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The Dow's Lost Decade

Most people sense that the financial crisis that has now been escalating for 15 months, and the "sudden'' collapse of the real economy, are only the beginning. These were just the first waves of the storm, but the really powerful tsunami wave is coming toward us. The catastrophe could still be avoided, but that would require responsible figures in governments and financial institutions to admit their mistakes and accept competent help.

But here we have a problem: Those who now should be taking decisive measures to defend the common good are still not ready to face up to the origins of the crisis. The communiqué of the G-20 summit in Washington on Nov. 15 admitted that "risks in the financial markets were underestimated.'' The latest annual advisory of Germany's Council of Economic Advisors, the so-called Five Wise Men, speaks in nebulous terms of "a darkening of the entire economy'' as the main reason for the crisis. "The chain of failure includes many,'' declared German President Horst Köhler at a conference of top bankers in Frankfurt--and one can only agree with him.

But Köhler's perhaps well-intentioned, but completely ineffective, appeal to the bankers who made ``a lot of money'' in recent years, to set up a ``Hardship Fund,'' is hardly a strategy to overcome the crisis, and the answer from those so addressed was just a tired smile. It is clear from all these statements, that the government, as well as the so-called experts, are still not willing or able to take the necessary steps to reorganize the financial system.

- Derivatives: The Main Problem -

In Europe, it is Italian Economy Minister Giulio Tremonti who, as a government representative, has had the courage to call a spade a spade, when he compared the financial crisis to a video game, in which every time you kill one monster, another pops up. And when you kill all of them, along comes the super-monster, which is derivatives outstanding.

This is exactly where the body is buried! Now panic is setting in, as investors in November have been massively withdrawing their deposits from hedge funds and financial institutions, in turn, forcing these to sell whatever assets they can. This generates a double feedback-loop: Since the depression is coming to a head, asset prices are falling--most of them having been bought on credit in the first place--which further stresses the balance sheets of banks and hedge funds, which therefore curtail their lending even further. These various intensifying phases of "deleveraging'' of so-called structured paper are the main problem.

The volume of derivative contracts outstanding was said to be, according to the Bank for International Settlements, $675 trillion at the end of 2007; the French magazine Marianne recently gave the figure as $1.4 quadrillion, but it could be much more. If an attempt is now made to honor what these bankers themselves call "toxic waste,'' then, on the one hand, this leads to hyperinflation, since more and more liquidity is pumped in to try to back up the virtual values; but at the same time, it brings on deflation, since the collapse of the real economy leads to falling prices.

This is the reason for the breathtaking speed of collapse of the real economy worldwide--the auto sector, the steel industry, petrochemicals, construction, shipping, etc., etc. And it is a global phenomenon: The U.S.A. is plunging into depression; China's American export market is collapsing; the Chinese economy is falling apart; China is no longer buying textile machinery in Germany; shipping is collapsing, since in the four or five weeks that it takes a ship to go from Europe to Asia, conditions have dramatically changed, so that the letters of credit are no longer accepted, etc., etc.: a downward spiral to...! Until an orderly bankruptcy reorganization is carried out.

- The Roosevelt Solution -

Fortunately, there is an historical precedent for how the problem can be solved: We need a new financial architecture, in the tradition of Franklin D. Roosevelt's Bretton Woods System: a New Bretton Woods. That was the idea that motivated French President Nicolas Sarkozy to propose the summit meeting of the G-20 countries, and this is the policy that is being proposed by Tremonti on a daily basis. This is what Lyndon LaRouche and I have proposed for a long time--since the beginning of the 1990s, to be precise. We must win the Berlin government over to supporting this policy.

We need a real New Bretton Woods conference, at which a new financial system is decided upon, just as Roosevelt intended in 1944; that is, replacing colonialism with a new, just economic and financial order.

Second, we need a worldwide New Deal, such as Roosevelt implemented in the U.S.A. during the 1930s, to end the Depression through state credit creation.

Concretely, for Germany, this means that after (!) reorganization by means of a New Bretton Woods system, there must be an investment program of about EU200 billion for the creation of full, productive employment, as the BüSo has demanded for years. We need to build the Eurasian Land-Bridge as the centerpiece for reconstruction of the world economy.

From a technical standpoint, such a reorganization is absolutely no problem. The problem lies elsewhere. For the last four decades, the economy and morality have been completely separated from one another, and a unrestrained dog-eat-dog society and personal profiteering have taken control. On the one side, you have totally unnecessary luxuries, such as the recent dedication of an artificially created luxury island in Dubai, which was apparently planned as a refuge for the super-rich before the outbreak of a world financial crisis; at the opening festivities, the fireworks alone cost $20 million and 1.7 tons of lobster was consumed; on the other side, billions of people are threatened with starvation and brutal poverty.

Pope John Paul II, in his encyclical Centesimus annus (1991), called it an "abuse in the sight of God and humanity, if someone directs his capital against the people and their work,'' and this has happened, without a doubt, under the now-shattered system of globalization. We need a new paradigm, in which the economy and morality are brought into harmony, and man is placed at the center of politics and economics.

Do you really want those who neither foresaw the crisis, nor are ready now to come to terms with its real origins, to be left to decide what should happen now?

I propose that you help us, the BüSo, to carry out the necessary mobilization of the population, so that we can implement a New Bretton Woods System and a new New Deal!

Eight Areas to Consider About This Market

An organisation using the death of the global financial system to eliminate the nation-state system and impose a global, fascist, corporatist dictatorship upon the world. One does not need inside information to see this; one merely need examine the policies being pushed by the international banking crowd and take them to their natural conclusion. The push for fascism is, to use H.G. Wells' term, an “open conspiracy.”

However, it is always useful to receive confirmation of their intent from inside the enemy camp: According to reliable sources, there is an active discussion within the halls of HSBC's London headquarters of the need for a new Hjalmar Schacht.

This should not be a surprising development. HSBC is the lead bank of the Brutish Empire, and was the political force behind the rise of Adolf Hitler in Germany. And Schacht was the empire's man on the scene, as head of the Reichsbank and then, Minister of Economics under Hitler.

Schacht's role was to impose an even more brutal austerity on a German population whose standard of living had already been destroyed by the hyperinflation which resulted from the savage reparations imposed on the nation after World War I. Schacht helped create the conditions which made Hitler possible, and then helped finance the rise of Hitler, working closely with the Bank of England. Just as the bankers created Hitler in the 1930s, they are now pushing fascism again, this time, on a global scale.

- Corporatism -

Hitler was just one of the projects of the Brutish Empire. Another was Benito Mussolini, the Italian dictator who took office a decade before Hitler, then allied with him in World War II. Mussolini took the title “Duce of Fascism,” a term which can be translated as either Duke or Doge of Fascism, Doge being the highest office in the Venetian system. Behind both the Hitler and Mussolini governments lay a complex of imperial financiers and corporate cartels, which used the governments to keep the people in line. The German cartels, many of which came together to form the infamous IG Farben, were actually creatures of the Anglo-Dutch Liberal system; they, like Schacht, helped finance Hitler and build his war machine for the purpose of having Germany attack Russia--having rivals fight debilitating wars against each other is a specialty of the Brits. It was only when Hitler turned his guns west toward the heart of the empire, that the oligarchs were forced to defend themselves against the monster they created.

The purpose of this corporatist movement was to eliminate the role of the nation-state as a force in world affairs, and replace it with a system run by financial houses and corporate cartels. There were fascist parties in all the major Western nations in the 1920s and 1930s, including the U.S.A., where the Morgan and du Pont interests tried to organize a coup against Franklin Roosevelt, in a plot exposed by Gen. Smedley Butler, in 1934.

The coup against Roosevelt was thwarted, and FDR led the United States and its Allies to victory over Germany and Italy in World War II. The tools of fascism had been defeated, but not its imperial core. This corporatist movement resurfaced in a big way with the 1968 Bilderberg meeting in Mont Tremblant, Canada.

At that meeting, George Ball, a senior banker at Lehman Brothers and a major figure in the Anglo-American Establishment, gave a speech outlining the need for a new structure to replace the “outmoded” nation-state. Ball called this new structure the “world company,” an explicitly corporatist formulation. This “world company” would, in the view of its sponsors, take control over raw materials and other resources worldwide, allowing the empire to use them as it saw fit. Nations, it was said, were too selfish, tending to view the resources within their borders as theirs, to be used for the benefit of their own people.

Fast-forward to today, and look at the world from that perspective. This world company approach has largely been implemented, under the name globalization; nations everywhere are dependent upon the empire's financial markets for their funds, and dependent upon the empire's cartels for many of the necessities of life. Though we do not--yet--have the jackboots of Hitler and Mussolini, we do have the corporatist fascism they represented, and that system is coming to the fore under the guise of bailing out the financial system.

- Debt Overload -

It should be obvious to all thinking persons by now, that we cannot solve a debt crisis by taking on even more debt. All the bailout really does is transfer losses from the books of the banks to the books of the government--and thus to the taxpayer--without doing anything to increase our economy's ability to pay that debt. It does, in fact, do just the opposite, as the physical economy is further cannibalized by the demands of the bailout. We incurred this debt as a result of the decision to deindustrialize the U.S. economy, and switch to a service/finance economy; with every passing year we produce less while we spend more, making up the difference by borrowing from the rest of the world.

Wall Street financed this expansion of debt by creating an ever-wilder series of financial instruments. This process, in which debt was treated as an asset, and then that asset used as the basis to create even more assets, ad absurdum, resulting in a mountain of highly over-leveraged securities and derivatives bets which far exceeds the debt-carrying capacity of the economy. The same is true, to varying degrees, in most other countries of the world.

We are, to put it simply, flat broke, with no prospect of recovering unless we break with the failed Anglo-Dutch Liberal system and return to the time-tested policies of the American System.

- Fascism, or Renaissance? -

The clear intent of the Brutish Empire is to use this crisis to return the world to the way it existed before the American Revolution, a rentier-financier feudalist model coupled with the modern technology of "Big Brother." This is explicit in the call for a new Schacht, but it is also implicit, at least, in the efforts by the Bush Administration, the Congress, and the Federal Reserve to bail out the system. From the insane perspective of the financiers, the only chance they have of saving their system is to ram through a savage consolidation of the financial system into a dramatically smaller number of global institutions--giant banks, insurance companies, and a few others, which owe their allegiance to the empire rather than any nation. This would give the Anglo-Dutch Liberal empire even greater control over the issuance of credit than it now has, giving it a greater stranglehold over the peoples of the world. Credit would be largely limited to the financial institutions and the cartels of the empire, eliminating all competition, and accelerating the collapse into a new Dark Age.

The alternative, as laid out clearly by Lyndon LaRouche, is a return to the credit system established by the U.S. Constitution, in which Congress appropriates credit for infrastructure and related projects for the public welfare, and the Executive branch administers the issuance of that credit through a national bank. This method provides the optimum combination of government control over the money supply and the distribution of that credit in a manner that insures the money is used for the most productive purposes. The national bank would issue the credit to private companies via private banks, tapping the entrepreneurial spirit and creativity of the American people. Naturally, this would also require educating Congress and the citizenry in the American System, so that we can make sure Congress follows the Constitution. Were we to do this, we could lead the world into a new Renaissance.

Gold Pressure Is Near a Breaking Point

Sen. James Inhofe (R-Ok.) said on 21st Nov that it was Treasury Secretary Henry Paulson who personally told Congressmen that there would be martial law in America if they did not pass the bailout of the banks as demanded by the Bush Administration. On Oct. 2, Rep. Brad Sherman (D-Calif.) said on the House floor that "Many of us were told in private conversations that if we voted against this bill on Monday the sky would fall, the market would drop two or three thousand points the first day, another couple of thousand the second day, and a few members were even told that there would be martial law in America if we voted no."

Now, Senator Inhofe, speaking on KFAQ radio station in Tulsa, has confirmed who it was that issued this threat. The interview host Pat Campbell asked Infhofe, "Somebody in D.C. was feeding you guys quite a story prior to the bailout, a story that if we didn't do this we were going to see something on the scale of the depression, there were people talking about martial law being instituted, civil unrest. Who was feeding you guys this stuff?"

Inhofe replied, "That's Henry Paulson. We had a conference call early on, it was on a Friday I think--a week and half before the vote on Oct. 1. So it would have been ... the 19th of September, we had a conference call. In this conference call and I guess there's no reason for me not to repeat what he said, but he said, he painted this picture you just described. He said, This is serious. This is the most serious thing that we faced."

Inhofe has demanded that the remaining funds not already given away be taken back by the government, and suggested that Paulson was giving the money to his friends.

But simply taking money back is not a solution. There is only one competent solution to this mess and that is a bankruptcy re-organization as Lyndon LaRouche has defined.

Gold Pressure Is Near a Breaking Point

Most people sense that the financial crisis that has now been escalating for 15 months, and the "sudden'' collapse of the real economy, are only the beginning. These were just the first waves of the storm, but the really powerful tsunami wave is coming toward us. The catastrophe could still be avoided, but that would require responsible figures in governments and financial institutions to admit their mistakes and accept competent help.

But here we have a problem: Those who now should be taking decisive measures to defend the common good are still not ready to face up to the origins of the crisis. The communiqué of the G-20 summit in Washington on Nov. 15 admitted that "risks in the financial markets were underestimated.'' The latest annual advisory of Germany's Council of Economic Advisors, the so-called Five Wise Men, speaks in nebulous terms of "a darkening of the entire economy'' as the main reason for the crisis. "The chain of failure includes many,'' declared German President Horst Köhler at a conference of top bankers in Frankfurt--and one can only agree with him.

But Köhler's perhaps well-intentioned, but completely ineffective, appeal to the bankers who made ``a lot of money'' in recent years, to set up a ``Hardship Fund,'' is hardly a strategy to overcome the crisis, and the answer from those so addressed was just a tired smile. It is clear from all these statements, that the government, as well as the so-called experts, are still not willing or able to take the necessary steps to reorganize the financial system.

- Derivatives: The Main Problem -

In Europe, it is Italian Economy Minister Giulio Tremonti who, as a government representative, has had the courage to call a spade a spade, when he compared the financial crisis to a video game, in which every time you kill one monster, another pops up. And when you kill all of them, along comes the super-monster, which is derivatives outstanding.

This is exactly where the body is buried! Now panic is setting in, as investors in November have been massively withdrawing their deposits from hedge funds and financial institutions, in turn, forcing these to sell whatever assets they can. This generates a double feedback-loop: Since the depression is coming to a head, asset prices are falling--most of them having been bought on credit in the first place--which further stresses the balance sheets of banks and hedge funds, which therefore curtail their lending even further. These various intensifying phases of "deleveraging'' of so-called structured paper are the main problem.

The volume of derivative contracts outstanding was said to be, according to the Bank for International Settlements, $675 trillion at the end of 2007; the French magazine Marianne recently gave the figure as $1.4 quadrillion, but it could be much more. If an attempt is now made to honor what these bankers themselves call "toxic waste,'' then, on the one hand, this leads to hyperinflation, since more and more liquidity is pumped in to try to back up the virtual values; but at the same time, it brings on deflation, since the collapse of the real economy leads to falling prices.

This is the reason for the breathtaking speed of collapse of the real economy worldwide--the auto sector, the steel industry, petrochemicals, construction, shipping, etc., etc. And it is a global phenomenon: The U.S.A. is plunging into depression; China's American export market is collapsing; the Chinese economy is falling apart; China is no longer buying textile machinery in Germany; shipping is collapsing, since in the four or five weeks that it takes a ship to go from Europe to Asia, conditions have dramatically changed, so that the letters of credit are no longer accepted, etc., etc.: a downward spiral to...! Until an orderly bankruptcy reorganization is carried out.

- The Roosevelt Solution -

Fortunately, there is an historical precedent for how the problem can be solved: We need a new financial architecture, in the tradition of Franklin D. Roosevelt's Bretton Woods System: a New Bretton Woods. That was the idea that motivated French President Nicolas Sarkozy to propose the summit meeting of the G-20 countries, and this is the policy that is being proposed by Tremonti on a daily basis. This is what Lyndon LaRouche and I have proposed for a long time--since the beginning of the 1990s, to be precise. We must win the Berlin government over to supporting this policy.

We need a real New Bretton Woods conference, at which a new financial system is decided upon, just as Roosevelt intended in 1944; that is, replacing colonialism with a new, just economic and financial order.

Second, we need a worldwide New Deal, such as Roosevelt implemented in the U.S.A. during the 1930s, to end the Depression through state credit creation.

Concretely, for Germany, this means that after (!) reorganization by means of a New Bretton Woods system, there must be an investment program of about EU200 billion for the creation of full, productive employment, as the BüSo has demanded for years. We need to build the Eurasian Land-Bridge as the centerpiece for reconstruction of the world economy.

From a technical standpoint, such a reorganization is absolutely no problem. The problem lies elsewhere. For the last four decades, the economy and morality have been completely separated from one another, and a unrestrained dog-eat-dog society and personal profiteering have taken control. On the one side, you have totally unnecessary luxuries, such as the recent dedication of an artificially created luxury island in Dubai, which was apparently planned as a refuge for the super-rich before the outbreak of a world financial crisis; at the opening festivities, the fireworks alone cost $20 million and 1.7 tons of lobster was consumed; on the other side, billions of people are threatened with starvation and brutal poverty.

Pope John Paul II, in his encyclical Centesimus annus (1991), called it an "abuse in the sight of God and humanity, if someone directs his capital against the people and their work,'' and this has happened, without a doubt, under the now-shattered system of globalization. We need a new paradigm, in which the economy and morality are brought into harmony, and man is placed at the center of politics and economics.

Do you really want those who neither foresaw the crisis, nor are ready now to come to terms with its real origins, to be left to decide what should happen now?

I propose that you help us, the BüSo, to carry out the necessary mobilization of the population, so that we can implement a New Bretton Woods System and a new New Deal!

Panic-Crash Sentiment Causing Market Volatility

The system which was to explode, or implode, just broke loose at its weakest point. The financial derivatives system of the world is what is in the process of collapsing. And the financial derivatives system totals to over $1 quadrillion U.S. dollars in estimated value! And this is the great speculative bubble which has built up from 1987 on, under Alan Greenspan and others. This is the bubble that is now collapsing.

This is a hopeless collapse, in terms of the present system. No mere reform of this present system, will save the planet. The nearest event comparable to this, in all European civilization's experience, occurred in the 14th Century, with the general collapse, called a "New Dark Age," in which the entire system of Europe collapsed. The number of villages collapsed by one-half, the population of Europe collapsed by one-third, and it took several decades before even the beginning of civilization returned.

The crisis we have today, worldwide, is of a similar form: A great financial bubble, which has been growing at a great rate, while the rate of net physical production per capita, has been collapsing. This system is doomed in its present form. And there is no minor reform, there's no monetary reform that could save this system. We are headed for an absolute, total collapse of the planet, unless a change is made. There is no hope, for any remedy, within the framework of what's called a monetary system. But rather, as I shall emphasize here, the alternative is the establishment of a credit system, to replace the present monetary system.

The Crucial Role of the United States
Now, the model for the credit system lies in the United States, historically. If you study the U.S. Constitution and the peculiarities of the U.S. Constitution, as opposed to those of Europe, our system of government has no resemblance in essentials, to any European system of government. European systems of government are essentially parliamentary systems, not federal systems. There are reforms in European states, which have moved in the direction of a Presidential system. The best example of an attempt in that direction was Charles de Gaulle, as President of France, in his Fifth Republic. There was a serious attempt to establish a nation-state system in Europe, by de Gaulle. But since that time, there has been no successful effort, to establish a true nation-state system, as opposed to a parliamentary system.

Therefore, the United States has a crucial significance in this, and without a crucial role by the United States, which seems extremely difficult right now, because of the present Presidency and so forth—without the United States, there is no hope for avoiding what will be a plunge into a new dark age, resembling that which occurred in Europe, which occurred in the 14th Century. That's the situation we face. No simple reform, no adjustment, no monetary agreement, nothing of that sort will work.

There are, however, very specific measures, of agreements among governments which could change the system, could change it without anything too radical, but it would get us through.

Now, the first thing that has to happen is, in practice, is that unless there's an agreement of a certain type among the United States, Russia, China, and India, we have reached a condition, where it would be impossible to save the world from a collapse, a worldwide collapse. The form would be this: It would be the change of the present world monetary system, the elimination of the present world monetary system, to replace it by a credit system, which is consistent with the principles of the U.S. Federal Constitution. Remember that our Constitution, and our Presidential system, was not based on a parliamentary system; it was not based on a monetary system. It was based on what's called a credit system.

The difference is obvious to all of you: You have two types of systems in the world today, of any significance. One, there are credit systems: A credit means that the money issued by a government, is issued by a government, in the name of the government, and is backed by the promises of the government to support the credit. This credit, under law, can then be monetized and supply a money currency as well as credit for development.

This is distinct from a monetary system. A monetary system represents a system of money, which is outside government, but which may or may not have agreement with government. European systems, today, are not credit systems, they are monetary systems. The monetary system, which is tied to the IMF, today, and has been since 1971, 1972—that period—the monetary system is what is collapsing. The monetary system is collapsing, because it is tied, specifically now to the credit bubble, the derivatives bubbles. And this is what's collapsing. There's no possibility at this stage any longer, of saving the monetary system in its present form. That is, a reform made internal to the monetary system will not work. It's too late. We could have done something in that direction, back a year ago, July a year ago, back in 2007. The system is so rotten today, that it would not be possible, especially the changes that have been made by the U.S. and other governments, in the recent months, are so radical, that it would be impossible to reform this system. You have to completely overhaul it and revolutionize it.

But, our American System allows us to do that, under our Constitutional system in our history.

A Four-Power Agreement
Now, what we have to do is, is establish a power bloc, to force through a change among nations. Western Europe, despite the fact that there are positive elements, as the case of [Economics Minister Giulio] Tremonti in Italy, or some efforts on the part of [President Nicolas] Sarkozy in France; there are some initiatives in the direction of useful reforms. There are desires for useful reforms from other parts of the world. But the requirement here, is to have a sufficiently powerful agreement, to force through the reforms in a timely fashion. This can only occur by an agreement among the United States, Russia, China, and India. If the United States, Russia, China, and India function as a bloc, other countries will join them, and we can force through the reform. In my view, without that particular agreement, it would be impossible to ram through the reform, politically, at this time—not in time. We might eventually agree to it, but it would be too late. We need change now: The world system is collapsing at such a rate, now, that we do not have years to play with. We do not even have many months to play with. By the end of the year, we must be in the direction of making some kind of reform, in this direction.

Now, what it means, is this: As those of you from China know, and other countries, the change in the system, especially since 1971 and 1972 on, the change was a change in the relationship of China, from the United States to China and other countries. The change was essentially to what is called "globalization": to move production out of Europe and the United States, and to move it into countries which have low per-capita incomes: in other words, cheap labor. And thus production, and infrastructure, were moved out of the United States, and increasingly out of Europe, especially after 1989-1990, into other countries, Third World countries in particular, which operate at a cheap-labor price. Today, most of the production of the world depends critically, on a margin of production in these countries, which are the export countries, which replaced European production, U.S. production, and so forth.

So therefore, at this point, you have two things: First of all, the system is collapsing. Now, by the nature of the system, it means that the countries which were used as substitutes for production from Europe and the United States, for example, are now collapsing, because the purchases from other countries are collapsing, as in the case of China, where the collapse of China is a potential time-bomb for the entire planet. Because if the collapse of China's exports continues at the present rate, this will be a time-bomb for the entire system; and some people understand this. Therefore, the unity of four powers, the United States—which has a certain special power—Russia, China, and India, represents a bloc that can force through reforms of the type that are needed.

A Credit, Not a Monetary System
What is required is this: We have to eliminate the monetary system, by a credit system. A credit system is not some mysterious thing. It's essentially something which is traditional to the United States in particular. European systems today, are monetary systems: that is, despite agreements with government, money is controlled by agencies outside government. This is a characteristic of parliamentary systems—not a true Presidential system, but a parliamentary system. And thus, money exists independently of the control of government, although with agreement with government, but nonetheless, under the control of outside agencies: international, financial agencies, which actually control the monetary system, control and regulate the money, and government plays, less and less, a role in the control of money, in control of the monetary system. This is characteristic in Europe, particularly since 1989-1991, in which the control over money, with the Maastricht agreements and similar kinds of agreements, Europe has absolutely no control over its own monetary supply: It's controlled by outsiders, largely through London, and through things like the oil price market.

So therefore, the creation of a credit system to replace a monetary system, is where the solution lies. There's no way to save this monetary system in its present form. It's so full of junk, with the financial derivatives far in excess of a quadrillion dollars in claims, against the nominal size of the actual production of nations, it is impossible to reform this monetary system in its present form. You have to put the monetary system, itself, through bankruptcy. You will have to wipe out the greatest portion of nominal monetary assets in the world today! Cancel them! Because the system as a whole is hopelessly bankrupt.

Now, what do you do in that case? Well, what you do for a monetary reform to a credit system, you use the U.S. Constitution. Because of our Constitution, we can create, as Roosevelt did that formally, we can create a credit system. To replace a monetary system.

Now, what you do under this case, and with agreement with the United States, and its Constitution, with Russia, China, and India, it can be done. What you do, is you say, we put all the claims which are equivalent of monetary or credit claims in two piles. One pile we call "monetary." That's the manure pile. The other we call the "credit" pile. Now under the U.S. Constitution, money, when the Constitution is followed, is created only by the will of the government. It is done by the Executive branch of government, with the consent of the House of Representatives, and things flow from that. This credit being issued, is also authorized for monetization: So, the credit can be issued as loans for projects, or international loans, and part of it can actually be monetized, under the condition under which it was uttered. Particularly, if we had a national banking system, which we don't have presently, we could convert the Federal Reserve System, which is bankrupt, into a national banking system, as Hamilton proposed. Then it would do that, automatically. We do need a national banking system in each country. That doesn't mean they're the only banks, but it does mean you use a national banking system to control the relationship between government and the banking system as a whole, in general.



Put the System Through Bankruptcy Reorganization
If you do that, then you do a bankruptcy reform: You take the hopelessly bankrupt system—we're talking about quadrillions of dollars of claims, of monetary claims, especially as located in these speculative markets of derivatives and related kinds of things—we have to wipe most of this off the books! It can never be paid. It was foolishness, it was a lie, it was done largely since 1987, under Alan Greenspan's insanity. This we have to wipe out.

What do you do? You have to protect those things which are productive, and are necessary for the government and necessary for the population. Therefore, you create a pile called the "credit pile." What you do, is you take every obligation, and every asset, which is valuable to society, currently, or necessary and meritorious—you take the monetary value of that, and you assign that to the creation of credit, government credit, a credit system. And you leave the remainder to rot.

Then, at that point, you enter into agreements, with governments—and this is where the relationship of the United States, Russia, China, and India occurs; there are many ramifications to this thing—under the case, what we do first of all, is you create among these governments, and others who will join them, you create a credit system to replace the present monetary system. That doesn't mean that every nation is involved immediately; it means these nations and others who wish to join, will join immediately. Now, we enter into an agreement which amounts to a revival of the Bretton Woods system. What we do, therefore, is, we create a credit system, as an international system, as a fixed-exchange-rate system. And we issue credit, by agreement among these countries, as a fixed-exchange-rate system. We then proceed, to expand world production, involving these countries, through the new credit system, leaving the useless money, the useless claims, to rot.

In doing that, two things happen, particularly with these countries involved, because the future of the planet, economically, is concentrated in Asia, where the greatest single concentration of population and the need for growth exists. The other area, which has a similar character, is Africa. Now, Asia and Africa are also two areas, which contain a lot of the raw materials assets required for the development of production in the world.

Therefore, if this part of the world develops, several things happen: First of all, you have in China, and you have in India, and other countries in Asia, you have a tendency where 60-70% of the population is essentially destitute, because of the present structure of prices, prices paid. A small part of the population of these countries, varying from case to case, has, shall we say, a modern standard of living, a modern ability to produce. A great part of the population remains outside! While there's infrastructure development in China, it is not sufficient to compensate, for example, for these needs. The development of resources for developing raw materials, that is, mineral raw materials, is not sufficient. The raw materials, the minerals, lie there in the ground, but you just can't extract them, you have to develop these resources. And you have to mobilize the flow of this into the expansion of production to include that: India, China, are typical of this—but also all of Asia.

You have a parallel situation in Africa. Africa is one of the larger repositories of raw materials, necessary for humanity in the coming period. But under the present conditions, with the lack of infrastructure, you can not develop those raw materials! So therefore, what you have, is a part of the world, over 40% of the world in Asia, essentially, and a large part in Africa, and you have comparable situations in South America, where you have large resources, which are undeveloped, which could be developed, but the infrastructure development needed, has not occurred yet.

The Challenge of Development
So therefore, we have not only the question of a reform of a monetary system, to prevent a collapse of the system; we have the challenge now, of taking these areas of development, which involve large raw materials deposits, at the same time, a very large part of the population—and a large part of the population of the world is living at substandard conditions, with no immediate prospect of significant improvement—therefore, the frontier of humanity, for centuries yet to come, involves this thrust of development. It means, then, a reversal of the present tendencies in Europe and in North America, away from becoming post-industrial societies, toward playing a key supporting role in freshly generating technologies which will support this development in Asia and in Africa, and also similarly, in South America. But South America's much closer to the United States, and so forth, has largely a European cultural population, and therefore, dealing with that is much different than it is in dealing with other parts of the world which have a different cultural heritage.

So therefore, there are two things involved: First of all, is to mobilize a section of the planet, which can be mobilized, which has to be mobilized—Russia knows it needs to mobilize! Russia is facing an existential crisis, not as severe as China's right now, but it's an existential crisis. They can not simply continue to function the way they're going. Changes are required. China knows that a change is required, from the present situation. India is less unstable in some respects than China, because its characteristics are different, but all of Asia is in this condition. Africa's in a known condition. The problem in South America, even though it's a different part of the world, and has different characteristics, is similar.

So therefore, we have to think not merely about a monetary reform, or a credit reform: We have to think of a credit reform in terms of a mission-orientation, of a system of sovereign nation-states, globally, for an extended period to come. Automatically, in this kind of process, if you have this agreement of the type I've indicated, among the four leading nations, and those who join them immediately, you will go immediately to a gold-denominated, fixed-exchange-rate system. So you will begin to operate in one part of the world, even if the rest of the world has not yet joined; you'll be operating under treaty agreements, among a bloc of nations, a powerful bloc of nations in these terms. And you're moving back in the direction we have to get, to solve these problems: a fixed-exchange-rate system.

What we would do, probably, and I would do in the United States, if I had my druthers, is take the Federal Reserve System, which is now bankrupt; the Federal Reserve System is hopelessly bankrupt. I say it: It's true. Merely, the axe has not the head off, yet, but it's gone! What you have to do, is put it through bankruptcy reorganization. Now, since it has a Federal government relationship, which the Federal government has to deal with, you simply do what Alexander Hamilton would have done, and intended to do, had he had his choices, despite Andrew Jackson—and convert the Federal Reserve System, as a set of assets, and use the power of government by an Act of Congress, and the Executive branch, to convert it into a National Bank. That does not mean it's the bank that controls everything in the banking system. You are going to restore the private banks, the state banks, and the Federal banks, the chartered banks. But you need a vehicle interfacing between government and the Treasury Department, and the private part of the banking system, to mediate the handling of long-term agreements, and the handling of other things which are done on behalf of both government interest and on the part of the institutions.

So, if we create this seed crystal, of these four nations, and others who join them, we now can have, any time we decide to do it—if the President of the United States says, to the President of Russia and to the President of China, and to the government of India, and some other countries: "Let's make this agreement!", the United States has Constitutionally, the Constitutional apparatus and the authority, to do this! So we don't have to worry about what somebody in England says, or some other part of the world says—if these countries agree, on a certain mission-orientation, to act now, we can start a process toward a recovery of the planet as a whole. And once we start that process, we then can go on to the major business of getting other parts of the world involved in it. But we need to make a break.

The American Presidential System
Now, we have, of course, a new President-elect of the United States, and provided he lives—I understand there are some threats to his life—the prospects don't seem good on the surface from his behavior, but if forces like that combine, the way the American Presidential system works, the President of the United States will be shaped by the approach to such an agreement. Sometimes a President determines the way the U.S. government goes, sometimes he does not. Sometimes he dominates, in a bad way. Sometimes he dominates in a good way. But our system is not a system of a President; it is a Presidential system, in which the entirety of the Federal government is essentially a Presidential system in its character. And the other branches of government are essentially auxiliary to our control-mechanism, which determine and shape the Presidency.

But if the United States Presidency decides to move in that direction, the forces of the Presidency can control the President of the United States. And therefore, the President of the United States will be inclined and steered to do useful things, for the sake of the United States and for its allies. So that's what's required.

If we do that, then we can deal with other parts of the world, which eagerly join. The problem now, is the attempt to pick off one country at a time, to agree with this—the kind of negotiations that are occurring between London and Sarkozy of France, is completely hopeless! Nothing good can come out of this! It's absolutely useless. And the results we'll see, in the coming meeting [the Nov. 15 G-20 meeting—ed.], will be terrible results. They'll be inconsequential; it'll be chaotic. No solution will be presented! Something may be presented and called a "solution." But, calling a pig a person does not make it human. This will not work.

Nothing presently planned, by the coming meeting, will do any damned good, at all—but will only make things worse. Only a reform of the type I've described, is within sight as a feasible change in the system.

What I've said, also implies that we would go away from a floating-exchange-rate system, not only to a gold-reserve system, or a regulated system of the type that Roosevelt prescribed in 1944, as opposed to what Truman did after 1945: What Truman did, what was done under Truman, was not Roosevelt's intention. Remember, that Franklin Roosevelt's intention was to eliminate all imperialism, to get rid of colonialism, and to use the vast economic power we had assembled in the war, to build up other countries, through a partnership to eliminate colonialism, and to establish a system of nation-states on this planet.

Truman was different: Truman was actually an enemy, a political enemy of Franklin Roosevelt. He belonged to a different faction, an opposing faction. Roosevelt died. Truman took over—in a sense, Winston Churchill took over. And if President Roosevelt, who had intended to eliminate colonialism throughout the planet, through a process of development, was replaced by a President who cooperated with the British to restore colonialism—as in the case in Indochina, as in the case in Indonesia, and so forth and so on, around the planet.

So what happened under Truman, was not the actual intention of Roosevelt. If we go back to 1944, at Bretton Woods—against Keynes! Keynes was a fascist and an imperialist! That's frankly what he was; his famous 1937 General Theory, published in Berlin, in which he said his system would work better in Nazi Germany than it would in a free country. He was right. The Keynesian system was adapted to a colonial/imperial system, and we functioned under a monetarist system, with imperialistic characteristics, especially since 1971 to the present time: It's been one of our big problems.

So, going back to the Roosevelt intention, of 1944-early 1945, with a reform of this type, does give us an answer. This means that we have to have a fixed-exchange-rate system; we have to have a hard-currency system; it means we have to have a lot of regulation of prices. You can not have free, floating prices. Because, if you're not covering the costs of production, by undercutting prices, so that you try to produce below the cost of production, you're not going to have development.

The World Needs Infrastructure
This also means, that this will not work without a very large-scale investment in basic economic infrastructure. For example: Take the case of Asia, North Asia.

North Asia is a repository, part of Russia, but North Asia in general; the Siberian area and below, is a repository of concentration of raw materials which are necessary for the development of Asia as a whole. But you just can't go in there, and get those raw materials; you have to have a system of development, which develops the territory in which the raw materials lie. You can't just go down and dig them out. You have to have a system, and Russia used to have a system of that type, under the old Russian system, in infrastructure, in minerals. And therefore, to develop this area, you require large-scale, modern transportation systems; you need power systems, which means nuclear power systems, and so forth; otherwise you can not develop these territories. This means developing magnetic levitation systems in place of rail systems, restoring rail systems where they fit the bill, and all other kinds of infrastructural development which are necessary for high-technology investment and production. Without that, we can not accomplish our mission.

Therefore, we have to have very large-scale international agreements on creation of credit, for large-scale infrastructure projects, of especially international interest. You can do nothing in Africa, without a large investment in basic economic infrastructure: mass transportation, power, water management, and so forth. These countries, given freedom—true freedom—could tend to develop themselves. But! Without large-scale infrastructure, which they're not equipped to develop, they couldn't launch that kind of development.

This means, also, the world itself, at large, requires a return to large-scale rail or magnetic levitation transportation systems, which we've been destroying in the post-war period. It means other kinds of development of that type.

It means also, a new tariff system, a protectionist system, which guarantees to each nation, that its investment in production, which everybody has supported, presumably, is going to be protected in price. We can not have a low-price economy. The problem in China, for example, is, the prices at which China is able to have an export market, the prices are too low! You can not maintain China's population with those prices. And the reason this was done, was to lower the price of production below the cost of production! So we moved production out of Europe, and out of North America, we moved it to prices below the actual, physical cost of production, considering the capital investment in technology. Therefore, you take and dump on China and other countries, you dump an export market for them, but then you don't allow them to earn enough to support their entire population in development. The same thing happens in Africa. The same thing has happened in South America and Central America, in recent periods, mainly since the 1970s.

So we need these kinds of reforms, now! And that's the direction we have to go in. That's the option.

Billions Are Already Imperiled
If we're not willing to move in the direction I've indicated here, in these remarks so far, today, then, I tell you, that the situation for humanity on the planet as a whole is worse today, than it was in Europe in the 14th Century, in the onset of what was called the New Dark Age. We have over 6.5 billion people living on this planet today. With the present conditions, much of that population is already imperiled: the question of food supplies, alone, problems of disease and related things; the food crisis is grave on this planet, today, as many of us know: Without an increase in productivity, physical productivity, which means a change in these conditions, and the introduction of protectionist conditions, we're going to have a holocaust. We now have between 6.5 and 7 billion people on this planet: If we don't do something now, we're going to end up, in a couple of generations, with about 1 billion, or less.

So, we have an existential crisis on this planet. The present monetary system, the present systems, especially since 1968-71/72, the net physical output of the United States, since 1968, since the fiscal year of '67-'68—the net physical output per capita of the United States has been continually shrinking! There has been no net physical growth, per capita, per square kilometer, in the United States since fiscal year '67-'68.

You have a similar condition, but a worse condition, in Europe today, especially in Germany: In Germany, the most obvious collapse has occurred.

So, if these reforms are not made, with the goal of a protectionist system, which ensures that long-term investment is promoted and encouraged, and technological progress and the investment that goes with it, is encouraged, we are headed—right now—for a new dark age! Not some time down the line. What has happened, at an accelerating rate, since the end of July of 2007, has already been a run into a crisis.

One of the problems here, is that every economist who engages in forecasting has failed, in this entire period. They failed in the long term, but they've also failed, in particular in the past year and a half. Every economist in the world, that I know of, has been generally incompetent in forecasting, during this period. Incompetent, particularly—you have people who are publishing reports to the effect that this crisis will soon be over. It will never be over! Without this reform I've indicated, it will never be over! Life on this planet is headed for a dark age, unless the kind of reforms I've indicated occur now. There is no other solution. And any forecaster who says differently, you know is incompetent.

And that's why I say—I return to it—the key to a reform, as I see it today: There's no possibility of a necessary reform, unless you reach agreement of the United States, Russia, China, and India. If those countries agree on the general directions I indicate, and are prepared to act in that direction, other nations will join them—obviously, Japan will join them, automatically! Korea will automatically join them! Other countries will immediately join them, because they're part of the same system, the East Asian system. That whole area of East Asia, Northern Siberia, the area around Korea, the same thing—these are areas that have immediate potential for very significant development! And these countries, given the chance, will leap to that, and take advantage of that.

But without that kind of reform, without that orientation, without agreements where we can create large masses of new credit—that is, under a credit system, while junking the old monetary system—if we can't do that, there's no chance for humanity at all. And anyone who forecasts differently is wrong, and dangerously wrong.

If we don't make this kind of reform now, we're not going to have a decent planet to live on for some time to come.

Panic-Crash Sentiment Causing Market Volatility

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.

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. 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 and so far, the only coherent solution is bankruptcy reorganization of the entire global financial system--starting with the cancellation of all derivatives obligations. This is why the fear has turned to outright panic. We are nearing the showdown moment.

The Downfall of Keynesian Economics and the U.S. (Part 3 of 3)

The most important thing is a clear understanding of where we stand. We have two issues: You have the issue of what the U.S. policy is going to be. I don't think the U.S. knows what its policy is going to be. There may be people in the incumbent government, and that which is about to be incumbent, who may respectively have ideas about what they're going to do, but I don't think any of them knows what they're actually going to do. They may have ideas which they think they're going to have, but that's going to change because the circumstances are going to change in a very shocking way.

We're leaving an administration which is totally bankrupt. It's created a greater mess than any U.S. Presidency in recent record. The situation's almost hopeless. We're now in the terminal phase of the existing international monetary system: This monetary system will not exist much longer. I'm talking about weeks, as a probable case. You probably will have, as of the middle of January, you might have a peep out of France from the President of France; so far, I don't think he's made up his mind exactly what he's going to do, but he might do something. Otherwise, from Western and Central Europe, you can't expect much of an initiative. You certainly will not get anything useful out of the United Kingdom at this time.

What is probable, and what is possible--but it's a big question mark--is, what is going to happen with the incoming administration in the United States. It's a very complicated question. Because there are deals, there are interests, there are arrangements, and I don't think any of these plans are going to work. I think this is a period in which most of the plans that people are making in government are going to fail, because the system is going to change very rapidly, and very profoundly.

We are in the end-phase of a general breakdown crisis, of the international monetary system. There has been nothing comparable to this in European history, since the 14th-century new dark age. We are going to have a total collapse of the system.

Now, the system's failure is complicated by the fact that governments have been lying. The crisis is not caused by some breakdown in some mortgage crisis inside the United States, or something in England as well. The crisis comes from the top down: The crisis comes from a long-term trend since 1968, which is the beginning of the problem. Which led into what the Nixon Administration did in canceling the Bretton Woods system. This opened a period of instability, which was aggravated by the creation of the expanded spot market for petroleum, 1973 and so forth, and so on.

So suddenly you had a fundamental change in the characteristic of the world monetary system, and this went through a phase. It went through a phase of de-industrialization of Europe and the United States, especially following the developments of 1989-1990, and so forth. So we have gone through a fundamental change.

In point of fact, the United States has had no net growth, in terms of physical standards, since the Fiscal Year 1967-68. There has been absolutely no physical expansion in the United States. We've had a comparable situation in Europe, which became worse, after the fall of the Wall, when the conditions were put in by Margaret Thatcher, Francois Mitterrand--then the President of France--and George Bush, the father, then. These conditionality sent Europe into a spin: Germany has been shrunken, actually, in net effect, as a result of these conditions. And from now, Europe--essentially Western and Central Continental Europe--are essentially impotent; Britain is going heavily into a crisis.

Therefore, the only remedy, in this crisis, because of the nature of the breakdown of the system, is creating a new international system, to replace the present monetary system, while putting the old monetary system into bankruptcy. Remember, most of you know that the United States, constitutionally, is not monetary system. The United States is unlike any nation of Europe: That our system is a credit system, not a monetary system. All other countries in Europe, some with more or less independence, are participants in an international monetary system, which is not controlled by any government. Even though the monetary system has agreements with governments, it is not controlled by them; whereas under the U.S. Constitution the creation of currency, or related credit, can only be done by consent of Congress, and by action of the Executive branch. Therefore, our currency--when our law is enforced--is entirely a credit currency; it's a currency of the U.S. government, the currency of the U.S. people. Whereas the other countries have monetary systems, where they participate by agreements with governments at a central monetary system, or a group of central monetary systems.

Therefore, the European system is essentially an imperialist system, in the sense that Europe is dominated by a monetary system, which belongs to no country, although each country has agreements with the monetary system. This is a continuation of the old Venetian system, under which an imperial power, in the old times, since about 1000 A.D., in the old times, the Venetian interests, the financier interests, control the credit and currency of the world. And functioned like an empire. This financial empire made agreements with governments, or controlled governments entirely. That was the system that crashed in the great crash, the great breakdown crisis in the 14th Century. Since that time, there has been no fundamental change: Europe still operates on the basis of monetary systems, which are based on supranational monetary systems which have contracts with governments.

But the United States is unique among leading governments, even though de Gaulle wanted to go in the same direction, but unique in the sense that our Constitution, means that our government in its credit system is the system of the United States.

Now: Since we have a world monetary system, the so-called IMF system today, this system is hopelessly bankrupt. The cause of the problem is not some mortgage crisis. The cause of the crisis, which broke out in July of 2007, was a result of an increase of an expansion of derivatives expansion, which now totals to obligations in excess of quadrillions of dollars! The greatest amount of this expansion occurred under the administration of the former head of the Federal Reserve System, Alan Greenspan. And we have now quadrillions of dollars of obligations, so denominated, which are self-expanding obligations. This hyper-inflationary monster is eating the world, and the only thing we can do is put it out of its misery: Put it into bankruptcy by governments, by agreements of governments, and create a new international system, which is based on credit systems, such as the Constitution of the United States provides.

What we have to have, also, is a fixed-exchange-rate system, like the one that Roosevelt intended, when he was still President. So, what we will have to do, is, we're going to have to put the entire system into bankruptcy reorganization, by decisions by the sovereign governments.

Now, to do this, there are four sovereign governments on the planet, who are absolutely crucial in launching something which can then be participated in by other governments. These are, the United States, and include Russia, China, and India. If these four countries enter into an agreement to reform the monetary system, and replace it with a credit system, we can get out of this mess alive, and safely. Because, if these four powers agree, and this represents a margin of power absolutely required to force through the reform, then Japan will automatically join; it's in its interest to do so. Korea will join; it's in its interest to do so. Other weaker countries will join; it's in their interests to do so. On that basis, we can create a fixed-exchange-rate system, to do what the original fixed-exchange-rate system was intended to do. We can use the credit system, based on this agreement, to reorganize the bankrupt monetary system, make sure that the immediate agreements that have to be reached can be settled. We can start to expand production, solve some of these problems, and postpone settlement of some of the other matters into the future, as you often do in a general bankruptcy reorganization.

It's the only chance, right now. And it depends upon good diplomacy, among the United States, Russia, China, and India, knowing that other countries will gladly join such a union, once it's started. And it will have to lead to a fixed-exchange-rate system, because we're going to have to launch long-term credit agreements, for large projects, especially in areas such as Asia, where you have whole regions, 70% of the population is extremely poor, and underdeveloped; Africa, which is potentially a large food-growing area, but is not able to do so, because of the present conditions.

We must create those conditions. This means, large-scale infrastructure development of things like power systems, sanitation systems, and so forth, to enable Africa to get on its own feet again. So these kind of projects will be necessary, and these are long-term projects. They need two generations of investment, or longer, in mass transportation, power and so forth. And we can come out of this.

But we're at the point, that this kind of agreement and discussion among nations is absolutely indispensable: There is {no way}, that you can make a compromise with the existing system, and survive. All attempts at compromise will fail! Because they will lead immediately to disaster: You have quadrillions of dollars of obligations, all of a short-term nature, coming down on the whole system! And there's no way you can postpone that thing. You come to the point, and say, "We are not going to honor derivatives obligations! We're going to freeze them, first. We're going to defend the economies, first. We're going to have a bankruptcy reorganization, which is in the general interest, first, the general interest of the nations and their peoples.

And this requires power to push it through, because the powers that are imposing this crash upon us, do have a lot of power. Therefore, you need a combination of power strong enough to break the will of that opposition. With that combination, we can succeed.

And that's the kind of crisis we face.

Now, we have a new President of the United States coming in, a President-elect--if somebody doesn't kill him, because you're in a kind of period where those things happen, in times of crises like these, highly unstable. And the trick is, to get this Presidency, of the United States, by one way or another, to enter into this agreement, with Russia, China, and India, that I've indicated; and bringing in other nations who are informed of what this is all about, into this agreement. But the basic thing, is we need a power bloc, which is powerful enough to break the back of the opposition to a reform. And that's where I think we stand right now. Everything flows from that.

So it's a very interesting period. And the month of January is going to be extremely interesting, if we don't have a complete blow-out before the end of this year. That's the kind of world we're living in. It had to come to this. We've been insane for a long time; we've been doing insane things for a long time. And now somebody came up and just presented the bill to us, for what the costs of this insanity were. And so, the time is, we just have to act like governments, take our responsibility seriously, come to agreements, agreements of reform, and adopt a perspective which is fair to all concerned. Which I think we can do fairly easily, if reasonable governments realize how serious the danger is, right now

China Continues To Consider U.S. Treasuries Its Best Option

George Soros, who was thrown out of China for financing an attempted "regime change" in 1989, was unfortunately given voice in an interview in the Chinese economics newspaper Caijing on Nov. 1, where he peddled Keynes and green fascism. Soros admitted that he had lost a bundle on his speculation on Asia and Southwest Asia: "I thought that China and India and the Gulf States would be immune to the crisis, but they were not. That has been a source of actual loss for me -- a lot of money."

But his bets will be made good, he said, if China implements three things: political and economic "reform;" bailout of the IMF to save the banking system; and going green. China, he said, must implement a stimulus which is "directed at stimulating investment in preventing global warming, because that is a problem that is facing the world. I hope that both the US and China will introduce energy saving and alternative energy generation as a way of stimulating the economy, because that is what you need to come out of this global recession."

Soros also exposed his own fascist proclivities: "We are back to Keynes," he said. "He had the right idea for the 1930s, and these ideas have come back in a cyclical fashion, and they are right for the 21st century." Keynes, of course, admitted in the 1930s that his policies were better implemented in a fascist dictatorship like that of Germany under Hitler, and later fought to reject FDR's anti-colonial proposals for the post-war world, in favor of the revived Empire, and thirty years of genocidal warfare across Asia.

Is There an End Game to the Recession?

On this occasion we should be reminded that there are no tragic figures in real world history; there are, rather, tragic nations and peoples, such as those described by the Homeric Iliad, and the tragedies presented by Shakespeare and Friedrich Schiller, a virtual Comedie Humaine, whose leaders have incurred the misfortune of being what the people of that culture had, like the citizens of our U.S.A., chosen to place positions of leadership.

This is not to say that all such misleaders were bad people. Some, like both George Bush administrations, were, admittedly, malicious. The fault of others, is that they gave the people the administration which it seemed that popular opinion desired; but, perhaps, they lacked the will to do better, since they lacked the stuff of which a President George Washington, a John Quincy Adams, an Abraham Lincoln, and a Franklin Delano Roosevelt were made.

A qualified leader of a great republic, especially one with that special quality of Constitution such as our own United States, is to know what the destiny of the nation and its people require, as Presidents Abraham Lincoln and Franklin Roosevelt did, and to deliver the effort needed to bring the nation to safety, and, also, to contribute to the well-being of the community of nations generally.

I must concede the point, even as I must note the failures of the performance of recent Presidents, since Franklin Roosevelt, who were not bad, but who intended good, but lacked the standard of leadership. Leadership, especially in times of grave crisis - - and this is now the greatest crisis in the history of all modern civilization - - must be a commitment to provide that mission which is required at that time, and, more than that, the destiny of coming generations.

For this reason, while there is a hopeful escape from the present general breakdown-crisis of the planet as a whole, there is only one course of action which could plausibly enable the planet to escape a global catastrophe now. (see other comments I have added esp. under

(i) Is Hyperinflation on the Horizon? (ii) Bretton Woods Redux: The Real Bridge to Nowhere

Berkshire Hathaway Down Nine Days in a Row

lol mahoney, well spotted

Famous Thoughts for a Bear Market

Italian Economics Minister Giulio Tremonti was the first member of an acting government to ever open the academic year at the Catholic University in Milan. Tremonti developed the theme of his speech, "social market economy," by calling for a new economic system that allows the long-term survival of society, and described the current crisis as due to globalization. He repeated his call for dealing with the derivative bubble in the only way possible: cancel it.

"If I can use an image, it is like living in a video-game, with a key difference: In a video-game you can turn it off and the game is over. This is a video-game that will not be over. And just like in a video-game, you face a monster, you beat him and you start to relax, but another one comes, bigger than the first one; thus, the first monster was the sub-prime and somehow it was managed; the second monster was the collapse of credit and it was somehow managed; the third monster is the bankruptcy of the main financial institutions and it was somehow managed; the fourth one is the collapse of the stock markets, but behind the corner there are more monsters: the credit cards, the expected corporate bankruptcies due to troubled classification of corporate bonds, and then the monster of monsters, the derivative one, where the folly of incalculable risk appears, of non-intentional but collateral effects, definable not ex ante and not manageable without procedures that could evoke in the economic realm, the old wisdom of sabbatical year."

Tremonti quoted Cardinal Ratzinger in a 1985 paper, in which Ratzinger forecasted the collapse of a system based on market rules in the absence of "a discipline based on a strong ethical and religious order.. "We are in a terra incognita", Tremonti said. "In the current moment we are inside a situation characterized by big critical complexities. I said in a conference that this is not a recession cycle but a discontinuity... of a crisis that nevertheless leads to a solution, but you must go through it. I think that we must have scientific ignorance, knowing of not knowing. I think we should be diffident towards those who do not know that they do not know, those who, not having forecast the breakout of the crisis, want to explain to you how it will develop."

Tremonti listed a series of key changes introduced by globalization, that caused the crisis. Among these, he mentioned the rejection of Luca Pacioli's system of "double-entry bookkeeping". Calling it a "tribute we owe to an ancient Franciscan," Tremonti said that this shift was not a simple accounting change, but "a fundamental political and moral shift." "The real account is the world of values and the economic account is the world of prices. The real account is the world of values where you see the structure, the history, the origin, the present and the future of a society, as well as its industrial and moral mission." "The crisis we are living in is the crisis of a paradigm, which in the last 10-15 years has been dominated by the ideology of demand for consumer goods, often superfluous ones, better if purchased through debt... and eventually, the crisis of positivism that, at the same time, like in an insane oblivion of natural law, has deceived us into thinking that everything could be dominated by other than what is in our tradition, in the idea of a fair order, in the view of a fair social order which inspires the magistracy of the Church. The separation of moral law and economy, the effect of positivism has produced a view of man and of society in which morality is nothing but a subjective choice, and irreducibly so. Law [has become] nothing but the exercise of command by those who detain power, justum quia jussum, and the economy is nothing but an anonymous mechanism of satisfaction of individual and irrational whims, de gustibus non disputandum est... Moral law and economy have been separated, and globalization has accelerated this process, sublimated it, and favored the illusion that the individual person can always and increasingly distinguish between good and evil without the help of moral, of tradition, [but] on the basis of pseudo-scientific abstractions rather than on the basis of historic reason, as if one could crush man, values, time, space and history".

The solution to the crisis goes through a new system, that "will replace the paradigm of demand for superfluous and debt-driven consumer goods, it will be a moral, civilian and political paradigm that organizes demand on collective investments done for the common good: not for the present but for the future, and not debt-driven but made on a solid, ground-laying perspective. It will no longer be the market but individual and collective consciousness to judge power, not the other way around. One thought can inspire us on this road, an old and wise thought by Plato: `The only good currency to be changed with all others is phronesis: a practical intelligence.' Above all if it is guided by God."

Paulson Drops the Ball Again

Calls for a new U.S. Federal "economic stimulus" of $400 billion-plus are multiplying on a far larger scale than before the British government's steering of "a consensus for internationally coordinated fiscal stimulus" at the G-20 summit. This is also a much larger "stimulus package" than the $150 billion which Congressional Democrats talked about before the November 4 election, and then dropped. Although the Mis-Leadership around Speaker Nancy Pelosi is not yet talking about $400 billion, it appears that think-tanks like the Economic Policy Institute, Center for American Progress, and Peterson Institute for International Economics have been asked to point "the British way" until the 111th Congress can meet.

Today a circular letter was released signed by 400 economists, headed by Joseph Stiglitz, demanding a $350-400 billion stimulus annually for several years. Its purpose was stated by Dr. Laurie Appelbaum of Rutgers University to be, "filling the huge hole in economic demand" left by a collapse in consumption. Purely Keynes--the John Maynard Keynes who from 1932-36 looked to Nazi Germany as the model for his monetary theories. This morning Dr. Simon Johnson of the Peterson Institute was in front of the Senate Budget Committee calling for the same policy. This was ironic, since Johnson's boss Peter Peterson is spearheading the propaganda campaign for long-term drastic cuts in U.S. fiscal budgets, including particularly in Social Security and Medicare entitlements!

EIR representatives asked the four economists presenting the letter, including Stiglitz, why they hadn't emphasized that the cause of the economic collapse sweeping the globe was the breakdown of the financial and banking system--or discussed the need to reorganize the financial system in bankruptcy. All four answered in turn, that the measures of Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke had stabilized the financial crisis (!) and taken it off the table--exactly what Paulson and Bernanke had been claiming the previous day to a House Committee. "I think we stopped the financial collapse," said Dean Baker of Economic Policy Research Center, speaking for all of them and putting the "big stimulus" network firmly in Paulson's and Bernanke's camp.

Famous last words.

Is There an End Game to the Recession?

I think China might be able to help us. China's government is so concerned about the impact of the global breakdown crisis on its economy, that the Ministry of Human Resources and Social Security has enacted measures to "help protect social stability." Ministry official Liu Junsheng told the China Daily yesterday that social stability is now "more important than economic development."

In a directive issued on November 17, the Ministry announced that China's provincial and local governments must give "top priority" to keeping workers on the job. Not only the cheap-export-oriented industries, but also China's steel, aluminum, auto, and other basic industries, are laying off masses of workers. The Ministry is demanding not only measures to control the layoffs, but also emergency plans to prevent, or deal with, large groups of unemployed workers. In the export sector, bankrupt foreign factory owners are shutting down and fleeing China, leaving unpaid workers on the streets.

The Ministry wants the local emergency plans to be reported as soon as possible, and called for an "efficient" channel to deal with labor disputes, China Daily reported. Steps must be taken to guarantee unemployment insurance, try to get workers reemployed, and support migrant workers.

Both Shandong and Hubei provinces are now requiring companies to get prior approval for any layoffs of more than 40 workers, a stricter amendment of the national labor contract law, which came into effect in January. This year so far, almost 700,000 workers have lost their jobs in Shandong, a center of export production. China's state-owned companies in finance, oil, power, and telecommunications, have been told to cut wages, not jobs.

After G-20: The Beginning of the End of the Old Order

Mario Draghi is described as the mastermind of the G-20 plan, which boosts the Financial Stability Forum (FSF) as the world bankers' government. Draghi and IMF head Strauss-Kahn catapulting to action as early as November 13, sending a letter to the G-20 leaders, with the guidelines of the plan which envisions the FSF and the IMF as the two pillars of the world government.

At the November 14 working dinner at the White House, Draghi gave the main address. On November 17, the daily Il Giornale commented, "Only one central banker appears in the family photo of the 25 participants at the G-20 financial-economic summit--a clear privilege of Mario Draghi, present at the Washington summit as chairman of the FSF."

The FSF was founded in 1999 on British initiative, when Gordon Brown was Chancellor of the Exchequer. It is based in Basel at the Bank for International Settlements, and includes major central bankers and financial "regulators." The plan is to enlarge it to include China and Russia. To achieve its goals, the FSF "needs the support of the new U.S. administration. And one of the candidates for a top position at the U.S. Treasury is N.Y. Federal Reserve chairman Tim Geithner, who in recent months has closely collaborated with Draghi," Il Giornale writes.

Mario Draghi became famous as "Mr. Britannia" in January 1993, when EIR exposed his participation as a government official in the June 2, 1992 meeting on the British royal yacht Britannia, off Italy's territorial waters. At that meeting, bankers from the City of London and Italian businessmen discussed future privatizations.

At that point, Draghi was director general of the Treasury Ministry. Under the Ciampi government, he was then appointed head of the Privatizations Committees, and oversaw all privatizations. He also authored a reform of the 1936 banking law that eliminated all firewalls between commercial banking, insurance, and investment activities, and a liberalization of the stock market that allowed hostile takeovers. Eventually, he left the Treasury in 2002 and became European Director for Goldman Sachs. He was then appointed Governor of the Bank of Italy in December 2005, in the aftermath of a scandal that caused the resignation of Antonio Fazio, the central banker who tried to oppose a foreign takeover of a regional bank in Northern Italy by ABN-Amro.

Draghi is so afraid to be called "Mr. Britannia", that last year he filed a libel suit against a right-wing newspaper in Rome. Strangely enough, he did not file a suit against the Italian Movisol website, which had been the source for the article.

Ecuador Approaches Default

one day after his government missed a $30.6 million interest payment on its Global 2012 bond, Ecuadorian President Rafael Correa denied that the missed payment represented a moratorium on the foreign debt.

Rather, he said, his government has serious questions as to the legitimacy of the foreign debt. Speaking on his weekly radio show, he said he would use the 30-day grace period which the debt contract allows, to further study the situation, and would consult the finding of a special commission which has spent months auditing the foreign debt, and whose final report will be released on Nov. 20.

The commission's preliminary findings have already been "truly horrifying," Correa said, with more than enough proof of illegal and abusive behavior by foreign creditors.

Immediately after the government missed the payment, Standard & Whores rating agency cut Ecuador's rating to CCC-, three levels above default. But Correa responded that what S&P, and other "financial speculators and creditors" do, doesn't interest him in the least. "We shall act in the country's interest, and [on behalf] of the common good." That is the only important criteria, he said.