Excerpts from the proceedings at Lyndon LaRouche's lecture to Prof. Wilhelm Hankel's senior adult economics class at the Johann Wolfgang Goethe University in Frankfurt, Germany on May 29, 2006.
Now, on the difference between Europe and the United States: We dealt with this problem before, with Roosevelt, in the post-Roosevelt period. While European systems are monetary systems, not Federal credit systems, and it is the nature of parliamentary government to tend to go in that direction, the way we dealt with the reconstructions in the post-war period, was through the Bretton Woods system, in which the United States as a repository of Federal credit, was able to enter into long-term agreements with Europe and other locations, which extended U.S. credit as a driver for development of credit for reconstruction, in Europe, for example. And that's the way we'd approach it.
My view is that, because of the present construction of government in Europe, European governments are not ready, legally, to take the kind of reforms that are required. However, were the United States to resume its proper role in this relationship, based on the experience of the immediate post-war period, then such a recovery in the United States, through international treaty agreements would create the process for generating credit through international treaty agreements.
Let me explain what I mean by that: We've reached the point that the natural destiny of Germany, today, in particular, depends upon the development of a new approach, or a new form of approach, to Eurasian economy. We have over a billion, probably 1.4 billion people in China. We have over a billion people in India. Contrary to much illusion, China is not such a secure place right now, because China has been engaged in producing product with cheap labor for the world market, largely the U.S. and the European market. If the European economies were to collapse, you would have a disaster for China. India has made some significant progress in the same direction: It has over a billion people, of whom 70% are desperately poor as ever before. There are problems. Therefore, if the European and U.S. economies were to collapse, this would be a disaster for India—for all of Asia.
What this reveals is, that despite the progress that has been made in India and China, for example, we have a desperate world situation, in which there have to be fundamental long-term changes, which would enable the countries of Asia to deal with their problems.
We have the configuration in Europe which fits that: You have Western Europe, especially Central Europe, with a relationship to Russia. And Russia is the fulcrum that connects Europe to Asia. The large deposits of undeveloped natural resources in Russia are crucial for the development of Asia. This requires a major development program inside Russia tied to these programs. Because we must develop efficient connections, long-term agreements with places like China, India, and so forth. We must have programs, long-term contracts, long-term investments, and we must then take Western Europe and "crank it up" as we say, to maintain its market role as a generator and supplier of technology, where you would assist in the development of Asia over a 30- to 50-year term.
It has probably occurred to you, as you've heard me going through this proceeding, you said, "Well, what about the present U.S. government? What about the present President and Vice President?" That, that is not something I'm ignoring. Matter of fact, I'm part of the process of trying to bring about a very early change in that situation. You have a Vice President whose popularity is less than 10% of the population; you have a President whose popularity is less than 20%. You have a Vice President who has now been accused of a crime, in the case of this exposure of Ambassador Joe Wilson's wife. He's now been the motive for the crime. And as you know law a bit, that the conviction on the crime depends upon proving to the jury and the judges that the motive for the crime that was committed was there. And the motive for the crime is now out, legally, in the courts. This does not say exactly how Mr. Cheney will go, but the point is that we are in a situation, where likely the Blair government in Britain, and the French government, and some other governments—the U.S. government is ready for a change, a very sudden, and very sharp change, probably in the near future.
The driver of the change, at the same time, is the recognition that we are in the worst financial crisis in modern history. It can be solved. But in its present characteristics, it's extremely dangerous: You are now living in a period of inflation, comparable to what Germany experienced as a model, in the second half of 1923. If you look in primary materials, petroleum, metals, and so forth, you have a twofold process which has been characteristic of the recent two months: First, you have a rate of inflation which is accelerating in these commodities. Second, you have a pattern of sharp collapses of whole sections of the market. What is happening is that the hedge funds, which are actually agents of leading banks, are driving a massive speculation, on ratios of actual money-paid-up to borrowed money of 20:1. So, what happens then is, they always overborrow. They're investing in control of primary materials, in the same way that some people, but outside Germany in 1923, with the idea of coming back in and buying up cheap after the collapse had occurred: The idea was that if the world economy goes, that those who control primary raw materials will have a mortgage on the world. And this doesn't work. It's insane, these people are insane, but they're powerful. And that's a bad combination, big power and insanity.
So therefore, you have, then, because of the bidding nature of this process, you have the periodic sharp collapses in the market—already ongoing. So, you have hyperinflation on the one side, collapse on the other side. And this can't continue.
So therefore, this has created a situation, in the financial community internationally, the monetary community, in which the Blair government is reportedly on the way out. You've seen the French government go from seeming awesome power, relative to Europe, to becoming a victim. We've in a period of sudden political change. Because responsible politics can deal with a crisis of this type. You can not simply let things continue to roll in this way.
And we're fully aware of it. And I'm a part of the process of trying to bring about the necessary improvement in the U.S. government. Not a complete improvement, but some, please! At least, some. So therefore, when I say this is a policy which we're fighting for, which the President would oppose and Cheney would more than oppose: Well, they may not be around so long, in the present condition.
Now, the problem we have here, is exactly that. It's that the central banking systems of the world are hopelessly wracked by this crisis. They say on the surface that, "it's not so bad; we could have problems, we may not have problems." From what I know from the inside, in the United States, and we discuss this with circles of leading economists of various stripes and so forth from inside, and from inside the government, this thing is ready blow. We have the crisis. And only responsible government, by putting it first that the stability of nations and the avoidance of all kinds of chaos, are necessary, can we deal with the crisis. We can deal with it. The lessons we got from the 1930s in the United States indicate that we can deal with it: If the will of government is there, there are rational things we can do, to reorganize and manage our economies and prevent a catastrophe.
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