LaRouche Speaks at a Washington DC Diplomatic Gathering-- Transcript
July 28th, 2008 • 7:27pm •


The Time Has Come, We Have To Make Some Major Steps, Of The Type I First Proposed Last Year

July 28, 2008 (LPAC)—Lyndon LaRouche provided the following strategic overview to a private Washington meeting on July 23. Because of technical problems, only part of his keynote remarks were recorded.

LAROUCHE: We had a [webcast] yesterday, which is on our LPAC, EIR as well, which I presented in a 3-hour session—which will be produced, generally already exists in an audio/video form. It went on for three hours, and I spoke directly for an hour, and then we had questions and answers and discussion following that.

What I said was of particular importance, globally, strategically at this time. Because most people are aware there is an international financial crisis, with many ramifications. The crisis is not merely financial, it is also strategic: The issues of war and peace depend upon the outcome of this particular crisis. The fate of civilization is very much in jeopardy at this point. There's much effort to deny that, but it's a fact.

What we're in, first of all, is a general breakdown crisis of the present international monetary-financial system. This system will disintegrate. Nothing can prevent that. The question is, will governments or a sufficient number of governments take the forms of action which are available, by which this problem could be brought under control? Or will they not?

The problem inside the United States is not only a certain speculative class of people, interests, who very much do not want any reforms, despite the fact the system is collapsing, because they would go out of existence, as I shall explain. But also of pure cowardice in our institutions: Even where people in politics are not corrupt or stupid, they tend to be cowardly. You may know something about that from your work in life, how this happens. They're just afraid. There's no one in a leading position here, in the United States, who does not know, the entire international financial system is disintegrating. We're on a very short fuse, and have been on a short fuse since I first warned of this, when it began to happen toward the end of July of last year.

At that time, as I indicated yesterday, I had made three general proposals for emergency action by the United States government, and others. First of all, that we put the banking system into receivership for reorganization, the financial system. We have to stop the bleeding: Because as long as you postpone the correction, the thing gets worse. So therefore, the important thing is to put the international monetary-financial system, under emergency bankruptcy control. The purpose is, that, despite the fact that practically every bank in the United States is bankrupt, and the situation in Europe is no better—if anyone in Europe tells you the banking system is healthy, they're lying, or they're stupid. It is not. This thing is collapsing. We've been on a short fuse, and more recently we've reached a breakdown point. We're on the edge.

Now, the three proposals I made, were, first of all, the crisis was not caused by housing. It has nothing to do with so-called, this lower case of housing financing. That was an effect of the operation, not the cause of it. The cause was a general breakdown of the system, which has been fully understood since 1988, '87-'88. It's a breakdown, we might call it, of the "Alan Greenspan System of Hyperinflation."

But the problem is, since every major bank in the United States is implicitly bankrupt, and that's a fact, and since the housing market is also in danger, which is a social crisis, what is required immediately in the United States, then as now, is emergency action by the Federal government, putting the banking system, and the housing crisis into receivership in bankruptcy; to freeze all foreclosures, to keep the people in their homes under an interim arrangement until we can sort the mess out. Also to ensure that all essential banks, which we call chartered banks—which were chartered to receive deposits and loan money, as deposits, whether on the Federal level or on the state level—that these banks must be protected, and in general must be kept in ordinary operation, but under bankruptcy rules. That is, they will be perfectly permitted to conduct their ordinary business of a certain type, they will be supported by the Federal government in the ability to maintain that responsibility, but other matters which are debatable, the corruption of the system, that will be examined at leisure, with no panic. We must maintain social and political stability in a crisis: Number 1.

Secondly, I proposed then, and I have again, that the United States must have a two-tier system in credit: That is, the United States is a very special case in this; England is operating on a 5% ratio, the European Union is operating on a somewhat lower ratio on discount rates; I proposed that the United States adopt immediately, and again, recently, a 4% prime interest rate for lending for the Federal system, with a lower rate, only for special Federal categories, where the Federal government gives credit for projects authorized by the Federal government, which can be between 1% and 2%. But all business transactions, a 4% rate, discount rate in the bank, is required. On that basis , I estimate that the value of the U.S. dollar will rise rather rapidly toward about 20% above its current operations.

The United States is peculiar, because Europe can't function because of the Maastricht agreements, and therefore Central and Western Europe have no way of coping with this crisis, because the governments have been inactivated by an international system which is the Maastricht Treaty system. England is not quite in the Maastricht system, though it's the author of it, because the English always like to keep out of dictatorships over themselves, not necessarily over others. So you have controversy there.

The British are operating at a 5%, approximately, rate. And Trichet and so forth are operating at above 4%. But, since the United States is, by its character—[interruption]... All right, but because the United States needs to function on the basis of Federal investment ...[interruption]

So, the United States, under investment drive, by releasing credit, Federal credit, can keep certain projects going that are necessary, and prevent the bleeding out of funds deposited in banks, from those banks. What's happening now, is because of the 2% Federal Reserve rate now, the funds are bleeding out of U.S. banks into foreign banking markets, where the interest rates are, as in the case of Britain, 5%, and in Europe, somewhat higher than 4% under Trichet.

But the United States going back to its normal functioning, under bankruptcy protection of its banks, at a 4% rate, I would expected a 20% increase in the value of the dollar on international markets, on trading dollar, very quickly. Because the United States is a good investment, and Europe is not, simply because Europe's in a worse situation than we are.

But in that case, we have a third step that has to be taken: These are temporary measures, but they're absolutely necessary, because the first thing in a crisis of this type, is stability. The first concern, for me, is stability of the U.S.: stability of the U.S. economy, and the U.S. as a political system. Because if a political system doesn't function, the U.S. economy will not function.

The third point is international: The present international system—financial system, monetary system—is hopelessly bankrupt. It can not function under the present conditions. We are on the verge internationally of a general breakdown process, accelerating breakdown process, which is comparable to the dark ages of the medieval period of history; comparable most recently to the general breakdown crisis which occurred in the middle of the 14th century in Europe, where the population, the number of cities, towns, parishes, collapsed by about half and the population collapsed by one-third, and there was a general dark age effect throughout Europe, and beyond that, in that period.

We're in a potential for that: If you see things, for example, like the food crisis internationally, if you take the percentile of populations which get one meal a day, and that a poor meal, if you get the percentile of the populations which get only two meals a day, and usually a fairly poor meal; and then look then at the populations which get three meals a day, and that isn't so good in many parts of the world. The lower 80% of family-income groups in the world, is in very serious condition: Africa is in a very dire condition. We are struggling in South America, and Central America, to get some kind of stability there, in terms of the local government and the local economic institutions; and so forth, around the world.

So therefore, what we require is a general international recovery, and that can be effected in only one way, as a matter of practicalities: If the United States—and this may seem initially rather far-fetched, considering the nature of the present government of the United States—if the United States, or if a leading Presidential candidate of the United States government, were to approach Russia, China, and India, and propose that the four countries combine as an initiating group to mobilize a larger group of nations for a general reorganization of the international financial system, back to a Bretton Woods type system, that is, an agreement for a fixed-exchange-rate system, with approximately a 50-year prospect for long-range development among countries, hmm? Under these [interruption]... additional provisional basis, but to make it permanent, it has to be [inaudible] economic purposes, we could organize a general recovery.

The present international financial-monetary system can not be saved. So, we can use the weapon of bankruptcy procedures, under government protection to stabilize the system by recognizing those parts of the system that do work, which are essential for the normal functioning of government and among nations, and launching some large-scale programs, of long-term infrastructure development, which is what the world needs largely now, and to use that to organize the general recovery.

As to a long-term agreement, what I have proposed is that the United States dollar—with all this money to China and other countries, as some people know—can make that good, by guaranteeing the value of the U.S. dollar. Under those conditions, a new Bretton Woods-style system would function, and could be made permanent, after a short period of provisional arrangements in that direction.

It's important to know that, despite all talk and chatter to the contrary by various sources, it is absolutely impossible to continue life on this planet, in an acceptable form under the present international financial system. You can not reform it. What has happened in recent periods, especially since 1987, and 1991, since those fundamental structural changes in the world system, we created a monetary system which is a monster, with highly inflated obligations that never could be paid. They're highly fictitious, it's a bubble, like a John Law Bubble, and you have to simply cut out and cancel whole classes of debts, or whole amounts of classes of debts. Therefore, it has to be done. And many governments lack the courage to undertake that.

If the United States will have the courage, to recognize its responsibility and take that action, I'm sure that other countries will coincide. I think that Russia will cooperate, if they believe in it. China? China: We owe a great deal of money to China. China's economy depends upon the stability of our obligations to China in dollar denominations. The collapse of the dollar is a crisis for China. And therefore, stabilizing our obligations in dollar-denominated obligations floating in the world market, is essential for peace and stability in the world.

Therefore, we need a fixed-exchange monetary system again. This time not based on a Keynesian system, which was based under Truman, but based on a credit system, which was what Roosevelt originally intended in 1944. Under such a credit system, then we could function.

And there are long-term projects. For example, the obvious one: Back already, in the 19th century, there were general plans, and feasible plans between 1875, and the end of the century, there were plans for the development of modern railway systems, including across the Bering Straits, which would connect every major continent of the world with an efficient rail system. This went with the development of water-borne transport systems, with the use of electrical power, and so forth, all of which came out of the 1875 development in the United States around the Philadelphia Convention.

This is what the geopolitical wars were about: The United States proposed this, Germany accepted it, the French government at the time accepted, Russia accepted it, the leadership for China accepted it; but at that time, the project wasn't done. And again, it's on the table. Russia has now moved for a Bering Straits tunnel project, which is a normal extension of what the original project was.

This is necessary to connect Africa and other continents together, because of the raw materials issues. We need two things in raw materials: First of all, nuclear power. Without conversion to nuclear power, in a big way, we can not deal with the materials problems of this planet. We need power. We are also running out of traditional sources of raw materials, which means we have to develop raw materials in area which are undeveloped. To do that, the only efficient way is not water transport, but actually rail transport. So the building of an intercontinental system, of the type that was already underway, between 1875 and the end of the century, is now overdue. The use of nuclear power: We can not deal with the water problems of the world without nuclear power, the fresh water problems. We have countries that are living on fossil water, that is, deposits of water from centuries ago, or even millions of years ago. For example, the southern part of India, there's a large reservoir of water, but it's water which was put there 2 million years ago, and you just can not go on using up fresh fossil water. We need to have a processing of fresh water to meet human needs.

So, this is the time this has come. The problem is, that in any crisis, of this type, that the customary practice, habits of governments, says, "Let's not change everything. Let's make little steps. Little steps—politically feasible little steps." And the time has come, we have to make some major steps. Most of these steps involve things that governments have wanted for a long period of time. The will to make these changes has been lacking: The time has come, now, we have to take the thing that various parts of the world have wanted to do, and put them all in one package, and say, "We're going to do it."

Don't underestimate the crisis! Don't believe that "maybe" this is going to happen; don't believe that "maybe it isn't going to happen." I've been forecasting for a long time, and I've never made a mistake when I made a forecast. Sometimes I don't make forecasts, because I don't know what I'm doing, so I don't make forecasts. When I make forecasts, I've been right: The system is presently—the present international monetary-financial system, by virtue of its structure, its inherent characteristics, and its depletion, can not be saved! A minor reform in the system, minor reforms in the system, will not work! We're in a breakdown crisis comparable to the dark ages of earlier parts of history.

And that's what I'm working on. In the present election campaign in the United States, nobody knows who is going to be the next President. Nobody knows yet, who is going to be nominee, for the next Presidential candidate. Nothing is settled. Everything is up for grabs. And we're in a crisis. We're not even sure we're not going to have a war, an attack on Iran in this period, because certain forces are desperate, and will try to start a war, even though the war is really foolish—simply because they want to start a war, to try to change things, in the way it looks. A very dangerous period.

This, as I say, is tantamount to the edge of a dark age for the entire planet. And you look, today, at the planet as a whole, from a physical-economic standpoint—at the question of food supplies, standard of living, disease, every kind of problem, and look at the condition of life of people: a general collapse of trade, under these conditions, the kind of collapse that this financial collapse indicates, is sufficient to reduce the population of this planet by billions of people in a fairly short period of time! The extinction of whole cultures and chaos throughout the planet.

The time has come for men and women of courage in leading positions, to think clearly, now. And that's what I'm doing. There are, probably more people than you might think who are sympathetic. But the problem is, that most politicians today, are more coward than brave: That is, they will say, "Yes, it's a good idea. But, I'm not ready to make it. I'm not ready to do it." So the thing is going to depend upon the initiative of a few people. That's why I mentioned the four nations: Russia, China, India, are the pivot of an attempt from largely Asia, for a change in the direction of the planet. The planet as a whole depends to a large degree on the success of initiative from that quarter, because Europe right now, Western Europe, Central Europe, can not do anything, of any depth. The United States government in the recent period has been unable, for at least the last three to four years, isn't capable of doing anything of worth and importance.

And therefore, the United States deal with the crisis, and being at the point of a gun economically, means that the United States is in a position where it mustit must!—think of going to Russia, to China, and to India, and to say, "Let us bring together, in a larger group of nations, who agree on this objective, and let's push it through." That, I think, is the only hope for civilization now.

And that's what I'm pushing. I think it's an interesting problem.