in the cultural characteristics of the population of the United States and other countries.

This is another version of the Apollo-Dionysian cult tradition, which is what we saw with the Paris Review, for example, back in the 1950s, and so forth.

Now, this is what Eisenhower defined, in his last days as President, as a "military-industrial complex." That's the meaning of "military-industrial complex." But what he meant, referred to what had happened under British direction with the death of Franklin Roosevelt and Truman's entry into the office: We have been on that road, toward this "reform in military affairs" to eliminate the citizen army! To eliminate national military forces, as national forces, and to turn more and more of control over military power into private hands, in the hands of supranational agencies. This is true empire! This is the New Empire, the new form of what was proposed to the head of the British operation, Lord Shelburne, by Gibbon in the Decline and Fall of the Roman Empire.

Again, the center of this is the Anglo-Dutch Liberal system, typified by the British Empire. That's where the problem lies.

So, this is not a war among nations. This is not wars among nations. This is not strategic conflicts among nations; this is not what runs this thing. What runs this thing, is a struggle, of the legacy of empire, and the form of empire, from before the time of the great Council of Florence in the 15th Century, to the present. It's the determination to eliminate the sovereign nation-state as an institution from the planet, to establish what's called "globalization."

Maastricht vs. the Nation-State
For example—and I'll get to this, under the next heading here—but, the problem we're facing today, is that Europe, in particular, Western and Central Europe, do not function. Why don't they function? Because Maastricht, in its present implementation, has destroyed the effective sovereignty of the nation-states of Western and Central Europe. Sovereign decisions based on national interest are no longer a right of the people or governments of these nations, as long as this arrangement continues to be the case. The Maastricht Treaty did it. Therefore, the great reform, which I'm coming to now, which we have to make, can not be undertaken, initiated, from anyone in Western or Central Europe, not by any government; it can't be done. They have lost their independence! They've lost their sovereignty! Maastricht took away the sovereignty. Maastricht proposed it as a British proposal—but they didn't join it. It was meant for others' consumption, not theirs, hmm?

Therefore, we depend upon those nations which still have a sense of sovereignty, and power, as a combination, to make those reforms which eliminate everything that went wrong, in general, from the time that Franklin Roosevelt died. That's what the issue is. That's the issue of every struggle on this planet of any significance.

Therefore, we depend upon getting the United States to recognize its own self-interest. And this bill that I've proposed, which is being pushed now, by people in the Congress, on this protection of housing and banks, this is simply the kind of measure that will mobilize the American people to take back their sovereignty, their sense of sovereignty. Under those conditions, conditions in which the President of Russia has been assiduously pursuing some kind of cooperation with the United States, and correctly so—since the time Putin met Bush for the first time, Putin has stuck to that policy, repeatedly. He's continuing it now. There are important parts of the U.S. institutions which are continuing that discussion, with the Putin government. You would be surprised at some of the names involved in that, but it's there.

Only by the United States realizing that potential, and coming to an agreement with Russia, which also has to be in an agreement with China and India, would we have a possibility of an initiative, to change the way things are going now, away from doom, into an immediate change into a new system. That does not mean we're talking about four powers to run the world. It means, we need an initiating force, around which the nations of the world can rally. They need that. They need an initiating force, of authority, around which they can rally to say, "Me, too." Then we can use the United Nations, and what that implies, as a vehicle for what Roosevelt had intended, to create a system of sovereign nation-states, and nothing but sovereign nation-states, on this planet.

So therefore, that's where the problem lies. Go back to the death of Roosevelt: That's the problem! And all the other things are diversions—often caused by people who try to distract our attention from what the real issues are.

RE: LaRouche - Admin - 09-30-2007

Creating a Public Credit System

This involves, now, a special problem. And this is where I become somewhat technical, but it's necessary: There is no way, no conceivable way, in which the existing monetary-financial systems, among nations, or of any nation, could be salvaged. The degree of bankruptcy within the existing financial systems, is so far gone, there is no possible way of refinancing any part of this, within the terms of the system. There's only one thing you can do, and from that flows the only method that can work: What you can do, is put the entire, international monetary-financial system into bankruptcy.

Now, that's easily done, technically. Because these systems are so intertwined with each other, there is no such thing as a national monetary-financial system. The banks of the United States, the banks of Europe, don't own anything! They are controlled by the hedge funds. The hedge funds have been using the banks like toilets; they visit once in a while for comfort! Banks don't have resources in them. It's not a matter of settling how many dimes for a dollar. It's impossible. There are no reforms within the framework of the system that can work! Not only because it can't work on a national basis, and because it can't work for a system as a whole. The monetarists can all be unemployed: We don't need monetarists any more. Matter of fact, we would like to get rid of them!

Because, we're going to have to go to a completely new world system, and it's going to have to go by a certain kind of step. And this is the remedy: What has to be done—and my little proposal for this new legislation, for Federal protection of households, mortgaged households, but households in general, and banks; that is, legitimate banks, banks that actually take deposits and loan money, and conduct that kind of business. We need them, and everybody knows that. You need these banks, because those are the ones on which the community depends, for managing its affairs. Without these banks, communities don't function. So those banks, even if they're bankrupt, are going to be protected under this act.

Secondly: No householder can be put out of their home because of foreclosure. We're going to settle it? No! We're not going to settle anything! We're just going to take all this whole package of mortgage paper, we're going to take it, in one big package, and say it's all frozen. It's all taken in receivership by the Federal government. And it's going to sit there. And we'll arrange that the people who live in those houses will pay something to the relevant bank on that account, every month. But they will stay in their houses! We are not going to try to settle the accounts, because we know that the value of these mortgages is going to collapse to a very small fraction of their present nominal value. So any attempt to write down some of the mortgages, or buy off part of it, is not going to work. Because the intrinsic value of these mortgages—we don't know where it lies, but it lies "way down there," someplace!

And therefore, our problem is, to prevent a disruption of the U.S. economy, in particular. Therefore, how do you prevent a disruption? Well, you freeze it! It's like taking a firm into bankruptcy, into receivership for protection—you freeze it.

It now lies in the Federal government. The Federal government is now responsible, at some time in the future, to clean this mess up. In the meantime, it's frozen. The people will stay in their homes; they will pay a reasonable amount, as the equivalent of rent, into the accounts against these mortgages. But the mortgage will sit there in the banks! We're not going to try to renegotiate them now.

In other words, we're creating a firewall, against a chain reaction, already in process. We will have to do the same thing in other categories. What does that mean? It means that the Federal government—and we recommend this heartily to European and other governments to do the same thing—faced with this situation, you have to realize that you have to eliminate the factor of the present system, from the economic and related life of the people in the nation. And it's only by neutralizing that, by putting it in a cage—like a little squirrel in a cage, let it spin as fast as it wants, but it's going to stay in that cage. Because we're going to a new kind of system.

We're going to get out of a monetary system which is the basis for empires, of the type we've been discussing, and we're going to a public credit system, which is what the United States Constitution prescribes. The U.S. Constitution says, "We're not owned by banks. We're not owned by bankers. We own the bankers." Because, in our Constitution, the printing, or uttering of money, or the uttering of a promise to deliver a created money, is the power of the Federal government. The states have no power to utter money. Only the Federal government has the power to do so, and does so, only with the consent of the House of Representatives.

Now, the uttering of money, under this kind of system, is a credit system, not a monetary system. The government utters the currency, or utters the credit, against an issuable amount of currency, as the Congress has allowed it to do: The Congress votes a bill; the government can now utter so much currency, which will be charged to the debt of the United States. That is the equivalent of money.

What do you do with it? Well, you can do necessary things, but you also do something much more fundamental: You use this money, that you've created, this credit, you use this for large-scale infrastructural development, primarily. Because large-scale infrastructural development—and we're way short of it in the United States and in Europe, right now—it means all the things that are the public sector: power stations, mass-transportation systems, health-care systems, so forth. These are things which are essential to all parts of the population. They have no control over their need for them—hmm? They are facilities on which we depend. So therefore, we issue credit; we issue credit for fixing up infrastructure, maintaining it.

Now, when you start to fix up infrastructure, then you really put the rest of the economy to work, in contributing to this work of building up the infrastructure. So now, you issue credit to people who are doing that. Now, you're into the private sector, and you're bringing in firms which supply this or that facility, this or that job. And now, you are stimulating the business, in the community, through infrastructure for the future. And you're doing it in a way which keeps a balance between the ratio of the public sector and the private sector.

But how is this going to function? Let's take another problem here: We have now a floating condition of currencies. Under floating conditions of currencies, the price for lending is uncontrollable. Because, if the currency that you're dealing with is dropping in value against your currency, what are you going to charge for your interest rate? So, under a floating exchange rate in a declining economy, the tendency is, on the one hand, for a demand for cheap credit, and on the other, a denial of a possibility of generating it through the private sector, or through central banking.

So therefore, we have the problem, that, for global development, we must have a fixed-exchange-rate system internationally. What does that mean? Essentially, you try, as close as possible, to actually freeze currencies at their present relative values. Freeze them.

And then go to a state public credit system. How do you do the state public credit system? Well, we have China, we have India, we have Russia, we have the United States, and other nations, which all need a lot of things. And these things involve a heavy reliance on trade, trade goods. So therefore, if we're going to have lending and credit issuing across national borders, we must have a fixed-exchange-rate system. Otherwise, how are we going to determine what the rate of interest is going to be, in terms of medium- to long-term loans?

So, now, what do you have to do? You say, what's the basis for an international credit system? Is it a monetary system? No. The monetary system was a bad idea, didn't work out too well. We get rid of that. We're going to have long-term treaty agreements. What do I mean by long term? I mean 25, 50 years, minimum. That governments, of the world, will enter into treaty agreements, long-term treaty agreements, in the form of trade and related agreements, in a fixed-exchange-rate system; and instead of trying to balance the system by letting currencies float, you balance the system, by letting the prices of goods within currency domains, float, within a regulated range.

So, the problem here, is that, on the one hand, we must immediately take this action. We must immediately bring a group of nations—and we're talking about weeks, now, because this thing is blowing! This is finished. There's no bottom to this crisis—none! You either stop it, by the methods I've indicated, or you don't stop it at all! And pretty soon, you have something worse than Germany, 1923.

You have no choice, that is, no rational choice. Do this, or else, the worst'll happen to you.

So, governments will tend to go along with this, only when they perceive, that they have no choice. Some governments are clinically insane, and won't go along. So therefore, we need to have a stable system, created by agreement among a growing number of nations who are joining the list of those who enter this agreement. And, essentially, we will try to reform the United Nations Organization, to perform a function in accord with this type of agreement.

Creating the Firewall

Now, in order to do that, you're making a transition from a monetary system to a credit system. You have to make it turn on a dime. Because a week of chaos, or two weeks of chaos, may destroy your country—you can't have it. So therefore, you have to come in with a firewall. And the housing and banking protection act is a firewall: The Federal government takes this category—the housing market poses a threat, a threat to the banking system; it's a threat to the entire system. Therefore, we must protect those two pivotal elements of the economic system, otherwise, we don't have a chance of surviving!

Are we willing to plug the hole in the bottom of the boat? If we're not, we're not fit to survive. And our elimination will probably help the human race of the future.

So therefore, we need a method of firewalls; now I mentioned two kinds of firewalls. I mentioned this act; it's a firewall. It is a feasible form of firewall under U.S. law. We just need that one piece of legislation, no more complicated than what I've written. That piece of legislation will create a firewall.

Now, we need another firewall: We need a firewall for the transition from the way the U.S. financial system is operating now, to what we are installing. We also need, in that, we need a firewall in the form of treaty agreements among a powerful aggregation of nations. In other words, if the majority of the powerful nations of the world agree that something is going to be protected, it can be protected. Without such an agreement, it can't be protected: That's a firewall. If these nations agree to come to each others' support and defense, on this issue, knowing that it's their interest that's at stake—a firewall, a transition from a system that has failed, the Cold War system, the present system, the globalization system: These systems have failed. We must, with one fell swoop, get rid of them! Well, you can not reform them, piece by piece: You have to create a firewall, to contain the disease.

And you have to have the backing and support for this firewall, from a sufficiently powerful group of firemen, firefighters. Those firefighters are powerful governments, who agree to cooperate with one another to defend each other's interest, their mutual interest: the same thing as the Treaty of Westphalia, the Peace of Westphalia—the interest of the other. The nations know they're going to Hell, if they don't protect one another. Therefore, the interest of that nation, just as the people in the Peace of Westphalia after the Thirty Years War, knew: They had to go to this, to protect themselves! They had to put the interest of the other, first! And that had to make that a firewall, and all decent European civilizations since that time, depended upon that 1648 Treaty of Westphalia. We need the equivalent now: Firewalls!

And we need, above all, to educate people, to understand that there is no alternative. Because there is no alternative! The boat is sinking! Fix the leak, or get off the boat! Don't try to get a better stateroom.

There's a principle involved in this, which is a sticking point: Most systems, economic forecasting systems that are used, the formal ones, the mathematical ones, are junk. A good economist does not depend entirely on figures. A good economist always looks behind the figures, to what the reality is. He does not go by the financial figures—never believe an accountant. Use the accountant, employ the accountant, but never believe what he writes. You need his figures, you need his head, but you're going to have to decide what it really means, not him.

And the problem is, that we operate, as right now—we're in post-industrial economies, not entirely physically, but ideologically. These economies—look at the government, the government of Germany, the government of other countries—they're all, ideologically, post-industrial societies. They have no perception of reality. They don't like reality! It annoys them. It gets in their way. They would ignore reality where it's possible. "If reality comes in the front door, we will defy it!" That's your present population.

Mathematical Formulas Cannot Describe an Economy

The problem is, that—speaking as an economist, looking at reality as I know it—we are in an insane society, on this kind of issue. Let's take the case of Myron Scholes; he's a good target to hit. He was the famous forecaster who was employed as a mathematician in the LTCM case. And he made a mess, and he keeps making a mess! The hedge fund business, all of these fellows are functioning on mathematical formulas. Every one of these mathematical formulas are utterly incompetent! They're wild-eyed. It's traces of John von Neumann—and he was an idiot. He was a mathematician; he was not a scientist, he was a mathematician.

Therefore, they believe that somehow there's a law, somewhere, that dictates what prices must be, by some mathematical formula. There is no such law. No economist believes that. Every competent economist looks at a physical reality, and thinks in terms of the consequences, the physical consequences, of a certain policy, or a certain trend. Not the price movement, as such. Not John von Neumann's crazy system, which is what people are using.

The other aspect of this, where people fail, is on trends. They believe in statistical trends, in terms of Cartesian systems of mathematical systems, mechanical-statistical universe. They think of bodies floating in empty space. And the empty space is their head. And they have these objects, these balls, are floating in there, and they're watching the trajectory of these balls in this empty space, which is inside their head. And they assume that you can predict a future state, within this Cartesian vacuum, on the basis of a statistical current trend, they extrapolate. And what gets people like Myron Scholes and company into trouble—and they haven't given it up even after the lesson of 1998!—is they think they're all going to compete to use the right mathematical formula! But using the right mathematical formula the way they do, is like a bunch of people betting on the same horse, in a horserace. And if they're wrong, which they probably will be, they're going to lose everything.

That's what's happened with the hedge fund business. They're all using this kind of formula, the same kind of formula, the mathematics that Myron Scholes uses. And they're all creating a system, which is collapsing. They're all going to lose. And the whole hedge fund pile-up, is now hopelessly bankrupt. There are no net assets in the hedge fund domain. They're demanding money be given to them, to bail them out, like beggars on the street. And they're all based on projecting something, like the projection of a trajectory of a ball in empty space—a mechanistic-statistical system.

Real economies do not function in that way. They function in terms of physical laws, as we know, if we know production. A gain, through a technology, or a gain in the way you use a technology; the interrelationship of infrastructure to productivity in manufacturing—these kinds of things. Physical factors. And we have a way of dealing with that in science. It was called, in ancient Greek, "dynamics," or dynamis. Since Leibniz, in modern society, we call it "dynamics."

The kind of dynamics you require to understand an economy is Riemannian dynamics: That is, we are in a universe, in which any assumed a priori axioms and postulates, or definitions, are insane. They're wrong. They're arbitrary. We live in a universe, which nonetheless, does have some laws; it does have the equivalent of laws which are universal. Gravitation is an example of that. These laws define a universe, not as a Cartesian universe, not something open-ended, which is stretching out infinitely in all directions without limit. No, but, a universe in which there are certain things that bound the universe! Like the shells that enclose the universe, and which affect every part of the universe, as a shell, like gravitation. Gravitation, as Kepler defined it, as Einstein defined it later, as Riemann defines it. It's a principle of dynamics. Universal principles.

For example, the difference between man and an ape, is a principle. It's a universal principle. Mankind is creative. That is, mankind has the ability to increase the potential population-density of a species, itself! No animal has that. Therefore, there's a principle which separates mankind from any animal! These bound the universe.

When we introduce a power system, or anything else in the form of infrastructure into an economy, we are creating a boundary condition which contains the space in which we're operating.

And therefore, you do not determine value in economy by Cartesian methods, by statistical Cartesian methods. You determine value in an economy, if you want to succeed, according to the principles which confine the economy you're talking about. The way you design an economy, the way you design its operation, the kind of technologies you develop, the way you apply them, this is the action of the universal physical principles of the universe, as you have come to know them; or as things you have done, you have understood what you have done, which now bound the way you behave. And you're able to see where you're getting, because you think like this.

It was why I have had the success as a forecaster that nobody else has had, on precisely this issue. Because, the field of economics is dominated by people who believe in accounting, as a basis for forecasting; believe in Cartesian mechanistic methods of forecasting, as a way of predetermining trends, who will tell you, "We see the fundamentals are sound." Somebody tells you, "The fundamentals are sound." The economy's collapsing! What's sound about this? This is the Titanic, buddy, it's going down!

We Have To Change Our Thinking

And so, therefore, the other problem we have here, is precisely that: That we have to change our thinking, away from what's prevalent today. And to what many people, as economists understood, but they understood it almost as by instinct. You're dealing with a physical economy. You're thinking about the effect of changes in the physical structure of economy, about the way people live physically, that sort of thing. You think about how this affects the future of humanity, not statistically. And then, on the basis of this knowledge, you inspect something, you think about it. And you come up with some answers, which are good approximations. But then you realize, well, a good approximation isn't good enough, so we're going to do some more research, and we'll try to find out what the principle is involved here.

And that's where we are, when you try to function in economics, today. We do not have competent economics as a theory, taught in any university. We have a lot of things we know about economies, from a physical standpoint, of how they affect the economy. We can make some very good medium- to long-term guesses, about what to do. And if we know what we've done, and how we thought about it, and it doesn't work out the way we thought it was going to, we can get in there, and see what corrects our error.

So, we are going by a kind of approach to physical science, with a lot of trial and error, and pure insight goes into it. And because we take care to know what we've done, we make good decisions. If we go as a statistician, and try to forecast everything just by von Neumann's method, and his and Morgenstern's, then you have incompetence. What you have now, is drastic incompetence.

We have to get rid of the idea, that there's any mathematical law in the universe that determines the value of money. There is none. We can construct systems, of designing priorities, long-term investment priorities, management of currencies, regulation of prices, fair-trade regulations, which give us a good approximation. And if we keep somebody on the job, watching this, to make sure it's working as we thought it was going to, we can do a good job. And that's good economics.

But, if you want to understand economy, what you really have to do, is study Bernhard Riemann, and read some people like Vernadsky who have good insights into some very important, new things, and start to apply that kind of thinking to the way our economies work or don't work. And that's what I do.

So, we've come to this point: We have to make a change. Forget all the usual habits which have been accepted as acceptable, as expert. Know that the experts have created this big mistake, this collapse, and don't ask for their opinion about anything, about how do they think they made a mistake. Because everything they've done is obviously a mistake. Every government of the world, has made major mistakes: China is apparently successful, but I know some big mistakes they've made. India's apparently successful, but I know the poverty in India is greater than it was before. They've made some mistakes—the caste system had something to do with that. Europe made mistakes. The United States made mistakes.

So: We are dealing with good, scientific approximations. And science never had the last answer. It gave us better and better closure on the suspect area of principles. And as long as we remember, how we came to certain conclusions, and are prepared to reexamine them, when the evidence suggests it's time for a little fresh look, that works. But we have to get away from all the assumptions that are taught and believed today, in this society, especially the post-industrial society. And make this change.

It requires guts. It requires the same kind of guts as required for command in warfare: You have to make a decision. You have to think about what the consequences are, if you're wrong. But you still have to make the decision. And we're going to have to start thinking that way, right now: If we do not build firewalls, instead of trying to muddle with this thing, if we do not freeze the system, and ensure that we keep functioning on essential things without any change of step, we're not going to make it! And it will be the end of civilization as we know it.

Oh, somebody will come back a few generations down the line, and start to rebuild. But civilization, as our generation knows it, the living generation now knows it, will cease to exist, very, very soon, unless we change our ways. And I can give you some insight at best, on some of the things we have to think about.

RE: LaRouche - Admin - 10-07-2007


Lyndon LaRouche issued a strong warning this morning to Senators Richard Durbin (D-IL), Arlen Specter (R-PA) and others, not to pursue legislation that would allow for case-by-case home mortgage "work-outs" under revised bankruptcy protection laws. He addressed exactly the same warning to FDIC Chairman Sheila Blair on her proposal today that Congress freeze the rates of adjustable-rate mortgages.

LaRouche's warnings were focused on the fact that the crisis is not merely one of sub-prime mortgage foreclosures, but a general breakdown crisis of the entire banking system and the global dollar-based world monetary architecture. "Don't commit to pricing on mortgages," LaRouche warned. "The whole banking system is undergoing a collapse, and a new system is going to have to be established. To tie mortgage values to the old, bankrupt system, would be a grave mistake." LaRouche added, "What is wrong with just implementing a blanket freeze on mortgage foreclosures, until the whole mess is sorted out? Just set some appropriate interim payments so that there is some flow of funds into the banking system, as homeowners remain in their homes, paying, in effect, rental payments. But don't attempt at this moment to deal with the issues of appropriate property valuations, mortgage rates, etc. It would only make matters worse."

"You have to understand that the system is coming down," he continued. "And trying to tinker within the system is not going to work. You have to put the SYSTEM into suspension. It's like declaring a bankruptcy of the system. And the only honest thing you can do is declare the system bankrupt. Now, then, the system continues to function in the general welfare interest, according to appropriate rules for reorganization of the system. Don't try to negotiate a solution to the conflicting demands within the system! Suspend what you cannot deal with. You must keep the economy functioning; you must keep people employed; you must keep the economy working. We'll sort it out over the next two years. Don't try to find an instant solution,-- there is no instant solution! You're going to go through bankruptcy reorganization of the entire system. The system is bankrupt! And to try to pretend that you've got a solution for a bankrupt system, by tinkering with the values,-- YOU ARE COMMITTING FRAUD!

"The point is," LaRouche concluded, "there is no solution. We're talking about a transition from a present system, which is hopelessly bankrupt, and the main thing we're talking about, is keeping the economy functioning, despite the fact that the system which we're administering, is bankrupt. And we're acting on the basis of the Constitutional obligation to defend the General Welfare. And that, essentially, is what the story is. Nothing more complicated than that. But, people don't want to do that; they want to get the agony over, and hope that they can now renegotiate and lower the price of the mortgage, and somehow, everything will be back to business as usual. The problem is,-- the business-as-usual question, is what the issue is. They want to get back to business as usual. And that's where the failure comes in. There is no business as usual. There can't be. This business is ENDED. What we have to do is keep the economy functioning, while we have a couple of years to reorganize it."

RE: LaRouche - Admin - 10-08-2007


Prof. Rodrigue Tremblay

"Manias, panics, and crashes are the consequence of an economic environment that cultivates cupidity, chicanery, and rapaciousness rather than a devout belief in the Golden Rule." –

Peter L. Bernstein, Foreword to Manias, Panics, and Crashes (4th ed.) by C. P. Kindleberger

"In a crisis, discount and discount heavily."

Walter Bagehot (1826-1877), British economist

"The job of the Federal Reserve is to take away the punch bowl just when the party starts getting interesting."

William McChesney Martin (1906-1998), Fed Chairman (1951-1970)

"The dysfunctional state of American politics does not give me great confidence in the short run.''

Alan Greenspan, Fed Chairman (1987-2006)

The  mismanagement of money and credit has led to financial explosions over the centuries. The causes, cures and consequences of such financial catastrophes are most often repetitive. Indeed, such financial collapses are usually the result of the unbridled greed and cupidity of financial operators and of the lack of necessary supervision by public institutions designed to protect the public and the common good.  For example, after the October/November 1907 financial crisis in the United States, the idea initially advanced by banker Paul Warburg to establish a partially private and partially public Federal Reserve system of banking was finally adopted, in 1913. The Fed thus became the lender of last resort for banks that find themselves in an illiquid position. It is only after the stock market crash of 1929, however, that the Security and Exchange Commission (SEC) was established, in 1934.

But even with institutions and regulations in place, when they are  inoperative, corrupt or ill-adapted, financial crises can still occur. And the current financial crisis is there to remind us of this fact.

On September 18 (2007), the Fed showed some panic and announced a larger than expected half percentage point cut in both the Federal funds rate and in the discount rate , and this after having slashed its discount rate by a half point, on August 17, in order to facilitate borrowing by America's largest banks and to facilitate the bailout of their affiliates and other operators, such as hedge-funds, caught in the sub-prime loans crisis. In so doing, the Bernanke Fed is following Bagehot's advice for aggressive discounting in a situation of financial crisis. The only problem is that Bagehot's rule calls for the central bank to lend copiously in times of critical credit stringency ... but at a high rate of interest. By lending to troubled lenders at reduced preferential rates, the Fed is acting as their "government", i.e. subsidizing their risky loans operations and taxing anybody else who holds American dollars. It is not only attempting to make them more "liquid", but also more "solvable" and less likely to fail.

This raises three interesting questions. First, who pays for the bailout of U.S. financial institutions; second, what are the longer-run consequences of the massive bailout undertaken by the Fed; and third, why did the Fed let the financial situation deteriorate to such an extent that an entire sector of the economy is being clobbered and its collapse is threatening the whole economy.

First, we must consider that the U.S. dollar is still a key reserve currency, although loosing ground to the euro, and it is still being held in massive amounts by most central banks in their foreign reserves, and also by private banks, commercial and economic entities and individuals around the world. For example, in early 2007, foreign central banks alone held some two and a quarter trillion in U.S. dollars reserves, which represented about 66 percent of their total official foreign exchange reserves, with a bit more than 25 percent being held in euros.

Since the dollar is loosing its purchasing power, both in absolute and relative terms, central banks and other foreign investors have been "taxed" by the American Fed's policy of benign neglect regarding the dollar. In real terms, the seigneurage tax on foreign holders of the dollar can be measured by taking the difference between the annual rate of depreciation of the dollar vis-à-vis major convertible currencies and the short-term rate of interest on these reserves. For example, if the annual rate of depreciation of the dollar is five percent and the short-term rate of return on U.S. T-bills is four percent, central banks are loosing some $22.5 billion on a yearly basis. Since private foreigners hold more than two trillion in dollar denominated debt, the net annual loss of foreign holders of U.S. dollars can easily reach $50 billion a year. The conclusion is easy to see: Not only have foreigners been heavily financing the large U.S. government's deficits over the last six years, but they are now being called upon to help finance the generous bailout of American financial institutions.

Investors both abroad and in the U.S. know that official inflation figures are tilted on the low side for many people, essentially because they are designed to reduce the weight given in the indexes to goods and services whose prices increase the fastest, but also because housing costs and asset prices are only partly taken into consideration. This could explain why inflation expectations are on the rise, even though official inflation figures do not register an increase in inflation. Too much easy money as experienced over the last few years at first fuel asset inflation, but sooner or later it shows its ugly head in the prices of all commodities and in the prices of all goods and services. With the current drop of the dollar, Americans can be expected to pay more for a lot of items, such as fuel and food. This will translate to a lower standard of living.

Already, the price of gold, the price of oil and the prices of other commodities are on their way up and can serve as inflation bell-weathers. The behavior of long-term interest rates that incorporate inflation expectations is also a good indicator of future inflation. With the Fed printing money and increasing the money supply on a high scale as if it was dropping money from an helicopter, thus the nickname of Fed Chairman Ben "Helicopter" Bernanke, short term interest rates will drop for a while, but long term interest rates will be edging up, unless a deep recession steps in.

Secondly, a massive bailout as the Bernanke Fed has undertaken raises the question of moral hazard present in any massive central bank rescue intervention, after it has failed to properly regulate the risky activities of the banks it supervises. Indeed, by accepting mortgage-backed securities as collateral for huge more or less longer term loans to American banks and brokers, at reduced interest rates, the Fed is in effect rewarding the very institutions which acted the most irresponsibly over the last four or five years, while saving its own face for having failed in its regulatory mission. The message is loud and clear: American financial institutions can indulge in creating "innovative" risky artificial credit instruments, shifting the risks to unsuspecting borrowers and investors while reaping juicy fees and rewards, and when things turn sour, as can be expected, the Fed will come to their rescue and bail them out with cheap and extended loans. That is a good way to carelessly encourage a greedy and out-of-control financial institution to create successive disorderly and disruptive financial crises.

Indeed, the Bernanke Fed is presently taking the pain of the consequences away from financial institutions that acted irresponsibly, and for some, as former Fed Chairman Alan Greenspan has said, which have acted criminally. —This is a clear case of moral hazard.

If old regulations are not implemented or if no new regulations are put into place, such a massive bailout will insure that American financial institutions will continue in the future to pursue the fast buck in creating risky artificial capital, without due regard to the risks involved for small borrowers and small savers, while the Fed will take responsibility for shifting losses partly on itself but mainly to holders of American dollars. In effect, the Fed is suspending market discipline for the big financial players it puts under its protection, while letting market discipline crush small homeowners and small investors who bought now foreclosed houses on shaky mortgages or who invested their savings in fraudulent and risky collateralized debt obligations (CDOs). That is the net result of applying Bagehot's rule only in part.

The third question is why both the Greenspan and the Bernanke Fed did not remove the punch bowl of easy money and easy credit sooner when things began getting ugly in the sub-prime mortgage market during the 2003-2007 period. Why did they appear paralyzed and do nothing? Former Fed Chairman Alan Greenspan has an easy and self-serving explanation. Before 2003, he was afraid of an onset of deflation and that is why the Fed brought its key lending rate to 1 percent (from June 2003 to June 2004) for only the second time in history. He also says that there were too much "global savings" around the world and that is what pushed interest rates down. This is a slight of hands explanation, because if globalization and global savings kept inflation low and term interest down, short term interest rates and money supply increases were under the Fed control at all times. The Fed had no obligation, after 2003, to keep real short term interest rates so negative for so long. Indeed, as the Bush administration was cutting tax rates to enhance its 2004 reelection prospects and was spending money like a drunken sailor in wars waged in remote lands, the Fed should have taken the contrary route to counterbalance the fiscal impetus this created for the macro economy. In other words, it should have taken the punch bowl away. —It did not.

As a consequence, mortgage debt as a percentage of disposable income in the U.S. is at the highest level it has been in seventy-five years, reaching 100 percent, while consumer debt has risen to its highest level in history. All this makes the economy more vulnerable than it has been since the 1929-39 depression. Another consequence of this binge of easy money has been the frenzy of leveraged buy-outs and industrial concentration that we have observed over the last few years.

Finally, let's put the cherry on the cake. Indeed, there is a most disturbing piece in former Fed Chairman Alan Greenspan's recent Memoirs (The Age of Turbulence) and in the explanations he gave in interviews granted to promote his book, and it is his confession that while he was acting chairman of the Fed he actively lobbied Vice President Dick Cheney for a U.S. attack on Iraq. [If this was the case, it was most inappropriate for a central banker to act this way, especially when he had other things to do than lobbying in favor of an illegal war. Does it mean that Mr. Greenspan was an active member of the pro-Israel Lobby within the U.S. government and joined the Wolfowitz-Feith-Abrams-Perle-Kissinger cabal? It would seem to me that such behavior would call for an investigation.

Indeed, to what extent was the pro-Israel Lobby responsible for the Iraq war and the deficits it generated? Already, polls indicate that forty percent of American voters believe the pro-Israel Lobby has been a key factor in going to war in Iraq and that it is now very active in promoting a new war against Iran. This figure is bound to rise as more and more people confront the facts behind this most disastrous and ill-conceived war. Indeed, how many wars can this lobby be allowed to engineer before being stopped? And, to what extent can the current financial turmoil in U.S. and world markets be traced back to the influence of this most corrosive lobby?


Richard C. Cook

The U.S., as the only so-called superpower, exerts a decisive influence on the fate of the world. Today peace and stability are threatened by three giant problems whose outcome depends a great deal on U.S. decisions. These problems are linked to each other synergistically in ways that increase the overall danger.

The first problem is the peril to the world’s economies from the massive worldwide pyramid of speculation and debt, a.k.a., the financial bubble. Moreover, we have not seen the end of the fallout from the deflation of the U.S. housing bubble of the mid-2000s. The Federal Reserve facilitated this bubble to fill the void left by the bursting of the bubble of the 1990s. That one followed on the heels of the 1980s buyout-merger-acquisition bubble.

Officials with a vested interest in the status quo claim that the global economy is still fundamentally sound. In the face of the financial crisis of July-August, 2007, the Federal Reserve seemed to succeed, at least temporarily, in using its available tools to reassure the financial markets. This included the interest rate cut that spurred the stock market back into record territory. But when dollars are used to float a bubble, it eventually means a lot of trouble.

The second problem is the U.S. march toward military conquest of the Middle East. Even while the takeover of Iraq seems to hang in the balance, an attack on Iran may be next. U.S. action is obviously connected with hunger for gasoline, oil company profits, and the central role of the petrodollar in international commerce. In a now-famous phrase, former Federal Reserve Chairman Alan Greenspan states in his new book, Age of Turbulence, that the Iraq War is “largely about oil.”

But is Greenspan’s characterization a red herring? Are oil and dollars the full explanation? Would there have been no other way for the U.S. to secure its strategic interests in that part of the world, such as through multilateral cooperation with other powers like Russia and China? Isn’t it a fact that the neocons who control foreign policy within the Bush administration have steered a program of preemptive warfare clearly aligned with the more radical elements of Israel?

The third problem is that global warming seems to be proceeding at a more rapid pace than anyone previously thought. Weather patterns are clearly being affected, with many areas of the continental U.S. now locked in severe drought. Much of the Midwest and West are running dangerously low on water. The possibility that sometime this century sea level could rise up to one meter could be devastating to a nation like the U.S. where fifty percent of GDP is produced along its coasts.

If we began now, major infrastructure investments might help us prepare. But we already have an infrastructure maintenance deficit in the trillions of dollars. New large-scale expenditures are inconceivable for a government whose budget has been trashed by tax cuts for the rich, a trillion dollars spent on “wars of choice,” commodity price inflation, and stagnant tax revenues in the face of a recovery which looks a lot like a recession.

Bad as these three problems are, they are the tip of the iceberg. What really controls the fate of nations is money. And what looms beneath the surface is that we have in the U.S. and elsewhere a monetary system which is fundamentally flawed. It is a system that creates money almost exclusively through debt, one that has the net effect over time of funneling much of the world’s wealth from the hands of those who earn their living in the producing economy of goods and services into the bank accounts and investment funds of those who lend money at interest.

The recent actions of the Federal Reserve have been largely a refinancing of debt. The hope has been to realize the axiom of American billionaire Warren Buffett: “A rolling loan gathers no loss.” And government borrowing to wage war has always been good business for the banks as well.

But refinancing of debt does not change the overall purposes, operation, and outcome of the system. What we need to understand now is that the system itself can and must be changed. This should be done by establishing a more democratic and equitable world financial paradigm. Such a change can only be accomplished through fundamental monetary reform that would make credit-creation less the private property of financiers and more in the nature of a public utility.

The U.S. should start by 1) calling off our military adventures and replacing them with new efforts at multilateral solutions, including a negotiated two-state solution for Israel and Palestine; and 2) rebuilding our public and private infrastructure through low-cost government-provided credit. Individuals carrying unsustainable debt burdens or trapped in the collapsing housing bubble should be given relief. A basic income guarantee, not tied to employment, should be provided to all citizens as advocated by many economists going back to the 1960s. Infrastructure investment should include a massive program to deal with the present and future effects of global warming and climate change. Such a program would also help restore our tax base along with adding to consumer purchasing power.

To accomplish this program would require a shift in the control of monetary policy from the Federal Reserve, which only seems good at inflating and deflating bubbles, to a Congress and Executive Branch with the same degree of determination, vision, and authority we saw during the New Deal. The U.S. economy needs to be rebuilt from the bottom up. This means political leadership, not the monetarist games of technocrats who really work for the financiers.

A change of this order of magnitude requires a revolution at the ballot box in 2008. The Republican Party has fatally compromised itself by playing host to the neocon Trojan horse. The Democratic Party, which has failed to act on the voter demand in the 2006 mid-term elections that we get out of Iraq, doesn’t look much better. In just three months, in Iowa and New Hampshire, something profound and unprecedented must start to happen. If it doesn’t, things figure to get much worse in four more years.

RE: LaRouche - Admin - 10-28-2007


The U.S. Federal Reserve Board of Governors agreed to extend Federal Reserve contingency lines of credit to two British banks—$10 billion to the Royal Bank of Scotland (RBS), and $20 billion to Barclays, two of Britain's Big 4 banks. The Federal Reserve would open these $30 billion facilities to the two banks, should the banks, in turn, need them to extend credit to their clients "in need of short-term liquidity to finance their holdings of securities and certain other assets," the Federal Reserve said in a letter to the banks.

With respect to the Royal Bank of Scotland, the Fed said that the coverable assets could include "residential and commercial mortgage loans and mortgage-backed securities, asset-backed securities, commercial paper and structured products." At the same time, the Fed lifted the limit on how much credit the RBS and Barclays could extend to their "affiliated broker-dealers," to $10 billion for RBS, and $20 billion for Barclays, matching the size of the contingency lines of credit that the Fed would extend to them. RBS' and Barclays' affiliated broker-dealers would be the vehicles, which would then extend the funds to the two banks' collapsing clients.

Thus, the U.S. Federal Reserve is preparing to extend a hyper-inflationary $30 billion to bail out the British banking system, and the Cayman Island- and London-headquartered hedge funds, which use the British financial system globally as a base of operations from which to destroy the banks of the United States. This would create a Weimar-style hyperinflation; the Fed's behavior approaches criminal.

With the Fed promising to backstop its actions, the Royal Bank of Scotland went into action: It announced Oct. 21, that it was deep in talks to take over the failed Cheyne Finance, a $6-7 billion Structured Investment Vehicle (SIV), which was set up and is controlled by the London-headquartered Cheyne Capital. This SIV was on the verge of a fire-sale of illiquid assets. Deloitte Touche, Cheyne Finance's accounting firm, received an extraordinary ruling by Britain's High Court last week, which allowed Deloitte Touche to declare the Cheyne Finance SIV to be "insolvent." Deloitte Touche, appointed as receiver, is now offering to sell Cheyne Finance to Royal Bank of Scotland.

Simultaneously, Barclays Bank is heavily involved with three deeply troubled SIVs, one of which, Solent, is headquartered in the Cayman Islands.

Thus, the Federal Reserve is openly caught desecrating the purpose of the U.S. banking system; it is creating hyperinflationary funds for multi-billion British speculative instruments which helped trigger the continuing global banking crisis.

RE: LaRouche - Admin - 10-28-2007

Paul Gallagher

Over the two weeks between Treasury Secretary Paulson's strange Oct. 15 announcement about a mysterious "Master Liquidity" scheme to save huge banks from huge losses, and Moody's Investors Service's Oct. 26 move to a massive international downgrade of bonds collateralized by mortgage securities, every economic sign has flashed the raw red of depression collapse underway.

The U.S. dollar, after Paulson's giveaway announcement that the fear of bank collapses is abroad in his high financial circles, rapidly sank by another 5% against the euro (for example) within ten days. The U.S. Treasury's Oct. 16 report of net investments into/out of U.S. securities in August (Treasury International Capital Statistics, or TICS) was a shock that opened a view of the financial crash underway. One Royal Bank of Scotland economist quoted by the Financial Times called the report "A truly stunning TICS number, the likes of which I have never seen." The Treasury reported that there was a huge net outflow of $163 billion from U.S. securities in August, as everything but short-term U.S. T-bills (the flight to safety) was massively dumped. The United States mortgage-based bubble was where the junk, sub-prime, high-interest action was for banks and funds worldwide, blowing that bubble to $20 trillion proportions until it collapsed—and everybody had to dump the toxic crap.

Asian central banks, and other countries holding major dollar reserves, dumped U.S. government securities to the tune of nearly $80 billion in the past six months, according to Treasury reports; only the Bank of England and British investors bought them on a large scale, masking the effect until now. EIR correspondent Mary Burdman reported, "Chinese and Japanese sales of U.S. Treasuries grew in August 'at a pace unprecedented in the last five years, as the U.S. subprime mortgage crisis triggered the biggest sell-off of dollar assets since Russia's 1998 default,' said China Daily. China cut its holdings of U.S. treasuries by 2.2% or $9 billion, to $400 billion, while Japan dumped 4% of its total holdings [or $24 billion], the most since March 2000. Taiwan's ownership of U.S. government bonds fell sharply by 8.9% to $52 billion."

The sales of homes in the United States during the July-September period was revealed, by official reports, to have sunk to the rock-bottom rate of 5.5-5.7 million per year—when 6 million sales a year was typical three decades ago. Median home sale prices—of new homes and resales—were shown by the same reports to have fallen by 8-10% during 2007, a drop unique to the Great Depression, but only just accelerating now. Medium-sized homebuilders like Neumann Homes in Chicago are following mortgage lenders into bankruptcy, and the biggest builders spent the last two weeks reporting multi-hundred million dollar losses. 100,000 construction jobs, net, have disappeared this year. Home ownership has fallen from 69% to 68% of American households over the past year, and is back to the level of 2000.

That two million or more households could lose their homes to foreclosure next year, after 500,000 this year, is agreed by every report of the situation.

No Action on Industrial Collapse
Despite $700 billion in defense spending, orders for durable goods in the U.S. economy have fallen by 6% over the past twelve months, from $223 billion in September 2006 to $211 at latest, including drops in June, August, and September 2007, according to Commerce Department reports. Sales of autos in 2007 are heading for a total below 16 million—back to the level of 1994-5, and a level after which at least one of the big automakers will go into bankruptcy during 2008. Auto plants continue to be closed down, and some 150,000 U.S. manufacturing jobs have been lost in the first three quarters of the year.

In a sad drama enacted throughout the auto shops during September-October, 250,000 unionized auto workers are being forced to accept new contracts under which the average auto industry wage is falling to $15-18/hour, wiping out the largest remaining source of middle-class incomes in the United States. This is a major factor in the explosion of home foreclosures across the Midwest and Mid-Atlantic states.

Banks and other financial corporations have announced, or carried out, about 100,000 layoffs during 2007 as they are hit by mounting losses in the mortgage bubble meltdown. Another 30-40,000 have been laid off by exploding mortgage lending companies, from New Century Financial to Countrywide.

U.S. non-financial corporations, according to Federal Reserve reports, continue to spend more than their total net profits in dividends and similar payouts—in other words, they are not investing.

Just what "economic fundamental" is it, that remains strong?

Has Congress enacted a halt to foreclosures to prevent social chaos and impoverishment? So far, it has refused to do so. Has it lifted a finger to stop three years of collapse of the auto/machine tool sector? It has not. Has it issued credit for investments in economic infrastructure to reverse this collapse? That is "off the table" in Nancy Pelosi's Congress. Would President Bush allow any such investments by Congress? Not if he can stop them by veto, as he has shown with Congress' one attempt, the Water Resources Development Act.

Outrageous and Desperate Fed
At the time of publication of this issue of EIR, the Federal Reserve board will likely be cutting short-term interest rates by another one-half percent, in a worried attempt to keep Countrywide Financial Corp., Citicorp, Merrill Lynch and other banks, mortgage lenders and insurers, and brokerages from failure. The broad U.S. money supply, what was called "M3" until the Fed suppressed reports on it last year, is estimated by private economists to be growing at a nearly 15% annual rate as of October—an absolute flood of Fed money-printing. As the dollar sank after Paulson's Oct. 15 forced blunder, an explosion of hedge fund speculation and hyperinflation hit oil, energy commodities, metals, agricultural commodities. This will accelerate further, at another "emergency" rate cut by the Fed.

Most outrageously, EIR's Richard Freeman found that on Oct. 12 the Fed agreed to extend huge lines of credit to two British banks—$10 billion to the Royal Bank of Scotland (RBS), and $20 billion to Barclays, two of Britain's Big Four banks—to cover their "need of short-term liquidity to finance their holdings of securities and certain other assets," including "residential and commercial mortgage loans and mortgage-backed securities, asset-backed securities, commercial paper and structured products."

These mortgage-backed securities (MBS)—as shown in a sale of them just made by bankrupt American Home Mortgage Holdings—are sellable at best for 80 cents on the dollar, where the underlying mortgages are being paid completely up to date, and for no more than 55-60 cents on the dollar when any of the underlying mortgages are delinquent. Thus the structured investment vehicles (SIVs) that hold them, and the banks that are on the hook for them, want at all costs to avoid their sale, and instead to repurchase them internally,and hold them off their books. For that, they want huge bailouts from the central banks.

In a signal of desperate bailout, the Fed explicitly authorized RBS and Barclays to extend these entire credit lines from the Fed, totalling $30 billion, to their "affiliated broker-dealers," which would then extend the funds to the two banks' collapsing structured investment vehicles (SIVs). RBS did so immediately, with the failed Cheyne Finance, a $6-7 billion SIV of London-headquartered Cheyne (that's pronounced "Cheney") Capital.

Thus the Fed is creating hyperinflationary funds for multi-billion dollar, super-leveraged instruments designed in London for speculation in the $20 trillion U.S. mortgage bubble, registered in offshore British protectorates to avoid taxes and regulation, and now at the center of the global banking crisis.

On Oct. 25, the Bank of England (BoE)'s desperation cash infusions to Northern Rock bank officially reached $40 billion; this big mortgage bank was hit by huge runs by depositors in September and is headed for failure.

All of the hedge fund-designed special investment vehicles supposed to spread the risk of huge losses away from the big banks in a bubble implosion and credit crisis, are now coming back to hit—the banks.

In September, bank analysts estimated publicly that $1.3 trillion in losses had occurred in the August-September crisis. But a very knowledgeable European banker consulted by EIR in late October, estimated that at least $2.4 trillion in unrealized losses—that is, losses unacknowledged, so far, in the collapse of mortgage and mortgage-securities bubbles—remain on and off the books of U.S. and European banks and financial institutions. In the next several months, the banker estimated, those losses will have to be acknowledged and taken. The "super-conduit bailout" Paulson had talked up, of somewhere between $80 billion and $200 billion, might bail out the dead assets of Citicorp alone, the banker said—not the losses of the system.

All of the desperation money-printing of central banks, epitomized in the actions of the Federal Reserve described above, are an attempt to postpone those losses, liquify those dead, illiquid assets—whose only effect is to collapse the dollar, create hyperinflation and financial markets chaos.

Yet the banks could take those losses and survive, under new policies by the most important governments, to create "national firewalls" protecting both essential economic sectors and chartered banks from the unstoppable collapse of the rotten financial and monetary system.

The Merrill Lynch Revelation
The fact that Merrill Lynch's estimate of the mortgage-bubble losses it would have to write off, slid rapidly from $4.5 billion on Oct. 10, to $7.9 billion in its Oct. 24 third-quarter report, exposed the entire banking system, in the United States and Europe, as sitting on the kind of losses indicated to EIR by the European banker. "A couple of weeks ago, we thought the line had been drawn under the losses [of the mortgage bubble collapse]—and it hasn't," said a scared London securities dealer to Reuters on Oct. 25. Some estimates were that Merrill Lynch would soon have to 'fess up to, and write off, $20 billion more, which could easily sink it for good.

Many money-center banks, and nationally chartered banks, have just reported big write-downs, and in some cases large net losses overall, in their third-quarter reports. Bank of America immediately cut 3,000 jobs, and National City Bank in Ohio, the ninth-largest U.S. bank, cut 2,500, in a parade of layoffs of hundreds to thousands of employees.

But, Reuters quoted a Bear Stearns banker, "The Merrill result means all bets are off." The banks have only been showing the tail of the dog of what their real losses are, denying the illiquidity of the assets in all their "special investment vehicles" and so forth, for as long as possible. "We are somewhat nervous" about European announcements about to come, said a bank analyst for Royal Bank of Scotland.

On Oct. 26, Moody's, having just downgraded $33 billion in mortgage-backed securities (MBS) in one fell swoop, downgraded an even bigger mass of collateralized debt obligations (CDOs) tied to $52 billion of downgraded mortgage bonds. The widely watched index of value on these securities dropped to about 82 cents on the dollar. This shock began to collapse the stocks of large insurance companies that insure mortgage securities—most notably Hank Greenberg's AIG Corp., and also MBIA, Ambac Insurance, Radian Group, and other insurance giants—which also insure municipal bonds and mutual funds.

The credit collapse of July-August—after roughly $1.5 trillion in liquidity injections has been thrown at it by the Fed, BoE, and European Central Bank through October—is back on again going into November, and on a bigger scale.

The financial system is collapsing. Congress must act to put a "firewall"—a Homeowner and Bank Protection Act—between the financial collapse, and real households and the real economy. That opens the door to other emergency actions to invest in a new national economic infrastructure, revive the industrial economy. Congressional leaders who are denying this systemic collapse, and basing their response to the foreclosures crisis on that denial, will have to eat their words—and soon.

RE: LaRouche - Admin - 10-28-2007


Lyndon LaRouche addressed a three-hour international webcast on Oct. 10. His opening remarks were followed by two hours of discussion. Here is an edited transcript. Audio and video archive of the webcast.
Debra Freeman: Good afternoon. My name is Debra Freeman, and on behalf of LaRouche PAC, I'd like to welcome all of you to today's event.

Certainly, Mr. LaRouche's address here in Washington today, could not come at a more opportune moment. Our nation finds itself clearly in the throes of what I think can only be assumed is the final stage of a breakdown crisis that has been a long time in coming. We find ourselves in a situation where virtually no American can escape the immediate effects of this breakdown crisis. Probably the first people being hit are those unfortunate individuals who got sucked into various kinds of exotic mortgages, or subprime mortgages, but clearly that is really just the very, very tip of the iceberg.

It doesn't come as a surprise, certainly, to anyone in this room: Mr. LaRouche has warned about this, and really, with time to spare, proposed an initiative that would establish a firewall that would protect not only the American people, but which would also provide a measure of protection for the chartered state and Federal banks, to ensure not only that people were allowed to remain in their homes, but that at the same time, our banking system continued to function.

Now, some of our friends said, "Well! We agree with keeping homeowners in their homes, but why the heck should we do anything to save the banks? You know, they're the ones that are responsible for this, they made plenty of money. Why is LaRouche concerned about them?" And while the anger might be understandable, I would challenge anybody to try to figure out how to run a nation—in fact, how to run a superpower—without a banking system. It doesn't really function. And I think that Lyn's expertise in this area is really vital.

And while the developments of the last weeks and months have not been surprising to those of us associated with Mr. LaRouche, what has been surprising, and continues to be surprising to me, is the absolute impotence of the response here in Washington, where no longer do you have the excuse that there is not a Democratic majority. There is a Democratic majority; yet, our national leadership stands paralyzed.

Fortunately, what Mr. LaRouche has been able to do, with the help of the LaRouche Youth Movement and others, has been to mobilize city, state, and county leaders—political leaders, civic leaders, labor leaders, etc.—to begin the kind of drive necessary to get action taken here in Washington. As we convene today's meeting, more than 100 political leaders from across the United States, including leaders of some of the largest national constituency organizations, have endorsed Mr. LaRouche's Homeowners and Bank Protection Act. At the same time, that legislation, in memorial form, is being considered in eight state legislatures, which is somewhat unprecedented, when one considers that at this particular time, about 70% of the state legislatures are not even in session. Were they in session, I can guarantee you that the number considering this piece of legislation would be far more.

But the fact of the matter, is that even for this simple action to be taken, what we need is a leadership in Washington, which is prepared to do what it has not been prepared to do up to now: And that is to face the simple reality. And I can think of no individual, who is a better messenger and spokesman for that reality, than my boss. So without any further introduction, ladies and gentlemen, I bring you Lyndon LaRouche.

9/11 Was an Inside Job
Lyndon LaRouche: Thank you. Well, let's start from the top.

In early January of 2001, before the inauguration of George W. Bush as President, I warned that the general nature of the catastrophe would be, that the U.S. economy would be a failure—the policies of Bush would be a total failure: We were headed into a downslide, which in fact has happened, all throughout this period. And the thing we had to fear, from inside the U.S. government, was that someone would set off a form of terrorist incident within the year, which would shock the nation into submission.

In the Summer of that year, 2001, the recession was fully on. The collapse was on; the political systems were shaken by the collapse. And then, on the famous Sept. 11, someone, with cooperation from inside the highest levels of power in the United States, unleashed an incident which is called the 9/11 incident. That job was done with the complicity of the British Empire. It was done with complicity of elements in Saudi Arabia, as all the evidence would plainly tell you. That was a terrorist act, against the United States, done with complicity of people at a very high level inside the United States, with a coverup organized by people inside, a high level inside the United States.

Now, certain facts are not known, and I shall not say what I know now. But I shall say, that I do know, beyond doubt, that 9/11 was an inside job. It was an inside job on behalf of what the Bush-Cheney Administration represents. And since that time, everybody who knows anything about the government, knows about our system, knows that more or less to be true. You see the behavior of members of the Congress and political institutions who are running scared! Because they know that kind of thing is on.

Now what I said in January of 2001, prior to the inauguration of this President, the first time: I said that we had to look at the precedent, under these kinds of economic conditions which I indicated, in which Hermann Göring orchestrated the burning of the Reichstag, for the purpose of making Hitler not merely the Chancellor of Germany, but the dictator. And Hitler remained a dictator from the night after that burning of the Reichstag, until the day he died! Nobody got rid of him. I would say, that what has happened is, with the case of Cheney, in particular—Cheney is the figurehead of this operation, Vice President Cheney, the man everybody's afraid of because of 9/11!—that everyone is running in terror, just as in Germany, they ran in terror from the burning of the Reichstag, and the Germans never got free of that, until the day Hitler was dead.

Now, the operation was run against the United States by whom? It was run against it by the British Empire. They're the ones that ran it. And right now, you see in politics now, the shadow of exactly that kind of problem, because that's what you're looking at when you look at the U.S. Presidential campaign, right now. The Presidential campaign, the political campaign on the Federal level, is a bad joke! Hillary Clinton says a few things which are important. She does not have a clue as to what the problem is. She doesn't have a clue as to what the solution is—but she is the closest to telling the truth, and all the rest of them are far from the truth. Dennis Kucinich says a few things that are true, but he has no grasp of this issue.

I do have a grasp of the issue—and I know more than I'm saying: With complicity of certain people in Saudi Arabia, with the British Empire, which shares power with Saudi Arabia, through the BAE, a job was done on the United States on 9/11. And we've been living under the heat of that, ever since. That I stand by. Other facts will come out at a suitable time.

But the point is, under those conditions—you saw what happened in 2005: At the end of 2004, Kerry failed in nerve, as a Presidential candidate. He could have won, but he lost his nerve. It's something that Kerry tends to do—he's a man of anger, who sometimes, when restraining his anger, imposes a certain kind of impotence on himself, as we saw in his behavior under attack during the period of the Summer Democratic Party convention, when this same thing happened. So, under that condition, we had this monstrous thing face us: the reelection of the present President, with his Vice President as the actual acting President.

So, I intervened—a carry-over from what I had done in assisting the Democratic Presidential campaign—to mobilize the United States, the Democratic Party and others, for the defense of Social Security. This occurred in November of that year, late November, and was fully in play in January. The Democratic Party responded to what I set into motion, and organized to defend the Social Security system, against the plans of the Bush-Cheney Administration. That program succeeded, during the course of 2005.

The 'Revolution in Military Affairs'
However, approximately April-May of that same year, we had a well-known fascist, a Democratic Party fascist, from Middlebury College, Felix Rohatyn, who is a partner with George Shultz in what is called the "Revolution in Military Affairs." The Revolution in Military Affairs is what you're looking at when you think about Blackwater, and the Blackwater scandal in the papers right now. The policy has been, and this was the policy of Cheney when he was Secretary of Defense, was to eliminate the regular military forces of the United States, except for the Air Force, which had a special function, and perhaps some Naval forces, but to eliminate the regular military forces of the United States, in order to implement what was called "the Revolution in Military Affairs."

This is a policy which has been around for a long time. Under Hitler, it was called the SS policy: Get rid of the regular military forces and bring in the SS. The International Waffen SS has never come fully into operation—that was a matter of timing—but the intention remained there. So, we had the intention to establish, in the post-war period, actually from about the time that President Roosevelt died—an intention to change the course of military affairs and to set up a kind of Caesarian world dictatorship, an Anglo-American world dictatorship, with special military capabilities, in which private armies, or privatized armies, would be used to police the world. We had this, for example, in the Pinochet regime in South America, in Chile, the terror in South America in the 1970s—the same kind of thing, the same operation: Revolution in Military Affairs.

Now, this has been the special project of George Shultz, who is the official author of the Bush-Cheney Administration, and who was behind Felix Rohatyn in this Revolution in Military Affairs.

So, we had a second program that year, in 2005, which was to defend the automobile industry, preventing it from going into the dissolution it's undergone since then, now, by saying, "Let's take the automobile industry, which is overbloated by the way it was mismanaged, and let's take valuable sections of the automobile industry, which are a machine-tool capability with an attached labor force; and use this capability as a government takeover of this capability, to deal with things like fixing up power stations, fixing up rail systems, fixing up water management systems and so forth." Which would have been actually a Roosevelt-style recovery program, which means going to public infrastructure first! And by employing forces which exist for public infrastructure, you create a market which builds up your private sector, which is what in a sense we did with Harry Hopkins under Franklin Roosevelt. That kind of method would have worked.

However: In comes Felix Rohatyn, with Shultz behind him, and these monkeys say, "No, no, no!" So, what happened is that the Democratic Party, while they picked up and defended the Social Security system, did not defend the rights of the American citizens, because we had to defend the automobile industry, not necessarily to produce automobiles, but as an industrial capability, to keep the capability of running an economy here. When the decision was made by February of 2006, to let the automobile industry go down the chute—and that was the decision that was made: It was made at the highest levels of the Democratic Party and the Republican Party: "Let the auto industry and what that represented go down the chute." And they did. And we have since gone down the chute.

The last shards of the automobile industry, of the American-owned, American-run automobile industry, are being destroyed. Throughout this nation, there's desperation. The state of Michigan is a no-man's land. The state of Ohio is virtually a no-man's land. Throughout the United States, there is desolation, because of these policies.

And the war continues! And the intention to extend the war into Iran and beyond continues. And the same thing behind their 9/11—Cheney, the friends of Cheney in London, in the BAE, and the Saudi accomplices in the BAE—the same crowd that gave you 9/11, are behind it all. And many people in the United States know that, many people in high places. But they're afraid to say so. I'm saying so. A lot of us have been talking about this in private, at a high level: I'm saying so, now.

If you don't give up the blackmail, the fear of 9/11, the fear that something terrible will happen to us if we displease Cheney, and Cheney's backers in London; if we don't give that up, we don't have a nation.

The Political Parties Are a Joke
We're now at a point, in terms of the economy, where the U.S. dollar is collapsing. The collapse is worse than it appears to be, because in these cases they fake assets, as you see massive faking of assets, like the Northern Rock in England; Goldman Sucks, or Goldman Sachs, or whatever you want to call it, is doing these kinds of things. This is fake. There is no recovery! There is no growth! It's fakery! Entirely fakery. And people wish to believe.

Then you have a situation, like the recent developments in the Democratic Party. Forget the Republican candidates, they're all a joke; they're not serious. And they don't intend to be serious. It's a joke.

But look at the Democratic Party side, it's a real joke: Do you realize that the entire Congress has the level of popularity today, that Dick Cheney has? The leadership of the Democratic Party is held in the highest contempt, by the Democratic voters of the United States! And this despair, this lack of a sense of leadership at the top of the Democratic Party, is one of the problems, which aggravates our problems. Hillary Clinton has expressed some being upset about that. She doesn't understand what the answer is, what the solution is; she has no program that fits reality. None of the candidates has a program that fits reality—they're not about to. And the leaders of the Democratic Party, for example, Harry Reid in the Senate, and Nancy Pelosi in the House, will not allow the Democratic members to do anything worthwhile doing.

Take, for example, at the beginning of the nomination campaign for the 2000 election: Before the Iowa caucuses, I published a summary of my estimate of the various Democratic contenders, leading Democratic contenders for the nomination. And in that, I made a special note of the fact, I said: Many people think that Howard Dean is a contender. And I said, he is not a contender. He's going to blow his stack, and that is going to take him out of the race—it did! He remains "Howard Scream" to the present day. That's all he's good for!

He was a key part in wrecking the Democratic campaign in 2006, a key part of it. He was the one who had moved the money around to prevent a serious campaign being done from the Democratic Party on behalf of the candidates, and he spent the money in his own, little special projects! So the Democratic Party had no money to run its campaigns, as it should have had, to launch from the top its campaigns for the year 2006, and you saw the result. Howard Scream: They made him the head of the Democratic National Committee! Howard Scream! And he has certain qualities worse than just his bad temper. There was a cartoon series that used to appear in the newspapers back during the 1930s, called "The Terrible-Tempered Mr. Bang," and I think that was Howard Scream, or Howard Scream's grandfather, or something like that. But that's our situation.

Now, where are we?

Right now, we're on the short end of the end of civilization as we've known it: this present world monetary-financial system is hopelessly bankrupt; it's at its terminal end.

Now for reasons I shall explain to you now, here, you can never precisely predict a date on which something is going to happen, in economic processes: Because, economic processes are a reflection of voluntary powers of persons and institutions. And so, they don't operate on the basis of a Cartesian projectile system, where you launch a bullet, or launch a cannon ball, and it goes out at a certain speed and comes to an inevitable end at a predictable point. In real life, in real economies, economic systems don't function with that kind of predictability. Economic processes are not statistical in nature, they are actually dynamic, in the same sense as the term dynamis was used by the ancient Greeks, the Pythagoreans, in defining scientific method, and the way that modern scientific method which is based on Leibniz's definition of dynamics, operates. We operate in a universe which has laws. These laws include laws which are discovered by mankind and used by mankind, and become an integral part of the way society works.

In this process, there's free will operating. There are choices. Free will is operating at all levels, on an individual level, in powerful institutions, and so forth. But the rules which society has adopted, rules which function like universal physical principles, these rules remain—at least temporarily until they're superseded—they represent the thing that controls what is going to happen in society. Within this set of rules, individuals have choices, they can make decisions. Institutions have choices, they can make decisions. You can shift the way the consequences unfold. You can change the timing of events, by human will. But you can not change the characteristic direction, which the rules of the system have built into it.

So, now we have reached a point, where we are, at this point, in terms of dynamics, in terms of the system, this world monetary-financial system is finished. It's as good as dead, right now—or as worse than dead, right now. There is no possibility, that, of its own volition, it will rebound. There is no possibility that it can have a remarkably extended life. Though you can have an extended life, under a dictatorship. But as the kind of political systems we have now, it can not continue. You can have an exception to that—dictatorship, extended wars, other things that will delay the point of decision, or resolution. But this system is finished. There's nothing you can do within the terms of this system, to prevent it from collapsing. Somebody can alter the date on which the collapse officially occurs. But the inevitability of the collapse is built into the system, and it's on the short term.

But you can change the system.

We Are a Unique Form of Government
Now, the United States has had quite a bit of experience with systems. The system which the United States represents was new in its time. We were a unique republic. Nothing like it actually existed in Europe. It did not exist in the 18th Century, it did not exist in the 19th Century, and did not really exist in the 20th Century. We are a unique form of government.

The European systems, and systems of the world in general, are oligarchical systems: That is, you have an upper ruling class, or influential class, which dominates society, typified by parliamentary systems. A parliamentary system is a system of tyranny. You have a parliament, elected officials, who presumably make certain decisions. But the minute they try to make a decision that offends the leading powers, the parliament goes into a crisis, and you have a new parliamentary government, the end of the threat. That's the way it works.

Our Constitutional system, inherently, is superior to any other system on this planet, when we use it, when our Constitution is followed. Because, our Constitution is based on certain principles which flow implicitly, from the intention of the Preamble of the Federal Constitution. And also, that our system of government, constitutionally, is not a monetary system—it's a credit system.

Read the Constitution! How is money created, under law, under our Constitution? A bill is presented in the House of Representatives. That bill authorizes the Department of Treasury, and therefore, the President, to utter credit of the United States, in the form of currency or some other form of credit—public credit. This credit is then released, and applied, according to law, at the discretion of government. This credit forms the basis for our currency, the utterance of our currency; it forms the basis for public credit, such as investments in public infrastructure: building a railway system, building power systems, dams, and so forth; funding certain kinds, or launching certain kinds of private projects, as well as for warfare. Public credit is our system. We regulate our currency, as we did best under Franklin Roosevelt, to have a fixed-exchange-rate system, among nations. That works the best.

We are unique, in that sense. Every part of Europe, for example, is still—well, forget Eastern Europe, forget Russia for the moment—but every part of Central and Western Europe is actually an oligarchical system, in which there is a higher power than government. That higher power is central banking. Central banking is private central banking. And private credit, in the form of a monetary system, controls the governments.

We're living in, essentially, a British Empire: That is, the world is run by a money system, called a "free-market system." Or the equivalent. The money system is controlled by banks and similar financial institutions. Governments, under free trade, are not supposed to interfere with the functioning of that system. You're under a dictatorship of international finance. The only alternative to this, which is what is hated by the oligarchs, is Franklin Roosevelt's system: Franklin Roosevelt instituted a revival of the American System, based on public credit, rather than monetary power, arbitrary monetary power.

Now, the present system—to make as short of this as possible in terms of this aspect of the presentation—the present system, as long as we try to operate according to the rules of an international monetary system, the United States is now hopelessly doomed. And Howard Scream can scream all he wants—it's still doomed. He would just make it worse. There is no hope for the continued survival of the United States, under the present monetary system.

However, under our Constitution, with a President, and with the backing of a Congress which supports him in this, the United States can turn on a dime: Precisely such is the key to my proposed legislation, which is now before the Congress. That is: You can not reform this system. You can not improve it, it can not work, there's no way of escaping catastrophe globally, under this system—none!

What you can do, you can do under our Constitution: The Federal government can act, to create a firewall, in which we protect—for example—mortgages, and banks, that is, legitimate banks, chartered banks. We move to protect them, absolutely, under the same thing as a bankruptcy procedure. In other words, you're putting the system into bankruptcy, under the authority of the Federal government. That means that no household will have an eviction. We'll sort it out later. No bank will be shut down; no regular bank, no chartered bank, will be shut down—they're protected, under bankruptcy protection.

We now proceed to decide what is going to be paid in the future. We're not going to pay gambling debts. And most of this monetary effluent, that you're seeing floating out there, is gambling debts, what is called "monetary assets." All of it is speculation, speculation, speculation, speculation—gambling debts. We don't pay gambling debts. "What about my bank, my debt? I got this note, I got this note, who's going to pay my note?" "We're not paying your note, buddy. It's a gambling debt. Can't collect—it's an IOU, not worth anything." As George Bush said—wrongly—about Social Security claims. That's not an IOU, that's an obligation of the Federal government. That's not an IOU. Gambling debts are IOUs, Goldman Sachs is a bunch of IOUs, and I don't think they're going to pay them, either.

So, the point is, what you can do under the authority of government, you can create a new system. In our case, in our republic, the system you would create, would be a return to the principles of the Constitution, as typified, for example, by the precedent of what Franklin Roosevelt did, with Harry Hopkins and others, to save the United States from the worst Depression we'd had up to that time, that is, in the 20th Century. We do the same thing again.

A Firewall of Law
So what is required here, leadership, means very simply, things that the average guy out there can understand. The average person on the state level, the state legislatures and similar institutions, are sane. The people in the Congress are insane from the top down. That doesn't mean they're all insane, it means they're intimidated by Harry Reid, they're intimidated by Pelosi, and so forth and so on. Therefore, they will sabotage anything, which is not pleasing to the bankers, to the financiers. And that is to the international financiers, in the City of London.

The center of the world economy today, is the City of London. It's not the British monarchy, as such. The British monarchy is an institution of the system, but the British monarchy is not the controller of the system. The controller of the system is a Venetian-style system of private financier interests, sort of like a slime mold, which assembles and asserts its collective power, and uses the instruments of government, under its compulsion, to cause societies to submit to its will. That's an empire. That was the empire, the medieval empire, of the Crusaders and the Venetians, the usurers. That's been the British Empire since February of 1763, when we broke from the British on that issue.

All we have to do, is reestablish the principle of sovereign government: That sovereign government is the highest authority on this planet, and especially in our own country. We say, we put the system into bankruptcy reorganization. Our objective is to make sure that we can keep the economy, society going, without missing a step. No one is evicted from their homes. No bank, which is a chartered bank, is closed down. We take other measures of a similar nature, to ensure that what we're doing today that is good, will continue! And we will build on that to introduce new things, which will get us back on the road to expansion.

And the first thing we'll have to do, once I get this bill through the Congress, the next thing, is go back to do what we should have done, in 2005 and 2006: Take the capacity represented by the automobile industry of the United States—that is, U.S. corporations—take that capacity, which represents primarily a machine-tool capacity, in locations which still exist (the plant may be closed down, but the location exists; the people still live there, or most of them do). It has a machine-tool capability. It has also an associated labor force which worked with the automobile industry, and similar industries, to engage in the production to realize the fruits of what the machine-tool sector does in terms of rebuilding.

We can use the remains of the machine-tool sector associated with the auto industry, by getting it back into functioning under government financing. We can use that to start a recovery program. We start it in the public sector. We build nuclear power plants, rapidly, many of them. We rebuild our water systems, rapidly. We create a national rail system, immediately, rapidly.

We use these kinds of projects, which are government-related projects, we use these to stimulate employment and production in the private sector of industry, in agriculture and industry. The same way! The same way as the Homeowners and Bank Protection Act, the same method: We create a firewall of law, a firewall of Constitutional law, which protects what is essential for the functioning of the nation and the security of its people, to separate what we do day by day, which is protected from claims of another nature. Those claims of another nature can stand outside the offices and wait their turn to be considered: We are going to protect the people and nation of the United States. We're going to encourage other nations to join us in doing the same thing.

We're going to shut down British Empire! Which, as I described it, is the source of 9/11: We'll shut it down.

We Can Break the Power of the British Empire
We'll bring together a cooperation among nations. Take the case of Israel. The thing is a little more complicated than it might seem on the surface. But, any sane Israeli, and there are some there, wants peace. They realize that Israel has no future in a continuation of the present system. Every sane Israeli knows that there must be a permanent peace between Palestinians and Jews. It must be established. The President of Israel at present, has said so. Well, I know him quite well, and I believe him. And these have been ideas he's had for a long time. He is, for me, and for many Palestinians, an acceptable partner for discussion of this question. And the idea of having a two-state solution for the Middle East, Palestinians and Israelis, each with its capital in Jerusalem—so you have in Jerusalem two capitals, one the Palestinian state, one the Israeli state.

You do this, first of all, by going to Syria, which is ready to make a peace agreement with Israel. Everything is done that needs to be done, to discuss. You can go in there and you can make the agreement. You can't dictate it, but you can make the agreement—it'll work. If you're determined to make it work, it'll work. And that closes the last insecure border for Israel.

That means then, that you proceed with what? Well, with nuclear power! What's the big problem in that area? Water! There's not enough water; how can you get water? With nuclear power! Nuclear desalination.

So, now you can transform an area which is destitute because of the water crisis and related things, and if you have peace among these people, as parties to the peace, and base the peace on commitment to this project, you can stabilize that region! If people of good will are there.

The problem is, the Israelis did this operation against Syria, and therefore, they're not too enthusiastic about going ahead right now, and making the negotiation. Though Peres has indicated he's committed to doing it, and everything he's said so far, indicates that's true.

So, what we have before us is the prospect, if we can get this thing in view, we can proceed quickly, throughout the world, to work through part of the world, we can begin to put things into place, to rebuild the world as President Roosevelt had intended, had he not died. The intention, coming out of the war, the idea of the creation of the United Nations, the idea of the elimination of colonialism, systematically and immediately—these kinds of things were the intention of Roosevelt. The Truman Administration turned it around, and went with the British.

But today, the same kind of thinking applies: If we decide that we're going to defend the U.S. economy, in particular, against what is now an immediate and virtually inevitable collapse, disintegration of our economy, of our republic—if we decide to do that, and use the methods I indicated, that can change the world. It will break the power of the British Empire: the empire which gave us 9/11.

RE: LaRouche - Admin - 11-04-2007

Lyndon H. LaRouche, Jr.

From the beginning of the systematic European colonization of North America, during the early Seventeenth Century, the patriotic currents which generated U.S. independence organized what became, in the course of time, the leading national intelligence organization of the U.S.A.; such was the Society of the Cincinnati, as a private organization. That tradition, however wounded and seemingly frail, persists, still, inside the U.S.A. today.

There are comparable experiences in other nations. Contrary to some widespread doctrines, the successful making of history is not limited to the conduct of presently adopted official policies; the future of any nation depends upon the creation and adoption of fundamental scientific and other necessarily revolutionary discoveries, on which the continued vitality of any culture depends. The case of the Society of the Cincinnati is, like the tradition of the rigorous Classical composition of J.S. Bach through Beethoven and Schubert, among the best illustrations of that point. Those abroad who have not yet understood this fact about the foundations and development of the U.S.A. could not comprehend the nature of the existential challenge which confronts global civilization at this moment.

The role of such private associations, whether formally constituted, or informally organized in some efficient way, has been made indispensable by the fact that even notable Presidents or Vice-Presidents of the U.S.A. have been traitors in fact, such as the British Foreign Office's agent Aaron Burr, or Presidents Andrew Jackson, Martin van Buren, Polk, Buchanan, Theodore Roosevelt, and Woodrow Wilson, or wretched agents of foreign-directed factions, such as President Richard Nixon. Circles of men and women of suitable skills and well-crafted conscience devote themselves privately to nourishing the intention of our republic.

The situation inside the U.S.A. on that account is far worse than during the immediate two decades following the death of President Franklin Roosevelt, especially since the replacement of well-informed patriots of my own generation by a presently dominant generation born between 1945 and 1958; as the government of Russia's President Putin's search for cooperation with the U.S.A. illustrates the point, the dying out of the generation of relevant patriots from among the veterans of the 1939-1945 war has left the U.S.A. with governing strata which are far more poorly equipped, culturally and intellectually, to cope with the most crucial challenges of our planet now, than the relevant veterans of the last great war.

Nonetheless, despite those relevant difficulties of diplomacy now, the only hope of avoiding an early and disastrous outcome of the presently onrushing, global economic breakdown-crisis, is the kind of informed cooperation between Russia and the U.S.A. which could come, from the U.S. side, only from the deep forces of a tradition traced back to the Society of the Cincinnati. Russia and the U.S.A. could not decide the outcome of the present global crisis; but, without their appropriate cooperation, no solution for the world at large exists. The Bering Strait transport tunnel-project is an excellent illustration of the practical point.

I think it most useful, at this time, to share some relevant thoughts with sensitive citizens of our prospective partner, Russia. Into what kind of cooperation shall we engage, in cooperation with relevant other nations, to rescue a menaced world from its present deadly mess?

For an example of this, consider the following features of the present world crisis-situation.


The best pedagogical precedent for what is happening to the world-wide economy right now, is what happened to Weimar Germany within the hyper-inflationary breakdown-crisis of 1923. The Anglo-Dutch Liberal allies which had prepared and created the great war of 1914-1917, had imposed what became a monetary hyperinflation upon the Reichsmark of post-war Weimar Germany. That inflation put the productive potential of Germany fully at the disposal of the Anglo-Dutch Liberals who had orchestrated the two, general, geopolitical wars of 1895-1945. Through the takeover of Germany's financial system through the 1931 founding of the Basel, Switzerland Bank for International Settlements (BIS), the Anglo-Dutch Liberal backers of Adolf Hitler's rise to dictatorship would have permanently crushed continental Eurasia, but from the unforeseen rise of Franklin Delano Roosevelt to occupy the U.S. Presidency.

The situation in the world today, represents a resumption of the essential features of the same Anglo-Dutch Liberal imperialist ("neomalthusian," "geopolitical") policy. From the very instant President Franklin Roosevelt died, the accommodation of President Harry S Truman to the anti-Franklin Roosevelt policies of Winston Churchill et al., was the intention to orchestrate the functional equivalent of "geopolitical World War III" again, as today.

The present world monetary-financial crisis, is not a U.S. dollar-crisis; it is a breakdown-crisis of the world's present monetary-financial system, a breakdown comparable in essentials to the 1923 collapse of the Weimar Reichsmark, but on a world scale. This present crisis was actually triggered by a recent, lunatic series of actions (concerning both China's currency and Taiwan) conducted against China (despite my repeated warnings to the Senators). That provocation against China was crucial in prompting a very significant July dumping of the U.S. dollar by China and Japan; however, if it had not happened that way, the situation was already rotten-ripe for another event with similar consequences. The world monetary-financial system is, presently, hopelessly doomed. There will never be a recovery—under the present world monetary system—from the on-rolling global financial-breakdown-crisis.

Only the launching of a new world monetary-credit system could halt the breakdown-crisis, and permit the development of a new monetary-credit system which could halt the presently mounting global panic.

Therefore, the crucial point to be made here, is that unless the U.S.A. overturns its present policies, the world-wide monetary-financial collapse entering its concluding phase now, will tend to create a hopeless situation for humanity, globally, for generations still to come. Without the activation of patriotic forces within the U.S.A., to take joint remedial action with some other leading powers of the world, there is no reasonable hope for humanity, globally, for generations still to come.

Thus, for Russia, as for other nations, the crucial question is, what forces within the U.S.A. are likely to attempt to change current U.S. policy-trends into a sane direction, away from the trends of, most emphatically, the recently nearly seven years? The memory of the Society of the Cincinnati comes, thus, to the fore.

That memory is also prompted by the tremendous collapse of the credibility of the U.S. Congress under Democratic leaders Senator Harry Reid and Representative Nancy Pelosi over the interval since the November 2006 mid-term election. (The credibility of Republicans, with the Bush-Cheney albatross hanging around their necks, is even worse.) The popularity of the Congress with the citizenry has dropped from a more or less clear popular majority then, to about 10.7% calculated presently. The onrushing mass-foreclosure of mortgages of the citizenry and menacing collapse of leading banks, creates fears of who might be hanging from the 2007 Christmas tree, if there actually were a Christmas tree available. The situation through western and central Europe is actually no better, either politically, or economically.

The world situation today, is, therefore, either a hopelessly disgusting situation, or, speaking literally, a revolting one. The issue is: what sort of a revolt against the present state of gross misleadership were possible?

The first step which must be taken very quickly, is the adoption of the draft legislation freezing all foreclosures on housing and protecting all Federal and state chartered banking institutions for their socially essential normal functioning within the relevant community. Only a socially dangerous incompetent in our government would object to that emergency legislation.

However, such measures are no more than absolutely indispensable stop-gaps—to stop the bleeding, so to speak. The objective is to prepare the way for:

The launching of a general economic-recovery program, based largely on Federal constitutional credit used to launch essential building of basic economic infrastructure;
The use of such infrastructure programs as creating the markets for the recovery of the private sector.
Those recovery measures must be matched with a return to a global, fixed-exchange-rate, protectionist model of monetary system. Without that, there would never be an economic recovery for generations to come.

To establish such a global system, quickly enough to be effective, and in a coordinated way, U.S. partnership in this project with major nations such as Russia, China, and India, is indispensable. Four major nations can provide the pivot around which to bring the world's smaller nations into a new, equitable, fixed-exchange-rate system. Without such action, there is presently no hope for humanity at large from generations yet to come.

Thus, in New York, Lady Macbeth steps to the front of the stage, crying "Out, damned spot!" and then throws Mrs. Lynne Cheney into the pit, to the accompanying cheers of a vast, and vastly grateful audience!