Helga Zepp-LaRouche on Ecuadorian Radio
August 21, 2007 • 3:54PM

Helga Zepp-LaRouche appeared Aug. 17 as a guest of Patricio Pillajo on Ecuador's popular Radio 530-AM, where Lyndon LaRouche had been a guest in late June. Señor Pillajo's frequent interviews with EIR correspondents has become a favored feature among listeners of his "Opinión Popular." EIR Ibero-America Editor Dennis Small acted as interpreter. Señor Pillajo's questions are transcribed from his translation into English. Here is the transcript.

PILLAJO: He wishes you good morning, Helga Zepp-LaRouche. And his first question is: Why has the Schiller Institute issued this call for an alliance of countries in the world, around a New Bretton Woods, in light of an ongoing collapse? What is the nature of the collapse, and why this call now?

HELGA ZEPP-LAROUCHE: Good morning. Well, because the long-prognosed systemic collapse of the financial system, which has been prognosed by my husband, is now full swing. You have now an explosion which will not vanish. You have the collapse of the subprime mortgage system in the United States, and you have, at the same time, a credit crunch as the result of the ending of the yen carry trade. At the beginning of the last week, the central bankers, like Trichet from the European Central Banks and others, said they would not intervene; that they would allow a certain "adjustment" of certain of the wildest hedge funds, and it would not matter if they would lose 25% of their value.

But then, about Wednesday-Thursday last week, they realized that the dimension of the collapse was such that the entire world financial system would crack if they would not intervene. So, they opened the sluice-gates of monetary liquidity pumping: The European Central Bank in two days pumped in more than EU 200 billion, and I think the Fed in the meantime, pumped $70 billion, and other central banks, like Japan, Australia, New Zealand, pumped also significant amounts.

But this is not helping anything, because you have a reverse-leverage collapse. Not only from the subprime mortgage market from the United States, because of the hedge funds linking all market segments of the world, but also because a lot of the hostile takeovers, fusions, mergers & acquisitions of the last period, which was gigantic, a lot of this was financed through loans from the banks, and this now turning out to be bad debt for the banks. So, the big question is: On how much bad debt do the banks really sit?

So, this will go on, and there are only two options left: Either they let a chain-reaction collapse occur, or they try to pump enough liquidity to prevent that from happening—but then you end up with a situation like in Germany 1923, with the hyperinflation. The only problem is, this time it's not in one country like Weimar Germany, but this time it's affecting the whole world. As one analyst in Europe wrote, the globalization had profits and benefits for everybody, but now it is pulling everybody down equally.

So, we are at a point, where the question of a new financial system, a New Bretton Woods system, is the only remedy.

PILLAJO: Why do you call for a New Bretton Woods? If that system which was created in 1944, under the ideas of John Maynard Keynes, built the institutions we know today like the IMF and World Bank, which you have criticized, and the experience of the Bretton Woods system has not been good, so why call for a New Bretton Woods?

ZEPP-LAROUCHE: Well, I think the initial Bretton Woods had very positive features. For example, the fixed exchange rates: You need fixed exchange rates, because otherwise there is no way you can prevent speculation against currencies. And why should you allow speculators to bring down the value which was worked for by populations over decades, in a week? And Franklin D. Roosevelt had conceived of the Bretton Woods in a different way than what Truman did, after unfortunately FDR had died at the wrong moment. And the reason why we are using the New Bretton Woods as a reference is more as a pedagogical device, because it tells people that it is up to the government to make or eliminate monetary systems, and that they can overthrow one and make a new one. And there, the reference to the New Bretton Woods is a very useful one, because it is in recent memory.

PILLAJO: Okay, that is clear.

SMALL: Helga, there's a panel of people who are at the station as well. Engineer Mariano Santos, who is an oil engineer has two questions for you:

The first, in your discussion of the U.S. economy, you talk about a "collapse" of the U.S. economy. What effect or impact will this have, especially what was the result of the United States going off the gold standard in the 1970s?

And the second question is related to Ecuador: If the United States system does collapse, what impact will this have on our country, in light of the fact that Ecuador has adopted the dollar as its currency? (It was dollarized.)

ZEPP-LAROUCHE: The first question, with the dollar going off the gold in '71, which actually was the ending of the Bretton Woods system: that was the abandonment of the fixed exchange rates, and the creation of the Eurodollar market, and with that, the creation of private credit creation through private banks and offshore islands. So, that was really the beginning of the present bubble economy.

I think if the collapse continues, the consequences for Ecuador, but for every country in the world would be a complete collapse into a catastrophe. Because of the very nature of the hedge funds and the so-called derivatives credit system, which was invented by Alan Greenspan, all market segments of the world are connected. You have the so-called "cluster risk."

And therefore, I think that every government in the world, at this point, must take serious measures, and think about what to do. And you must have contingency plans for how to protect the people. When the Wall came down in Germany '89, the German government did not have a contingency plan for the case of reunification, despite the fact that German unification was the number one issue of state policy. And it had very bad consequences for the eastern part of Germany. Later the German government admitted they did not have a contingency plan.

So, now we are at a much worse collapse of another system, and that is why I am circulating this New Bretton Woods call, so that people can really start thinking. My husband, Lyndon LaRouche, has made the point that the problem is so big, that only if you have the four most powerful nations of the world—the United States, Russia, China, and India—working together, and putting the question of a new financial system on the table, that this reform can be done. That requires, obviously, certain internal changes in the United States, and it has to be an activation of the Democratic Party to go back to the tradition of Franklin D. Roosevelt.

PILLAJO: Yes.

The question is, with this idea of a New Bretton Woods, which would be a great worldwide agreement, it would obviously call for a new kind of agreement, a new type of leadership in the United States, a new role for the United States. But the question is what role would there be for emerging economies and countries such as Ecuador, such as South America, in this new financial architecture, with this bankruptcy reorganization of the world system? What role do we play?

ZEPP-LAROUCHE: You know, we have not only the question of a new financial architecture, but we need a real reconstruction of the global economy. And therefore, we have also the question of the Eurasian Land-Bridge, as the cornerstone of a global reconstruction of the world economy. We have proposed the integration of the Eurasian continent, after the collapse of the Soviet Union, through large development corridors, to connect the industrial and population centers of Europe with those of Asia. That implies the integration of waterways, highways, maglev, autobahn, computerized main stations, and that obviously should not be limited to the Eurasian continent, but it should extend itself to all of the Americas and Africa.

So, in order to accomplish that kind of a large, global infrastructure development, you can not leave that to the private banking system, but you need contracts between sovereign governments, or sovereign nation-states. And these contracts must be orchestrated in such a way, designed in such a way for 25 to 50 years. And you should not demand that any government pay any debt before the real development has given that country the ability to do so.

So therefore, you need contracts which take into account the difference between the different countries: Some have raw materials, others don't; some countries are small, others are big. So therefore, you need a multinational network of treaties which allow the development and the uplifting of the productivity of every country on this planet.

PILLAJO: Would this be like the idea of the Bank of the South, and the Market of the South posed by Presidents Correa and Chávez?

ZEPP-LAROUCHE: Absolutely. That's a very important ingredient of the new system. Because you need a banking system which is devoted to the common good of the people. And the role of the state is very important, because that is the only instrument which can guarantee this common good. So the Bank of the South would fit perfectly into this global reorganization.

PILLAJO: Mrs. LaRouche, I have one last question for you, which is, when should such a meeting of leaders of the strongest or most important nations of the world occur, to bring about this New Bretton Woods? When should such a meeting be held?

ZEPP-LAROUCHE: Well, if there would be sanity in the governments, they would do it this second, because any delay is destroying more of the physical economy. But I'm afraid the present constellation in the world will probably mean that it will take an even more shocking phase of the systemic collapse, until they do it.

But, there are good signs. For example, the fact that in Russia, President Putin has been talking about the Franklin D. Roosevelt tradition, and Putin has called many times for a "New Deal" for Russia and for the whole world. And the Russians, recently, in April conducted a very important conference around the question of the construction of the Bering Strait [Tunnel]. That is a gigantic project, which involves 6,000 km of railway, from the Trans-Siberian Railway to Alaska, and they have invited Mr. LaRouche as one of the main speakers, and that was very clearly meant by the organizers of the conference, as a signal that Russia wants to have a war-avoidance policy with the United States, and they very clearly played the "LaRouche card," to signal that they want to have war-avoidance through building of great projects, together with the United States.

And there was great excitement about that policy, because the discussion was that these development corridors should go all the way down, through North America, Central America, all the way down to Chile. And many of the Academicians of the Academy of Sciences were actually excitedly discussing that when this development grid is built, you can travel more quickly from Acapulco via the Transrapid maglev, through the Bering Strait, to Mumbai in India.

PILLAJO: Very good. Dennis, unfortunately our time has run out. And we thank Helga Zepp-LaRouche, of the Schiller Institute, and the wife of Lyndon LaRouche, former candidate for President of the United States, and thanks for her explicit remarks to our listeners.

Mrs. LaRouche, thank you very much. Thank you, Dennis Small, for the translation. We wish you well: Thank you very much.

ZEPP-LAROUCHE: Thank you.