Forums
THE GLOBAL FINANCIAL MELTDOWN - Printable Version

+- Forums (http://www.globalvision2000.com/forum)
+-- Forum: Think Tanks (http://www.globalvision2000.com/forum/forumdisplay.php?fid=4)
+--- Forum: Western (http://www.globalvision2000.com/forum/forumdisplay.php?fid=10)
+--- Thread: THE GLOBAL FINANCIAL MELTDOWN (/showthread.php?tid=63)

Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31


RE: LaRouche - Admin - 05-26-2008

THE END OF FREE TRADE: REVOLT BEGINS AGAINST BRITISH POLICY

Helga Zepp-LaRouche
http://larouchepac.com/news/2008/05/25/end-free-trade.html


Not a moment too soon, a group of seven former European heads of state, five former finance ministers, and two former presidents of the European Commission, including former EU Commission head Jacques Delors, former French Prime Minister Michel Rocard, and former German Chancellor Helmut Schmidt, have gone public with an open letter to the EU Presidency and the EU Commission. They warn that the systemic collapse of the global financial system--a collapse which had been foreseen by “farsighted individuals''--brings with it the threat of unprecedented poverty, the proliferation of “failed states,'' migration of entire populations, and further military conflicts. The financial world, they argue, has accumulated a massive amount of “fictitious capital'' (!), with very little improvement for humanity. Among the immediate countermeasures they propose, is creation of a European Crisis Committee, and the convening of a world financial conference to “reconsider'' the current international system and the globalized world order.

Although their letter, which was made public on May 21, does not expressly state so, its unusually sharp tone clearly reflects that the signers are aware of the imminent danger of the eruption of a new fascism: “But when everything is for sale [for profit--HZL], social cohesion melts and the system breaks down.'' And even though the letter's call for an emergency conference does not use the term “New Bretton Woods system,'' its tenor clearly reflects the years-long campaign which the LaRouche movement has been waging for just such a conference. It is also an implicit admission that, in view of the current systemic collapse, the entire design of the Lisbon Treaty, with its cementing into place of a neo-liberal policy, is a non-starter.

The reaction came promptly from one of the most notorious mouthpieces for the British Empire, Ambrose Evans-Pritchard. Writing in the Daily Telegraph, he characterized the letter's “fulminating text'' as the clearest proof of the existence of a European-wide publicity campaign for a “super regulator,'' who would protect citizens from the social risks of modern capitalism. And that, in turn, threatens to reduce Britain's Financial Services Authority to ``a regional branch,'' and would thus “pose a grave threat to the City of London'' (!).

Mr. Evans-Pritchard deserves our thanks for his frankness! He couldn't have been more direct: Any impediment to vulture capitalism in defense of the citizenry, represents a threat to London, which wants to remain the undisputed headquarters of the British Empire (see, for example, “Britannia Redux,'' in The Economist, Feb. 3, 2007), and certainly not a "regional branch.''

The champions of what 19th-Century German-American economist Friedrich List termed the "British free-trade doctrine,'' also must surely be irked that this “fulminating text'' has been made public just at the point when the World Trade Organization (WTO) is attempting to bring the so-called “Doha Round'' to a conclusion, so that, in conjunction with the EU, the last remaining measures to protect physical production and citizens' general welfare, could be entirely eliminated in favor of unrestricted profit maximization. And the last thing they need right now, is a new round of the “financial locust'' debate earlier sparked by former German Vice-Chancellor Franz Muentefering--only now with 14 former top political leaders backing it. Already before the 14 former leaders had issued their letter, an open confrontation had broken out between Pascal Lamy, director-general of the WTO, and French Agriculture Minister Michel Barnier, with the latter rising to the defense of the last remnants of protectionism provided by the European Common Agricultural Policy (CAP), and even proposing the CAP as a model to be followed by Africa and Latin America.

The former UN Special Rapporteur on the Right to Food, Jean Zeigler, in his 2002 book The New Rulers of the World and Those Who Resist Them, describes how at the time of writing, the WTO had already registered over 60,000 transnational firms for trade, finance, services, etc., but that world trade is dominated by only 300-500 firms in the United States, Europe, and Japan. He calls the WTO a “fearsome machine in the service of pirates.'' And it is precisely this war machine which is now attempting, in cahoots with the EU--yet another non-elected, and therefore non-accountable bureaucracy--to achieve optimum conditions for speculators to make a profit.

When one hears that the United States or the EU are negotiating, Zeigler says, in reality it is the planet's 200 most powerful transcontinental corporations which are setting the tone; and that is why the WTO has always been dominated by the transcontinental corporations' rationales, and never by the interests of peoples and their respective states. This unbridgeable conflict of interest between people on the one side, and the British imperialist, free-trade doctrinaire vulture capitalists on the other, who are threatening entire continents and are plunging ever greater masses of people into poverty, has never been clearer than it is right now, at a time when even the financial media are mooting that central banks could go bankrupt, and that the taxpayers will have to pay for speculative losses suffered by private firms.

- Separating the Wheat from the Chaff -

And surely, the wheat never been more cleanly separated from the chaff than it is today, as far as heads of state are concerned. By their own words ye shall know them: The British Empire's neo-liberal free-traders speak of “sustainable development,'' “renewable energy sources," “appropriate technologies," etc., whereas the defenders of the general welfare speak of “food and energy security,'' and the need for expanded production.

And so, the Schiller Institute's worldwide campaign for placing a doubling of food production onto the agenda of the UN Food and Agriculture Organization's conference in early June, is now intersecting a sense of responsibility being shown by a quite a few heads of state in the face of the worldwide crisis.

In a speech which has been completely blocked out by the western media, Egyptian President Hosni Mubarak told the World Economic Forum in Sharm El Sheikh that the world must take responsibility for the poor--not only in the developing countries, but also for the poor in the rich industrialized nations. And therefore it is utterly irresponsible to speculate on food and to use it for producing fuels, which simply ends up making food still more expensive: "Is it reasonable," asked Mubarak, "that some would go ahead with the production of biofuels with support from the governments for its producers? Is it reasonable or even acceptable that agricultural crops are used for the production of ethanol to make the crisis of food prices worse? ... The international community is in need for reassessing the real cost of the production of biofuels, including all its social and environmental effects, and its consequences for the food security of humans." He promised that he will make this important issue a topic at the FAO conference, and expressed hope that this meeting will place both the developing and industrial nations on the right track.

- Eurasia Defends Itself -

But the most important strategic shift by far, is the one currently under way in the aftermath of the newly upgraded strategic partnership among Russia, China, and India, which was agreed upon at a meeting of those three countries' foreign ministers in Yekaterinburg, Russia, on May 15. Underlying this strengthening of their strategic triangle, is the British Empire faction's intent to isolate each nation, so that it may be first destabilized, and then destroyed. Included in this, is London's longstanding campaign against Russian Prime Minister Vladimir Putin, as well as the campaign against China around the Dalai Lama and the Uighurs in Xinjiang. Because, as they rightly fear: Russia, China, and India not only represent together more than one-third of humanity, with the world's fastest-growing economies, but these countries are also now demonstrating clear determination to work jointly to establish a new international order.

In keeping with this, the new Russian President Dmitri Medvedev took his first foreign trip to Kazakstan and China, his top agenda item being extensive cooperation, which, in the words of former Indian Foreign Minister Salman Haidar, is going to tap the full potential of mutual relations among India, Russia, and China.

Shortly before, at an agricultural conference on May 19 in Yessentuki, Russia, Putin declared that food security, stable prices, and developing the agricultural sector are going to be his government's top priorities. Russia not only has the potential to become self-sufficient, he said; it can simultaneously become a food exporter, and can become a major player on the world food market. Putin's remarks at the conference, along with those of Agriculture Minister Alexei Gordeyev, left no doubt that Russia--a country which today must import about 40% of its food, thanks to the “shock therapy'' of the 1990s--will use all necessary subsidies and protective trade measures, and is prepared to ignore the WTO's rules, in order to achieve its goal.

Putin emphasized that in view of the steep rise in food prices on world markets, agriculture has been moved to the top of his government's agenda, because it so strongly influences Russia's domestic situation, and because it especially afflicts the poorest layers of the population. Putin laid out five objectives for Russian agriculture: 1) increase gross output, through increasing the area under cultivation, as well as yields; 2) technological re-equipping of agriculture and the food-processing industry, using long-term credit; 3) achieve price stability by using anti-monopoly regulation and subsidies; 4) risk management; and 5) constant monitoring of the food products markets, and automatic regulation, using import and export tariffs. Putin also ordered a re-evaluation to determine whether Russia's existing agricultural trade agreements are in harmony with its national interests.

- A Question of Morality -

It remains an open question, whether the governments of Europe's nations have the intelligence and moral integrity to follow Russia's example, or whether they will allow the negotiations between the WTO and the EU, and the policies of European Commissioner for Agriculture Mariann Fischer-Boel and of British Commissioner of the EU for Trade Peter Mandelson, to cause Europe's farmers to suffer losses which agricultural experts estimate will be on the order of 30 billion euros ($47.4 billion). The Irish Farmers Association, for one, has announced that it will refuse to accept the WTO agreement. And we can assume that the policies set forth by the EU in these negotiations, will only serve to massively heat up the ferment in favor of a “no'' vote against the Lisbon Treaty in Ireland's upcoming referendum.

The battle between the proponents of “British imperial free trade'' and the defenders of the general welfare and of food security, is the most important conflict facing us today, because the future of civilization hangs in the balance. On the positive side, we can note resolutions passed by the state House of Representatives in Alabama, and submitted to the Michigan House, which call upon the U.S. Congress to take measures to double food production, to halt production of biofuels, to pay farmers parity prices for food products, and to cause the United States to immediately withdraw from the WTO and NAFTA.

It is furthermore extremely significant that for the first time in the post-war era, Japan has now broken from the “Washington consensus'' and is preparing joint measures with a number of African organizations, to set a Green Revolution in agriculture into motion, on the model of what was done in the 1970s.

The FAO conference in early June provides us with an excellent opportunity to correct the failures of globalization, and to take up measures aimed at doubling food production as rapidly as possible. For, if the use of food to produce biofuels is a crime against humanity, then speculating on food is doubly so, and must be outlawed with stiff criminal penalties.

The British imperial free-trade system is more bankrupt today, than the Communist system was in 1989-91, and there can only be one answer to it: The New Bretton Woods system which Lyndon LaRouche had the foresight to propose years ago, must be immediately discussed and adopted at an emergency conference of the world's leading nations. The “fictitious capital'' must be removed from the system, and the economy must once again become dedicated to securing humanity's long-term existence. One part of the Establishment is beginning to understand this. Therefore, if we are to preserve the world's population from immense suffering, there is no time to lose!





RE: LaRouche - Admin - 10-20-2008

THE BANKING CRISIS IS BACK IN THE HEADLINES
John Hoefle
http://larouchepub.com/other/2008/3524banking_crisis_back.html


After more than a month of claims that the worst is behind us, the banking crisis is suddenly back in the headlines. Those who compare the propaganda to the calendar will see a pattern forming, revolving around the fiscal quarters, in which the beginning of the quarter is dominated by the reports of the losses from the previous quarter, followed by a period in which it is claimed that, with all that bad news, the worst must be behind us. Then, as the quarter enters its final month, the propaganda machine begins preparing the population for another round of losses. June is the final month of the second quarter, and right on cue, the bad news reports have begun. The banking crisis itself is not back, because it never went away, and is worse than ever.

Far from having been stabilized, the global banking system is on life support, kept alive by extensive government funding while it is being restructured; capital injections are being arranged for failing institutions, steps are being taken to keep the book values of worthless securities from plunging to zero, while the banks are being forced to write down the values of their assets.

This downsizing is already traumatic, but it has really only begun, because the reason for the existence of much of the banking system has disappeared. With the collapse of the securities bubble, the markets in which the banks played are gone. The casino has closed, and the gamblers have been left out in the cold. When the system dies, so do the players.

June Swoon
It was as if, suddenly, a switch had been thrown, with the banking crisis suddenly reappearing in the headlines. Gone is the talk of the worst being over; instead heads are again on the chopping block; there is talk of big losses to come, and even rumors that a major investment bank is in serious trouble.

Wachovia Corp., the fourth-largest U.S. bank holding company by assets, dumped its CEO, G. Kennedy Thompson, after relieving him of the chairman's position in May. Formed by the 2001 merger of North Carolina's First Union and Wachovia, the bank has gobbled up lots of smaller institutions, including the $26 billion acquisition in 2006 of Golden West Financial, a huge thrift with heavy exposure to California and Florida real estate. Wachovia reported $363 million in losses for the first quarter, then amended that figure upward to $708 million. The bank has already written off some $7 billion in assets, and raised $10 billion in emergency capital. The firing of its CEO is an indirect admission of much bigger problems.

Washington Mutual, the nation's largest savings and loan bank, stripped Kerry Killinger of his chairman's position, though he remains as CEO. WaMu, as it is called, has already written off over $9 billion, and raised $10 billion in capital, including a big chunk from pirate equity fund TPG (née Texas Pacific Group). A heavy lender in the plunging West Coast real estate market, WaMu, like Golden West and many others, is helplessly watching its asset-base dissolve.

In Britain, where Northern Rock was nationalized, another mortgage lender is in trouble. Bradford & Bingley, which specializes in making loans to landlords, has dumped CEO Steven Crawshaw, and sold nearly a quarter of itself to TPG for a paltry $300 million. TPG was introduced to B&B by Goldman Sachs, and the injection took Citigroup and UBS off the hook for underwriting a $600 million share offering. The rescue was "shepherded" by Britain's Financial Services Authority. Unfortunately for B&B, it still has a deal with GMAC to buy some $4 billion in mortgages by the end of next year, as GMAC tries to avoid the bankruptcy of its own mortgage unit.

In other bad news, State Street Corp., the 13th-largest U.S. bank holding company, is facing a reported $3.4 billion in losses on its mortgage-related securities portfolio, and is seeking to raise $2.5 billion in capital. The bank, like many others, is issuing new stock to raise funds, thereby diluting the value of the stock already held by existing stockholders.

The investment banks are also taking a beating. Standard & Poor's has downgraded Merrill Lynch, Morgan Stanley, and Lehman Brothers by one notch each, saying it had lost some confidence in the banks' abilities to meet their financial obligations. Given the promiscuous quality of S&P's ratings in the past, and its dependence upon the investment banks, these downgrades are tokens of much more serious problems.

Also indicative of growing problems is the announcement by the FDIC that the $5.8 billion in profits reported by commercial banks in the fourth quarter of 2007, has since been restated downward to a mere $646 million, the lowest quarterly profit since 1990 resulting in $100 billion profits on the year (Figure 1). The FDIC said the banks were still profitable in the first quarter, earning $19 billion, but that is about half the $36 billion the banks reported in the first quarter of 2007, as loan losses grew, and the values of securities held by the banks declined. The level of loan-loss reserves to non-current loans fell to $0.89 in reserves for every $1 of non-current loans, the lowest level since 1993, despite the addition of $37 billion to those reserves"and the official level of non-current loans is just the tip of the iceberg.

Life Support
Since this financial crisis began last year, the world's banks"commercial and investment"have written off nearly $400 billion in assets and credit losses, led by the big institutions. Citigroup, UBS, and Merrill Lynch have all taken writeoffs in the $40 billion range; HSBC has written off nearly $20 billion, and Royal Bank of Scotland, Bank of America, and Morgan Stanley hover around $15 billion each.

These are big numbers, but they pale in comparison to the monies the central banks have injected. Since last Summer, the central banks, led by the Fed and the European Central Bank (ECB), have made some $3.5 trillion in loans to the banks, an intervention unrivalled in human history.

In the United States, the Fed has created a number of what it calls "lending facilities" as the crisis has deepened. In mid-December, it created the Term Auction Facility (TAF) as a way to make loans to depository institutions. The first TAF auction occurred on Dec. 12, 2007, offering $20 billion; the demand was high, with 93 banks submitting bids totalling $62 billion. Another $20 billion was auctioned Dec. 20, with 73 banks seeking $58 billion. In this way, U.S. banks were given $40 billion in December to help them clean up their books at the end of the year. In January, the Fed increased the loan limit at its twice-monthly TAF auctions to $30 billion each, and in March, bumped it up again, to $50 billion. In May, the limit was raised to $75 billion; and for June, the Fed plans to hold three auctions instead of just two. To date, the Fed has lent $585 billion through the TAF, with another $150 billion available later in the month. Assuming all the money is taken"and it has been every time"that would bring the total to $735 billion in just a bit over six months (Figure 2).

The Fed created two more lending facilities in March, the final month of the first quarter. On March 11, the Fed announced the Term Securities Lending Facility (TSLF), under which it would lend up to $200 billion to primary securities dealers, through weekly auctions beginning March 27. Before the TSLF could begin, however, disaster struck in the form of the Bear Stearns crisis, so the Fed created yet another facility, the Primary Dealer Credit Facility (PDCF), to lend an unspecified amount to the primary dealers effective March 17. In less than three months of operation, the TSLF has lent out over $378 billion (Figure 2). The Fed does not report the amount of money it lends through the PDCF, but before the month of June is out, the Fed should easily surpass the $1 trillion mark in loans to financial institutions through these new facilities.

These loans, it must be noted, are gross, not net. Most of them are 28-day loans, meaning they must be paid back. When a loan is paid back, the net amount is zero, and the money is available to be loaned again, so a cumulative total of $1 trillion in loans does not mean that there is $1 trillion outstanding. According to the Fed, the amount of loans outstanding through these credit facilities and others, such as the discount window and the repo market, have increased from $76 billion in mid-December, to $440 billion at the end of May.

Supposedly, these loans are being made to mitigate the effects of the "credit crunch," but providing the banks with money is only half the story. When they take out these loans, the banks provide collateral to the Fed, which means that, in effect, the Fed is trading cash for "illiquid" securities. What is really going on here is a huge debt-recycling scheme, in which worthless securities are transferred from the books of the banks to the Fed, in exchange for cash or Treasuries, which helps the banks hide the fact that they are insolvent.

In theory, the banks should get their collateral back when they repay the loans, but it is also possible that the Fed keeps the collateral in lieu of full or partial repayment. The Fed is silent on this issue; asked explicitly about it by EIR, the Fed punted, directing us to a page on its website which does not answer the question. Even if the collateral is returned, the issuance of one-month loans twice a month provides plenty of room to repay old loans with new ones, keeping the collateral away from the banks' books.

These types of maneuvers are nothing new. Nazi/British banker Hjalmar Schacht used similar methods to recycle German debt via Mefo bills, and Felix the Fascist Rohatyn used similar measures to loot New York City with Big MAC. Austerity, backed by fascist economic policies, is old hat.

What is new, is the scale of these actions, in a crisis which is just beginning. The accompanying figures give a hint of what is to come as the bailout escalates to cover the growing holes in the books of the players in this bankrupt casino. Will the existing facilities be sufficient to get through June, or will more extraordinary measures be required, as they were in March, when Bear Stearns collapsed, and the Fed intervened to stop a chain reaction of derivatives defaults?

Bear Stearns was the smallest of the major investment banks, and is no more, having been taken over by J.P. Morgan Chase with some $50 billion in help from the Fed. That leaves Lehman Brothers as the smallest, and rumors are swirling around it like sharks in a feeding frenzy. Lehman insists"just as Bear did"that it is solvent, that there is nothing to worry about"but that can't possibly be true, for it or its larger cousins. They are creatures of a dead system, a system which no longer has the capacity to support them all. The securities market is virtually dead, and the shrinking of credit is crushing everything in its path, from households to corporations to financial institutions. The system is not coming back, and without it, the speculators have no chance of survival. The world these dinosaurs inhabited is no more.

The danger, as is becoming more visible every day, is that the attempt to save these beasts"and the money they represent"is sending the dollar into a hyperinflationary frenzy. There are consequences to pouring trillions of dollars into such a process to try to save it, instead of shutting it down. Those consequences can be seen every time you go to the gas station or the grocery store, in soaring prices, and if that's where you see them, you are one of the lucky ones. In a growing number of countries, the food is too expensive for most people, and in some places, the food simply isn't there.

In a very real sense, there is no banking crisis because the banking system is already gone. The path we are on, with the futile and foolish attempt to bail out the money, will inexorably lead to the sort of hyperinflationary shock which destroyed Weimar Germany and paved the way for Hitler. The fascists are now in the wings, waiting for the opportunity to make their move. The fascists on the Right, typified by Cheney and the howling mob around Fox News; and the fascists on the Left, typified by Rohatyn, Soros, and Gore, are but two sides of the same coin.

The only alternative to that is a return to the American System policies of Hamilton, Lincoln, FDR, and LaRouche. Either the U.S. government steps in and asserts its sovereignty to put the financial system through bankruptcy, or the financier oligarchy will put the government through bankruptcy. If the former, we can quickly begin rebuilding our nation and the world; if the latter, we will soon have a much more sensuous understanding of how the Nazis came to power in Germany.







RE: LaRouche - Admin - 10-20-2008

G8 SUMMIT FAILS AGAIN :NEW BRETTON WOODS!
Helga Zepp-LaRouche
http://larouchepub.com/hzl/2008/3528g8_fails_again.html

Before our eyes, the world financial system is disintegrating at an ever more dramatically increasing rate; the G8 states are meeting for their annual summit in Japan and the systemic collapse is not even a topic on its agenda, let alone are they finding a solution for ending the crisis! These governments' collective avoidance of reality continues to mislead them into looking for escape-hatches within the confines of the collapsing system escape-hatches which in fact don't exist. Considering the fact that this is the collective wisdom of the governments of the seven leading industrial nations, plus Russia, and that the weal or woe of the vast majority of humankind hinges on their expertise, we can only speak of this as a tragedy, in the Classical meaning of that term.

In no time at all, it's going to dawn on even the dullest ignoramus, that there's nothing in this universe that can save the current global financial system. Freddie Mac and Fanny Mae, the two U.S. mortgage giants, are "insolvent," according to former Federal Reserve governor William Poole. "The financial crisis has returned in full fury," according to Spiegel-online. The Financial Times Germany edition headlined "There's Blood on the Floor in Zurich's Financial Center." The Danish Roskilde Bank is collapsing. The mortgage and real estate crises are escalating in the United States, Great Britain, Spain, and other countries, and more investment banks, such as Wachovia, JP Morgan, Lehmann Brothers, UBS, and Credit Suisse, are on the skids. In Austria, the government is supposed to shoulder the liabilities of Bawag Bank. The death-gyrations of the American airline companies are making another round, with mass layoffs of another 20,000, while in Germany, Siemens is firing almost 18,000 employees. And the list goes on.

The intensifying crisis of the government-backed mortgage financing companies Fannie Mae and Freddie Mac "signals the final collapse of the Greenspan bubble," commented Lyndon LaRouche. "This is not a crisis of these two institutions. It is the concentrated collapse of the entire globalized debt bubble Greenspan created falsely called the 'U.S. subprime mortgage bubble'  falling onto these two institutions. And it signals that the next phase is the total explosion of the entire financial system." In the event that the U.S. government intervenes on these two institutions whose stock value plummeted by almost 50% on July 11 and takes them over, it will be the taxpayers who must pick up the tab, while the problem of the systemic crisis will remain unaddressed. For we must keep in mind that the primary function of these two institutions, has been to keep the bubble economy pumped up, by turning debts into assets which could then be resold as structured securities.

One well-placed source in the financial sector stressed that something gigantic, of unfathomable and unimaginable proportions, must be done by Aug. 1, or the world financial system will collapse completely. If the Americans could only think through the implications of Freddie Mac and Fanny Mae's bankruptcy, he said, they would realize that we're in the greatest financial crisis of all time. But instead, they're all leaving on vacation, as if everything were just fine.

In the month of June alone, financial institutions in the United States repossessed 110,000 family homes, and foreclosures were announced for an additional 250,000 homeowners. The number of such repossessions is four times greater than at the height of the Great Depression of 1933, and since July 2007, approximately 3 million homeowners have been in foreclosure proceedings, while $3.5 trillion in real estate value has been obliterated. The flood of foreclosures has, in turn, caused real estate prices to collapse, and many homeowners with mortgages they thought were secure, are now left with a house that is worth less than their mortgage; and so the spiral continues downward.

Hyperinflation and Austerity
The financial oligarchy's determination to keep its failing institutions afloat just a few days longer, even if it means hyperinflation, is typified by a press conference which International Monetary Fund Managing Director Dominique Strauss-Kahn gave on the side at the G8 summit. He recommended that the G7 countries' financial authorities should keep extremely careful watch over their respective financial sectors, and should come to the rescue of all institutions that get into difficulty, with injections of liquidity.

Now, that is truly outrageous: It's precisely the same "helicopter" strategy which earned Federal Reserve Chairman Ben Bernanke his nickname: the crazy idea that in an emergency, it would be better to fly helicopters over American cities and drop banknotes, than to permit large financial institutions to go bankrupt. And this, knowing full well that the resulting hyperinflation would devour the savings of all the so-called little people.

Just how the neoliberal oligarchy envisions the continuation of the crisis, is as clear as day: massive reductions in the population's standard of living, in the tradition of Hitler's Economics Minister Hjalmar Schacht. Strauss-Kahn presented the brilliant idea that price inflation in energy and food should be fully passed on to consumers, since this would create an incentive for producers to increase their production, while for consumers it would be an incentive to reduce consumption. And in typical British "lady-do-rightly" manner, he suggested that there be a safety net for the poor. Lorenzo Bini Smaghi, a member of the European Central Bank's board of directors, blew on the same horn, arguing that the sacrifices which the population will have to make, must be distributed evenly.

The fact that for the majority of the population, who in recent years haven't been able to accumulate savings, such a "reduction of consumption" and "equal distribution of sacrifice" mean a further plunge into poverty, with incalculable social and political consequences, is evidently a matter of indifference to these incompetents, whose own personal salaries would not be affected in the least by such a "distributed sacrifice."

One Contradiction After Another
The only positive result coming out of the G8 summit, was their unanimous commitment to a renaissance of nuclear energy worldwide—except for Germany, of course. Russian President Dmitri Medvedev announced the massive expansion of nuclear energy in Russia, as well as international cooperation with all countries which desired it. Perhaps more important than the G8 summit itself, was a bilateral side-meeting between Indian Prime Minister Manmohan Singh and Chinese President Hu Jintao, where they agreed on their countries' close cooperation in nuclear energy development.

Within the G7 states, however, one contradiction is piling on top of another, with the interests of nation-states sharply clashing with the ideology of the neo-liberal free-trade faction. French President Nicolas Sarkozy, for example, assured the European Parliament in Strasbourg that under no circumstances would he sign the final documents of the World Trade Organization's so-called Doha Round, which has been set to occur at a meeting on July 21 in Geneva. Admittedly, Sarkozy used a free-traders' argument that Brazil and China are also refusing to open their markets; but his real, more compelling reason, was surely the 100,000 agricultural jobs that would be eliminated in France, were the Doha agreements to go into effect. The WTO had made a desperate attempt to push the negotiations through by early June at the very latest, so that governments could get the required arrangements into place while the Bush Administration was still in office.

But the G8's inability to even put the problem of the systemic crisis onto its agenda, or to give serious consideration to a new financial architecture, is a sure sign that, very soon now, there will be an extremely rude awakening for governments who have insisted on clinging to their ideological prejudices. Just as the Communist system collapsed in 1989-91, so also the speculative system, which was started at the latest by Richard Nixon in 1971, and which, starting in 1987, was puffed up by Fed Chairman Alan Greenspan into the most immense casino economy the world has ever seen, is now finished. The invention of derivatives and other "creative financial instruments" created a global monster which has led to the absolutely unpayable indebtedness of the system, along with huge mountains of unmarketable structured financial securities.

No Breakthrough in Europe
The European side of this monster was bestowed upon us by Margaret Thatcher and Francois Mitterrand with the Maastricht and Amsterdam treaties, the currency union, the Stability Pact, and the Treaty of Nice. Thanks to these, we now have the bubble economy of the so-called catch-up economies, and in Germany, the collapse of the Mittelstand small and medium-sized industries and the past decade's reduction of real wages. The only ray of light in this otherwise dismal picture, is the Irish people's "No" on the referendum on the proposed Lisbon Treaty for European supranational government, and the subsequent declarations from the Presidents of the Czech Republic and Poland, that the Lisbon Treaty is a dead letter.

What has unfortunately become all too clear in this attempted coup from above, in which heads of government had sought to impose the EU Treaty in a cloak-and-dagger operation without any public discussion, is that democracy in Europe is in miserable shape. Even now, after the Irish "No" has at least ensured that the population knows that the Lisbon Treaty exists, there has not been a single in-depth analysis or presentation of the treaty in the media, with the exception of a brief talk show on the Phoenix network. If it is true that Germany's Chancellor Angela Merkel actually did demand that President Horst Kohler sign the EU Treaty right now, even though the Constitutional Court's decision on relevant cases is still outstanding, then this is a truly hair-raising deficit in democracy, in a woman who, already back in 2005, said on the occasion of the 60th anniversary of her party, the Christian Democratic Union: "For truly, we do not have any legal claim to democracy and the social market economy for all eternity." So, what, then? Dictatorship?

A Solution Can Still Be Implemented
One thing is clear: The world is now facing shocks of an extent heretofore unknown. Lyndon LaRouche's proposal that it is only if the world's four most powerful nations the United States, Russia, China, and India join in cooperation, that a solution can be found for a new financial architecture (a "New Bretton Woods") may seem unlikely to many, but under the crisis conditions we are now headed for, it is not so. The world's people are currently thinking about solutions: for example, a continental Eurasian solution, without the U.S.A. and Great Britain, or a strictly Asiatic or South-South solution, or a ruble zone, or a British-Scandinavian zone, etc., etc. But already in the 15th Century, Nicholas of Cusa recognized that universal problems cannot be solved on the basis of side-arrangements, and that concordance in the macrocosm is only possible if all microcosms develop into a harmonious whole.

And so, even if today this might appear unlikely to most citizens, the only way to prevent humanity from being plunged into a really dark age, lies in our ability to establish a new and just world economic order, one which can secure the survival of all people and all nations, in human dignity. And the best thing that we in Germany can do, is develop ourselves into true citizens of our country.
 
A CALL FOR A NEW BRETTON WOODS
We Need a New World Economic Order, Now!
Helga Zepp-LaRouche
http://larouchepub.com/hzl/2008/3529need_nbw_now.html


The author is the founder of the Schiller Institute, which has branches in many countries, and its president in Germany. She issued this open call, titled "World Financial System Faces a Meltdown; Call for a New Bretton Woods System; We Need a New World Economic Order!" on July 17. It is being distributed as a leaflet in Germany, and has been translated from German for EIR.

[PDF version of this text]

Inflation is gobbling up the income of the so-called "little people": 56% of German citizens don't make enough to be able to save anything. And now, as the result of speculation, prices for food, gasoline, heating oil, electricity, and raw materials are exploding. But the people do realize that a much bigger catastrophe is hitting us.

The fact is, the financial system has collapsed. The so-called subprime mortgage-market crisis in the U.S.A., which broke out a year ago, is now exploding with the insolvency of the mortgage-lenders Freddie Mac and Fannie Mae, which reportedly are holding or backing $5.3 trillion in mortgages that's 5,300 billion dollars which is 70% of the American real estate market! But both of these giants were at the core of the "creative financing instruments" that former Federal Reserve chairman Alan Greenspan bestowed upon the world, by means of which, debts were miraculously transformed into assets, and sold throughout the entire globe as so-called structured financial packages, without the slightest control by governments or central banks.

The Federal Reserve's attempt to put practically unlimited financial infusions at the disposal of both giants will only accelerate the hyperinflationary explosion of the system. The patient—the world financial system—has already died; it's only the burial that hasn't yet occurred. The dance around the Golden Calf that made the speculators super-rich, but the majority of the world's population poorer and poorer, has come to an end.

It is deplorable that the summit of the G8 countries that is, the seven most powerful Western industrial nations plus Russia, which recently took place in Japan unfortunately proved itself incapable, as was to be expected, of finding a solution for the systemic collapse that is playing out so dramatically before the very eyes of the world public. The heads of state of the G5 China, India, Brazil, Mexico, and South Africa who were also in attendance, were not seriously incorporated into the search for a solution. A number of governments will soon be voted out, since, during their term in office, they did not meet their obligation to take care of the common good of their populations.

The hyperinflationary disintegration of the world financial system has already led to hunger riots in 40 nations, as more and more people are threatened with the loss of their livelihoods. If even more, unforeseeable, harm to the world's population is to be prevented, an emergency conference must be called, at the level of heads of state, to establish a new financial architecture, in the tradition of the Bretton Woods system initiated by Franklin D. Roosevelt.

Lyndon LaRouche has reiterated in recent months, that only the combination of the four most powerful nations the U.S.A., where the election remains open, as well as Russia, China, and India is strong enough to take a stand against the international financial oligarchy. Other nations should then join these four to bring about a solution.

This emergency conference for a New Bretton Woods system must resolve that:

The present world financial system must be declared hopelessly bankrupt, and replaced by a new one.

It must promptly set up a fixed-exchange-rate monetary system, so that long-term investments in international infrastructure projects are possible, under predictable conditions.

Derivatives speculation and speculation in food, energy, and raw materials must be banned by treaty among governments.

There must be an immediate reorganization, including, for example, cancellation of debts.

In a New Deal for the world economy, in the tradition of Alexander Hamilton, Friedrich List, Henry Carey, and FDR, new credit lines must be made available for investments in basic infrastructure and technological renovation.

Building the Eurasian Land-Bridge, as the core project for reconstruction of the world economy, is therefore the vision that can not only bring a new economic miracle, but also bring peace to the 21st Century.

Food production must be doubled worldwide in the coming years.

A new "Peace of Westphalia" must, within at least 50 years, secure the availability and development of raw materials for all nations on this planet.

We, the undersigned, maintain that the system of "globalization," with its brutal, predatory capitalism, is economically, financially, and morally wrecked. Instead, man must be placed at the center again, and the economy must serve the common good. The new world economic order must guarantee the inalienable rights of all men on this planet.

  
LAROUCHE APPEALS TO NATIONS IN TIME OF CRISIS
http://larouchepub.com/hzl/2008/3531hzk_appeals_nations.html

In the spirit of deliberations at an international EIR seminar held July 26 in Wiesbaden, Germany, attended by parliamentarians, economists, and legal experts from France, Italy, Denmark, Sweden, Austria, the U.S.A., Niger, Zimbabwe, Jordan, and Germany, Helga Zepp-LaRouche, president of the international Schiller Institute, has published the following resolution for worldwide circulation and endorsement. Titled "Make the Dream of the American Revolution Come True!" it is addressed "To All the Nations of the United Nations and the Presidential Candidates in the American Election Campaign."

"We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed. That whenever any Form of Government becomes destructive of these Ends, it is the Right of the People to alter or abolish it, and to institute new Government, laying its Foundation on such Principles, and organizing its Powers in such Form, as to them shall seem most likely to effect their Safety and Happiness...." So reads the American Declaration of Independence of 1776.

And Martin Luther King reminded the world on August 28, 1963 in his famous "I Have a Dream" speech: "When the architects of our republic wrote the magnificent words of the Constitution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir. This note was a promise, that all men, yes, black men as well as white men, would be guaranteed the unalienable rights of life, liberty, and the pursuit of happiness. It is obvious today that America has defaulted on this promissory note, insofar as her citizens of color are concerned."

But the American Revolution and the establishment of a republic in the New World was not only a "Beacon of Hope and Temple of Liberty" for America alone, but it represented a perspective for a future in which imperialism and colonialism would eventually be overcome, for the entire world. The plan of John Quincy Adams, for an international "community of principle" of fully sovereign republics, which would, notwithstanding, be bound together by the common aims of mankind, was the noble fulfillment of the idea of the international law of the people, as it was established by the 1648 Peace of Westphalia. Unfortunately, today, it is obvious that America has kept this promise over recent years just as little for the international community, as King complained it did for the citizens of color in his time. But a unique opportunity, and perhaps also the last chance, currently presents itself, with the American Presidential campaign, to infuse the ideals of the American Revolution, of John Quincy Adams, Abraham Lincoln, Franklin D. Roosevelt, and Martin Luther King, with new life.

An Unprecedented Threat
Never in its entire history has humanity been threatened by greater dangers than now. We are experiencing the end phase of a systemic crash of the global financial system, whose hyperinflationary effects have already led to hunger riots in more than 40 nations, and are massively threatening the living standards of the majority of the population in the so-called industrialized nations as well. The system of unrestrained free trade associated with globalization has utterly failed, and threatens to plunge the world into a state of chaos which threatens the lives of many millions, if not billions of people.

While, during the 1950s and '60s, the idea of UN Development Decades still prevailed that is, the perspective that the underdevelopment of the developing countries would be overcome in each decade, step by step, in order to reach, as soon as possible, the level of the industrialized nations sometime, in the middle of the 1960s, a paradigm-shift set in, in which the talk was no longer about overcoming underdevelopment, through the construction of infrastructure, industry, and agriculture, but of "overpopulation," "appropriate technology," and "sustainable development." Instead of producing harvests for the welfare of their own populations, the developing countries had to produce, more and more, so-called "cash crops" for export, in order to pay off their foreign debt, which had been constantly increased through the conditionalities of the IMF.

In the industrialized nations, this paradigm-shift led increasingly away from production, toward speculation. In Europe, this has taken the form of turning previous cooperation among sovereign nation-states into a free-trade nightmare, run by a supranational Brussels bureaucracy, while tying the hands of governments, under the disastrous Maastricht-Lisbon treaties. Through so-called "outsourcing" to the countries with low-wage production, the productive small and medium-sized industries and the highly skilled jobs in the industrialized nations were destroyed in many places, while the real income in the low-wage countries could not cover the real cost from the standpoint of physical economy. Through this policy of free trade, important capacities in industry and agriculture have been destroyed over the last 40 years. A small section of the population in all countries became obscenely rich, while about 80% of the population in all countries became ever poorer. The situation escalated more and more, to the point against which Gandhi had written in reference to the British colonial masters: "Wealth without work, pleasure without conscience, knowledge without character, commerce without morality, science without humanity, worship without sacrifice, and politics without principles."

The model of globalization and free trade has been proven a failure, which has been demonstrated, not the least, by the final collapse of the Doha Round of the WTO trade negotiations in Geneva. Therefore, it is of the greatest urgency that we again put on the agenda, the ideas which had been proposed earlier, for example, by the Non-Aligned Movement at the Sri Lanka conference in 1976, in the so-called Colombo Resolution, that is, the demand for a new, just world economic order, which affords all people and all nations on this planet a humane life in freedom, and the pursuit of happiness, as it is demanded in the Declaration of Independence.

The Last Chance
The upcoming General Assembly of the United Nations, which begins this year on Sept. 26, in New York, is perhaps the last opportunity to put the interests of humanity as a whole, and not that of a few speculators, on the agenda. If courageous leaders of several nations comport themselves like those outstanding personalities, such as former Foreign Minister of Guyana Fred Wills, did in 1976, or the former President of Mexico, Jose Lopez Portillo, did in 1982, then the reconstruction of the world economy after the crash of the system can be set in motion in sufficient time.

What mankind needs today, are individuals who have the vision and the love for the idea of the international community, to put the question of a new, just world economic order on the agenda. This resolution is a call to leading representatives of all nations, to work toward this goal. And the more that forces appeal to the three Presidential candidates who still find themselves in the race, to honor the promise of the American Constitution and Declaration of Independence for all nations on this planet, the greater the chance that America can return to the positive role which it played in the times of Benjamin Franklin, Alexander Hamilton, John Quincy Adams, Abraham Lincoln, and Franklin D. Roosevelt.
  
PUT UP THE FIREWALL, BRING IN THE SHRINKS!
John Hoefle
http://larouchepub.com/other/2008/3528firewall_shrinks.html

As their speculative financial system crumbles around them, the bankers and their regulators are in obvious denial about the nature of the problems they face, and the nature of the solutions. Rather than being guided by reason, they are being guided by their compulsions, trying to save what cannot be saved, by methods which have failed repeatedly. Like crack addicts or compulsive gamblers, they find themselves unable to stop their destructive behavior, even when they know, deep in their hearts, that their actions are leading them to their doom.

All the signs are there. Fed chairman Ben Bernanke has rather openly stated that the Fed's escalating series of emergency bank loan operations will continue, thereby confirming that the U.S. banking system is insolvent. Treasury Secretary Henry Paulson, while talking openly about the possibility of the failure of a major U.S. investment bank, is pushing for further deregulation of the financial system. Regulators are discussing the possibility of using the big private equity funds to inject badly needed capital into the banks, in exchange for further deregulation; and some of the bankers, like J.P. Morgan Chase CEO Jamie Dimon, are calling for the banks to be allowed to operate like private equity funds. Congress, under the guise of protecting homeowners, is pushing legislation designed to protect the banks and other holders of mortgage-related debt. More bailouts, more deregulation, more of the same poison that is killing us all.

Meanwhile, the disintegration continues. The FDIC is gearing up to handle a rash of commercial bank failures, as rumors of problems circulate amid suggestions that quiet runs on suspect banks have already begun. The FDIC is, at least nominally, focussing its attention on small and medium-sized banks with large exposures to their local/regional commercial real estate markets, in the hope that the Plunge Protection Team can head off the open failure of the giant banks. The situation is far worse than they will publicly admit, and they have no solution other than buying time, in the hope that the financial markets can somehow be brought back to life.

What they are doing is the equivalent of rearranging the deck chairs on the Titanic, trying to keep themselves and their passengers calm as their ship sinks beneath the waves. They are in denial, paralyzed with fear, and making the same mistakes over and over again. They obviously cannot stop themselves so we must intervene, get them some professional psychiatric help, and let more reasonable minds take over.

It's the System
The tendency of most people, regulators and citizens alike, is to approach this banking crisis through the prism of individual institutions. As institution after institution flames out, from mortgage lenders to giants like Bear Stearns, we are treated to a series of soap operas, a new cast of villains to be blamed for our trouble. The Justice Department has indicted over 400 individuals in the mortgage-loan business as part of Operation Malicious Mortgage, including two former officers of Bear Stearns. While we leave it to the courts to decide the innocence or guilt of individuals, there is certainly no shortage of criminal culpability in the mortgage sector, and people who committed fraud should be held to account for their actions. However, this approach falls far short of what is needed.

Take the cases of Fannie Mae and Freddie Mac, the big government-sponsored enterprises that buy mortgages and issue mortgage-backed securities. Both institutions, due to their huge exposure to the collapsing residential mortgage system, are effectively insolvent, and both have had their share of investigations and accounting problems. Nevertheless, the Plunge Protection Team and the Congress are using both Fannie and Freddie, along with the Federal Housing Administration, as integral parts of their bailout machine. The name of the game is to convert as much of the private mortgage paper as possible into government-guaranteed paper, even though that will ultimately mean huge taxpayer bailouts.

Former St. Louis Fed president William Poole made the point about Fannie and Freddie explicitly, in a interview with Bloomberg News July 9. "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to exist as bastions of privilege, financed by the taxpayer," Poole said. Poole later told the New York Times, "We are potentially looking a crisis in the face, and we must not allow this to happen. The government must intervene."

Poole's comments helped accelerate the slide in the stock prices of both institutions. Fannie Mae's stock is off 76% from a year ago, Freddie Mac is down 83%, and they are now at their lowest levels in 17 years.

Poole's blunt comments and the stock slide had both Paulson and Bernanke in damage-control mode during Congressional hearings July 10. Paulson claimed that both companies were "adequately capitalized" and "working though this challenging period," while Bernanke claimed that they "are well capitalized in a regulatory sense." Given the dismal track record of this pair and the weakness of their statements, they were less than reassuring.

Sooner, rather than later, Fannie Mae and Freddie Mac will blow up and require huge bailouts. Inevitably, investigations will be launched to find out what went wrong, and those investigations will likely focus on events and personalities inside the companies, whereas the real culprits will be people like Paulson and Bernanke, whose policies put the companies in an untenable situation.

To understand what has gone wrong, one must focus on the system itself, the overall process, rather than merely one or two components of the system. It is the policy of attempting to bail out the bankrupt system, which will be the cause of the damage to come.

Coverups
What is required, is for the public to be told the truth about the condition of the financial system, and the costs—monetary and societal—of the bailout operation. No constitutional republic can function properly when the citizens are lied to, repeatedly and systematically, about the most important matters before them. The citizens have a right to know the true condition of their financial system. Instead, what we get are lies and coverups, designed to hide the damage.

Perhaps the most egregious case of this is the speculation in oil and food. Much of the money being stolen from the population through this oil and food speculation is being funnelled into the financial system to fund the restructuring now under way. Despite a series of Congressional hearings on the subject, nothing has been done to curb this speculation. Regulators like the Commodity Futures Trading Commission (CFTC), which are supposed to defend the citizens, are instead captives of the financial markets, and protect the looting apparatus. The CFTC, like its regulatory peers, is determinedly oblivious to what is so obvious to the rest of us. "We see no evidence" is the mantra they repeat over and over.

Not only that, but this deadly price-gouging is being actively protected by Wall Street. After a recent House Agriculture Committee hearing in which he testified on the need to rein in speculation, Rep. Bart Stupak (D-Mich.) reported that a "Wall Street warroom" had been set up to block any action by the government against speculation. Later, Stupak told EIR that this warroom was being run by investment banking giant Morgan Stanley, and that the banks and other financial companies are doing all they can to stop any action aimed at ending speculation in food, oil, and other commodities.

Blowing Out
This "Wall Street warroom" operation is another sign of the desperation of the bankers to avoid dealing with the truth of their situation. Despite their efforts, and in many cases, because of their efforts, the banking system continues to disintegrate. Mortgage lender Countrywide has now been absorbed into Bank of America, at a cost of making the problems faced by Bank of America even worse. Now we see IndyMac Bank, a spinoff of Countrywide, disintegrating before our eyes; it's laid off over half its workforce and ceased making loans. It is but the latest in a never-ending series of disasters.

The regulators and the financiers assured us that the "subprime crisis" was contained and would not pose a threat to the banks—but they were wrong. The regulators and financiers assured us that the "credit crunch" was contained and did not pose a threat—but they were wrong. Now, after hundreds of billions of dollars of admitted losses to the world's banks, they tell us that the banking system is safe despite its problems—but they are wrong. They tell us that Fannie Mae and Freddie Mac are safe, even while they use them as vehicles to transfer enormous losses from the speculators to the taxpayers.

The bankers' plan is to save themselves by sticking the government, and thus the taxpayers, with their losses, to protect their looting rights at all costs, and to eliminate any laws, regulations, and government efforts which get in their way. They will accept consolidation among their ranks, and even the demise of some important institutions, in order to protect the system itself.

The irony is that their own efforts to protect themselves will destroy them. They cannot bail themselves out, even via the government, because our economy can not support the debt. It can't be paid, and all their bailout schemes do is add more debt to a dead system.
 
PAULSON's THREE POINT PLAN:
PANIC, CHANGE PANTS, RINSE AND REPEAT

John Hoefle

"Take a deep breath," President George Bush advised us this week, and for once, on that one point, he was right. Bush was trying to head off the latest episode of financial panic by rallying us to hang tough, to have confidence. "We're going through a tough time," he said, but "we can have confidence in the long-term foundation of our economy." One of the proofs he offered of this is that "consumers are spending." No kidding! With prices for gasoline and food and virtually everything else in the consumer market-basket soaring, consumers will keep spending. Apparently, in Bush's limited worldview, price-gouging and hyperinflation are indications of strength.

Still, everybody knows that Bush knows nothing about the economy, or virtually anything else, but what about his vaunted experts, like Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke? Paulson, after all, is one of the Goldman Sachs "masters of the universe," while Bernanke is widely touted as an expert on the Great Depression.

This dynamic duo may know a lot about the financial markets, but when it comes to economics, they are just as stupid as their glorious leader. Lyndon LaRouche has more than once denounced Paulson as incompetent, and good ol' Hank has done everything he can to prove LaRouche right. This is the gang that couldn't shoot straight.

The latest bit of insanity from these boobs is the so-called "bailout" of Fannie Mae and Freddie Mac, done, we are told, to protect the "housing market" and help the American people. Once again, the big money is riding to the rescue of the little guy! If you believe that, I have a bridge for sale you might want to take a look at.

Paulson interrupted his ongoing panic on Sunday, July 13, to announce a three-part plan to rescue Fannie and Freddie by throwing more taxpayer money at them. He was aided in this fool's mission by Bernanke, who announced that the Fed stood ready to lend the ailing companies whatever they needed, until Paulson's plan could kick in.

Faced with the worst economic disaster since the 14th Century, the one that spawned the Black Death, we have a dimwit President assuring us that all is well, while his experts pour our money down the bottomless rathole of a dead financial system. On top of that, we have legions of economists, analysts, pundits, and other prostitutes assuring us that all is well, if we just believe. The economy is fine, so grow a pair, and keep your chin up. When the going gets tough, ... ad nauseam. They talk a good game, but they've been wrong about virtually everything so far, and seem incapable of getting it right.

Delusional
What Paulson, Bernanke, and the rest of the Ding-a-ling Brothers, Barney and Bailout Circus refuse to accept, is that the bubble has popped, and their speculative financial casino has failed, leaving the banks holding trillions of dollars of securities which are now virtually worthless, dependent upon a business model which no longer exists. The heady days of expansion are gone, replaced by a desperate fight for survival, in which once-powerful institutions have begun to disappear, with many more to follow. The game is over, but the players remain on the field, shell-shocked, refusing to admit they have lost.

For decades, the bankers have pushed deregulation and globalization, fighting to break free of the rules and regulations imposed upon them by nations. They have largely accomplished that goal, only to find that they have destroyed themselves in the process, and, much to their chagrin, must turn to governments to save themselves. Even so, they refuse to admit the errors of their ways, blaming everyone but themselves for their failures.

Last December, as the year came to a close and books needed to be balanced, the major western central banks delivered a series of liquidity injections designed to save the banks. The European Central Bank announced $500 billion in emergency loans, and followed that up in January with another $250 billion; the total is now well beyond $1 trillion. The Federal Reserve created a new lending window for depository institutions called the Term Auction Facility (TAF) in December, promising $100 billion for the month; the TAF began holding twice-monthly auctions, offering $20 billion at each, but the amount has increased steadily to the current $75 billion per auction. To date, the TAF has loaned $810 billion to the banks, out of $1.3 trillion requested.

In March, as the first quarter was ending, the Fed created two more of these emergency lending windows, the Term Securities Lending Facility (TSLF) and the Primary Dealers Credit Facility (PDCF) to lend to investment banks. This represented both a significant expansion of the Fed lending operations, and a leap in the Fed's power, as heretofore, its lending operations had been restricted to depository institutions. To date, the Fed has lent over $550 billion through the TSLF.

Now, just a few months later, Paulson is seeking yet another expansion of the bailout mechanism, this time, for Fannie Mae and Freddie Mac. The plan originally leaked to the press was to inject up to $15 billion into the companies to bolster their balance sheets, but that quickly turned into a three-point plan involving an expanded line of credit from the Treasury, the authority for the Treasury to buy equity in the companies, and giving the Fed a role in the regulation of the companies. In addition, the Fed announced that it would allow Fannie and Freddie to borrow from the Federal Reserve Bank of New York. Paulson declined to state how much money would be required, effectively asking for a blank check, while vowing to "protect the taxpayer." He also claimed the emergency funds and powers would be temporary.

Thus we have an ever-growing bailout operation, trying to cope with an accelerating banking collapse and failing miserably, all being managed by regulators who have yet to get anything right. Paulson's credibility as the expert from Goldman Sachs has been considerably tarnished. His M-LEC SuperSIV bailout plan announced last year never got off the ground; his plans to "modernize" the U.S. financial regulatory system would reduce oversight and give more power to the Federal Reserve the same Fed which played a major role in getting us into this mess; and now he is moving to put the taxpayer on the hook for the losses in the mortgage bubble.

Thrown to the Wolves
This insane plan is being sold as a way to stabilize Fannie Mae and Freddie Mac and thus the U.S. housing market, in order to help homeowners, but what it really is, is a way to transfer losses from the bankers to the taxpayer by turning Fannie and Freddie into toxic waste dumps. Far from saving the already broke Fannie and Freddie, Paulson's plan will destroy them.

The banks are broke and cannot save themselves, so they turn to the only institution that can, the U.S. government. Paulson has already made clear, through his Hope Now Alliance and public statements, that Fannie and Freddie must play a crucial role in the refinancing of problem mortgages.

Protecting homeowners from foreclosures is an admirable goal, but the primary purpose of all of these bailout measures is to protect the banks, by protecting the valuations of the securities they hold by the trillions. What Paulson, Bernanke, and the Plunge Protection Team are trying to do is to put a floor under the real estate market, to slow or stop the decline in housing prices, as a way of slowing the vaporization of the trillions of dollars of mortgages, and the hundreds of trillions, perhaps quadrillions, of dollars of mortgage-related securities and speculation leveraged on top of those mortgages.

The loans to the banks and the investment banks from the Fed serve a similar purpose, since the Fed accepts a wide range of collateral, including mortgage securities, for loans, giving the banks the opportunity to dump their bad paper on the Fed in exchange for cash. The primary purpose of many of these loans appears to be taking the bad paper off the banks' books, addressing their insolvency crisis under the guise of dealing with a "credit crunch." It is the mountain of bad paper, not the lack of cash, which is killing the banks.

Overall, the various bailout schemes being pushed by Paulson and Bernanke amount to a giant debt-recycling scheme, in which losses are transferred from the banks to the taxpayers, giving the banks the profits and the public the losses. It is incredibly corrupt, and incredibly stupid.

This scheme cannot work. The bailouts may seem to be working, with obligations being transferred from the books of the banks to the books of government-backed institutions, but transferring bookkeeping entries is not the same as paying the debts, and this is where it all breaks down. The problem is that the U.S. economy no longer produces enough wealth to cover the debt. We have been operating below breakeven for some four decades, dismantling our manufacturing capability and cannibalizing our infrastructure to the point that we cannot support the existing debt load, much less the endless trillions of dollars of losses the bankers would dump on us. We are a net debtor nation; during the 2000s to date, we have incurred over $5 in debt for every $1 rise in GDP, and most of GDP is services and other overhead. We incur this debt because we no longer produce enough wealth to cover our expenses. The government can print money to try to cover these huge debts, but the resulting hyperinflation will destroy the dollar, and everything in its path. The only solution is LaRouche's: Write it off.



RE: LaRouche - Admin - 10-20-2008

PELOSI IS COVERING UP FOR `MONEY-CHANGERS IN THE TEMPLE'
Nancy Spannaus
http://larouchepub.com/other/2008/3528pelosi_money_changers.html


Upon taking office in 1933, President Franklin D. Roosevelt promised to use the Constitutional prerogatives of government to drive the "money-changers" out of the temple, those who had put the pursuit of profit and speculation before the welfare of the people of the United States. Roosevelt delivered on that promise during his three full terms in office, not only in saving people from eviction and destitution in the short term, but also establishing the institutions and laws which would keep the greedy profiteers under control. Having allowed the free-marketeers, starting in the early 1970s, to dismantle FDR's protections, and now faced with the hyperinflationary explosion of food and fuel prices, the Congress and the public have now finally woken up to the need to put protective regulations back into place.

During the week of July 7, Congress held no fewer than three hearings in a row, to delve into the role of speculation in the skyrocketing price of fuel. However, at the insistence of Speaker of the House Nancy Pelosi, responsibility for this issue was put under the House Agricultural Committee, which is chaired by Rep. Colin Peterson (D-Minn.). His mission? Suppress all legislative initiatives which would go against the interests of the speculators.

Briefed on this spectacle, Lyndon LaRouche reiterated his demand for Pelosi's immediate ouster as Speaker. "Pelosi has run a fraudulent side-show, to protect the speculators, and this is more than reason can tolerate," LaRouche charged. "She should be sent back to housekeeping, to defend the honor of all women."

Roll Up the Speculators
Over the month of June, a number of legislators, mostly Democratic Senators, put forward legislation which would force the Commodity Futures Trading Commission (CFTC) to regulate all trading by U.S. firms in the oil futures market, closing the "London loophole," and make the CFTC designate the banks and hedge funds as "speculators" in oil futures. The CFTC could then subject these purchasers to position limits, much greater margin requirements, and to strict regulation. In the House of Representatives, some Democrats, like Rep. Bart Stupak of Michigan, have also aggressively gone after the speculators, and solicited the advice of "experts" on how to bring down the price of oil " by as much as 50% " within 30 days.

On July 10, a coalition of airlines, acting under the auspices of a coalition called Stop Oil Speculation (SOS) Now, issued an extraordinary letter which blasted the excuses of the speculators, and their apologists in the banking community and Congress. The letter read, in part:

"Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil future contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade, and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs."

The letter then explicitly referenced the measures taken by Franklin Roosevelt: "Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency, and sound market oversight."

"The airline statement is correct," LaRouche said, noting that this just adds fuel to his demand for Pelosi's immediate ouster. Pelosi, LaRouche charged, has become a "tool of the very speculators" targeted by the airline executives. LaRouche cited the June 30 LaRouche PAC press release, exposing Pelosi's deep ties to mega-speculator George Soros, in addition to her well-documented, longstanding ties to Felix Rohatyn. Immediately following her election as Speaker of the House, in January 2007, Pelosi hired Soros operative Joseph Onek as her general counsel. Onek had been the chief policy advisor for Soros's Open Society Institute and its affiliated Open Society Policy Center, before being hired by Pelosi.

"With the entire financial system coming apart, rapidly," LaRouche concluded, "the kind of treachery that we have seen coming from Pelosi, on behalf of Rohatyn, Soros, and their ilk, has just reached the point where it is no longer tolerable. If this nation is to survive, Pelosi must be dumped now."

And on the European Front
A heated battle is being led on the other side of the Atlantic by Italian Treasury and Finance Minister Giulio Tremonti, to impose FDR-style restrictions on speculators in food and fuel. Tremonti is a leading proponent of a New Bretton Woods and a supporter of LaRouche's Eurasian Land-Bridge program,

At the July 7-8 Brussels meeting of the European economic and finance ministers (Ecofin), Tremonti presented a proposal to use Article 81 of the European Treaty against commodity speculators, a proposal that has given his monetarist opponents conniptions, in London and Switzerland, as well as Italy. For two hours, Tremonti discussed the issue.

Tremonti "will explain why, in his view, it is possible to use European laws against those who buy and sell paper oil barrels, i.e., contracts and instruments decoupled from the real possession of commodities, but able to steer the price-amplifying tendencies dictated by 'demand and supply,' " reported the Rome daily Il Messaggero July 7.

The Italian initiative against speculation received prominent support July 6, when Pope Benedict XVI issued a call for emergency action in favor of the poor during his Sunday Angelus. "I address myself, then, to the participants in the meeting in Hokkaido Tokayo, Japan, that they may focus their deliberations on the needs of the weakest and poorest people, whose vulnerability is greater today because of speculation and financial turbulence and their perverse effects on the cost of food and energy," the Pope said. "Probably Giulio Tremonti did not expect to be able to present his plan against oil price increases in Brussels, the day after a papal statement that uses the same terminology," Il Messaggero reported.

More surprising was the fact that Italian Prime Minister Silvio Berlusconi also pushed Tremonti's proposals against financial and commodity speculation at the Group of Eight summit in Japan.

"I made some proposals," Berlusconi told Italian journalists July 7. "We should intervene on the exchange markets, where margin requirements on futures, currently at 5%, should increase " some countries propose up to 50% " and intervene through the European and the American antitrust authorities against speculation." Berlusconi stressed that the European Treaty provides the EU Commission with the authority to act through Article I, which says, "the market should determine the well being of the citizens, but this does not occur; articles 81 and 82 outlaw the abuse of dominant [market] position, and Article 208 establishes rules on violation procedures."

On the opposite side of the issue in Europe, are the Swiss and London banking establishments, which have made their displeasure known. The July 7 Neue Zürcher Zeitung, mouthpiece of the Swiss bankers, accused Tremonti of simply using his fight against speculation and globalization as a diversion; but, the paper was forced, for the first time, to give his campaign prominent, accurate coverage. The Swiss paper wrote,"The Italian economy minister, a legal expert by education, is already well known for his interventionist suggestions.... The self-declared admirer of French mercantilist Colbert has already called for a new Bretton Woods and protective tariffs to bring globalization under control, and accused the Financial Stability Forum, led by Italian Central Banker Mario Draghi, of proposing measures that are not effective enough, against the international financial crisis. The FSF has only prescribed an aspirin, Tremonti impertinently once said."

Not surprisingly, it is these very same London-based international financial circles who, through Soros and Rohatyn, control Pelosi, and others fighting to stop the restoration of FDR-style regulation in the United States. It is high time they were removed from positions of influence.







RE: LaRouche - Admin - 10-20-2008

THE US IS RUNNING OUT OF TIME TO SAVE ITSELF
John Hoefle
http://larouchepub.com/other/2008/3530us_out_of_time.html



The bottom has been blown out of the U.S. banking system by the collapse of the biggest speculative bubble in history, and there is no recovery in sight, absent the emergency measures designed by Lyndon LaRouche. With each passing day the situation becomes more dire, as money which should be spent on rebuilding our devastated productive sector is instead diverted into Alan Greenspan's bottomless pit.

Little more than a week after banks and other financial companies had their worst day in 16 years on the New York Stock Exchange, the banks plunged yet again, having their worst day in eight years on July 24. These drops come as the big banks continue to report losses at rates which are both astonishingly high, and yet fall well short of the truth.

The U.S. banking system is bankrupt, and will not recover under the current policies. The Plunge Protection Team (PPT) has been reacting to the crisis, pumping in money, cooking the books, taking measures to prevent a collapse, yet the relentless disintegration continues, destroying everything in its path. Far from helping, the PPT's actions have accelerated the hyperinflation in the financial markets, including the markets for oil and food. These increases, combined with the overall decline in consumer-credit availability due to the death of the asset-backed securities market, have devastated the families of the lower 80% income brackets in the U.S. Home foreclosures are soaring, credit card defaults are rising, and consumer spending on goods other than food and fuel is contracting " all ominous signs of a rising wave of bankruptcy which will wipe out the banks already mortally wounded by their securities losses, as well as the banks which did not play that game.

Firewall
The first step toward solving a problem is to admit that it exists, and see it for what it is. Treasury Secretary Henry Paulson has been adamant that the banks take their losses " Citigroup leads the pack with some $50 billion in writedowns to date " and raise capital, but these measures have done nothing to solve the underlying problem, as the losses are growing faster than the banks can raise new capital to allow them to admit their losses. Well over $300 billion has been raised by banks worldwide since the crisis began, but those who have bought into the banks have seen the value of their holdings plummet, which makes further funding difficult to obtain. The problem facing Paulson, and the rest of us, is that a bankrupt system cannot bail itself out, but requires intervention from the outside. The only solution is for the government, acting in its sovereign capacity, to intervene, put the system through the equivalent of a bankruptcy proceeding, write off the unpayable debts, and act to protect the general welfare of the population. Denial is not a solution.

LaRouche has identified several measures which must be taken to put the economy back on its feet. The first step is for the Fed to raise interest rates to 4%, to assure that institutional depositors maintain their deposits in the banking system, and thereby defend the banking system against the attempts by the British to weaken U.S. banks by luring the deposits to London. While this step will not solve the larger crisis, it will help keep capital in the U.S., capital which will be necessary for recovery projects. It will also give the Brits a bloody nose, and teach them a needed lesson about the dangers of looting the United States.

Once the interest-rate policy has been put into place, we can move to phase two, beginning with the passage of the Homeowners and Bank Protection Act (HBPA). The HBPA would erect a firewall to protect homeowners from foreclosures, and begin the process of putting the financial system through bankruptcy. Necessary functions like food production and delivery, education, health care, and the like would continue, while the huge mass of speculative derivatives bets, securities, and such would be frozen, to be sorted through later. Among the essential services to be protected, ironically, would be banking, as a functioning banking system is essential to the operation of an economy, and to the rebuilding process which is required. However, we should stress that we are talking about protecting functions, not institutions, and that saving the banks in many cases means saving them from the people who now run them. Many of the banks will have to be reorganized.

Having erected the firewall, the rebuilding can begin, using low-interest-rate directed credit to repair and upgrade our depleted infrastructure, rebuild our manufacturing base, and implement new technologies to lift the entire economy into a new era of productivity. This includes the large-scale development of nuclear power and the building of high-speed magnetically levitated (maglev) trains to deal with our transportation problems; large-scale water projects and desalination to address the growing water shortages in the Western states, especially; and other projects of the same kind. These projects, far from costing us money, will, in the long run, increase the productive power of the economy, creating wealth far in excess of their costs.

At the same time as we begin rebuilding, we can enter into agreements with other nations, particularly, Brazil, Russia, India, and China (the BRIC nations) to carry out these policies on a global scale. With such a bloc committed to national sovereignty and international cooperation, the power of the British Empire and the Anglo-Dutch Liberal slime mold can be broken, finally freeing the world from its deadly embrace.

These policies, based upon the proven American System of Economics, are what built the strongest economy in the history of the world: Alexander Hamilton used them, Lincoln used them, FDR used them " they are proven, and they work. But time is running out, and we must act quickly.

"We're on a very short fuse," LaRouche said recently. "We have the policy. We have the approach, it will work: It's the only damned thing that will work! Either we win and get this through, or you can kiss the United States goodbye. And that's in the short term, not the long term.... The system is dead! The patient is dying. We're on a death-watch, by the bedside of the patient. The patient is the U.S. economy. You're sitting by the bedside while the patient is dying."

"I've already defined the only possible solution. Nothing else will work," LaRouche continued. "Everything else is a waste of time. The system is dead: It's the walking dead. It's finished! Either you put in a new system, and there's only one way to do it, or the United States and the system are dead! And the whole world goes down with it."

Dead Ducks
Stock markets are lousy economic indicators, with the Dow Jones Industrial Average serving mainly as a propaganda tool to hide the collapse of the American economy from the population. The daily fluctuations in the stock market may be relevant to speculators (and even to that rarer breed, investors), but they mean little to the real economy in which people live.

That proviso stated, it is useful to look at the recent performance of bank stocks, as a reflection of the seriousness of the banking crisis. Since the crisis began, bank stocks have been pounded as shareholders fled, seeing the writing on the wall. From their peaks circa the beginning of 2007, Washington Mutual has fallen 91%, Lehman Brothers has dropped 78%, Wachovia 71%, Merrill Lynch 69%, and Citigroup 60%. JPMorgan Chase, which allegedly has suffered the least among the big banks thus far, has dropped 23%. While these stock declines do not directly impact the balance sheets of the banks, they do serve as a warning that the banks are severely wounded, with more trouble expected.

The quarterly earnings reports from the banks, as fudged as they are, are also telling. Over the last three quarters, Citigroup has reported a whopping $17 billion in losses, while over the last four quarters, Merrill Lynch has lost well over $18 billion. Washington Mutual has lost over $6 billion in the last three quarters, and Lehman Brothers dropped nearly $3 billion in the second quarter alone. Wachovia, where PPT member Robert Steel recently took over as CEO, lost nearly $9 billion in the second quarter, after losing $664 million in the first quarter.

Steel, who resigned as Under Secretary of the Treasury for Domestic Finance to take the Wachovia job, was Paulson's deputy and a key player in the PPT; and, like Paulson, he is an alumnus of Goldman Sachs, where he was a vice-chairman. Steel adds to the list of former Goldman honchos who have moved into key positions as the financial crisis deepens. That list includes Merrill Lynch head John Thain, New York Stock Exchange president Duncan Niederaurer, Paulson advisor Ken Wilson, World Bank head Robert Zoellick, New York Fed chief of markets William Dudley, and State Department Under Secretary for Finance Randall Fort, among others. It also includes White House Chief of Staff Josh Bolten and New Jersey Gov. Jon Corzine. The appointment of one of these undertakers to head Wachovia does not bode well for the future of the bank.

Even these indicators, as bad as they are, do not convey the full damage. As LaRouche has stated repeatedly since last Summer, the financial system has died, and the institutions which depend upon that system are doomed, lifeless zombies going through the motions on Federal life support. We cannot afford this charade: it is time for the lower 80% (by income) of the population to force Washington to let the zombies go, and begin to attend to the living!







RE: LaRouche - Admin - 10-20-2008

AUGUST THE MONTH OF CHANGE
http://larouchepub.com/other/editorials/2008/3531august_month_change.html

The stunning rate of economic and financial breakdown in the U.S. and world economy should underscore the message which Lyndon LaRouche has been stressing recently: August will be a month of change, profound change. And any citizen concerned with the survival of his or her nation, and the human race as a whole, had better conceptually prepare himself or herself to engage politically in unexpected ways. Because by September, the political situation will have qualitatively changed, and decisive action will have to be taken.

Just a hint of the drama of the upcoming developments is available in what is being publicly released about the economic and financial implosion. While LaRouche was way ahead of the crowd in projecting the impending bankruptcy of General Motors from the policy signals made public in February/March 2005, it is now obvious that that's where the situation is headed " with all the attendant devolution of related industries and communities, and the nation's machine-tool capability, that goes with it. The bank insolvency crisis, which was splashed all over the front pages of the U.S. press with the run on IndyMac (which has now filed for bankruptcy), has been suppressed as much as possible by the powers-that-be, but is equally dramatic. Just for example, sources close to the Federal Reserve report that the Fed has a secret list of 700 banks in critical danger, and another 700 in serious trouble.

The LaRouche movement has long been preparing the ideas and programs which can uniquely get us out of this crisis " and, in fact, is the only leadership currently on the scene to do so. While in-depth proposals are available, the approach has been summarized effectively in LaRouche's "three steps to survival":

the Homeowners and Bank Protection Act;


a two-tier credit system; and


the formation by the U.S.A., Russia, China, and India of an initiating bloc to create a new international fixed-exchange-rate credit system to replace the presently bankrupt international monetary system.
Under these circumstances, it is crucial that representatives of the lower 80% of the population by income-bracket " in contrast to the economic and political elite " become an active factor in politics. It is this portion of the population that has suffered, increasingly, over the past 35 years of de-industrialization, and, at the same time, has been marginalized by the agreement among "party professionals" on both sides of the aisle to adapt to the rules of the globalized world. Party clubhouses have been canned, media have replaced personal campaigning, money has taken center stage. The disastrous results are clear.

But, in a revolutionary period such as that into which the demonstrative failure of the leading institutions to prevent economic and political disaster has led us today, the broad base of the population must be engaged in the solution.

Not surprisingly, we are seeing an activation of this layer of the population, internationally. In Europe and elsewhere, this has been shown in action on the streets. Here in the U.S., the phenomenon is less visible, but a significant element of motion has come to the fore within the Democratic Party, in the wake of Hillary Clinton's suspension of her campaign. Thousands of supporters of Clinton, who had been mobilized as part of her campaign's championing of the interests of the lower 80%, and women, reacted to the virtual coup d'état by the sponsors of Obama by becoming activists. They are in crisis, and they want to learn. More should follow.

Dramatic change is coming, whether the American people are ready or not. Educate yourself now, before it's too late.


STOP BAILING AND THINK!
John Hoefle
http://larouchepub.com/other/2008/3531stop_bailing_think.html

A couple of months after the bankers and the banking regulators assured us that the worst was over, the global banking crisis is worse than ever, and the "temporary" bailout operations are being expanded yet again. The so-called housing bill has been signed into law, the stimulus checks have all been issued, the Fed's three emergency lending facilities have been up and running for months, and yet, despite it all, the securities markets range from moribund to dead, the banks continue to post huge losses, bank failures are on the rise, and there appear to be quiet runs on the banks, as nervous depositors take actions to defend themselves.

These bailout efforts clearly are not working, and yet the regulators continue down this unproductive " actually counterproductive " path, seemingly unable to help themselves. They are attempting to bail out a bottomless boat, which keeps sinking, no matter how fast they bail. Perhaps they should try a new tack, take that deep breath recommended by President Bush, and start to think for a change, instead of merely reacting. Sure, it will be embarrassing for a while for them to admit they have been on the wrong track, but it is better than the humiliation they face when the banking system completely disintegrates, and takes their trillions of dollars of bailout money with it.

Lyndon LaRouche recommends to Washington and Wall Street that they stop their knee-jerk reactions to the crisis, quit acting on their obviously ill-advised impulses, and use whatever power of reason they have left to adopt a real solution, based upon the American System of economics. They should stop and think for a change, instead of reacting like frightened rabbits. It worked for FDR, and it can work again, and LaRouche has already provided the roadmap.

A Little Reality
The whole bailout scheme rests on the assertion that we are in a cyclical downturn, and that if we can just hold on, the upswing will kick in, and prosperity will return. That's why the bankers, the regulators, the pundits, and the news poodles keep telling us that we're nearing the bottom; each plunge, they reassure us, only brings us closer to prosperity. Yet we keep falling, with no bottom in sight.

That's because this is not a cyclical downturn, but the inevitable death of a financial, economic, political, and social system, four decades in the making, in which the greatest industrial engine the world has ever seen was deliberately destroyed and replaced with services, information processing, and financial speculation. Productivity was replaced by overhead, causing the economy to operate at an increasing deficit. To fund that deficit, we incurred ever greater amounts of debt, and then we began to treat that debt as an asset, to be capitalized, leveraged, and speculated upon, creating a bubble of leveraged financial bets and claims upon leveraged bets and claims, which rose into the quadrillions of dollars in gross aggregate. Michael Milken's junk bonds paved the way for mortgage-backed securities and derivatives, generating huge pools of fictitious capital, which were then plowed back into new bets, and leveraged again to the point that no one knows the true level of claims in the system, how those claims are interlocked, and what will happen when the process shifts into reverse and begins to disintegrate, as it has.

What can be said, is that this whole house of cards is doomed. It is doomed because the level of claims against the economy is now many, many times greater than the amount of claims that our productive sector can support. We can no longer pay the interest on all the debt, much less repay the principal. We are, as a nation and an economy, bankrupt.

Even at this late date, however, the problem can be solved, but the solution depends upon admitting the errors of the past, and being willing to deal with the consequences. For starters, that means we have to throw out the post-industrial actually anti-industrial ideology and commit our nation to rebuilding our productive base with the most modern technology at our disposal. We need to produce, as rapidly as possible, sufficient nuclear power plants to provide the electricity to drive a network of high-speed, magnetically levitated (maglev) trains to deal with our transportation bottlenecks, to power the new plants and factories which will be required to produce the material needed to rebuild our tattered infrastructure.

We must once again understand that economics is based not upon finance and the manipulation of money, but upon providing the physical basis for life " the food, shelter, clothing, education, health care, and similar products and services necessary for humanity to survive and thrive. People, not money, must come first. Money and banking are necessary, but they must serve the economy, not control it.

The Bottomless Boat
Perhaps Treasury Secretary Henry Paulson, Fed chairman Ben Bernanke, House banking committee chairman Barney Frank, and others really believed that the crisis was temporary, that a little cash (measured in the tens of billions!) would see the banks through the "credit crunch," or perhaps they just told themselves that because they didn't have the guts to face the truth. Either way, it should be obvious to them by now that their plan has failed, yet they continue blindly down the bailout path, either too stupid or too afraid to change.

The runaway nature of the bailout disaster can be seen in a number of actions taken in the last week of July.

President Bush on July 30 signed the so-called housing bill which contains provisions for a open-ended Federal bailout of the mortgage market, including unlimited credit for Fannie Mae and Freddie Mac, and a Credit Suisse-designed provision to have the Federal Housing Administration subsidize mortgage lenders. Paulson, knowing the time bomb hidden in the bill, had demanded that Congress exempt the money spent on Fannie Mae and Freddie Mac from being counted under the national debt ceiling a move LaRouche called tantamount to high treason but senior members of Congress rejected the demand as un-Constitutional.

On the same day Bush signed the "housing" bill, the Fed announced that it was extending the supposedly temporary emergency lending facilities through January 2009, and introducing an 84-day loan program in its Term Auction Facility (TAF). Previously, the bi-weekly TAF auctions were restricted to 28-day loans and a $40 billion limit on total loans under the program, but that limit has been repeatedly expanded and now stands at $150 billion. The Fed also increased by $50 billion the amount available under its Term Securities Lending Facility (TSLF), one of two programs created in March of this year to lend to investment banks. To date, $885 billion has been lent through the TAF, and $607 billion through the TSLF. The extension of these bailout facilities were expected, since the Fed has repeatedly signaled an open-ended commitment to keeping the bankrupt banks afloat.

Paulson also held a press conference July 28 to push "covered bonds" as a way to revive the private mortgage-securities market, but the plan is too little, and far too late, and was probably intended as protective coloration for the "housing" bailout scheme.

Finally, the Financial Accounting Standards Board (FASB) announced July 30, that it had reversed a decision made in June, and would postpone the planned implementation of accounting rules which would have forced some financial institutions, notably including Fannie Mae and Freddie Mac and some of the biggest banks, to move back onto their books certain types of off-balance-sheet vehicles. In doing so, FASB capitulated to great pressure from the banks and the regulators, who are determined to keep the extent of the losses hidden.




RE: LaRouche - Admin - 10-26-2008

NEOLIBERAL DOGMA HAS FAILED NOW LISTEN TO LAROUCHE

http://larouchepub.com/hzl/2008/3542article_rhodes.html

Every participant in the Sixth Conference of the World Public Forum Dialogue of Civlizations, which took place on Oct. 9-13 after many weeks of daily reports of cascading catastrophe, respecting the collapse of the world financial system came with a shared awareness of having arrived at a turning-point in history. Speakers with the most diverse philosophical and geographic backgrounds were unanimous that the neo-liberal free-market economic dogma has been a complete failure. The conference's organizers saw this as confirmation that the goal for which the Forum was expressly initiated five years ago namely, to create a new paradigm for a more human world order has now been placed on mankind's agenda as its most urgent task.

In his opening address, Vladimir Yakunin, the Forum's president and co-founder, emphasized the existential nature of the crisis, in which the issue for mankind is "to be or not to be." As did many other speakers, he stressed that we are facing not merely a financial crisis, but a crisis of civilization, and that its underlying causes must be rooted out.

Yakunin's co-president, the Indian philosopher Jagdish Chandra Kapur, likewise a forum co-founder, saw the crisis as an opportunity to bring the future paradigm into harmony with the cosmic order, such that in this new world order, not only must every person have sufficient food, and a house to live in, but that each and all must be given the chance to realize the higher potential with which all human beings are endowed.

Russia's Deputy Foreign Minister Alexander Saltonov conveyed greetings from Foreign Minister Sergei Lavrov, who congratulated the Forum for the impressive contribution it has made in formulating conceptual and practical solutions for such fundamental questions as the coexistence of diverse social models, the preservation of nations' cultural identities under conditions of globalization, the role of religions in political life, and the resolution of regional conflicts.

Another clear expression of the changing times, were the remarks of Austrian Chancellor Alfred Gusenbauer, who took up two points: first, that the market-economy model has failed; and second, that confrontation as a means of conflict resolution has turned out to be incapable of achieving the desired political goals. And amazingly, the very same Chancellor who only recently had put his signature on the European Union's Lisbon Treaty, praised Austria's neutrality as the model for others to follow.

Even though this has so far not been expressed even approximately in the western media (which is hardly surprising), the Forum has evolved, over its five years of existence, into a significant counterpole to the neo-liberal World Economic Forum in Davos. This year, its annual conference on the island of Rhodes attracted over 700 participants from more than 70 nations, for more than four days of discussion, including two plenary sessions and eight working committees devoted to politics, economics, education, religion, law, culture, migration, the media, and, as a special committee, Chinese civilization. Even though each participant could only monitor a handful of the more than 250 speeches which were delivered, a selection of these revealed some philosophical pearls, especially, for example, some of the contributions on Chinese issues and topics.

Financial Collapse and National Security
The overriding theme, however, was the financial collapse, which each participant reacted to according to his or her own temperament and ideological orientation, ranging from scarcely concealed panic (speakers from certain western nations), to rather shortsighted Schadenfreude over the demise of U.S. claims to hegemony, to responsible concern that the failure of one paradigm does not necessary signify the emergence of a new and better one.

Many Russian speakers, especially in the committee on "Economic Parameters of the Integrated Development of the World Community," emphatically stressed that the spirit of Franklin Roosevelt is now making a comeback. Both on the Russian side, as well as interestingly enough on the European side, speakers emphasized that there is an awareness that relations between the United States and Russia have the utmost importance for the world strategic situation.

Jacques Sapir, professor of economics at the High School of Social Sciences in France, warned of the imminent danger of a collapse only days hence, if governments do not succeed in bringing the banking and liquidity crisis under control. Sapir stressed that he had to conclude that, even though he does not have anything against the European Union, the EU has collapsed since the outbreak of the crisis, and that since then, all decisions have been made on a national level. One German participant explained that the German government evidently has had no interest in intervening with German taxpayers' money in order to make up for mistakes made in other countries. There was talk of the failure not only of the EU, but also of the G7, which at its July summit in Japan had not even bothered to include the issue of the financial crisis on its agenda.

A second theme, which was only somewhat upstaged by the drama of the financial crash, was the existing outmoded systems of national security. The eastward expansion of NATO and of the EU have highlighted how quickly previously "frozen conflicts" can explode into hot ones. Salome Zurabishvili, Georgia's former foreign minister and currently chairman of the Way of Georgia Party, presented her view of the situation. Many discussion documents stated that the decision to launch Georgia's aggression against South Ossetia had been made not in Tbilisi, but rather on the level of the transatlantic command structure.

Another theme, one which is perhaps not as obvious as the end of the neo-liberal dogma and the transformation in the relative weighting of the world's nations, but one in which the current controls will no longer function, was the total lock-step control of the western media. Both inside the working committee, and in many conversations over breakfast, lunch, and dinner, the mass media as an instrument of manipulation of public opinion, was a hot topic, and this was also addressed by Yakunin in the plenum.

Hope for a Better Future
And herein, perhaps, lies the most important function of the WPFDC, in that it is far more in keeping with the actual political balance of power in the world today, than is the case with most western-dominated conferences and institutions. The United States, with its 16 Forum participants, did have the largest delegation, but also France with 13, Germany with 9, and Italy with 8 were well represented, and China and India also felt that they were adequately represented there.

The prevailing mood at Rhodes was a sense of an historic departure for a new kind of world. For this author, it brought up memories of a time which differed in its predicates, but which was similar in the systemic nature of the change under way, namely of 1989, when the Wall fell in November, and people had the profound sense of participating in an historic transformation, as they experienced the downfall of a system which everyone had thought to be unshakable, and began to feel hope for a better future. What Americans and Europeans today see as a crisis and a threat, is being experienced by the absolute majority of the nations of Asia, Africa, and Latin America, as cause for hope for a more human epoch, a dangerous situation, and yet with a perspective for new options.

Even though it may be difficult for Europeans to see it this way, what the fall of the Wall meant to people in 1989, is what is signified today, for the majority of mankind, by the collapse of the system of globalization, which has meant immense wealth for a tiny minority, but only spreading poverty, hunger, and death for billions of people.

Everything will hinge on whether the responsible people in the world's relevant institutions can grapple honestly and speedily with the question of what it was in their own thinking, that caused them to be taken in by neo-liberal dogma, and why they were incapable of taking up Lyndon LaRouche's widely circulated analyses of the problem, and of acting accordingly. There is still an opportunity, and perhaps the last, to correct this error.
 
FOR A NEW WORLD ECONOMIC ORDER IN THE TRADITION OF THE PEACE OF WESTPHALIA


Helga Zepp-LaRouche
http://larouchepub.com/hzl/2008/3542spch_rhodes.html

Helga Zepp-LaRouche, founder of the international Schiller Institute and of the Civil Rights Solidarity Movement (BüSo) in Germany, was among the keynote speakers at the Sixth General Meeting of the World Public Forum Dialogue of Civilizations, which was held in Rhodes on Oct. 9-13. The WPF was founded and is chaired by Vladimir Yakunin, chairman of the Russian Railways company, and, each year, brings together political, religious, and intellectual leaders from around the globe. More than 700 people from 70 countries attended this year. Her speech has been translated from German.

This conference is taking place at a time when even the previous advocates of the thesis that "there in no alternative to globalization," acknowledge in terror that we are in the midst of the meltdown of this globalization, and in the midst of a chain reaction of events that threaten, in a very short time, to bring most of world production and trade to a standstill.

It is therefore a very important step in the right direction, that French President Nicolas Sarkozy, at a meeting last Saturday [Oct. 4] with the heads of government of Germany, Italy, and Great Britain, and European Union representatives, announced the convening of an international conference, using the precedent of the conference convened by Franklin Roosevelt in 1944 in Bretton Woods, to lay the basic foundations for a new financial architecture. Nothing is more urgent than this. It is also long overdue that this must be a meeting of the so-called G-14 states, and that, among others, China, India, Brazil, and South Africa should be incorporated.

Worst Crisis Since the 14th Century
It is now thus all the more important to reach a common understanding of the theoretical fundamentals and principles, upon which the new financial architecture must be built if it is to be successful. Anybody who thinks it is sufficient merely to have a few "new rules" for the hedge funds and rating agencies, suspension of the EU's Maastricht Stabilization Pact in order to clean up the banks, and punitive reduction of the income of executives of failed companies, is mistaken.

If the world is to escape the danger of a collapse into a New Dark Age comparable only with that of the 14th Century, then the new financial system must be constructed on the basis of a qualitatively different paradigm than that of failed globalization. To attempt just to remove the most obvious, wild excesses, so as to find the quickest shortcut for returning to the old maximization of profit, can only end in catastrophe.

The parallels to the financial collapse of the 14th Century and the ensuing Dark Age certainly merit reflection: At that time, banking houses like the Bardi, Peruzzi, or Acciaiuoli had taken over all aspects of economic life: from financing the court of the King of England and the aristocracy, to the military, agricultural production, and trade. They operated according to the principle of profit maximization, without the slightest regard for the community, which they plundered beyond the point at which it could survive. They acted like a cancer which grows by taking over more and more of its victim, until the patient dies. In the end, the English King Edward III canceled repayment of the accumulated debts: That was the straw that broke the camel's back, and the banking houses collapsed.

A collapse of civilization resulted, decimating one-third of the population from India to Iceland. The combination of the Black Plague, failed harvests, hunger, superstition, witch hunts, and Flagellants meant a collapse that became known as the "New Dark Age." The paintings of Hieronymus Bosch vividly convey the insanity which dominated this era.

Globalization Today
In the era of globalization, the methods of the investment banks, the hedge funds, and the private equity firms are, doubtless, orders of magnitude more complex and sophisticated, due to the advances of the electronic age. But though they operate "globally," the principle has remained the same: the highest possible profit through control of scarcity. The principle "buy cheap, sell dear," and the maximum extraction of profit in the "shareholder value" society, have led to, on the one side, thousands of billionaires and over 10 million millionaires; but on the other side, billions of humans living below the subsistence level.

Additionally, since the invention of "creative financial instruments" by Alan Greenspan, massive sums have come into being, whose dimensions seem to belong to the domain of astronomy: three-digit trillions or perhaps quadrillions in outstanding obligations. Due to a lack of transparency, in particular with respect to over-the-counter (OTC) trades, no government or central bank has an accurate picture.

Most recently, since the outbreak of the so-called mortgage crisis in the United States 14 months ago, it has become clear to most insiders that a large part of these 16-digit-plus "assets" is in fact "toxic waste." The French magazine Marianne has just released figures only previously publicized by Executive Intelligence Review: The $1,400 trillion market in derivatives is 50 times the size of the combined GDP of all the world's nations! The attempt to honor this financial paper at 100% value, as the U.S. Administration is now trying to do with the Paulson plan (which is by no means limited to $700 billion, and is actually open-ended), can only lead to a rapid hyperinflationary disintegration of the world financial system. The events in Germany of 1923 now threaten to play out on a global scale!

Even if you take into account the impressive degree of incompetence of the greed-blinded investors, it must have been clear to the chief culprits that the unrestrained granting of mortgages to people without any down payment, would necessarily lead to a collapse of the mortgage and real estate markets, as soon as interest rates rose on the credit markets. And now it is also clear to them that hyperinflation will destroy the savings and living standards of the majority of the population, and threatens famine on an unprecedented scale. If this problem is not immediately solved through a reorganization based on the right principles, it threatens to bring on a collapse of humanity into a dark age in which billions could be victims.

LaRouche's New Bretton Woods
Now, it is a well-documented fact, that my husband, the American economist Lyndon LaRouche, has for a long time, and at every branching point, correctly forecast the accelerating tendency towards a systemic collapse of the financial system, on the basis of the axiomatically flawed decisions that were made; these include the promotion of consumerism in the U.S. of the 1950s, the elimination of fixed exchange rates and of the Bretton Woods System by Nixon in 1971, and the crashes of 1987 and 1997. On July 25, 2007, three days before the outbreak of the mortgage crisis, he explained in his now famous webcast, that the financial system had already collapsed and was hopelessly bankrupt, and that from then on, we would see various aspects of the bankruptcy rising to the surface.

I mention this, because in a situation so dangerous for humanity as this, it is better to listen to the solutions proposed by the economist who for decades has correctly analyzed the problem, rather than to those who, until recently, denied the systemic character of the crisis, or who still in August were saying, "The worst is already behind us."

Such an emergency conference, modelled on the Bretton Woods Conference of 1944, has long been proposed by Lyndon LaRouche, but he emphasized the difference in the conception of Bretton Woods intended by Franklin Delano Roosevelt, and what was implemented by Truman after Roosevelt's death, which was, in principle, a Keynesian system. It was Roosevelt's intention to use the Bretton Woods System to end forever the colonialism of the British Empire. It is precisely this intention of Roosevelt that must be implemented today with the New Bretton Woods.

In order for this new system to have credibility and integrity, the initiating powers—the U.S.A., Russia, China, and India—have to build the core of a representative group of nations which, in the tradion and spirit of the Treaty of the Peace of Westphalia, decide on a multicultural and multinational credit system, even while the current monetary and financial system is put through an orderly bankruptcy process.

A Credit System, Not a Monetary System
Because of the above-mentioned volume of outstanding obligations, it cannot be merely a matter of "new rules" for hedge funds and rating agencies. Instead, the financial system must be put through an orderly bankruptcy proceeding; most debts and speculative contractual obligations must be written off. Simultaneously, a system of fixed exchange rates must be established, along with National Banks for the creation of credit for productive investment.

The key to success of the reorganization, is that the new system, as a credit system, orient itself to the right that is anchored in the U.S. Constitution, to sovereign government creation of state credit, as demonstrated by the first Treasury Secretary of the United States, Alexander Hamilton, and his founding of the National Bank of the United States. In the U.S. the government can, through the Treasury, and with the authorization of the Congress, create credit, which thus becomes a legal means of payment.

The second way for credit creation to occur is by means of international treaties, which are also voted upon by Congress. Such treaty agreements by a group of leading nations, with the United States, would become formally the turning point upon which to build the alternative to the ever more dramatically escalating crisis. If a representative group of nations agrees upon a new system of credit, customs, and trade agreements, that is already a "New Bretton Woods System" and the last chance to prevent the risk of chaotic collapse that is becoming more dramatic every day.

The new system must be based on fundamentally different principles than the just-collapsed system of "globalization." The outsourcing of highly qualified jobs and production capacities to so-called "cheap labor countries," with significantly lower wages, poorer infrastructure, lower taxes, and lower standards of living, has not paid off for either the industrial nations or the developing countries. For example, the United States, as a result of this policy, no longer has medium-sized industries, while China, which has produced so much for export to the U.S., cannot cover the real costs of its total national production with its export earnings.

Thus, despite China's high growth rates of recent years, almost 70% of the population has not yet been freed from relative poverty, and China is not being paid enough for its exported goods, either to cover the costs of its cheap labor, or to cover part of the costs for the reproduction of society as a whole. And not only is the Chinese export market in the U.S. and elsewhere now endangered, but the escalation of the crisis threatens a massive loss in the value of the export earnings that have accumulated as currency reserves.

That was exactly how "market prices" ruled under conditions of globalization for most nations, but especially those subjected to diverse forms of monocultures, which meant de facto "primitive accumulation" of the national economy as a whole. The new system, therefore, must define "fair prices," which not only make possible a strong, protected internal market for industry and agriculture by means of protective tariffs, but also take into account the costs of optimal health and educational systems.

Creativity Is the Driver
In contrast to the insane and recently failed assumptions of the free traders, the real source of wealth in society is exclusively the creative capacity of man, which continually empowers him, through the discovery of new physical principles, to expand his knowledge of the laws of the universe. When this scientific and technological knowledge is applied to the production process, it leads to an increase in the productive powers of labor and production capacities, which in turn leads to an increase in the standard of living and life expectancy.

The fact that a world population of a few million people in hunting and gathering societies, could develop to today's six and a half billion human beings, is proof that by the application of these discovered universal principles in production processes, productivity increases by magnitudes that are significantly higher than the costs of the discovery and the investment in its application. Certainly, the general principle of progress is also required, since at every stage of development, natural resources are relatively limited, and new resources can only be defined through a new, qualitatively higher discovery.

Human creativity is thus the motor for the increase of relative potential population-density, which in turn is the necessary precondition for the long-term survival of human species. The increase in relative potential population-density is therefore the measuring rod for economic policy decisions. The Russian physicist Pobisk Kuznetsov once said that discoveries are always named after their author, such as "watt" and "ampere," so the concept of relative potential population-density, as an economic measure, would go down in history as the "La," for LaRouche.

The paradigm of the new system must therefore be centered on the maximum promotion of human creativity. A nation oriented to the common good will see as its most self-evident interest, the promotion of the creative capabilities of all its citizens, and above all, its children and youth. Such an orientation would not only promote those scientific and technological areas which, as "science drivers," optimize the character of the economy, but it would also expand the role in the universe of what scientist V.I. Vernadsky called the Noosphere. That means, it would further the process of the human race "growing up."

The New Bretton Woods must also be built upon the principles of the Peace of Westphalia, which, in 1648, ended a 150-year period of European wars, including the Thirty Years War. The most important principle of this treaty, upon which international human rights are based, was the idea that, in the interest of peace, all foreign policy must be oriented to the "advantage of the other." The warring parties had realized that, were the war to continue—a war in which whole areas of Europe had been decimated—nobody would be left to enjoy a victory.

Earlier, Nicolaus of Cusa, in the 15th Century, had laid the philosophical foundations for interntional law, in particular with the idea that harmony in the macrocosm can only exist when all microcosms can develop in the best of all possible ways, including viewing the development of other microcosms as in their own interest. Accordingly, peace in the world can only be achieved when all nations have the chance to realize the potential within them and their citizens, and simultaneously to promote the development of other nations. That was the same core idea upon which John Quincy Adams based his foreign policy of a Community of Principle among fully sovereign republics, which are allied by a higher interest of humanity.

We have now arrived at a point in history, at which we are confronted with the challenge with which Alexander Hamilton, in the Federalist Papers, was confronted with respect to the United States: namely, whether we are capable of giving ourselves a government and a political order which functions and is worthy of human dignity but this time, for the whole world. At a point where the possible collapse of humanity confronts us all too clearly, can we act together in time, to give the world a political and economic order that is in harmony with the Creation and the laws of the universe?

I think we can, and that this is the purpose of the individual, and of humanity!


NEW BRETTON WOODS MUST REVIVE PEACE OF WESTPHALIA
http://larouchepub.com/lar/2008/3542nbw_westphalia.html


Lyndon LaRouche responded today to reports of a planned "New Bretton Woods" conference of heads of state, before the end of November, by asserting that any such gathering must be based on the principles of the Peace of Westphalia, the 1648 treaty agreement that ended the Thirty Years War in Europe, and established the principle of cooperation among sovereign nation-states, around the idea of "the benefit of the other."

At the close of a heads of state summit of the 27 members of the European Union in Brussels earlier today, French President Nicolas Sarkozy, the current president of the European Union, said that a conference to establish a "New Bretton Woods" would take place in New York City within weeks. British Prime Minister Gordon Brown arrived at the Brussels meeting with a seven-page outline for a new global financial scheme, which he, too, called a "New Bretton Woods," although Brown's plan ruled out any regulation of offshore financial centers or hedge funds.

LaRouche cautioned: "If the heads of state proposing to convene this conference are, talking about some kind of negotiated set of terms, then you can forget it. It won't work. Right now, no government has genuine sovereignty. So you have to get back to basic principles, including the restoration of true national sovereignty."

LaRouche elaborated, "Any agreement, any discussion, must center around the combined benefit of all. You must start with the criterion of the Peace of Westphalia, or you will go nowhere."

LaRouche has been the architect of just such a New Bretton Woods proposal for decades. He has called for Four Powers—the United States, Russia, China, and India—to take the lead in convening a conference to carry out a bankruptcy reorganization of the hopelessly bankrupt global financial system, and to establish, by treaty agreement, a new, fixed-exchange-rate system, to end the tyranny of currency speculation. LaRouche has further emphasized that governments of the world must agree upon a series of high-priority, large-scale development programs, and establish a mechanism for issuance of long-term, low-interest credits to begin those development programs immediately.

"By launching urgently needed great projects on every continent," LaRouche declared, "we can put flesh and bone on the idea of the 'benefit of the other.' Let us take the most impoverished areas of the globe, starting with Africa, and build high-speed rail, nuclear power plants, modern water management systems. It may take us several generations to fully realize the benefits of these plans, but these kinds of efforts, starting with the bankruptcy reorganization of the present Anglo-Dutch Liberal system of globalization, free trade, speculation, and Malthusian genocide, embody the very essence of the Westphalian principle. Let us waste no time."


LAROUCHE PRESENTS PROGRAM FOR WORLD ECONOMIC RECOVERY
http://larouchepub.com/lar/2008/webcasts/3540oct1_opener.html


Lyndon LaRouche delivered this address to an audience in Washington, D.C., on Oct. 1, 2008; it was simultaneously carried on the Internet at www.larouchepac.com, the website of the LaRouche Political Action Committee (LPAC), where video and audio archives are on file. LaRouche's opening remarks were followed by more than two hours of discussion, moderated by his national spokeswoman, Debra Freeman.

[PDF version of this webcast, and discussion which followed]

Debra Freeman: Good afternoon, ladies and gentlemen. My name is Debra Freeman, and on behalf of LaRouche PAC, I'd like to welcome all of you to today's event.

Certainly there no moment more dramatic for our nation, and in fact for the world, than this one. And it is indeed fitting, that after the stunning defeat of the bailout package, if you will, by the House of Representatives, just a couple of days ago, that we would be hosting this event today. It is my understanding that we have the largest audience gathered around the world that we have ever had. That doesn't surprise me. But I don't want to keep them waiting. So, without further ado, please join me in welcoming the statesman and economist, Lyndon LaRouche.

Lyndon LaRouche: Thank you. We have come into times like those you have never, in your lifetimes, experienced before. As a matter of fact, there's nothing in all modern European history, globally extended, to compare with what is happening, globally, and in the United States as well, right now. There's been nothing like the crisis that faces us today, since a comparable crisis in Europe during the medieval period, called the New Dark Ages: We are on the verge of a complete collapse of the entire planet into a New Dark Age.

On the

25th of July last year, I announced that we were on the edge of the beginning of a breakdown crisis in the U.S. economy. At that point, I indicated the measures that would have to be taken, to deal with this crisis which is going to hit us, measures which if they had been taken, between the 25th of August and recently, we would not be in the crisis we're in today. We're in a crisis today, because people like Senator Dodd and "Bailout Barney," in the House of Representatives, prevented the actions which I had specified, which would have prevented the kind of crisis which the nation and its people are suffering today! So, if you don't like what's happening, blame "Bailout Barney" and Chris Dodd. Chris Dodd's a stooge for Felix Rohatyn, one of the worst right-wingers in our country today.

Now, I also indicated a proposal for certain other actions, in addition to the warning, which should be taken by the United States, to avert and begin the correction of this problem. The first was known as the Homeowners and Bank Protection Act of 2007, which I specified at that time. It was actually set into motion as a formal proposition in early September of that same year. This had much support at the state level, and counties, throughout the United States. It was voted up by county organizations and state organizations. But it was never formally adopted, because of the blocking from interests controlling people like Dodd and "Bailout Barney."

So we're in a crisis, because Bailout Barney and Dodd, and people like them, acted to prevent this action from occurring, which would have saved our banks which are now in trouble, and which would have saved the homeowners, who are threatened with continuing and accelerating evictions today.

This is one of the reasons, why the House of Representatives displayed such hatred against the Congress as a whole, in the recent vote on Monday, against the bailout.

Now, the bailout bill might be voted up. The danger is, that a desperate Bush Administration, and what it's tied to internationally, might try to make a military suppression of resistance to their policy now. They might try to use military force, to force through the kind of legislation, the bailout, which is being attempted now.

On the Verge of Global Hyperinflation
The other side of this proposition, apart from other measures which I've indicated earlier, but will repeat again here today, the essential irony of this situation, is that this is no longer the kind of crisis which the lying government which we have, and the stupid President we have, have been talking about. This is not a mortgage crisis! This is a collapse, a disintegration of the entire international monetary-financial system! Something that has never happened in European experience before! And for which there's no one competent in the White House, right now. We are on the verge of a global hyperinflation like that which hit in October 1923 in Weimar Germany [Figure 1]. When you start talking about $700 billion, then a trillion, then $2 trillion, then $3 trillion, then $7 trillion for this bailout, which is the direction we're going in, you're talking about a Weimar-style blowout of the entire international financial-monetary system!

And the problem now, is that the bailout method itself, is the driving force of hyperinflation, global hyperinflation.

And what you have, is, you have a sense like the French Revolution, in which the Marquis de Lafayette had the correct position, politically, with the Tennis Court Oath and similar kinds of things. But he lacked one thing: He lacked the guts to take on his own king. The king had been totally corrupted by a number of measures—and he was not too bright; you've got to let him off a little bit—he was kind of stupid. He was good at fixing clocks and making clocks, but he was not very good at politics. And his wife, Marie Antoinette, who was the sister of the Emperor of Austria, was framed up by a British operation called the Queen's Necklace Affair. She was humiliated publicly, and the Emperor of Austria, who had been a friendly fellow, a progressive fellow, relative to the rest of his relatives prior to that point, went berserk.

So, what happened, is, that the French king, who was a bit of a jerk, brought in foreign—not French—troops, to occupy the area around Paris, to suppress the French people. And this led to what became, inevitably, the French Revolution, the bloody French Revolution. Because of this kind of mistake.

We are on the verge of things like that, today. You have a situation, in which—as you saw with the House of Representatives' vote against this bill, despite all the pressure on the Representatives—and the pressure was not just from the Representatives, it was from people who are represented! It's the people out there, who hate this. And there's an instinct in this Administration, to use military force against the people of the United States, to suppress the opposition to this bill.

That is reality, right now! Not something "coming down": That is already the reality.

If this bill were to be pushed through, with or without the aid of military force against the American people by American troops—which are now being stationed for this kind of operation—the United States will disappear, in very short order. And civilization would crash, globally.

The world would go into a Dark Age, like that of a similar situation in Europe's 14th Century, during which, within a period of a generation, the number of parishes in Europe collapsed by one-half. The level of population of all Europe collapsed by one-third. And mass insanity dominated the population of Europe at that time. That was the end of the authority of the feudal imperial system which had ruled Europe from about 1000 A.D., up until that point.

We are on the verge of a situation, in which, if the bill is pushed through, the chain-reaction effects of the bill, will ensure that the population of this planet drops from about 6.5 billion people to less than 2—and that in a fairly short period of time. Entire languages will disappear, entire countries will disappear as entities, and we will go through a Dark Age worse than Europe experienced in the 14th Century.

Now, there are some people in the Congress and elsewhere who say, "Ohhh, ohh! We're frightened! We're frightened! You can't do this! Don't you know what you're doing? You can't do this, we can't vote against this bill!" Why? "They'll kill us!"

If American troops, ordered by the President, turn on the American people to suppress the opposition to this bill, the United States will cease to exist! This is worse than treason! Any such action, from any part of government, is worse than treason! And anyone who accepts such an order, is a traitor to the United States.

So that's the situation we face.

There Are Remedies
Now, what're the remedies? What're the alternatives? There are some excellent alternatives, but there are no alternatives for Wall Street. Wall Street has earned its death. It is a dead, stinking fish, lying in the streets of Lower Manhattan. The investment banking system is dead! And it should have been killed, before it rotted into death! [laughter]

So this is our particular problem.

Now, if we want to save the country, and save civilization, and avoid a Dark Age, there are some very elementary remedies, some of which I've already stated earlier, a year ago. One, as I said, we must keep the homeowners in their houses. No evictions. We can make other arrangements to manage the downsizing of the debt. Because most of the mortgage debt is fraudulent. That is, the agencies which generated this level of indebtedness, this level of a housing crisis, committed fraud—fraud against the nation. Therefore, they are not entitled to the full price of the mortgage in any case. But what the full price should be, we don't know. But, we'll find out. We will put this housing situation under bankruptcy protection, by the Federal government, with the cooperation of state government and local government. People will stay in their homes, if they wish to, if they are actually the mortgage holder. Because we must also keep the banks functioning.

Now, we have a problem here: In 1999, Clinton was in deep trouble, because of the frame-up against him, by Republicans and others who were trying to stop his attempt to make a change in the financial architecture. Remember, at the time, back in 1998, there was a great collapse of a speculative bubble, which was created about the Yeltsin candidacy for reelection in Russia: the GKO cases. So, at that point, the system was collapsing. I warned the government at that time, that the collapse was on; it was inevitable. And the President at that time—this was in August—agreed with me, that this was the problem. He moved, with the Secretary of the Treasury of that time, to initiate what became the intent to launch a change in the architecture of our financial-monetary system, to eliminate this factor of corruption, and to create remedies for it.

However, at that time, there was a frame-up, organized by forces which were opposed to this reform, which moved toward the impeachment of President Clinton. So, President Clinton, during the following year, was living most of his time, under the dictatorship of Al Gore! Who was acting as a man in occupation of the White House. And the ability of the President, Clinton, to deal with these kinds of problems, which were building up in the year 1999, was limited.

Under these conditions, and a confused and corrupted Congress—and it was confused and corrupted—the repeal of Glass-Steagall occurred. If Glass-Steagall had not been repealed, we would not be in the kind of crisis we're in today. We should restore Glass-Steagall immediately. That's one of the things the Congress should do. But that's not enough. There are new problems, in addition to those addressed by Glass-Steagall, which have been created by this process; so therefore, we have to have a larger piece of legislation, and I'll get to that.

I also proposed a protection for our banking system, in terms of currency: I proposed that we have a basic, minimum 4% interest rate, as the lending rate for our banking system. Except in cases of government projects which are in the national interest, government projects certified by the Congress, which would have a lower rate of borrowing. That would have protected us against some of the worst things that went on in this period.

The Big Four Powers
Now, the third thing, which is the big one, which is of crucial importance right now, is, I proposed that the United States approach Russia, China, and India, as the big four powers on this planet; not to establish a dictatorship by these four powers, but to take a group of four nations, which aggregately are so powerful, the world has to listen to them, and obey some of the suggestions they make. They would immediately be supported in these kinds of measures, by Japan, by Korea, by some nations in Europe—some forces in Italy, some forces in France, like President Sarkozy in France, right now. There's a movement in Italy, also, organized by the Finance Minister of Italy, which is moving in the same direction. The Italian motion is directly done in my name: That is, the idea of a New Bretton Woods, my policy, is specified by a motion, a bill presented in the Italian Senate, now, for a New Bretton Woods system.

Now, that is the solution, the key to the solution to this situation, internationally. We have a world system: The entire system is bankrupt! The entire world monetary-financial system is already in a Weimar-style hyperinflationary takeoff! We are weeks or so away from a crisis beyond belief! And all the troops that Bush might wish to deploy to the streets to try to get that bill through, will not save the United States from destruction by the effects of his doing that!

Therefore, we need the cooperation of Russia, China, and India, as a "Big Four," around which other nations can gather, and simply get rid of the opposition to doing this! It's in the interest of the people of the world, so why not mobilize the major part of the world's population, in these and other nations combined, and let's say, the people of the world, through their respective national governments agree: This is going to be stopped!

What would we do? We would take a leaf out of the book of President Franklin Roosevelt, who's much smarter than these jerks that we now have in government, today. He had some better supporters then, too.

We would then say, we're going to set up—as what the language is, in Russia, in Italy, from the President of France, and from others—a new Bretton Woods system! And they mean, a new Franklin Roosevelt Bretton Woods system. Nothing different. The difference between that, and what Truman did, is notable. What Roosevelt did, is, Roosevelt followed the Constitution.

FDR's Post-War Intention
Now let me explain what the problem was then, because it's relevant to understand the problem today. Roosevelt's intention, during the war, was to engage in a reluctant alliance with the British, in order to crush the Nazis, and some other pestilences running loose. But Roosevelt's intention was also, at the end of the war, to eliminate colonialism and everything like it from the planet. Now we had had, as some of you are old enough to remember (or very few of you I guess; you'd have to be my generation to remember that), we had launched, as a recovery measure, from the Depression created by Coolidge and Hoover and people like that, which we used as our mobilization, with the role of Harry Hopkins and others, to mobilize the United States economically, to prepare for our obligation to deal with this menace of Hitler and so forth in Europe, and in the world in general. We created, from the poor people of our streets, through Harry Hopkins and other Roosevelt programs, we created the greatest economic machine, physical-economic productive economic machine, the world had ever known, in our United States. Yes, we had allies that we depended upon. But! It was the margin of the United States' mobilization by Roosevelt, which enabled us to defeat Hitler, and similar problems! Roosevelt's intention was to get at the root of these global problems, by eliminating the power of British imperialism! And that was the big fight between Roosevelt and Churchill all during the war.

So Roosevelt's intention, as he said, clearly, was, at the end of the war, as he said to "Wi-i-n-ston!"—"At the end of the war, Winston, no more British crap! People are going to be free. There are going to be no more colonies." We're going to use the mighty military war machine, the productive machine of the United States, to free people, to enable them to develop, to gain their freedom, to eliminate colonies from this planet, and to allow nations to develop to the full dignity of mankind.

Now, we didn't do that at the end of the war, because Truman was a Churchill-lover. He was a bum, too. He was only stuck in, because he was a right-winger, and Roosevelt was under pressure in 1944, from the right wing, which was resurgent at point. And they put this character, Truman, in place. And Truman kissed the butt of Winston Churchill—there's no bones about it. He may have kissed some other things, too, but the butt was noted.

So what Truman did—under the Truman Administration, we didn't follow Roosevelt's post-war policy. Roosevelt's post-war policy was to convert the military productive machine, which we had generated to win the war, to convert it into a production machine for the benefit of the world, for capital goods and other things for the world. What the Truman Administration did, was say, "No, we like the British." The Truman Administration endorsed the recolonization of Indo-China! The Japanese soldiers were imprisoned in Indo-China; they had been freed by a revolution which was supported by the United States, by OSS people and so forth, from the United States. Under British orders, the Japanese troops were taken out of the camps, given their weapons again, and told to occupy Indo-China. Out of that, came the Indo-China war, which we spent some time on during the 1960s-1970s. We did the same thing with the Dutch in Indonesia. We did a modified version of the same thing in India. We did the same thing in Africa.

We worked with the British and Dutch to recolonize the planet, to restore the British Empire, which is what the Anglo-Dutch system is. And what we did in the United States, instead of converting our war machine into production for the world, and its development, we shut large parts of it down! We took the war debt we had inherited from the war, but we shut down the means of getting rid of that debt, by converting military potential into industrial and related potential.

And thus, we, the United States, were on the way down: We've gone down in successive stages. We went down, in the first stage, under Truman. We went down after the killing of Kennedy. Johnson was terrified; he thought these three guys were going to shoot him next, in the back of the neck, or something like that, and he said so. Johnson was not a bad President; he was a terrified President.

We Will Rebuild the World Economy
Then you had the Baby-Boomer factor, in 1968. And that destroyed the United States and let Nixon be elected. And we had that right-wing turn, and we've never recovered from it since. Since 1967-68, as measured in physical productive output, not money, but physical productive output, the United States has been declining in economic power, physically, per capita, per square kilometer, over every year, under every Presidency; from 1968 to the present time, there has never been prosperity in the United States [Figures 2 and 3]: There has been prosperity for some, in terms of money, like the thieves who are backing this thing about the bailout. But there was not improvement in our infrastructure; we have lost industries; we lost our automobile industry—we have a Japanese industry, which is functioning quite nicely inside the United States. We don't have a U.S. auto industry—and we will never have one, never in the normal sense of an auto industry. The Japanese are doing a good job, and similar people are making all the autos we need.

But we do need something else: We need a mobilization of the productive power of the United States, which is largely machine-tool design and related things, to build our infrastructure, to build systems, to build a railroad system to replace this crazy highway system; to fix our river systems which are about to collapse; to restore our agriculture; to rebuild manufacturing and similar activities in the United States, instead of make-work. To rebuild our nation, in the American tradition, not the British slavery tradition which we're operating under now.

Now, we're faced with a period, in which under the present system, the U.S. dollar is right now essentially worthless. It has not become worthless, but it's becoming worthless, and there's nothing underneath there to stop it from falling. As a matter of fact, the Secretary of the Treasury is causing the dollar to fall at an ever-accelerating rate! We are in hyperinflation—now! Like Weimar in the Autumn of 1923: The world is in a hyperinflationary spiral, and it's going to blow out.

Now, what do we do? What do we do with the Four Power agreement? Russia is ready to agree to this—now! Forces in Italy and France have declared themselves for it. What they mean by that is still up for some discussion, but it's there. China will support that, but not unless the United States comes in on it, because China is concerned about the price of the dollar; because China depends largely upon its trade with United States. India would join it. If Russia joins it, these countries would join it.

If this Big Four, joined quickly by other nations, comes to an agreement, we will put the entire world into bankruptcy reorganization. We will create an intention to form what we would call a "New Bretton Woods system." We will use the power of international government—that is, not an international agency, but the power of government pulled together as an international force—we will use that force to regulate a fixed-currency system throughout the planet. We will put the lid on hyperinflation. We will keep the banks of countries open—the real banks, not the fake ones. We will build the economy, by measures of economy-building: large-scale, needed infrastructure projects, using high technology, using engineering design. This will be a rebuilding of the world economy.

We will create new credit, not the fake credit you've been getting lately, but new credit, at low interest rates, long term, just as we did under Roosevelt: to launch the employment, in each of the countries, under a fixed-exchange-rate system which allows us to rapidly build back the productive power of nations. Yes, we're going to take time to clean this mess up that we have today. It'll probably take two generations, before we fully eliminate the results of the corruption which has been dumped upon us in the past 40 years.

A New Mission for Mankind
But you have to understand something else: In real terms, in physical economic terms, every policy directive of the United States over the past 40 years has been a miserable failure, a mistake. The U.S. economy, as measured in physical productive powers and output, per capita and per square kilometer, including essential basic infrastructure, has been collapsing consistently over 40 years. Since the budgetary year of 1967-68, there has been no net growth per capita, of real growth in the U.S. economy.

What this tells you is, that every government of the United States, every session of Congress, in the main, the opinion of newspapers, the leading newspapers and other publications, the opinion of most mass media, has been stupid! Because we have consistently made the decisions, one after the other, which have made the conditions of life worse with each generation. The per-capita physical output of the United States today, is less than it was in any preceding period going back to 1967-68. The influence of the Baby-Boomers, the influence of especially the environmentalists, so-called, has been a key factor in this. We have been destroying ourselves. A similar process has gone on in Western Europe; a similar process has gone on elsewhere.

Now, we have a global situation, in which there has been an implicit shift of power, a shift of power from Europe and the Americas, toward Asia. The future of the planet lies in the development of Russia, China, India, and other Asian countries. These are areas of large populations in which 60-70%, or more, are extremely poor, poorly developed. This represents a social crisis, a planetary social crisis, with all kinds of side-effects possible. But! If we're going to have a successful planet, we have to concentrate on large-scale infrastructure projects and similar things, which will, over two generations, raise the productive powers of labor of populations from all around the world. This means that the major investment, in the planet, in the period now, will come, first, in Asia; second, the second-largest component will be black Africa, especially black Africa; the third component will be development in Central and South America.

The United States and Western Europe must be mobilized as a driver, an economic driver, as well as a political driver, to bring about the success of development of the whole planet, by what we do in support of the development in South and Central America, in Africa, and in Asia. We need a new mission for mankind.

We don't have any enemies in the world, who are any worse, any more our enemies than President George Bush is. It is the people who are controlling us—and the British, the Anglo-Dutch Liberals, these characters are inducing us to destroy ourselves. We don't have real enemies in Asia, as nations! We don't have real enemies in South America. We don't have real enemies in Africa—not if we think like Franklin Roosevelt! If we think like Roosevelt, we don't have enemies there. These are our friends—and our government is our enemy!

So, essentially, if the American people are able to stand up to this, as many of the people of the lower income brackets, as represented in the Congress, in the House of Representatives—are able to push through the changes that are necessary, I can guarantee you, absolutely, if that change is made, Russia will fully cooperate; China will cooperate; India will cooperate. Then Japan will cooperate, Korea will cooperate, other nations will cooperate! The nations of Africa will greet this as—they're being mass-murdered now under British policy!—they will rejoice, at our coming back into the picture in this way.

The world will be on the side of the United States.

What the United States Is
Now, the other thing we have to appreciate, is what our United States is.

In modern history, there was an evolution, coming out of a long period of religious warfare, from 1492 to 1648, from the same time as Columbus's first exploration across the Atlantic, until the Peace of Westphalia in 1648.

Now, during this period, the forces that were trying to crush the nation-state institution, were not able to crush the nation-state, because the improvements in productive powers of labor, and the increase in intellect and freedom, among the rising citizenry in the cities which were emerging in this period, were such that, as Machiavelli describes this process, the city could defeat the forces of the opposition. And so, you had an adaptation, by the enemies of humanity, called the movement of Paolo Sarpi. Paolo Sarpi was a slick character, a Venetian, who, among other things, moved the operations of his part of Venice, away from the Mediterranean base, into Northern Europe, centered in parts of Germany, in the Netherlands, and in England.

This is a process which began with the Venetian restructuring of the marriage policies of Henry VIII, which was done from Venice: They sent him a marriage counselor, and he got rid of the wives; he sort of cut off their careers, at the head. He said, "You don't need a head any more, if you don't please me." So, in any case, there was a process in which the power of development or the power of civilization shifted from the Mediterranean to Northern Europe. And the two areas were the Netherlands and England.

So now, there was a split, and the split occurred in 1763, in February of 1763, with the Treaty of Paris, the Peace of Paris, in which we, in the United States, or what became the United States, broke with England, because England had become an empire, and was trying to loot us. Because of this cultural factor, the dominant characteristic of global civilization has been English-language domination and control of global civilization, from that time to the present day. Especially from 1763 to the present. Thus, the division between two English-speaking peoples, those of us, in the United States, today, and those who represented the British oligarchy or the Anglo-Dutch oligarchy—the bankers, the thieves—became the leading force on the planet—not necessarily the entirely controlling force, but the leading force. And thus, the role of the United States is built into the history of Europe! It's built into the history of civilization, like an organic quality: That we in the United States have adopted, and been given the destiny, of creating the leadership, to assist the rest of the world in becoming free, of the British, Anglo-Dutch Liberal Empire, and its practices.

That was Roosevelt's intention, his explicit intention. That was the intention of every great President we had, every great patriot this country had. We were considered a threat to Britain, to the British Empire, for this reason. Thus, it's built into the cultural relationships within the planet, that when the United States takes the moral role, as it did under Roosevelt, and says, "We are concerned with finding ways of cooperation with other nation-states on this planet, to form a society of perfectly sovereign nation-states, which enter into forms of cooperation in their common interest. We'll not try to dictate the internal characteristics of the government of these other nations, we simply cooperate with them as national personalities. And we as a national personality cooperate with these other nations, as their national personalities. And come to common goals and common ends, the common aims of mankind."

Now, if we take that policy—not, "Who's the enemy? Who're we gonna beat?" We've got one enemy to beat: the Anglo-Dutch Liberals. The other enemies are simply fools who don't know any better, but we're supposed to know better. We must become again, we must re-create in this country, a new political movement, based on the legacy of Franklin Roosevelt, based on the legacies which many Republicans bear, a new political movement, which adopts the idea of the United States as a unique, universal personality, which has a role to play, on this planet, for the benefit of humanity as a whole, and therefore, for itself: It's the principle of Westphalia, the Peace of Westphalia, "the benefit of the other"! It's the principle of the modern nation-state, the benefit of the other people, because if you care for the benefit of the other people, you're going to be cared for yourself. You're going to create the kind of society in which you'll be cared for. You create justice for others, you create a climate of justice for yourself; you create a climate of progress, you create a climate of progress for yourself.

An Agreement To Come to an Agreement
You know, the experience that I had since I was overseas during World War II, in Asia, is to see the evil of the conditions of life and culture under which people live, largely because of the factor of imperialism—of British imperialism in particular, also Dutch imperialism, and so forth. And these people, then, when I was in India, for example, in the Spring of 1945-46, that was the aspiration: The Indians looked to us, and coolies on the street would come up to me, in American uniform, and say, "Is the United States going to send us agricultural machinery? Is it going to send us textile machinery, so we can be no longer be coolies at eight annas a day, but we can have our own life?" That was the image of the United States in the eyes of the world, as long as Roosevelt was President, and that continued for some time. Roosevelt represented the best tradition of the United States: Not trying to find out "who's the enemy to beat?" An enemy is somebody who's coming out to kill you; well, you fight them off. But you're not looking for a system of relations among states, based on adversarial considerations! Your system, while it may deal with adversarial problems, must, in the long run, rely upon non-adversarial issues, like that of the Peace of Westphalia.

Under those conditions, given how terrible the situation is, right now, with our monetary-financial system, if we—the United States—if we can force, in this United States, to take this piece of crap, this President, and force this Presidency to move, to make an agreement—that is, to make an agreement to make an agreement: It doesn't require a full-fledged worked-out agreement. It requires a process of getting to an agreement; an agreement to come to an agreement, among Russia, the United States, China, India, and other countries, which now, probably include Italy and France, and some others. Under those conditions, we, as a combination of powers, can dictate what the fixed-exchange rate of the monetary system will be! We can dictate and regulate against inflation. We can create credit, large-scale creation of new technologies, and new kinds of infrastructure. We can do these things!

But we have to agree to agree.

Then, apply the power, represented by that agreement, among these powers and others who join them, to crush that force which is imposing this hyperinflation upon the entire world, and is now threatening to use even U.S. troops to try to suppress anybody who opposes a bailout—which would, in itself, destroy the United States. These guys behind the Secretary of the Treasury don't care about the United States! They care about their class, their Wall Street class, their investment banking class: They care more about Goldman Sachs than they do about the United States! And they want revenge against the United States for allowing Goldman Sachs to go bankrupt; or, it is bankrupt, aptly.

So that's the issue.

Real Economics
Now, the positive side has another aspect: There is a certain idiocy about economics, not only among our economists. Generally, if you want to become an idiot in economics, you have to study economics and become professional at it! You can not be a successful idiot without becoming professional!

And, there are good economists, in the sense that they do things which are useful, they know things which are important. But when it comes to the basic questions of international systems, we don't have economists—who are called "economists"—who know what the hell the score is. They just don't know it. They may be well-meaning people, they're often intelligent people. They know something. They are useful, at something. But they don't understand the basics of economics. Because they believe what they're taught in universities, and that's the first step down to absolute destruction of your intellect, these days.

The point is very simple: The idiot says, particularly the free-trader—I don't know who he's trading in, but he's a free-trader—says, "well, everything starts from the point of production." Well, that's nonsense. Economy does not start—not successful economy—from the point of production.

For example, let's take a case in about 1910-1912, in the area of New York City, in general, because Thomas Edison was in that area: And there was a development in improvement in electrical motors, the small electrical motors which could be attached to individual machines. And there was a leap in productivity in the greater New York area, through the Edison method of introducing these individual machines, of these new types, to attach them to machines, rather than belt-driven systems, or similar kinds of systems. It was a leap in productivity. There was no significant increase, as such, to account for this increase in productivity, at the point of production otherwise. But it was the effect of changing the environment of production.

This is only an expression of something else which happens in economics: It is fundamental discove...


RE: LaRouche - Admin - 11-09-2008

A TRUE CLASSICAL TRAGEDY: OUR ECONOMY IS BUSHED !
Lyndon H. LaRouche, Jr.
October 29, 2008
http://larouchepub.com/lar/2008/3544economy_bushed.html


It is time to be realistic about the situation which will menace the very continued existence of our U.S. Republic, whatever the outcome of the November 4th general election.

What must be addressed in the accompanying report, is the wretchedly corrupted state of the present leadership of the political parties, especially since about February 2006, at a time that the Democratic Party leadership, in particular, had refused to respond to the votes cast by the electorate in the preceding mid-term election " on any leading issue, then, or to the present date.

Similar problems, even critical ones, have existed for our republic during some past times, but the state of our national political affairs during the recent two years has been perhaps the most deadly threat of that type in the entire experience of our nation as a Federal republic. As we go into the 2008 general election, that is the problem which should be uppermost in our mind.

Notably, excepting certain U.S. Presidents, or Vice-Presidents, such as Aaron Burr, whose intentions were those of outright traitors, the outgoing George W. Bush, Jr., after nearly eight years in that office, has created a record for himself, as being, beyond reasonable doubt, the worst excuse for a U.S. President in our republic's history. He was already the worst possible choice actually available when he entered that office, and accomplished little since, except to rise from a complete absence of qualifications for that office, to achieve the more notable status of having been, traitors aside, the most despicable ever.

The disaster of this election has not been accidental. Whatever the developments of the increasingly tumultuous, remaining weeks ahead, George W. Bush, Jr. will go down in the Creator's ledger as the President who did the most in his efforts over eight years, not merely to bankrupt the U.S.A., but to adopt those policies which have amounted to the attempt to plunge the entire planet into what is presently looming as the onrushing threat of becoming the worst dark age in the presently recorded history of mankind.

What prominent political figure of our republic, or any reasonably well-informed foreign nation, could be so stupid, or so craven as to suggest that an incarnate virtual political disease such as President George W. Bush, Jr. could be the author of a remedy for the world's current disasters?

Why were so many citizens, especially the most influential ones, unable to muster the combined wisdom and just plain guts needed to prevent the scheme of the attempted impeaching of former President Bill Clinton, a hoax against our Federal Constitution, which set into motion the chain-reaction of economic and related events which ended with the alleged defeat of Presidential candidate Al Gore, Jr. by an even worse choice, George W. Bush, Jr.?

It is time for the apparent majority of our political influentials to ask themselves, whether their failure to defeat Bush's re-election in 2004, forecast a still worse expression of a continuing national tragedy already clearly in progress, during the still coming days and weeks now immediately ahead. Or, must we fear that what are considered our currently leading political figures, each and all, are simply lacking in the combination of insight and nerve which we require to lead our republic to survival now.

The only remedy for us now, lies in the potential embodied in the uniquely crucial distinctions of our republic's Constitution from that of the form of government found, for example, in western and central Europe, still to the present day. In this moment of the gravest threatened crisis in all modern history, the fate of the nation hangs not so much on the particular personality of an elected President whose very life may be in jeopardy, but on those institutions of the Presidency which persist as Presidents come and go.

I explain:


--------------------------------------------------------------------------------

What we are experiencing is no mere recession, but a presently accelerating general financial and physical breakdown of the entirety of this planet, which, unless turned around, now, will accelerate steeply into a planet-wide "new dark age of mankind."

It is already clear to those who actually understand the present U.S.A. and world situation, that the present pattern of general breakdown of the U.S. economy, an economic-financial breakdown-crisis which erupted at the close of July 2007, is a breakdown crisis with characteristics similar to, but worse than that brought about in mid-Fourteenth-Century Europe. Now, as then, this menace is represented by a pack of financier bandits fully as rapacious as that pack of Anglo-American financier parasites controlling the circles associated with Wall Street champions rallied around President George W. Bush's U.S. Treasury Secretary Paulson.

Those citizens who understand what is needed now to save our nation from the already onrushing horror, will reject any opinions on our present situation which are contrary to the warning which I have just stated here. This is no mere depression, no mere echo of 1929; it is a general breakdown-crisis of the financial systems of the entire planet.

There are ways in which to bring the world to safety, even from a crisis as terrible as what has been happening, continuously, as I had warned at the end of July 2007.

Therefore, since there will never be a spontaneous recovery of the planet from the presently accelerated general breakdown-crisis of the entire economies of the world, the only hope lies in a return to the kinds of measures undertaken by President Franklin D. Roosevelt from March 1933, onward. Today's pervasive problem lies, chiefly, in the confused, general state of mind of our electorate itself, most of whom think of issues of policy in terms of competing political parties, rather than thinking in terms of the common interest of the past, present, and future citizens of our republic. This non-partisan leadership must not be considered as representing mere factions, but as a whole leading constituency of our Presidential system for times of our nation's existential crises, as now. Our nation " and the world " could not be rescued from the greatest economic crisis in modern world history, unless our government adopts, immediately, the only kind of action which could rescue the world as a whole from the presently onrushing plunge toward a prolonged new dark age.

We of the United States could not save ourselves by options of the U.S. government itself. We require immediate agreement on actions to be taken in concert by such leading nations of the world today as our U.S.A., Russia, China, and India. Without a sweeping change, which eliminates most of the leading trends in economic policy-shaping of those, and other nations, since about 1968, the entire planet, including our own U.S.A., is slipping at a presently accelerating rate, virtually daily, into a total breakdown of the present financial-economic systems of the entire world.

Ours Is Not a Parliamentary System
Even at all times, especially whenever our republic is threatened in an existential way, as now, our citizens should think of the Presidency, rather than as the incumbent President, as the essential element of self-government under the unique, Federal, constitutional system brought into being through the interplay between the coincidental meeting of Society of the Cincinnati and the Constitutional Convention held in Philadelphia at that time.

Our peculiar advantage lies, to a very large degree, in that we are not a European parliamentary system! Nor, is our nation's economy based on the doctrine of the Adam Smith, who was, and remains, to the present day, our enemy of the time of our struggle for national freedom, from that time. We are, by our Constitution's specific principle of a national monopoly on the uttering of public credit, unique among nations in that respect; it is to the essential principle of that uniqueness of our constitutional system that we must turn, when we are being driven, as now, as under the mortal threat from Lord Palmerston's British Empire, to last resorts, again, today.

It is through constitutional authority to launch the sweeping replacement of failed monetary-financial systems, such as those of Britain and most other nations, that we, our nation, and our constitutional republic, alone, are presently capable of initiating the reform needed to launch an immediate recovery of the nations of the world from the presently onrushing avalanche of general breakdown-crisis of the planet as a whole.

Therefore, the crucial question which we must ask ourselves, is: are we capable of using the President to be elected, presumably, on November 4th of this year, to effect immediately the needed reforms needed both to save our nation and its people? Neither of the prospective President-elects actually has the qualifications for initiating that urgently needed, timely reform on which the continued existence of our republic depends.

Therefore, let us ask a somewhat different question: could the Presidency of our republic use the elected President as the constitutional instrument which could launch that urgently needed general economic reform?

The answer is "Yes." Will that Presidency, which is a mass of institutions and persons gathered around the policy-shaping and other relevant institutions be willing, and capable of mobilizing the needed remedies, where a mere individual President would probably fail? That is the question, a question of far, far greater importance than any individual likely to become the President of our republic by the time of the January next inauguration.

What we must avoid, as if our republic's life depended on it " as it does " is to reject all of the kinds of compromises being cooked up around the President Bush Administration, or similar mish-mash concoctions proposed by sundry interests and institutions abroad. The survival of civilization requires the immediate adoption of nothing different than the reform, based on replacing the inherently failed design of European-style monetary systems, by the U.S. Constitutional principle of a U.S. constitutional credit-system.

The needed reform will fail unless that specific condition, the junking of international monetary systems, in favor of a Hamiltonian credit-system, is treated efficiently as axiomatic. This requires the included, leading role of the U.S.A., in a small group of leading world powers, such as Russia, China, and India, in agreeing to a principled design of that specific, Hamiltonian, Franklin Roosevelt type. If that is done, and conducted in service of the equitable interests of the nations of the world, we can come successfully out of what would otherwise be, very soon, a general breakdown of every economy in the world over a period of perhaps generations to come.

For such a long-ranging challenge, no mere President, as a personality, could efficiently represent the people of the United States. For this form of problem, we must rely on the Presidency of our United States, rather than any mere President temporarily occupying that office.

My job, as my forecasts of events have now shown my competence to be presently uniquely competent, is to act to mobilize what represents the too-little understood, implicitly immortal institution of the U.S. Presidency as such, to craft that commitment by our republic, which is presently so urgently needed to rescue the world as a whole from the follies which have ruled the world, most emphatically, since the dumping of the legacy of President Franklin D. Roosevelt over the course of the 1968-1981 interval. It is not a merely passing President, but the immortal institution of our implicitly immortal Presidency which is required to commit us to our part in crafting the indispensable new commitment to the hopeful future destiny of humanity as a while.


STUBBORNNESS WORSENS WORLD DEPRESSION.  WILL THE GREAT CRASH HIT AFTER NOVEMBER 17?

Helga Zepp-LaRouche
http://larouchepub.com/hzl/2008/3544crash_nov_17.html

The way things stand now, there are grounds to fear that the New Bretton Woods summit which French President Nicolas Sarkozy has organized to take place on Nov. 15 in Washington, will not lead to an adequate result. It could easily turn out as one high-ranking banker, quoted in the French newspaper La Tribune, imagines it will: that Nov. 17 will be a "black, black Monday." But there could also be a "black Monday," a "bloody Tuesday," and a "horrendous Wednesday," soon to be followed by a total collapse of the world financial system. The only possible way to prevent that from happening, would be prompt agreement on Lyndon LaRouche's financial reorganization proposals, as set forth in his latest paper, "A New Dark Age Is Now Near: Today's Brutish Imperialism."

This gloomy prognosis is based on a number of factors. All indications are that neither the Bush Administration, which is heavily infested with former Goldman Sachs associates, nor British Prime Minister Gordon Brown, have any intention of agreeing on an actual reorganization of the bankrupt financial system. Bush was against the idea of the newly elected U.S. President taking part in the summit; and since there's nothing to contradict the estimation of Les Echos that Wall Street is throwing in its lot with Obama, despite McCain's good connections there, this really doesn't make much difference. But even those who are equipping the IMF with a "Global Regulation Strategy" " which simply means imposing one or two more rules on the bankrupt system " are totally misestimating the situation.

Because the idea that, after neo-liberal economic dogma has totally failed, the nations of Asia and Latin America will once again permit themselves to be subjugated by a global IMF dictatorship, is an absurd one. On the one hand, in the days leading up to Nov. 15, a number of summits will be held by groups of nations, ranging from Mercosur, to the Shanghai Cooperation Organization, to the G-20, etc. Participants in these summits will attempt to formulate their national interests within the context of the new financial architecture. The Asians' experience with the IMF during the 1997-98 Asia crisis does not exactly inspire trust in this institution, even if it has "reformed" and that includes Turkish Prime Minister Erdogan's recent declaration that he will not permit the IMF to "strangle" the Turkish economy.

While spin doctors in political circles and in the media continue to debate over whether the economy is gradually slipping into a "recession," or whether "the worst is over" (Robert Mundell), the facts speak an altogether different language: The real economy is in free fall. Freight transport rates for solid goods i.e., grains, ores, and coal have declined by 90% (!) over the past three months. In the past few weeks, China has not imported a single ton of iron ore. The Baltic Dry Index, which measures freight costs per vessel, has fallen by 92% since the beginning of this year  i.e., trade in raw materials has declined dramatically. The China International Capital Corporation Limited reports that orders for new ships have declined by 66% worldwide.

Now that the auto sector has collapsed worldwide Daimler, for example, is halting production of the Mercedes for five weeks for the full extent of the collapse in steel production is becoming clear. Arcelor Mittal, the world's biggest steel producer, expects to close 13 of its blast furnaces in Europe during from mid-November through the end of January. More than 60% of China's steel industry is running at a loss, and smaller firms are closing their doors, since the price of steel in China has collapsed by 30-40% since June. In the south of China, more than 50,000 small and medium-sized firms have declared bankruptcy. This shrivelling of industrial production has consequences for agriculture and for consumers' purchasing power. Prices for soybeans fell by 50% in the last three months, and grain by 20-30%.

In this age of (collapsing) globalization, the shrinking volume of freight transported is an indicator of the state of the real economy. Alongside the above-mentioned figures for shipping, sales figures for heavy trucks are also telling. In the third quarter, net sales of Volvo trucks plunged by almost 100%, from 41,970 to a mere 115. New orders for large trucks worldwide declined by 55%.

Empty Praise for the Free Market
The financial crash has been ravaging the real economy for some time now, and if the Bank of England just now says in its Financial Stability Review, that the instability is as big as it has "ever been in human recollection," it becomes clear how dangerous the politicians' and bankers' bull-headedness can get such as at the recent "financial summit" in Frankfurt, where instead of taking their own incompetence as the fitting opportunity to resign from their posts, they couldn't get beyond empty appeals to, and praise for the free-market economy.

The rate of collapse is bound to increase, with new chasms opening up daily, whether in the position of hedge funds, which have to dump their assets because terrified investors want to pull out their money; or in the so-called emerging markets. Hungary, for example, recently negotiated a $25 billion package with the IMF and the EU, after its currency went into free fall a sum which goes more for saving Western banks involved in Hungary, than for the people, who will be subjected to tough austerity measures. In this connection, Switzerland and Great Britain could easily turn into new Icelands: Swiss banks' short-term liabilities are now 13 times greater than the country's GDP; Iceland's were only five times bigger.

Thus it should be clear to every normal person, that unless a new world financial system is immediately put onto the agenda, humanity will be threatened with a fate which the yuppies and profiteers of today's system could not have even remotely anticipated. Only an orderly bankruptcy procedure, whereby the probably hundreds of quadrillions of derivatives would be wiped out, can solve the problem. The speculators detest this solution more than the devil hates holy water, but that should not prevent governments from putting precisely this onto the agenda for Nov. 15.

If we compare the trillions that have been thrown down the gullets of banks which have run out of money, to the paltry sums allocated to the developing countries, then we see that the protagonists of this system are bankrupt not only financially, but morally as well. So, for example, out of the $12 billion which was demanded at the Food and Agriculture Organization conference in Rome in early July, only one ridiculous billion has been allocated. And meanwhile, aid to developing countries has declined massively, and even out of what remains, the greatest portion is eaten up by administrative costs, climate protection, humanitarian assistance, and military deployments.

Participants in the Nov. 15 G-20 summit in Washington will be answerable to history, if they pass up this opportunity to put a real New Bretton Woods, in the spirit of Franklin D. Roosevelt, onto the agenda. The consequences of such a failure would be not only the early collapse of the world economy, with billions of people dying of starvation, but also incalculable social chaos in the G-7 countries chaos which would be uncheckable even with the Mussolini solutions envisioned by some.

While in Italy and France, an open and expanding discussion is under way on a New Bretton Woods system, up to now the media and politicians in Germany have been united in their efforts to prevent this debate from occurring. This includes the dictatorial repression and slandering of the program of the BuSo in this country. If this is allowed to continue, the guilty parties will surely not enjoy the fruits of their actions. There is only one reasonable solution: Lyndon LaRouche's ideas must be immediately put up for public discussion.

BLACK FRIDAY?

Mike Whitney
http://www.informationclearinghouse.info/article20985.htm

Panic has spread to stock markets around the world. A massive sell-off, which began when Henry Paulson announced a $700 billion bailout for the banking system, has turned into a global stampede. Shares fell sharply across Europe and Asia for fifth straight day following a 679 drop on the Dow Jones. Nearly $900 billion was wiped off the value of U.S. equities in just one trading day. The Chicago Board Options Exchange Volatility Index, the "fear index", soared to a record 64. Credit markets remain frozen. Libor, London interbank offered rate, nudged up slightly on Thursday night, signaling even greater resistance to lending between the banks. Until there is relief in the credit markets, stocks will continue to slide. But trust has vanished. The 50 basis points rate cut that was coordinated with foreign central banks has had no effect. The market is being driven by fear and pessimism. Friday is shaping up to be a bloodbath on Wall Street.

White House press secretary, Dana Perino said yesterday that President Bush will address the country on Friday morning:

"He will assure the American people that they should be confident that economic officials are aggressively taking every action to stabilize our financial system. The Treasury Department is moving quickly to use new tools to improve liquidity, which is the root cause of this problem."

Bush still believes that the problem is "liquidity" rather than "insolvency". When liabilities vastly exceed assets, liquidity does not help. The bad banks need to be closed so the good ones can be strengthened with capital injections.

New York Times columnist Paul Krugman said, "Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Henry Paulson, the Treasury Secretary, was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman’s failure caused the world financial crisis, already severe, to get much, much worse."

Lehman's credit default swaps, (the derivatives which Warren Buffett calls "financial weapons of mass destruction") will be "unwound" on Friday. It could be a "non event" or it could trigger another sell off; it is impossible to know. If tens of billions of dollars are drained from already weakened balance sheets in counterparty deals that have turned sour, the market will react violently. Wall Street is on tenterhooks waiting for the news from Lehman.

There is general agreement among economists about what needs to be done to stabilize the financial system. The banks have to be recapitalized, deposits have to be guaranteed (beyond the $100,000 FDIC limit) and additional stimulus has to be provided to increase consumer demand. Otherwise the United States will face another Great Depression. Too much time has been wasted on Paulson's failed bailout for G-Sax and his friends on Wall Street. Buying the bad assets of underwater banks does not fix the problem. The banks need capital so they can resume lending and transmit credit to consumers and businesses.

Former head of the FDIC, William Isaac summed it up like this:

"I was opposed to the bailout bill, mostly because I don't think it will work. The banks -- taking $700 billion of bad loans out of the banks doesn't help get banks lending again. It just solves some problems in some banks. And it doesn't have any leverage to it. If the Treasury were to put that same $700 billion and used that to invest in bank capital, the banks can loan $10 for every dollar of capital, roughly, which means that the Treasury would be creating $7 trillion of new lending capacity in the banks. And that is vastly superior to buying $700 billion of problem loans. It just -- it will really give some punch to the economy. It will get banks back into the lending business..... And to do that we need to get some capital back in there."

Isaac added: "The other major thing they really need to do... They really need to have the FDIC declare that there is a financial emergency. And when the FDIC does that, the FDIC should announce that during this period of crisis, all general creditors, all depositors, insured and uninsured, bondholders in our banking system, will be protected if a bank fails. And that, I think, will get the inter -- the financial markets working again and get banks willing to loan to each other again."

Nearly one third of all deposits ($2.5 trillion) are not insured under present FDIC guidelines. If these deposits are not insured, as Isaac says, there will continue to be a slow run on the banks which is why the credit markets are paralyzed.

Much of this week's volatility in the market is the result of program trading (many sell orders were automatically executed when the Dow hit 9,000) and massive deleveraging in the hedge funds, the secretive $1.7 trillion industry. As credit gets tighter, the funds are unable to roll over their short term debt and have been forced to dump their assets in an illiquid market at firesale prices. This explains the recent see-saw motion in the stock market; the huge 2 to 3 percent intraday swings (positive/negative) This has added to the fear of smaller investors who have left the market in droves for the safety of US Treasuries or cash. That's why the dollar has strengthened even though the Federal Reserve is printing money at a furious pace. The inflationary effects will not be apparent until the destruction of credit abates.

The biggest danger we face in the short term, is a run on the financial system. Calm must be restored if we want to avoid another depression. Investors have already pulled a record $72 billion from stock and mutual funds, and put the money in US Treasurys and government-insured bank deposits. If the trend continues, the financial system will collapse. This is where leadership and credibility really matter. The Bush administration's record on these issues is dismal. If the government overreacts and limits bank withdrawals or closes the stock market; the sense of desperation and panic will only grow. That increases the likelihood of rioting and violence, which is what took place in China just this week.

The falling stock market reflects the mood of the country as a whole. Confidence in the system is at an all-time low. The government has lost the moral authority to rule. People have lost faith in everything. Bush has created a tinder box which could explode in flames at any time. It is a dangerous situation.

BLACK FRIDAY: False alarm or Armageddon?

The econo-blogs were abuzz all night Thursday. The prevailing feeling is that Wall Street will suffer historic losses on Friday and that this will mark the end of America's dominance as the lone superpower. As always, economist Nouriel Roubini provided a chilling analysis of the present financial malaise:

Nouriel Roubini: "The US and advanced economies’ financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system... and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.

At this point the risk of an imminent stock market crash – like the one-day collapse of 20% plus in US stock prices in 1987 – cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown....

When... even the most radical policy actions don’t provide rallies or relief to market participants, you know that you are one step away from a market crack and a systemic financial sector and corporate sector collapse. A vicious circle of deleveraging, asset collapses, margin calls, cascading falls in asset prices well below falling fundamentals and panic is now underway." (Nouriel Roubini's Global EconoMonitor)

There's a way forward but it will take a lot of digging out and a vision of the future that doesn't center on Wall Street.


A SOLUTION?
Paul Craig Roberts

Readers have been pressing for a solution to the financial crisis. But first it is necessary to understand the problem. Here is the problem as I see it. If my diagnosis is correct, the solution below might be appropriate.

Let’s begin with the fact that the financial crisis is more or less worldwide. The mechanism that spread the American-made financial crisis abroad was the massive US trade deficit. Every year the countries with which the US has trade deficits end up in the aggregate with hundreds of billions of dollars.

Countries don’t put these dollars in a mattress. They invest them. They buy up US companies, real estate, and toll roads. They also purchase US financial assets. They finance the US government budget deficit by purchasing Treasury bonds and bills. They help to finance the US mortgage market by purchasing Fannie Mae and Freddie Mac bonds. They buy financial instruments, such as mortgage-backed securities and other derivatives, from US investment banks, and that is how the US financial crisis was spread abroad. If the US current account was close to balance, the contagion would have lacked a mechanism by which to spread.

One reason the US trade deficit is so large is the practice of US corporations offshoring their production of goods and services for US markets. When these products are brought into the US to be sold, they count as imports.

Thus, economists were wrong to see the trade deficit as a non-problem and to regard offshoring as a plus for the US economy.

The fact that much of the financial world is polluted with US toxic financial instruments could affect the ability of the US Treasury to borrow the money to finance the bailout of the financial institutions. Foreign central banks might need their reserves to bail out their own financial systems. As the US savings rate is approximately zero, the only alternative to foreign borrowing is the printing of money.

Financial deregulation was an important factor in the development of the crisis. The most reckless deregulation occurred in 1999, 2000, and 2004. See Roberts, http://www.electricpolitics.com/2008/10the_end_of_american_hegemony.html

Lax mortgage lending policies grew out of pressures placed on mortgage lenders during the 1990s by the US Department of Justice and federal regulatory agencies to race-norm their mortgage lending and to provide below-market loans to preferred minorities. Subprime mortgages became a potential systemic threat when issuers ceased to bear any risk by selling the mortgages, which were then amalgamated with other mortgages and became collateral for mortgage-backed securities.

Federal Reserve chairman Alan Greenspan’s inexplicable low interest rate policy allowed the systemic threat to develop. Low interest rates push up housing prices by lowering monthly mortgage payments, thus increasing housing demand. Rising home prices created equity to justify 100 percent mortgages. Buyers leveraged themselves to the hilt and lacked the ability to make payments when they lost their jobs or when adjustable rates and interest escalator clauses pushed up monthly payments.

Wall Street analysts pushed financial institutions to increase their earnings, which they did by leveraging their assets and by insuring debt instruments instead of maintaining appropriate reserves. This spread the crisis from banks to insurance companies.

Finance chiefs around the world are dealing with the crisis by bailing out banks and by lowering interest rates. This suggests that the authorities see the problem as a solvency problem for the financial institutions and as a liquidity problem. US Treasury Secretary Paulson’s solution, for example, leaves unattended the continuing mortgage defaults and foreclosures. The fall in the US stock market predicts a serious recession, which means rising unemployment and more defaults and foreclosures.

In place of a liquidity problem, I see an over-abundance of debt instruments relative to wealth. A fractional reserve banking system based on fiat money appears to be capable of creating debt instruments faster than an economy can create real wealth. Add in credit card debt, stocks purchased on margin, and leveraged derivatives, and debt is pyramided relative to real assets.

Add in the mark-to-market rule, which forces troubled assets to be under-valued, thus threatening the solvency of institutions, and short-selling, which drives down the shares of troubled institutions, thereby depriving them of credit lines, and you have an outline of the many causes of the current crisis.

If the diagnosis is correct, the solution is multifaceted.

Instead of wasting $700 billion on a bailout of the guilty that does not address the problem, the money should be used to refinance the troubled mortgages, as was done during the Great Depression. If the mortgages were not defaulting, the income flows from the mortgage interest through to the holders of the mortgage-backed securities would be restored. Thus, the solvency problem faced by the holders of these securities would be at an end.

The financial markets must be carefully re-regulated, not over-regulated or wrongly regulated.

To shore up the credibility of the US Treasury’s own credit rating and the US dollar as world reserve currency, the US budget and trade deficits must be addressed. The US budget deficit can be eliminated by halting the Bush Regime’s gratuitous wars and by cutting the extravagant US military budget. The US spends more on military than the rest of the world combined. This is insane and unaffordable. A balanced budget is a signal to the world that the US government is serious and is taking measures to reduce its demand on the supply of world savings.

The trade deficit is more difficult to reduce as the US has stupidly permitted itself to become dependent not merely on imports of foreign energy, but also on imports of foreign manufactured goods including advanced technology products. Steps can be taken to bring home the offshored production of US goods for US markets. This would substantially reduce the trade deficit and, thus, restore credibility to the US dollar as world reserve currency. Follow-up measures would be required to insure that US imports do not greatly exceed exports.

The US will have to set aside the racial privileges that federal bureaucrats pulled out of the Civil Rights Act and restore sound lending practices. It the US government itself wishes to subsidize at taxpayer expense home purchases by non-qualified buyers, that is a political decision subject to electoral ratification. But the US government must cease to force private lenders to breech the standards of prudence.

The issuance of credit cards must be brought back to prudent standards, with checks on credit history, employment, and income. Balances that grow over time must be seen as
a problem against which reserves must be provided, instead of a source of rising interest income to the credit card companies.

Fractional reserve banking must be reined in by higher reserve requirements, rising over time perhaps to 100 percent. If banks were true financial intermediaries, they would not have money creating power, and the proliferation of debt relative to wealth would be reduced. Does the US have the leadership to realize the problem and to deal with it? Not if Bush, Cheney, Paulson, Bernanke, McCain and Obama are the best leadership that America can produce.

The Great Depression lasted a decade because the authorities were unable to comprehend that the Federal Reserve had allowed the supply of money to shrink. The shrunken money supply could not employ the same number of workers at the same wages, and it could not purchase the same amount of goods and service at the same prices. Thus, prices and employment fell.

The explanation of the Great Depression was not known until the 1960s when Milton Friedman and Anna Schwartz published their Monetary History of the United States. Given the stupidity of our leadership and the stupidity of so many of our economists, we may learn what happened to us this year in 2038, three decades from now.


WHO GOT BAILOUT MONEY SO FAR?

Reuters
The Treasury Department's $700 billion bailout plan, also known as the Troubled Asset Relief Program (TARP), is one of the main U.S. tools to address the financial crisis.

The Treasury Department on October 14 set aside $250 billion of the program to buy senior preferred shares and warrants in banks, thrifts and other financial institutions. Half that money was allocated to nine big banks, the Treasury Department has said. Another $38 billion has since been earmarked for regional or small banks, according to statements from individual banks.

On Monday, the department announced its single-biggest TARP investment -- $40 billion in American International Group -- which the government said would not come from the $250 billion bank capital program.

The TARP has so far committed the following funding:

AIG $40 billion

JPMorgan $25 billion

Citigroup $25 billion

Wells Fargo $25 billion

Bank of America $15 billion

Merrill Lynch $10 billion

Goldman Sachs $10 billion

Morgan Stanley $10 billion

PNC Financial Services $7.7 billion

Bank of New York Mellon $3 billion

State Street Corp $2 billion

Capital One Financial $3.55 billion

Fifth Third Bancorp $3.45 billion

Regions Financial $3.5 billion

SunTrust Banks $3.5 billion

BB&T Corp $3.1 billion

KeyCorp $2.5 billion

Comerica $2.25 billion

Marshall & Ilsley Corp $1.7 billion

Northern Trust Corp $1.5 billion

Huntington Bancshares $1.4 billion

Zions Bancorp $1.4 billion

First Horizon National $866 million

City National Corp $395 million

Valley National Bancorp $330 million

UCBH Holdings Inc $298 million

Umpqua Holdings Corp $214 million

Washington Federal $200 million

First Niagara Financial $186 million

HF Financial Corp $25 million

Bank of Commerce $17 million

TOTAL: $203.08 billion

INSURANCE COMPANIES

In addition to the TARP program's $40 billion capital injection into AIG, the Federal Reserve is providing the company with up to $112.5 billion in separate loans and funds for asset purchases. Aid to the huge insurance company came after counterparties and rating downgrades forced AIG to post large amounts of collateral for its credit derivatives positions.

Some other insurers are interested in cash infusions, but must own a thrift or bank in order to qualify under the terms of Treasury's current capital injection program.

BANKS, LENDERS

The TARP program set a November 14 deadline for smaller banks to apply for capital injection funds remaining in the pool of $250 billion. The deadline will be extended for non-publicly traded banks.

The government's preferred shares will pay dividends of 5 percent annually for the first five years and 9 percent after that until the institution repurchases them. Participating banks must comply with Treasury restrictions on executive compensation, which limit tax deductibility of senior executive pay to $500,000. They require bonuses to be "clawed back" if earnings statements or gains are later proven to be materially inaccurate and prohibit "golden parachute" payments to senior executives.

OTHER COMPANIES

Struggling automakers General Motors Corp, Ford Motor Co and Chrysler LLC have requested tens of billions of dollars in Treasury aid under TARP. However, the Bush administration says the TARP program was designed by Congress to help the financial service sector, not the auto industry.

REMAINING TARP MONEY

The remaining $350 billion in TARP funding can be accessed only after the White House formally notifies Congress. U.S. House Financial Services Chairman Barney Frank has said that if the initial banks participating in the program do not use the money for lending, Congress could block authorization of the final funding.

LICENSED KLEPTOCRACY FOR YEARS TO COME
The ABCs of Paulson's Bailout
Michael Hudson
http://www.informationclearinghouse.info/article21066.htm

"Treasury Secretary Paulson’s bailout speech on Monday, October 13, poses some fundamental economic questions: What is the impact on the economy at large of this autumn’s unprecedented creation and giveaway of financial wealth to the wealthiest layer of the population? How long can the Treasury’s bailout of Wall Street (but not the rest of the economy!) sustain a debt overhead that is growing exponentially? Is there any limit to the amount of U.S. Treasury debt that the government can create and turn over to its major political campaign contributors?

In times past, national debt typically was run up by borrowing money from private lenders and spent on goods and services. The tendency was to absorb loanable funds and bid up interest rates on the one hand, while spending led to inflationary price increases for goods and services. But the present giveaway is different. Instead of money being borrowed or spent, interest-yielding bonds are simply being printed and turned over to the banks and other financial institutions. The hope is that they will lend out more credit (which will become more debt on the part of their customers), lowering interest rates while the money is used to bid up asset prices – real estate, stocks and bonds. Little commodity price inflation is expected from this behavior.

The main impact will be to reinforce the concentration of wealth in the hands of creditors (the wealthiest 10 percent of the population) rather than wiping out financial assets (and debts) through the bankruptcies that were occurring as a result of “market forces.” Is it too much to say that we are seeing the end of economic democracy and the emergence of a financial oligarchy – a self-serving class whose actions threaten to polarize society and, in the process, stifle economic growth and lead to the very bankruptcy that the bailout was supposed to prevent?

Everything that I have read in economic history leads me to believe that we are entering a nightmare transition era. The business cycle is essentially a financial cycle. Upswings tend to become economy-wide Ponzi schemes as banks and other creditors, savers and investors receive interest and plow it back into new loans, accruing yet more interest as debt levels rise. This is the “magic of compound interest” in a nutshell. No “real” economy in history has grown at a rate able to keep up with this financial dynamic. Indeed, payment of this interest by households and businesses leaves less to spend on goods and services, causing markets to shrink and investment and employment to be cut back.

Banks cannot make money ad infinitum by selling more and more credit – that is, indebting the non-financial economy more and more. Government officials such as Treasury Secretary Paulson or Federal Reserve Chairman Bernanke are professionally unable to acknowledge this problem, and it does not appear in most neoclassical or monetarist textbooks. But the underlying mathematics of compound interest are rediscovered in each generation, often prompted by the force majeur of financial crisis.

A generation ago, for instance, Hyman Minsky gained a following by describing what he aptly called the Ponzi stage of the business cycle. It was the phase in which debtors no longer were able to pay off their loans out of current income (as in Stage #1, where they earned enough to cover their interest and amortization charges), and indeed did not even earn enough to pay the interest charges (as in Stage #2), but had to borrow the money to pay the interest owed to their bankers and other creditors. In this Stage #3 the interest was simply added onto the debt, growing at a compound rate. It ends in a crash.

This was the flip side of the magic of compound interest – the belief that people can get rich by “putting money to work.” Money doesn’t really work, of course. When lent out, it extracts interest from the “real” production and consumption economy, that is, from the labor and industry that actually do the work. It is much like a tax, a monopoly rent levied by the financial sector. Yet this quasi-tax, this extractive financial rent (as Alfred Marshall explained over a century ago) is the dynamic that is supposed to enable corporate, state and local pension funds to pay for retirement simply out of stock market gains and bond investments – purely financially and hence at the expense of the economy at large whose employees are supposed to be gainers. This is the essence of “pension-fund capitalism,” a Ponzi-scheme variant of finance capitalism. Unfortunately, it is grounded in purely mathematical relationships that have little grounding in the “real” economy in which families and companies produce and consume.

Paulson’s bailout plan reflects a state of denial with regard to this dynamic. The debt overhead is self-aggravating, becoming less and less “solvable” and hence more of a quandary, that is, a problem with no visible solution. At least, no solution acceptable to Wall Street, and hence to Paulson and the Democratic and Republican congressional leaders. The banks and large swaths of the financial sector are broke from having made bad gambles in the belief that money could be made to “work” under conditions that shrink the underlying industrial economy and stifle wage gains, eroding the market for consumer goods. Debt deflation reduces sales and business activity in general, and hence corporate earnings. This depresses stock market and real estate prices, and hence the value of collateral pledged to back the economy’s debt overhead. Negative equity leads to bankruptcy and foreclosures.

By increasing America’s national debt from $5 trillion earlier this year to $13 trillion in almost a single swoop by taking on junk loans and other bad investments rather than letting them to under as traditionally has occurred in the “cleansing” culmination of business crashes (“cleansing” in the sense of clean slates for debts that cannot reasonably be paid), Paulson’s bailout actions increase the interest payments that the government must pay out of taxes or by borrowing (ore printing) yet more money. Someone must pay for bad debts and junk loans that are not wiped off the books. The government is now to take on the roll of debt collector to “make a profit for taxpayers” by going around and kneecapping the economy – which of course is comprised primarily of the “taxpayers” ostensibly being helped.

It is a con game. Financial gains have soared since 1980, but banks and institutional investors have not used them to finance tangible capital formation. They simply have recycled their receipt of interest (and credit-card fees and penalties that often amount to as much as interest) into yet new loans, extracting yet more interest and so on. This financial extraction leaves less personal and business income to spend on consumer goods, capital goods and services. Sales shrink, causing defaults as the economy is less able to pay its stipulated interest charges.

This phenomenon of debt deflation has occurred throughout history, not only over the modern business cycle but for centuries at a time. The most self-destructive example of financial short-termism is the decline and fall of the Roman Empire into debt bondage and ultimately into a Dark Age. The political turning point was the violent takeover of the Senate by oligarchic creditors who murdered the debtor-oriented reformers led by the Gracchi brothers in 133 BC, picking up benches and using them as rams to push the reformers over the cliff on which the political assembly was located. A similar violent overthrow occurred in Sparta a century earlier when its kings Agis and Cleomenes sought to annul debts so as to reverse the city-state’s economic polarization. The creditor oligarchy exiled and killed the kings, as Plutarch described in his Parallel Lives of the Illustrious Greeks and Romans. This used to be basic reading among educated people, but today these events have all but disappeared from most people’s historical memory. A knowledge of the evolution of economic structures has been replaced by a mere series of political personalities and military conquests.

The moral of ancient and modern history alike is that a critical point inevitably arrives at which economies either adopt hard creditor-oriented laws that impoverish the population and plunge downward socially and militarily, or save themselves by alleviating the debt burden. What is remarkable today is the almost total failure of political leaders to provide an alternative to Paulson’s bailout of Wall Street from the Bear Stearns bankruptcy down through the government takeover of Fannie Mae and Freddie Mac to last week’s giveaway to the banks. Nobody is even warning where this destructive decision is leading. Governments ostensibly representing “free market” philosophy are acting as the lender of last resort – not to households and business non-financial debtors, and not to wipe out the debt overhang in a Clean Slate, but to subsidize the excess of financial claims over and above the economy’s ability to pay and the market value of assets pledged as collateral.

This attempt is necessarily in vain. No amount of money can sustain the exponential growth of debt, not to mention the freely created credit and mutual gambles on derivatives and other financial claims whose volume has exploded in recent years. The government is committed to “bailing out” banks and other creditors whose loans and swaps have gone bad. It remains in denial with regard to the debt deflation that must be imposed on the rest of the economy to “make good” on these financial trends.

Here’s why the plan for the government to recover the money is whistling in the dark: It calls for banks to “earn their way out of debt” by selling more of their product – credit, that is, debt. Homeowners and other consumers, students and car buyers, credit card users and their employers – the “taxpayers” supposed to be helped – are to pay the repayment money to the banks, instead of using it to purchase goods and services. If they charge only 6 per cent per year, they will extract $93 billion in interest charges – $42 billion to pay the Treasury for its $700 billion, and another $51 billion for the Federal Reserve’s $850 billion in “cash for trash” loans.

If you are going to rob the government, I suppose the best strategy is simply to brazen it out. To listen to the mass media, there seemed no alternative but for Congress to ram the plan through just as Wall Street lobbyists had written, to “save the market from imminent meltdown,” refusing to hold hearings or take testimony from critics or listen to the hundreds of economists who have denounced the giveaway.

Hubris has reached a level of deception hardly seen since the 19th century’s giveaways to the railroad barons. “We didn’t want to be punitive,” Paulson explained in a Financial Times interview, as if the only alternative was an enormous gift. Europe did not engage in any such giveaway, yet he claimed that England and other European countries forced his hand by bailing out their banks, and that the Treasury simply wanted to keep U.S. banks competitive. Wringing his hands melodramatically, he assured the public on Monday that “We regret having to take these actions.” Banks went along with the pretense that the bailout was a worrisome socialist intrusion into the “free market,” not a giveaway to Wall Street in the plan drawn up by their own industry lobbyists. “Today’s actions are not what we ever wanted to do,” Paulson went on, “but today’s actions are what we must do to restore confidence to our financial system.” The confidence in question was a classic exercise in disinformation – a well-crafted con game.

Paulson depicted the government’s purchase of special non-voting stock as a European-style nationalization. But government’s appointed public representatives to the boards of European banks being bailed out. This has not happened in America. Bank lobbyists are reported to have approached Treasury to express their worry that their shareholdings might be diluted. But the Treasury-Democratic Party plan invests $250 billion in government credit in non-voting shares. If a recipient of this credit goes broke, the government is left the end of the line behind other creditors. Its “shares” are not real loans, but “preferred stock.” As Paulson explained on Monday: “Government owning a stake in any private U.S. company is objectionable to most Americans – me included.” So the government’s shares are not even real stock, but a special “non-voting” issue. The public stock investment will not even have voting power! So the government gets the worst of both worlds: Its “preferred stock” issue lacks the voting power that common stock has, while also lacking the standing for repayment in case of bankruptcy that bondholders enjoy. Instead of leading to more public oversight and regulation, the crisis thus has the opposite effect here: a capitulation to Wall Street, along lines that pave the ground for a much deeper debt crisis to come as the banks “earn their way out of debt” at the expense of the rest of the economy, which is receiving no debt relief!

Paulson shed the appropriate crocodile tears on behalf of homeowners and the middle class, whose interest he depicted as lying in ever-rising housing and stock market prices. “In recent weeks, the American people have felt the effects of a frozen financial system,” he explained. “They have seen reduced values in their retirement and investment accounts. They have worried about meeting payrolls and they have worried about losing their jobs.” He almost seemed about to use the timeworn widows and orphans cover story and beg Americans please not to unplug Granny from her life support system in the nursing home. We need to preserve the value of her stocks, and help everyone retire happily by restoring normal Wall Street financial engineering to make voters rich again.

European executives who steered their banks into the debt iceberg have been fired. England wiped out shareholders in Northern Rock last summer, and more recently Bradford and Bingley. But in America the culprits get to stay on. No bank stockholders are being wiped out here, despite the negative equity into which the worst risk-taking banks have fallen or the prosecutions brought against them for predatory lending, consumer fraud and related wrongdoing.

Government aid will be used to pay exorbitant salaries to the executives who drove these banks into insolvency. “Institutions that sell shares to the government will accept restrictions on executive compensation, including a clawback provision and a ban on golden parachutes,” Paulson pretended – only to qualify it by saying that the rule would apply only “during the period that Treasury holds equity issued through this program.” The executives can stay on and give themselves the usual retirement gifts after all, prompting Democratic Congressman Barney Frank to complain about how weak the Treasury restrictions are. “Compensation experts say that the provisions, though politically prudent to appease public anger, will probably have little real impact on how financial executives are paid in coming years. They predict banks will simply pay higher taxes and will find other creative ways of paying their executives as they see fit. Some say there could even be a sudden surge in compensation as soon as the government program ends, in a few years, leading to eye-popping numbers down the road. … When Congress limited the tax deductibility of cash salaries to $1 million, for example, it simply led to an explosion in stock options used as compensation and even higher total payouts.”

And speaking of stock options, the government shortchanged itself here too, despite its promises to ensure that it will shares in the gains when banks recover. Senator Schumer went so far as to assure voters that “under any capital injection plan that Treasury pursues, dividends must be eliminated, executive compensation must be constrained, and normal banking activities must be emphasized.” This was mostly hot air. England and other countries have insisted that banks not pay dividends until the government is reimbursed. The idea is to avoid using public money to pay dividends to existing shareholders and continued exorbitant salaries to their mismanagers! But the terms of the U.S. bailout is made simply call for banks not increase their dividend payouts – a policy they most likely would follow in any case in view of their earnings crunch.

Schumer verged on the ridiculous when he proclaimed: “We must operate in the same way any significant investor operates in these situations – when Warren Buffett invested in Goldman Sachs and General Electric in recent weeks, he demanded strict, but not onerous terms. The government must be similarly protective of taxpayer interests.” But Buffett obtained a much better deal for his $5 billion investment in Goldman Sachs, including warrants to buy its stock at a price below the going price when he helped rescue the company. Likewise in England, the government took stock ownership at low prices before the bailout, not at higher prices after it! But instead of exercising its warrants at the depressed prices where bank stocks stood at the time Paulson detailed the bailout terms, the U.S. Treasury would be able to exercise its warrants (equal to 15 percent of its investment) only at prices that were to be set after the banks had time to recover with the Treasury’s aid. Existing stockholders thus will benefit more than the government – which is why bank stocks soared on news of the bailout’s terms. So the government does not appear to be a good bargainer in the public interest. In fact, Paulson may be guilty of deliberate scuttling of the public interest that, as Treasury Secretary, he is supposed to defend.

Given his financial experience, Paulson had to know how deceptive his promise was in placing such emphasis on the government’s stock options, the sweetener that has made so many executives fabulously wealthy: “taxpayers will not only own shares that should be paid back with a reasonable return, but also will receive warrants for common shares in participating institutions,” he explained. But the “reasonable return” is only 5 per cent annually, just above what the government typically has to pay, not a rate reflecting anything like what the “free market” now charges Wall Street firms with negative equity. The government’s $250 billion in preferred stock will carry a dividend that rises to 9 per cent after five years, with no limit on how long the loan may be outstanding.

All I can say is, Wow! If only homeowners could get a similar break: a reduction in their interest rate to just 5 per cent, rising to a penalty rate of just 9 per cent – without the heavy penalties and late fees that Countrywide/Bank of America charges! By contrast, German banks that receive a public rescue will pay “a fee of at least 2 per cent annually of the amount guaranteed. The U.K. will charge 0.50 per cent plus the cost of default insurance on a bank's debt.”A British banker wrote to me that “the government offers 12 per cent preference shares, and ordinary shares at an absolutely huge discount to asset value to provide the cash.” But the U.S. Government agreed to exercise its stock options at the post-bailout price, not the price prior to rescue. It even gives up most of these options if the banks do repay the Treasury’s loan. On the excuse of encouraging private Wall Street investors to replace government “ownership” and “intrusion” into the marketplace, banks can “cut in half the number of common shares the government will eventually be able to purchase. That can be done if a bank sells stock by the end of 2009, and raises at least as much cash as the government is investing.”

These bailout terms suggest that what Wall Street wants is pretty much what colonialist Britain achieved for so many years in India and Africa: puppet leaders with an imperial political advisor, in America’s case a Secretary of the Treasury and a vice-regent as head of the Federal Reserve System. But what the rest of the economy needs is a genuinely free leader able to impose better and more equitable laws to write down debt, not build it up and bail out more bad loans. Within the present administration itself, Sheila Bair, head of the Federal Deposit Insurance Corporation, complained in a Wall Street Journal interview that she didn’t understand “Why there’s been such a political focus on making sure we’re not unduly helping borrowers but then we’re providing all this massive assistance at the institutional level.” She “described painstaking efforts made by lawmakers in crafting the federal Hope for Homeowners program to make sure it limited resale profits for borrowers who received affordable home loans,” by giving the government a share of the rising sales price.

The imbalance between creditor demands and debtors’ ability to pay is indeed the problem. Paulson claimed in his Monday address that he needed to get to the root of the economic problem. But in his view it is simply that the banks “are not positioned to lend as widely as is necessary to support our economy. Our goal is to see … that they can make more loans to businesses and consumers across the nation.” As he explained in his Financial Times interview, “for the first time you have seen an action that is systematic, that is getting at the root causes” of the financial crisis. But his perspective is remarkably narrow. It denies that the problem is debt above and beyond the ability of the economy at large to pay, and higher than the market price of property and assets pledged as collateral.

Creating a system for the banks to “earn their way out of debt” means creating yet more interest-bearing debt for the economy at large. Mortgage loans are what is supposed to restore high housing prices and office costs – precisely what caused the debt meltdown in the first place. Despite Paulson’s and Ms. Bair’s characterization of the present crisis as merely a liquidity problem, it is really a debt problem. The volume of real estate debt, auto debt, student loans, bank debt, pension debts by municipalities and states as well as private companies exceed their ability to pay.

Shortly after Paulson’s Monday speech a Dutch economics professor, Dirk Bezemer, wrote me that: “In my thinking I liken it to a Ponzi game where in the final stages the only way to keep things going a bit longer is to pump in more liquidity. That is a solution in the sense that it restores calm, but only in the short run. This is what we now see happening and – despite the 10 per cent stock market rally today – I am still bracing myself for the inevitable end of the Ponzi game – suddenly or as a long drawn out debt deflation.” He went on to explain what he and other associates of mine have been saying for many years now: “The actual solution is to separate the Ponzi from the non-Ponzi economy and let the pain be suffered in the first part so as to salvage what we can from the second. This means bailing out homeowners but not investment banks, etc. The qualification to this general appr...


RE: LaRouche - Admin - 12-01-2008

ALL NEGOTIATIONS PERTAINING TO THE CURRENT WORLD FINANCIAL-ECONOMIC EMERGENCY ARE A DISGUSTING WASTE OF TIME UNLESS THEY ARE PREMISED ON REPLACING THE PRESENT WORLD MONETARY SYSTEM, THROUGH A PROCESS IN REORGANIZATION IN BANKRUPTCY, TO A CREDIT-SYSTEM MODELED ON THAT PROVISION WITHIN THE U.S. FEDERAL CONSTITUTION. ANY PROPOSED REFORM WITHIN THE CONTEXT OF EXISTING MONETARY SYSTEMS IS, IN EFFECT, AN ACT OF INSANITY.
http://www.larouchepac.com/news/2008/11/06/larouche-all-negotiations-pertaining-current-world-financial.html

If your proposed expert does not agree, it is urgent that he, or she, be prepared to improve their understanding during the interval between the special meeting with some circles on November 11 and the webcast on November 18. Any contrary approach would be the equivalent, in global economic terms, of administering aspirins as a suggested cure for a the global-economic equivalent of a new pandemic of bubonic plague.

BRAZIL GROUP OF 20 MEETING "A BUNCH OF COWARDS"
http://www.larouchepac.com/news/2008/11/09/brazil-group-20-meeting-bunch-cowards-says-larouche.html

After meeting Saturday and Sunday in Sao Paulo, Brazil, the Group of 20 Finance Ministers and central bank heads produced a communique which was supposed to prepare for the Washington meeting of the Group of 20 heads of state November 15 on reversing the global collapse.

American economist Lyndon LaRouche, who was the first to call for a "New Bretton Woods," characterized the various aspects of their communique as follows.

Where the communique praised such "bold and decisive measures" as the trillions of dollars in giveaways by Paulson and Bernanke to their friends, LaRouche responded: "Doubletalk! It's plain doubletalk in avoiding the whole issue. They're refusing to face the reality. They're just plain refusing to face any reality. This is pipe-dream stuff! You've got to get off the pipe dream."

Where the communique called for strengthening the IMF's role, LaRouche objected: "The IMF is what's destroyed this thing! Don't they understand that? That's the whole point. They're whores, that's all. When people start talking like that, you write them off!"

Where the communique called for "voluntary efforts" at reregulating the financial system, LaRouche summed everything up by saying, "Forget it, it's babbling! Nothing to it; it's a waste of time."

The communique said, "We welcome the progress made this year in reforming the IMF." LaRouche replied: "We welcome the progress made this year! Give me some figures about the progress made this year! Give me some data about what was accomplished this year, by whom. Give me the figures! Tell me about this great progress! Where did you find it? Were you masturbating or something?"

"The IMF has an important role to play," continues the G-20 communique. "Oh, come on, this is crap!" said LaRouche. "They have NO role to play, and we should say so! These institutions have at this point, NO ROLE TO PLAY. Because their mandate prevents them from doing anything that would be useful!"

On the communique's call to "strengthen IMF surveillance and policy advice," LaRouche responded, "They're impotent! They're babbling! This is pure babbling, by people who are either afraid to say anything, or are in on Soros's drug-trafficking. Don't kid yourself,-- every South American country except Colombia, of any importance, is making deals with the drug traffickers. Only Colombia is opposing the drug trafficking.

"Don't waste your time on these countries at this time," he went on. "They're not serious yet. Some of them are valuable people, but the countries themselves do not have a serious outlook on any of the crucial questions of this crisis.

"They're a bunch of cowards," he added. "They're kissing the ass of the problem. Anything they adopt, working from this kind of policy thinking, will make things worse. It will come to the wrong conclusion and produce a worse result than the enemy's already creating.

"The minute you hear the word `interim solution,' it's `which mistress shall I go to see in the evening?' It's like the guy who gets his paycheck, and he doesn't have enough to pay for his family's food, and so he says, `as an interim solution, I'll stop by the gambling joint, and get some money,'" LaRouche concluded.


BUSH IS AN IDIOT!
http://www.larouchepac.com/news/2008/11/13/larouche-bush-idiot.html

In a speech today at the Manhattan Institute in New York, George W. Bush made clear his intention to sabotage discussion of a New Bretton Woods at the Nov. 15 G-20 summit. The man who has presided over the biggest government bailout in human history and who has never been accused of being intelligent argued: "History has shown that the greater threat to economic prosperity is not too little government involvement in the market, but too much. Our aim should not be more government, it should be smarter government. The answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market system."

Lyndon LaRouche's response to Bush was immediate: "Bush is an idiot! We all know it. Being an idiot is the highest rank he has been able to achieve. He has done more to destroy the U.S. than any recent avowed enemy. We're getting rid of him as President, so why doesn't he just shut up? People voted for Obama to get rid of him. If he had any brains he would shut up. The fact that he does not shut up, proves that he has no brains."

THE G-20 SUMMIT IS A FARCE
http://www.larouchepac.com/news/2008/11/15/larouche-g-20-summit-farce.html

"None of the participants are really facing up to the immediate, crucial issues, which are coming down rapidly on the world," Lyndon LaRouche stated today in a discussion about the Nov. 15 summit of the G-20 in Washington, D.C. "What French President Nicolas Sarkozy is saying in terms of restraint, and so forth, is relevant, but all the other stuff we're hearing is complete bullshit. This is nonsense.

"This is a farce, and it's intended to be a farce," LaRouche continued. "Nothing significant is going to be decided. There will be innuendo and attempts to corrupt the situation as much as possible, especially by the British side. And the British side, as usual, is looking for handouts from everybody else. They want a bail-out.

"The British always set these things up: `You've got to debate this; you've got to debate that.' It's all bullshit. The British deployment policy is: make sure that nothing works.

"I think we ought to express {unbridled contempt} for such a farce. I mean, after all: a whore is a whore, isn't she? And the British are one big old whore," LaRouche said.

Over recent weeks, LaRouche has emphasized that any serious intention of solving the global financial breakdown crisis has to emphatically {exclude} the British from any policy participation. If you don't exclude them, they will sabotage any attempt at serious change. If you try to reach a consensus with them, LaRouche has insisted, the result will be less than worthless.

That is precisely what is occuring in the run-up to the Nov. 15 summit of the G-20 in Washington, D.C.

* British Prime Minister Gordon Brown told journalists on his flight from London to the U.S., that he expects the summit to support a sharply increased role for the IMF in global surveillance, a return to the long-stalled Doha round of world free trade talks, and the establishment of a supranational "college of supervisors" to oversee all banks internationally. Brown is scurrying around to impose this agenda, meeting before the summit with Russian President Medvedev, Japanese Prime Minister Aso, and Brazilian President Lula, as well as with Nobel economists Joseph Stiglitz and Paul Krugman. Most significantly, Brown's financial and foreign policy advisers will hold talks with Obama's envoys to the conference, Madeleine Albright and Jim Leach.

* Japanese Prime Minister Aso will call for doubling the current $340 billion in IMF funds, and will offer $100 billion from Japan. The Saudis may also offer to pony up funds for the IMF.

* German Chancellor Angela Merkel will propose increased transparency and controls "for all kinds of financial products," including derivatives, to be managed through an upgraded IMF.

* Indian Prime Minister Manmohan Singh called for "greater inclusivity in the international financial system [and] the need to ensure that the growth prospects of the developing countries do not suffer," but he stressed "the need to avoid protectionist tendencies." His Finance Minister P. Chidambaram likewise warned that "the crisis should not be an excuse to go into a protectionist cocoon."

* French President Nicolas Sarkozy announced on Thursday that "I am leaving for Washington to explain that the dollar... can no longer claim to be the only currency in the world," while the daily {Le Figaro} warned that "Sarkozy has already planned to create some incidents during the sessions if the U.S. comes out being completely closed off from the European proposals." Sarkozy has also used his position as rotating president of the EU, to get seats at the summit for Spain and Holland.

* Russian President Dmitri Medvedev stated that tomorrow's summit will be inconclusive, but that he supports holding "without any extra red tape, and fairly soon," a follow-on summit on the financial system. "We need a full-scale, adequate response to the problems, not simply a collection of declarations, handshakes and photo ops, but rather an action plan." After talking about categories like "transparency," "early-warning procedures," and lowering trade barriers, he included something with more potential: "Elimination the imbalance between the volume of the mass of all kinds of various financial instruments that are issued, and the real returns on investment on the programs they are related to." If that point were truthfully pursued, it would lead to the guts of the crisis: the derivatives bubble.

RUNAWAY CRASH AFTER ABORTIVE G20 SUMMIT?
http://www.larouchepac.com/news/2008/11/15/larouche-runaway-crash-after-abortive-g20-summit.html

Aspic used to be a popular dish at parties: pieces of meat, poultry or eggs and vegetables, or fruits, suspended in a jello-like gelatin. This was the Group of 20's final communique today. Many of the government leaders had come to Washington with individual "issues" or slogans. Britain's Gordon Brown sought to bail out London, and screw everyone else, under the slogans of "coordinated fiscal stimulus" and international "colleges of regulators." France's Sarkozy, with much better intentions, sought the closing of offshore unregulated financial centers, and international regulation of derivatives and rating agencies.

What the communique did, after only a five-hour meeting of about thirty delegations, was embed each little, separate slogan or issue in the jello, but only as "words, slogans and issues, without commitment or expectation," as Lyndon LaRouche noted today. For example, the communique promises that "we will use fiscal measures to stimulate domestic demand," and then adds "as appropriate." It doesn't say what "colleges of regulators" are, or what powers they will have, if any, but calls on major global banks to meet them for "comprehensive discussions."

Typical are such ringing, inspirational declarations as this one: "Authorities should insure that financial institutions maintain adequate capital in amounts necessary to sustain confidence."

"This is all bullshit," said LaRouche. "There's no seriousness in this piece of disgusting incompetence. They're going to have a great deal of trouble trying to prevent a runaway crash Monday and Tuesday. Because, this bullshit can go on, but it's not something you can sell. They probably will pump up the greatest bloating of the market they ever did. Expect that from them."

The one thing the statement did that was useful, was to pin the crisis on George W. Bush, saying that its "root causes" occurred "earlier this decade," that is, under his Administration "Yes," said LaRouche, "the greatest collapse in history has occurred under George Bush's Administration. This event is the George Bush burial society. It nominates George Bush as the worst President in history, excepting the outright traitors. The collapse is the fruit of a Bush-league President. The idea of this son-of-a-bitch getting encomiums and going out, is disgusting."


BUSH's WEEKEND FARCE BRINGS US CLOSER TO HELL
http://www.larouchepac.com/news/2008/11/16/bushs-weekend-farce-brings-us-closer-hell.html

Llyndon LaRouche declared today that Saturday's G-20 farce brings us that much closer to Hell. "The fact that the meeting was held was bad. Everything around it was bad,'' LaRouche stated bluntly. "The system is disintegrating now. It is gone, and unless there is a change in direction, we face Hell on earth for generations to come. And so far, everyone is saying, 'We are not going to do anything about it.' If they play by those rules, it means Doomsday,'' LaRouche concluded. "If someone awakens to the fact that he or she has been behaving like a fool, and changes, and does what I have consistently said must be done, we can change things,'' LaRouche continued. LaRouche declared, "The world system is in the process of collapse. Unless you take certain prescribed actions, the world goes to Hell, by virtue of a failure to act.'' On Saturday, the so-called leadership of the planet "failed to act,'' in "just such a fashion as I have warned about, repeatedly.''

"You have got to face up to the fact that the British oligarchy is viciously insane. Britain's Ancien Regime is going down. It has happened before in history. Looking closely at yesterday's farce in Washington, you clearly see the implications. The fact that the system is going down, is widely recognized, yet there was a decision made, a determination, to do nothing to prevent the presently onrushing collapse from happening. It must therefore appear, that these governments would rather die, and allow billions to die a horrible death along with them, rather than change the system.''

LaRouche pointed to a second grave and imminent danger, "If you follow the British propaganda machine closely, and you see how much effort is devoted to British sources' forecasting the coming assassination of the President-elect of the United States.'' LaRouche explained: "I know the character of the British empire. I have studied its character from its beginning, as I have studied ancient empires as well. I know that the British will not just propagandize about the so-called danger of an assassination of the President-elect. They will do it! They are using their propaganda machinery to build up an expectation of such an assassination. We must, therefore, stop that British-planned assassination--now, or the consequences of such an assassination will wipe everything else off the agenda, and throw the United States and, by extension, the rest of the world, into a state of absolute chaos.''

LaRouche warned: "Everything I hear goes in that direction."

LaRouche, then, returned to the Bush farce that occurred on Saturday. "This Bush farce achieved nothing. The most likely outcome is that the farce will now trigger, in the immediate hours ahead, the next explosive phase of the already-pending general collapse of the entire global system. There are indications, already, that such a crash has begun, in early reports from the Persian Gulf. The risk of a major collapse of as many as 25 percent of all the existing hedge funds is also very real, and imminent, as the deadline passes for investors to withdraw their funds. The G-20 performance, which some saw as the Swan Song for George W. Bush, actually was tantamount to collectively kissing civilization goodbye.''




LaRouche - Admin - 12-01-2008

FROM FEAR TO PANIC AS DERIVATIVES CRASH HITS
http://www.larouchepac.com/news/2008/11/21/larouche-fear-panic-derivatives-crash-hits.html

Lyndon LaRouche today declared that leading bankers and government officials have gone "from fear to panic,'' as the next phase of the total disintegration of the global financial system hits. "We are now seeing the blowout of the multi-trillion dollar derivatives bubble,'' and this is what is driving the panic, LaRouche explained.

As of the end of June 2008, official figures, compiled by the U.S. Comptroller of the Currency, showed a total derivatives exposure of the three largest U.S. bank holding companies--JP Morgan Chase, Citicorp and Bank of America--stood at more than $179 trillion. And the Bank for International Settlements put the amount of documented outstanding derivatives contracts worldwide at the end of 2007 at $675 trillion--still a fraction of the actual exposure.

During November, investors in hedge funds had the opportunity to withdraw their cash, without penalty, and this factor, on top of the already onrushing unraveling of the derivatives bubble, is playing out. LaRouche noted that every major financial institution of the United States, Europe and Asia is tied up in the derivatives collapse, but no one has a clear picture of the exposure of the other financial institutions.

"This is the big explosion, detonating right now,'' LaRouche warned. "And so far, I am offering the only coherent solution--bankruptcy reorganization of the entire global financial system--starting with the cancellation of all derivatives obligations. My solution poses an existential threat to the entire Anglo-Dutch financial system of globalization. I know it, many leading bankers and government officials around the world know it, and, of course, the British know it. This is why the fear has turned to outright panic. We are nearing the showdown moment."


"YOU DAMN FOOLS : YOU SHOULD PUT THIS THING INTO BANKRUPTCY

Wall Street insiders know that last Sunday's $269 billion second bailout of Citigroup was intended to be only the first of a series, which will embrace most or all of the major banks. And that Sunday Citigroup fiasco was followed by Paulson's announcement Tuesday of an $800 billion Federal Reserve program to buy junk paper, making a total of over $1 trillion in new "bailout" commitments over a mere three days, and bringing the total up to about $8.5 trillion so far (over half of GDP), in the U.S. alone!

In this setting, Lyndon LaRouche said today: "Why don't they try bankruptcy? We should put this out clearly: You damn fools; you should put this thing in bankruptcy! You don't have enough money in the universe to pay this bill! So why don't you admit it! We should say that; exactly that. We shouldn't do any reporting of this stuff, because reporting it is being impotent in the face of it. Just say that there's not enough money in the universe to pay this damn bill. They can't do it; they should declare bankruptcy, and just cancel all these damn derivatives. We'll protect the firms that are driven into bankruptcy, in bankruptcy reorganization. We have no other course except to put this thing into bankruptcy.

"We're about to launch the greatest hyperinflationary burst in modern history," he continued, "unless we stop this. We're on the verge of a hyperinflationary explosion; they've been trying to conceal this hyperinflationary thing by various tricks so far. Now it can't work any more! So they've got to put the thing into receivership! Put it into bankruptcy now! That should be your headline on everything. There is nothing to do with this thing except put it into bankruptcy. Paulson, stop being a Christian Scientist! Take your medication! Don't be a Christian Scientist all your life; take your medicine!

"This is not just U.S.," LaRouche went on. "This is international. As I had warned, this is now going into a hyperinflationary phase. And if you don't want to blow out the world system, you're going to put the damn thing into bankruptcy now! You're going to put the legitimate banks under bankruptcy protection, now! No protection for derivatives, none! But the banks which may be put normally into bankruptcy as a result of that, are put under bankruptcy protection, and the derivatives payments are suspended.

"What that does, that's life and death time," he emphasized. "If you don't do it, you're going to lose the country! Are you going to do it?-- That's the whole point!

Look, you damn fools,-- you don't know anything! This is the guy that knows what he's talking about; you damn fools haven't known what you were talking about all along! Now, this is what you're going to do if you've got any brains left! "And Paulson," LaRouche said, "I don't care if he's a Christian Scientist or not; he's going to take his medicine! Bankruptcy!

"Bush may not like it," he continued, "but that's what you have to do! And, if you don't like the result, mail the bill to Bush! The Bush Administration itself, is going totally with the British line. And don't let this lame duck shit on your economy!

"The main thing is, my statement should just dominate everything," LaRouche told his associates. "Don't pollute it by coming up with other discussions and explanatory notes, which is what the usual mistake is. In this case, just say, as I've been warning, the hyperinflation is being unleashed. It's being unleashed over this Citibank thing, and this is the time to stop the bullshit. The policy must be to put Citibank and other banks under bankruptcy protection of their normal banking functions, which means freezing all claims based on the speculative investments called derivatives. No bailout for derivatives! Freeze them! Put the whole thing into bankruptcy and supply the protection to the regular functions of the banks. Then you don't have to pay out all that money, you damn fools! You don't have to put a nickel more into bailouts! Just put the thing under bankruptcy protection as I've told you all along, you damn fools!

"Now, you damn fools, do as I told you!" LaRouche concluded. "You did it your way, and that was wrong, and now it's a hopeless case! You've got to do it now my way!"


THEY'RE GOING INTO A HYPERINFLATIONARY PHASE NOW
http://www.larouchepac.com/news/2008/11/26/larouche-theyre-going-hyperinflationary-phase-now.html

Commenting on yesterday's announcement of a new injection of $800 billion into the banking system, Lyndon LaRouche said today:

"This is going to turn their debts into assets. They're going to take Fed money, deposit it in the system in their name, and they're not going to do any lending. How the hell is that going to stimulate the economy? They don't know how to spell `stimulation.' They really mean to say `suffocation.' What we have here is a lack of understanding of the English language. They should check their dictionaries. What they're really talking about is not `stimulation' but `suffocation' -- $800 billion worth of more suffocation."

"They're going into a hyperinflationary phase now. All of this is preparing for launching into the hyperinflationary phase. They've been holding back on the hyperinflation for a while, by various tricks; now they're coming to the point that they can't get by with that anymore. Now they're going to unleash hyperinflation."

U.S. banks have already put at least $600 billion of the $1.3 trillion in extraordinary Fed lending back on deposit to earn interest, rather than lending it, according to financial commentators. The same process is occurring in Europe where the European Union today announced a $258 billion stimulus package.


PAULSON WILLNG TO SINK ALL US BANKS
http://www.larouchepac.com/news/2008/11/26/larouche-paulson-willing-sink-all-u-s-banks.html

Treasury Secretary Henry Paulson is willing to follow the British scenario and sink all U.S. banks, Lyndon LaRouche said today.

Instead of following British orders, Paulson should take his medicine, and declare the whole system in bankruptcy-- reorganization in bankruptcy, not more bailouts. He may be a Christian Scientist, but this time he has got to take his medicine, LaRouche said.

LaRouche characterized Paulson's latest $800-billion Federal Reserve program to buy junk paper, as an end-run around the debt ceiling. It is illegal and unconstitutional, LaRouche said.

Part of the reason for the British-orchestrated assassination threats against Obama is the fear that he could overturn some aspects of this illegal sham, LaRouche said.