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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.