Helga Zepp-LaRouche on the LaRouche Show: "Join With LaRouche to Build the Bridge to the Future"
August 12, 2007 • 4:54PM

Helga Zepp-LaRouche, founder of the Schiller Institute, and head of the Bueso political party in Germany, was interviewed by Harley Schlanger on The LaRouche Show, on Saturday, August 11. The transcript follows:

HARLEY SCHLANGER: Good afternoon and welcome to the LaRouche Show. It's Saturday, August 11, 2007. I'm Harley Schlanger and I will be your host today.

This has been a really rough week on Wall Street and for insiders in the City of London. There are pictures on the front pages of newspapers of brokers sitting there, pulling their hair out, crying, falling to their knees—after months of promoting the illusion that all is well: That the sub prime mortgage blowout will have little effect; that there's no contagion, no systemic crisis. Well, the crisis they said wouldn't happen hit with a vengeance this week, exactly as Lyndon LaRouche had warned in his July 25th webcast.

In that webcast, he said that the disintegration of the world monetary system is here, now. He said—and I'm quoting Mr. LaRouche from that webcast, and you can get that webcast by going onto www.larouchepac.com and you can get the archive; he said, quote:

"What's listed as stock values and market values in the financial markets internationally is bunk! These are purely fictitious beliefs. There's no truth to it; the fakery is enormous. There is no possibility of a non-collapse of the present financial system! It's finished, now!" End of quote.

To prevent the complete meltdown of the financial system, the central banks of the world, led by the U.S. Federal Reserve and the European Central Bank pumped more than $323 billion worth of cash, into U.S. and European banks in the last 48 hours. You heard me right: They pumped cash into the banks, to keep them from blowing up, this last couple of days. This was a response to hysterical fears, and we're going to listen to the level of hysteria, by picking from a CNBC mad money guru, Jim Cramer, who had what is widely described as a complete meltdown on his show this week. Do we have the audio?

JIM CRAMER:

Just tell him [Fed Chairman Ben Bernanke] to cut the rate! Relieve the pressure!

FEMALE ANCHOR:

Okay, but if he comes out next week and cuts rates—

CRAMER: Relieve the pressure!

ANCHOR: You're going to have—that's going to cause Armageddon.

CRAMER: No, we have Armageddon. I wouldn't try to call it someth—. We have Armageddon. In the fixed income markets, we have Armageddon.

ANCHOR: No, but that's not what they said.

CRAMER: [crosstalk] We have Armageddon.

ANCHOR: They say—even—when I've talked to a couple of banks, they don't say it's Armageddon.

CRAMER: [crosstalk] If they'd cut the rate— Well, who—

ANCHOR: They say it's repricing. They're very firm about that.

CRAMER: Ohhh! Great! Okay. Well, let them be calm, and have them call me on the way home, like they do every night, and tell me, "Cramer, what're you going to do about it? Are you going to help us?! Are you going to help us? Are you going to stand on the sideline, like everybody else, and say that it's fine? Will somebody come on TV and tell the {truth} about how bad it is?"

ANCHOR: But, a lot of people say—these same people say, it's not Ben Bernanke and the rate that matters. The bond market now is completely separate from this.

CRAMER: No! It is the rate! It's entirely the rate [voice rising in volume and pitch]

ANCHOR: The bond market is trading separately from the rate.

CRAMER: No! It's entirely the— Look! We'll spend billions in Iraq to build homes. We're going to have thousands of people—no, we have thousands of people losing their homes, right now.

ANCHOR: Yes.

CRAMER: Fourteen million people took a mortgage in the last three years. Seven million of them took teaser rates, or took piggy-back rates.

ANCHOR: Mm-hmm.

CRAMER: They will lose their homes! This is cr-rrazy!!

ANCHOR: Yes, I—

CRAMER: I am sorry to be upset about it, but you have to understand what they're sayin' to me, off the record, before I come in here, every night, and every day. And what I hear from these blowhard managers, who act like—. Call someone, for heaven's sake!! Go call someone!

[shouting] I worked at fixed income at Goldman Sachs! This is not the time to be COMPLACENT!! [end clip]

SCHLANGER: All right. Now, you got a sense from of the "Screaming Jim Cramer," but for once he was telling the truth. But then, the same Wall Street hoaxsters and speculators who were saying last week that such a meltdown was impossible, are now saying that the wall of money which was pumped in as short-term loans, demonstrates that the central banks will not allow the situation to worsen: That is, that this is a "technical" crisis, a "momentary credit crunch" that is not systemic.

But the financial press is clearly spooked by these developments. The following headlines are representative of the belated recognition by some in the financial world that this is not "business as usual." A leading German paper had a headline, "Fear of Worldwide Financial Crash," while the usually restrained Times of London headline, today, is," Dead Mortgages Create Global Panic."

Joining us today on the LaRouche Show is Helga Zepp-LaRouche, who will give her analysis of the nature of this crash, and more important, what measures must be adopted to prevent a deadly global, financial-economic disintegration. We'll be joined by a panel of members from the LaRouche Youth Movement. I believe we have Vickie Overing from Los Angeles, Maria Channon from Chicago, and hopefully also Matthew Ogden will join us from Leesburg, Virginia.

So, Helga, welcome to the program.

HELGA ZEPP-LAROUCHE: Hello!

SCHLANGER: I know you've been studying these developments quite closely. Some of them came out of Germany this week, with the IKB bank, and that you have the benefit of a full global picture. So, tell us what happened this week?

ZEPP-LAROUCHE: Well, actually, I would like to take it back a couple of more weeks, because the change in the public mood among people, not only Jim Cramer, but many, many analysts and so-called economists around the world, has been really remarkable. Because, for example, still in June, the head of the Bank for International Settlements, the director general Malcolm Knight, said that there would be a golden age for the world economy, and that prosperity would always go on and it would never stop. So, that was in June. Then, until mid-July, everything seemed to be fine, people were making profit, profit, profit. And then, all of a sudden, triggered by essentially two events—one was the beginning collapse of the U.S. subprime mortgage market, and the other was the end of the yen carry trade—that you had the most unbelievable reversal of the situation.

So, on the 25th, Lyndon LaRouche made this webcast you quoted in the beginning, and there, he predicted that the system already had collapsed, and that the fallout would simply become apparent for the nonbelievers in a very short period of time. And it was exactly three days later, where the collapse of several hedge funds linked to Bear Stearns, Paribas, the French bank, and some other banks in Europe, started to really go belly up. And Lyndon LaRouche had also said in this webcast, that the problem was, that the physical side of the collapse, namely the collapse of the real economy, the total lack of investment in infrastructure over the last 30 years, meant for example, that the American transport system was also gone. And again, it took three days, until the bridge over the Mississippi in Minnesota collapsed, proving, once again, that Lyndon LaRouche was absolutely right.

Now, what has happened, is, in the last two weeks, you had an unbelievable, dramatic development. Two weeks ago, yesterday —that is, Friday—the SEC called their counterpart in Germany, the credit authority BaFin, and pointed to the fact that German middle-level industrial bank IKB was about to go under, because of their exposure to the subprime market. Then, totally unprecedented, the head of the BaFin, Jochen Sanio, called 20 leading banks, and over the weekend got the agreement of the German government to use the state-owned Kreditanstalt fuer Wiederaufbau to bailout this IKB bank with EU8.1 billion, that's $10 billion. And then, the next day, the bank's stock collapsed anyway, and it became very clear that this was just the tip of the iceberg. That in France, about eight hedge funds went under. That you had another major bank, Westdeutsche Landesbank, almost going under. And then you had more crisis management meetings of various banks and government agencies.

So, until the middle of this past week, there was a complete line by Jean-Claude Trichet, president of the European Central Bank, saying now is the best time to have the bubble explode, to have a certain adjustment to get rid of the wildest of the hedge funds, and that a certain shrinkage and adjustment would be healthy, and that the central banks would absolutely do nothing to intervene.

SCHLANGER: So, this last week then, they said, "Let the crunch happen."

ZEPP-LAROUCHE: Yes. So, that was the line of The Economist, "Now is a good time to have an adjustment of the markets"; the Financial Times had the same headline, endorsing an "adjustment" of 10, 20, even 25%, and there was a general line that they would do absolutely nothing.

But then, obviously, something happened around Wednesday-Thursday this week, and that was obviously that all of a sudden, the dimension of this thing became so obvious that there was a complete turnaround, and the European Central Bank, which just had declared that they would absolutely do nothing, they intervened within 24 hours, first EU95 billion and then within the same day, within another EU62 billion, altogether over EU150 billion; and then the Federal Reserve did same, and many other central banks in Australia and New Zealand also made interventions of $4-6 billion, and many other central banks said they were ready to pump in more liquidity if needed.

So, what you have now, you have the very ridiculous situation that the banking system is really in a "Catch-22": because on the one side, they wanted to increase the interest rates because of a very visible inflation, especially in raw materials, in oil, but especially in food. You have a definitely visible food price inflation. In China, I think it was up to 17%, in Italy, pasta—that is spaghetti—is going up, up to 20%; in Germany, bread is making the headlines, because it is going up, which in part is the result of the idiotic biofuel focus which naturally is leading to an increase of the price for grain production and similar foods.

So, they wanted to increase the interest rates, to curb inflation, but at the same time, Bernanke, the head of the Federal Reserve who was accused by Jim Cramer of doing nothing, that he "no idea! no idea!" reminded himself that he has the of "Mr. Helicopter Money," referring to a speech he made a couple of years ago, where he said, "well, the banking system will always survive and if there is a real crunch, we'll just take helicopters and fly over major cities and dump money down from the helicopters," just bills and bills of dollars and euros and so forth. So, he actually did that, and as you said, just between Thursday and Friday, between the European Central Bank and the Federal Reserve, they poured $323 billion into the system, and that is not the end of it.

Because, if you think you have seen the worst of it, well, this is just the beginning. Because now, you have a whole bunch of consequences. First of all, the collapse of the American subprime and other mortgage markets is far from ended, but the so-called adjustable mortgage rates—these were mortgage rates where people agreed to have very low mortgage payments for two years, but then after two years, when these mortgages are sold to other financial institutions, these rates can go up very dramatically, and that is coming full circle, because of a lot of this was sold since spring 2005. So the two-year grace period is coming to an end, and you will see this escalating. This is supposed to peak in October, when mortgages worth $50 billion are supposed to go into higher rates, but that's just the subprime market.

Then, you have the other phenomenon that a lot of the banks financed over the last period, the absolutely insane mania of mergers & acquisitions of the takeovers by the so-called "locusts," and this was I think $470 billion in the first half of 2007. And now, because of this liquidity crunch which was triggered by the end of the yen carry trade, a lot of these deals can not be carried through! So, the banks are actually sitting now, on an enormous amount of deals which they can not get rid of: For example, JP Morgan is apparently affected the most. They have the most open contracts of over $52 billion. Bank of America, $41 billion; Citigroup, $33 billion; Deutsche Bank, over $26 billion—and that is just what they admit to. But there is a whole area of a gray zone as in the case of Westdeutsche Landesbank, which basically said, "Oh, we have no problem, it's all fine." But then it turns out that the entire board of directors of the Westdeutsche Landesbank have known for a half-year how overexposed they were, but they were hiding it from the regulatory authorities to which they report. So, now they kicked out the CEO and another board member, and they only reason why kept three other board members who were guilty of trying to cover up these losses, because if they were kicked out, then the bank would be completely nonfunctional, so they kept them for damage control—not because they were not involved in this.

So, the reality is, now the panic stricken, and the greed which normally drives these markets has turned into fear, into angst.

SCHLANGER: Helga, it seems that—you're talking about the ironies, and this is a situation rich with ironies: That they're holding overvalued paper which no one will buy because they don't think it's worth what the face value it is, and no one has the cash to buy it anyway. And then, the idea that pumping in more money will somehow solve this—that's an irony. But I want to get to the deeper irony, that you referenced earlier, on the question of the physical economy: Because the deeper irony is, the assets are overvalued because we're not producing. The physical economy is what's jammed up.

So, that brings the question that I'd like you to address, is that the solution that Bernanke seems to have adopted, and that the press is praising him for now, is the same thing Grenspan did back in '87, when the stock market crashed in October '87, as Lyndon LaRouche had forecast, almost to the day; and then, again, after the tech bubble crashed in March 2000. Why do they think that this wall of money policy can work again, when the real economy has shrunken so far beneath it?

ZEPP-LAROUCHE: Well, I'm not so sure they really believe it can function. But these people, they really don't understand the physical economy, because they have believed in the "profit-profit, money-money world" for so long, that I think they just cannot reverse their thinking.

I think this will blow out. If they go between trying to combat inflation by hiking interest rates, and at the same time, trying to prevent major collapses of hedge funds, private equity funds, banks, the big question here is the banks, how much bad debt do the banks internationally have? It's a fair estimate that all the major investment banks in the G8 countries are bankrupt. So, that will become obvious, and if they try to cover that up by pouring in more money, then you will end up exactly in the situation like in Germany in 1923, when the hyperinflation simply destroyed the value of money altogether. The only difference, this time it would not be just in one country, like Germany, where it could be bailed out by the Dawes Plan at the time, but this time it is the entire global world financial system. And while the globalization supposedly brought so much wonderful profits for people around the globe, the collapse is also global, and that has just today been pointed out by no less than the former super finance and economic minister Guilio Tremonti from Italy, who had a conference with Lyndon LaRouche in May in Rome, and he said: This is it, this is the big crash. This '29, but much worse than even then.

So, I think we will see this play out. It will get worse and worse for the next weeks, and then will come the question: Can the governments of the world get their act together and take the kinds of measures which Lyndon LaRouche has proposed: Namely, to go in the direction of a New Bretton Woods; to declare the present financial system bankrupt; to basically reorganize the bad debt, write off most of it, because it can not be paid anyway; reorganize some other debt into long-term credits at low interest rates; go for fixed exchange rates, and then establish a new financial system in the tradition of the Franklin D. Roosevelt and the old Bretton Woods. And that is the only chance which exists.

Now, Lyndon LaRouche, my husband, is right now writing a proposal which is the draft platform for the Democratic Party. The reason why he's doing that, is because he looked at the different Presidential candidates in both parties, and said, that none of them is presently addressing this crisis in the slightest. I mean, it's almost, that the degree of denial of these Presidential candidates is really unbelievable and scary. And therefore, he is writing right now a proposal how the United States can use the power of the Congress, and the power of the Constitution, to address this problem, and call the kind of emergency conference with other great powers, like Russia, China, India, but then also countries like Germany, Japan, Brazil, South Africa, and many others, to reorganize this system.

SCHLANGER: Helga, you were talking about the conference for reorganization of the world monetary system, a New Bretton Woods, which has been something that you and your husband have been organizing for for years, while the denial is very thick in the United States. And you mentioned that in Italy, former Finance Minister Tremonti spoke yesterday of the fact that the system is gone, echoing what Lyndon LaRouche has been saying: You've been involved directly in organizing, in Russia, China, and India, the three other nations of the four powers—what is the sense in those countries, of the crisis? I mean, clearly, this is a global crisis: What kind of indications are you getting that there's a willingness to go with Mr. LaRouche's proposal?

ZEPP-LAROUCHE: I think that, from my best judgment at this point, each of these countries, has in high places, the highest respect for Mr. LaRouche. I have been told this personally so many times. In Russia, he is regarded as a legendary figure. In India, he is regarded as the only American they trust. In China, he's highly respected. But, I think people had illusions up to probably the present moment, about the full dimension of the collapse of the system. For example, in Russia, it is very clear that the Russian government and the Russian Academy of Sciences, has made many statements and sent many signals that they would like to put the relationship between the United States and Russia on exactly the platform Mr. LaRouche has been proposing, namely in the tradition of Franklin D. Roosevelt. That became very evident when he was invited in April this year, to address as one of the major speakers, a conference on the building of the Bering Strait as a link between Siberia and Alaska, which the government and the organizers of this conference very clearly presented as a war-avoidance policy, in stark contrast to the danger of a new Cold War erupting out of the idea the United States has of putting anti-missiles and radar systems in Poland and Czechia; and it was said very clearly at that conference that the LaRouche policy of war-avoidance through great projects is what the Russian government really wants.

So, there have been many other important signals, which I can not go through here, for time reasons, but I think there has been a responsiveness by President Putin, by other Russian officials, to go in the direction of Franklin D. Roosevelt. Because, when the 125th birthday of Roosevelt took place at the beginning of the year, you had huge celebrations—not in the United States, but in Russia! And many speakers called Franklin D. Roosevelt, the greatest of all great Americans, and Putin himself said that Russia needs a New Deal, and that the whole world needs a New Deal.

So, I think that there is a big, big openness., and I think the same is true for China in a different way. For example, there was a big fluff this week, about supposedly China using its dollar reserves to bring down the dollar, which was then denied by the Chinese government. And the story behind that, was that when the American Congress—I'm not sure if it was the House or the Senate—they voted this anti-Chinese bill before they left for the summer recess.

SCHLANGER: To raise tariffs against China.

ZEPP-LAROUCHE: Yes, exactly. So, that was regarded very bitterly by China. And they told my husband, directly and personally, that they would make clear that they do not take these things without answers.

So, while the story as such was not really true that they had threatened to bring down the dollar by dumping their huge dollar reserves, but, they also made very clear that there is a limit to their patience, and they have also made very clear that they are not going to submit to the idea of a world empire, which Condoleezza Rice has declared many times, by stating that the United States would never allow one country or a group of countries, would achieve the power of the United States economically or militarily. And the Chinese have also made very clear, that they do not believe that that is the place China is willing to take.

They have been very open to the ideas of the Eurasian Land-Bridge, instead. And you can see that, while the idea of going to a New Bretton Woods system and to have the Eurasian Land-Bridge, as the cornerstone of a reconstruction program for the world, for a long, long period of time, people said, "Oh, that's just the idea of LaRouche and his movement, but it will never come true," but you can see right now, that what we have been campaigning for, namely the Eurasian Land-Bridge is coming into being. Not only is the Bering Strait, which is a gigantic project—I mean, it involves 6,000 km of railway connecting the Trans-Siberian Railway through the 100 km undersea tunnel through the Bering Strait, then all the way through Alaska, Canada, to the continental United States; and the people who are pushing this project, they want it to go all the way down to Chile. And at this Bering Strait conference, people were totally excited: They said, if we build this tunnel underneath the strait, if we develop the Siberian raw materials, which is a tremendous technological challenge because you have to develop these raw materials under permafrost conditions, but these are the richest raw material reserves in the world; but then, you can build the maglev, and then you can travel, let's say from Acapulco, via the Bering Strait tunnel, all the way to Mumbai in India, more quickly than you can go by ship across the oceans now.

SCHLANGER: Well, in Los Angeles we're looking forward to a Los Angeles to Moscow trip.

Helga, you're having a conference in Germany coming up, to take this further, this organizing process.

ZEPP-LAROUCHE: Well, it's basically the idea that given the fact that we have been listening for some time to "the wise words of Mr. LaRouche," I assumed that the financial turmoil would be really be sharpening tremendously by the month of September. And at the other side, you have all these exciting elements of the Eurasian Land-Bridge coming into being. I just was telling you about a couple of them, I could tell you many more aspects: for example, the Indian government is building a 1400 km corridor from Delhi to Mumbai, which will affect the economic life of 180 million people! And there are many, many other projects which were in our initial Land-Bridge report from 1996. So, my idea was to say, "Okay, you have on the one side the financial system coming down. And on the other side you have an emerging alternative, namely, that the Eurasian Land-Bridge is being built—many, many elements of it are being built." So therefore, I said, why don't we bring this optimism which is going on in many parts of the world, for example, China is planning to build more than 30 high-temperature reactors. Now, that is an inherently safe form of nuclear energy. It was developed in Germany by Professor Schulten from the Juelich Research Center, and it was given at the time, practically totally ready, to the Chinese, because of the crazy environmentalist movement in Germany, Professor Schulten thought it could not be politically realized in Germany, but that it was too important a technology to wasted and sit somewhere in the closet. So, the Chinese built a test reactor which has now been functioning for a couple of years, and now they're building large numbers of high-temperature reactors, not only for China, but also for export.

So is South Africa: South Africa has presently the most advanced modular pebble-bed high-temperature reactor, of the same type as the one the Chinese are building but it's just the most advanced version of it, and they are planning to build it for export for all of Africa and beyond. Then you have India, planning to build a nuclear cycle based on thorium, which is also very good, because it can not be used for military purposes.

So, then you have many, many countries discussing that they want to have maglev trains. In Denmark, the Schiller Institute managed to get a whole national debate about infrastructure, about building bridges, several large bridges of 40-50 km, building maglev, connecting the major cities in Denmark, in the hope they would eventually connect to Hamburg, Berlin, Moscow, Beijing.

Finland is building new nuclear reactors. Sweden, of all places, wants to have nuclear reactors now. All the Maghreb countries, that is the Northern African countries, want to have nuclear energy; all the Persian Gulf states want to have an 11,000 km maglev line.

So, the idea of the conference was basically to say: Okay, on the one side the system is coming down, but you have all these very, very positive initiatives in terms of reconstruction of the world economy, around great projects, around advanced technology, so why don't we have a conference to bring all of these ideas together, to really demonstrate to all of the participants and German government and German institutions, and European institutions, that an alternative is very, very close. So, the timing of this conference could not have been better.

SCHLANGER: This is how optimism can overcome hysteria. Let me bring in the LaRouche Youth Movement panel now. But, before I do, I want to encourage people, because of the limited time we have, there's much, much more breaking by the hour on the financial crisis, and many more of these projects that Helga has just referenced, reports on them are being posted regularly on the www.larouchepac.com website, which I was told yesterday had a huge spike in hits, because obviously people want to know what does Lyndon LaRouche say about this financial crisis. So, get ahead of the curve, get the www.larouchepac.com website right now...

Okay, Matthew Ogden is not yet on, but we do have Maria from Chicago.

MARIA: I'm here!

SCHLANGER: Okay, what are you thinking about from listening to this picture that Helga's just described? MARIA: Hi Helga. I guess I still have the wrong perception of what a crash is, because I don't quite understand why the crash has already happened, so if you could go through that more.

ZEPP-LAROUCHE: Well, essentially what we are seeing right now, is not some cyclical crisis, where you have a little recession and then things go back. The problem is and what people don't understand, is that the paradigm shift of almost the last 40 years of replacing a productive society based on science and technology, and progress, and physical production with the utopia of a post-industrial society, a service sector, the whole, totally crazy system of "money makes money," of "just in time" production, of outsourcing of expensive jobs to cheap labor markets; this whole package of wrong economic thinking which was geared entirely only to get the shareholder value satisfied, and to have the greed of that part of the population which speculates, satisfied, at the expense of real production. So, what you have right now, is not only like '29, and a Depression like the '30s, but in a certain sense, the situation in the '30s was much, much better than now, because when Roosevelt did the New Deal, he would give credit to anybody who would produce, and then people would start to produce, because the agricultural and industrial capacities still existed.

Now, if you look in the United States, you have essentially three large areas where you still have machine-tool capacities, that is, on the one side, naturally the military-complex; then you have a certain amount of aerospace; and you have the car industry. But you do not have middle level industry. You do not find the typical structure of the economy of Germany, Switzerland, Northern Italy, or certain parts of France—where, for example, in Germany, 85% of all production is in the realm of middle-level industries. These are highly productive firms, where most of the patents are developed which are later used by the large corporations and bought up. But the ingenuity and the creativity of the German economy is located in this Mittelstand.

So, the United States has totally destroyed that, by outsourcing to cheap labor areas. So, therefore, now with the auto sector collapse, which was warned against by Lyn, my husband, but since the Congress didn't act on it, now you have certain financial corporations sucking the blood of whatever is left. But a whole bunch of industrial capacity and machine-tool design has been wiped out.

So, what you have right now, is a gigantic financial superstructure, a balloon, the so-called credit derivatives, and other "creative financial instruments" which Greenspan invented, and you have basically outstanding contracts and payments to make for which you have no money. So, when you had this liquidity pumping, one of the major channels for which was the yen carry trade, where speculators could go to Japan, take loans for zero interest, and then go to higher yield markets in other currency zones, speculate in bubbles, and then make gigantic profits. Since this pyramid had created a situation, where for example, people would borrow money from banks, then turn around and lend that money somebody else, thereby the borrower becomes the new lender, who would do exactly the same thing—takes money and lend it out again, and that way you have a gigantic chain, which is totally irrational, and it only functions as long as the asset prices increase in value. And the hedge funds and the private equity funds are structured in such a way that they have to make a lot of profit, because they have to service all of these contracts, and contracts, and contracts; and therefore they are dependent on making profits of up to 20% or more. As long as this balloon is increasing, everything is fine, and then you have such people like the head of the BIS saying, "Oh, a golden age has started."

But: If this comes a reverse leverage, then it turns out, this is all fictitious! This money does not even exist! It's worse than Germany 1923, because in 1923, the Reichsbank would print physical money! They would print reichsmark notes first RM100 for a pound of bread, then a 1,000, then a million, then a billion, and in the end a trillion, and then the whole thing came to a screeching halt, because it became ridiculous—but, the Reichsbank did at least print real money.

Now, as Bernanke said himself in a famous speech, there are so many wonderful ways of creating electronic money, you have 100 ways of creating electronic money, and this money is simply existing in computers. So, if you have reverse leverage, you can as well, push the delete button in your computer and it all goes.

SCHLANGER: It can end up eating your computer.

ZEPP-LAROUCHE: And then you see what remains: Namely, that you have no physical economy, and therefore, the rebuilding job, which needs to be done now, is much more severe and more challenging than even what Franklin D. Roosevelt had to do, because the industry has to be rebuilt, the labor force has to be trained, and the rebuilding therefore, will be much, much harder.

SCHLANGER: Helga, one of the ways we see that is with the infrastructure, where every year, there are billions of dollars that should be allocated for repairing levies, for example, in New Orleans or this bridge in Minneapolis, or one-quarter of the bridges in the United States. And by not spending the money for that, it appears there's money for other things, like Cheney's war.

We do have a question from James in California by email. He asks: How about rebuilding and repairing the present U.S. infrastructure. Clearly this is something that Lyn has been talking about for years. This would require this kind of banking reorganization that you're talking about.

ZEPP-LAROUCHE: Yes. It's very clear that you could not finance that from present, ongoing household, from an ongoing budget. This is why Lyn has recently revived two initiatives which he had formulated much earlier: One is the Economic Recovery Act of 2006 (ERA), which was essentially this proposal to retool the auto industry, and there, in particular, the machine-tool sector and machine-tool design to really now take whatever is left of this capacity and really build infrastructure. For example, you could take some of the same machine-tool capabilities to build sluices for water systems. You can build railways, maglev trains, you can build other infrastructure, nuclear reactors, inherently safe HTR reactors, because also in the energy field you have also a gigantic under-investment. You need to invest more in energy than the present existing energy capacities, if you want to prevent a total blackout of the U.S. economy in the very near future.

So, that is what needs to be done, and the financing of it has to occur through a special, national infrastructure bank, because this is a gigantic job, and it should not be part of the general budget, but should be geared for long-term investment of 20, 25, 30, or 50 years, because infrastructure has an average lifespan of about 30 or 35 years, and it's completely insane to take a financing approach which is less than that time span. So, that will be on the table when the Congress comes—although it could be that they have to come back much earlier. If this thing continues to tumble—and I think it will—maybe the Congress does not enjoy their vacation so much, and they will have to come back much earlier. But if they don't come back earlier, they've already scheduled hearings on the infrastructure situation in the United States for Sept. 5th. Whenever it will be, they have to deal with that, and they have to really take responsibility. Because, one problem is that the population is obviously very, very angry. The fact that the popularity of the Congress is at this point, 3%—that is even less than Cheney!—really tells you something. If these people want to be reelected, they better remember that they are responsible for the common good.

SCHLANGER: Well, there's an angry mood in the population. I mean, one minute a bridge is there, the next minute it's not. One minute your pension fund is there, the next minute it's gone in a puff of smoke. I would encourage everyone listening today, to find out if your Congressman is having a town meeting, if he or she is going to be in town: Go there, and bring up this question, "Will you support a New Bretton Woods? Or are you going to bail out the predators?"

Now, we do have Vickie on from Los Angeles. You have a question for Helga?

VICKIE: Yeah, Helga, your article, "Greed Turns to Angst: The Global House of Cards Is Collapsing," and you mentioned this today, about this IKB being only the tip of the iceberg. And I liked this analogy that you used of the Titanic, because it could describe the financial system, like the iceberg being the financial system hitting the population. But it could also be the mentality, like how people are reacting to it: because I've noticed in organizing out on the street that there's different reactions. There could be some reaction with financial people, where they're freaking out; but then, other areas like California, a lot of people just don't know what's going on, where they're still sipping their latte, trying to get the next deck chair on the Titanic.

So, I just wanted to ask you, how do you address that, because a lot of the axiom is about money, and stuff like that, but I haven't been able to figure out how to overcome that axiom, or how to communicate this financial crash with people.

ZEPP-LAROUCHE: Well, I think the problem you are describing, is that part of the reasons for this crisis, is the change of values in the population. Lyn has talked and written about that many, many times, that people have really been—I think they have been driven away from the axioms which made Franklin D. Roosevelt possible, by many, many waves of social engineering, which has left most of the population in Europe, Japan, and the United States, in a form of denial, which can only be described as clinically insane. That is my firmest belief: Because if people have such very developed form of denial, well, then they're not focused on reality, and if somebody can not perceive reality—well, then, they're clinically insane. That is not an insight, that is just a clinical, medical description.

Now, the way this functions, is that you have practically different groupings in society, who have their own belief structure as a grouping. And the internal repetition and confirming of that belief structure serves as a cushion against reality. And this belief structure is reinforced by certain dogmas, by certain sacred cows, by things which are absolutely untouchable. Now, one of these dogmas, for example, is that the central banks will always have means to fix it. That they have a limitless variety of instruments by which they can manipulate the markets, and therefore they will always control it. Now, that mythological is just being smashed, and you will see that it going to be smashed much more.

So, the way I see this right now, I don't know if you ever saw when a big building is torn down with these large steel wrecking balls, and when this wrecking ball hits, the whole structures falls in on itself. Now that is what's happening with this mechanism of denial right now: I mean, you should be prepared that the same people who tell you today, "Oh there is no problem," tomorrow will freak out, and totally scream at the top of their lungs—like this Jim Cramer—where funny enough, and I heard that the first time, I actually thought it was like a Stephen Colbert satire! [Schlanger laughs.] No, I didn't—because he said, "He has no idea! NO IDEA! Bernanke has no idea!" and I thought it was a joke, and then people told me, "No, no, he really means it." And that you will see happening a lot.

So, all these denials will collapse, and you should just be very calm, and tell people—like for example, we had the same phenomenon in Germany with the hits on our website, which were at a record yesterday, simply because the newspaper headlines were full "The Crash Is On," the "ECB Intervention"; so people naturally go to our webpage to find out what is the solution: so, you should prepare yourself to really intervene in the coming period, because this denial can not hold.

SCHLANGER: I think the one thing that happens sometimes when the denial disappears is that you get a certain amount of depression, and that's of course, why it's essential that the LaRouche Youth Movement is doing what it's doing, by going out and showing that there are solutions to this problem: that Lyndon LaRouche has been addressing this, he is competent, there is a precedent with Franklin Roosevelt.

Marie, I know you're in Chicago right now. What kind of response are you getting from the population there, to the financial blowout?

MARIA: We had a lot of fun yesterday. We had the intention of going down to the financial district, so we made a banner which on the top it says, "You Don't Have To Jump!" And in the middle of the banner, there's a picture of a dead bull on top of a dead bear, with blood coming out. And on the bottom, it says, "LaRouche Has the Plan."

So, we went to the financial district and we sang, and we got some pretty interesting responses. A lot of people were looking at the banner, some people just standing around observing the organizing. A couple people had total freak outs, like taking the pamphlet and throwing it on the ground—a couple of men in suits doing that.

And in our conversations, at least one broker admitted that, yeah, you can't continue this process of the hedge funds forever, and a lot of people wanted to know what LaRouche's plan was. Another young finance major also had a very interesting response—he understood the banner right away; he understood what that meant with the dead bull and the dead bear. And just a lot of people interested in knowing what the solution is, and people generally understanding that free trade and globalization isn't working, what we're doing right now isn't working, so what's the alternative? Quite fun!

SCHLANGER: Okay. I just emphasize that people should organize your friends and relatives and coworkers, to get on the www.larouchepac.com website, to follow this and become active. And if you want to get some literature and get involved, give us a call at our toll-free number, 888-347-3258.

We have a little less than seven minutes to go, and I think it's important that we not lose sight of the fact that Dick Cheney is down in a bunker somewhere looking for an excuse to launch an attack against Iran, possibly blow up Pakistan and Afghanistan. What's the latest we're getting from the crisis spots, and the danger of an expanded war?

ZEPP-LAROUCHE: Well, the problem right now, is that you have the situation in Iraq, totally, totally out of control. Much worse than the media are reporting. I mean, you have a situation which is really at the edge. Because a lot of the rebellion of the Sunnis inside Iraq is financed by certain Saudi channels which makes all the more absurd that the U.S. government wants to sell this gigantic armament deal with Saudi Arabia, and they blame Iran for being behind the rebellion in Iraq, while in reality it is really mainly certain Saudi channel, which are blowing up the situation completely.

SCHLANGER: Yeah, Cheney's allies, the Saudis.

ZEPP-LAROUCHE: Exactly. So, basically military and other sources we are talking with are very concerned about, is that you have right now, four aircraft carriers in the Gulf and they will be in there in the region throughout September having maneuvers in the Bay of Bengal and many other warships with them. And as one retired top general told us, "You do not put so much military equipment in such a small area, if you don't want to use it." So, the slightest incident as a pretext, either a terrorist attack, somewhere in the United States or in Europe; or another Gulf of Tonkin event, and that would then be the pretext to launch a military attack against Iran. And that would then throw the world immediately into a global asymmetric warfare.

Now, the danger is that people who are observing President Bush from a psychological standpoint, are very concerned. They say that if Bush feels cornered, he tends to lash out, that is his profile. Now, what people should be very wary about, is that if the financial markets continue to go in these kinds of turbulences, and the anger of the population at Bush is also tremendous, because as some headlines were writing "Katrina moved to Minnesota," meaning that the outrage of the population in Louisiana and other places, that the government did not solve the aftermath of the Katrina catastrophe, and many, many thousands of people are still homeless, are still sitting in desperate places, not only in New Orleans, but in a more widespread area, but the same negligence was demonstrated in the case of the Minnesota bridge, where Bush said, "No, there is no money, the Congress is making wrong priorities, and there's nothing we can do." But, that when Bush will be confronted with the coming turbulence, and with Cheney still in the place where he is, that the danger that an incident can be created which then is the pretext for a diversion, and that Bush, being cornered, will simply lash out, and says, "Okay, let's do it!"

I mean, this Damocles Sword is hanging over the world, and people should not be complacent. We are in a very dangerous moment of history. It can be solved, but the large part of the solution has to come from the United States: That means we have to get the Democratic Party in a different mental attitude, they have to be not financed by the hedge funds, but they have to address the concerns of the 80% of the forgotten people, the forgotten men and women, and we have to get the moderate Republicans to understand that they have a gigantic responsibility and they can not allow this present administration is going to really lead the world into a disaster and Armageddon, by launching a new war against Iran.

But that requires that people remember—you know, I was trying through a few places here a few days ago, and I was reflecting about the United States, which is such a beautiful country, and a country of such contradictions: On the one side, the country right now is hated in the world—I think most Americans have not an inkling, not only by the Arabs and the Muslim, forget that, but by everybody; by people in India, in Russia, in China, in Europe. The image of the United States has never been so bad, the reputation been so down. But, it would be so easy, if the United States would now take the initiative and say, "Okay, we will address the fact that this global system is really not working, and we are pulling together a New Bretton Woods, together with other great countries of the world." The friendship and the love of the people of the world could be regain if there would come bold leadership from the United States right now. Now, the only way that will happen, is, that people in the United States, have to do what López Portillo told me in 1998, when I visited him in Mexico for a conference on Alexander von Humboldt: He said, "The world now has to listen to the wise words of Lyndon LaRouche." And I think that that is what has to occur, now, and it has to occur in the United States.

SCHLANGER: Well, that was good advice then. It's even better advice, now. Helga, thank you so much for joining us today. People can read Helga's article will be in the next EIR, and will be available on www.larouchepub.com and www.larouchepac.com.