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Recovering From 
World-Bankruptcy

It's Not Just the Housing Bubble that's going Pop!


At the June 9, 2006 Washington webcast by the LaRouche Political Action Committee, Lyndon LaRouche was introduced by his national spokeswoman Debra Freeman who chaired the seminar. An excerpt from dialogs with Mr. LaRouche is presented below.

Listen to the: Webcast - transcript of the webcast


 

Freeman: Okay, we have a couple more questions from the House of Representatives. The next one is on the question of the housing collapse. It says, "Mr. LaRouche, you have long warned about the impending possibility of the bursting of the housing bubble. Everything that we have received in the way of information these last few weeks, suggests that that process has now begun. Our expectation is that the Summer months are likely to bring dramatic events in this area of the economy, that will affect hundreds of thousands of American families. Right now, there is nothing on the table to address this, and the Democratic leadership argues that it is an issue more appropriately addressed by the states. Some of us disagree, and believe that a problem of this magnitude requires emergency Congressional action. Do you agree and, if so, what do you suggest we do right now?"

LaRouche: Well, what you're going to have to do is this—and boys, you can not duck it now! It's come home to roost. What is going down is not the housing bubble. What is going down is the international banking system, and it can go down in a matter of weeks, or months.

The collapse of the housing bubble is merely an integral feature of the collapse of the international banking system. Nothing can save the present international banking system in its present form. It can not be done! I specified what has to be done. There's only one thing you can do. Boys, I'm speaking as an expert: You've got no choice! You can take a dive or you can do as I tell you. You got nothing else you can do! Okay.

As President of the United States, what would I do? Well, I would kick the Congress, because the Congress is not the place really to deal with an issue of this type. It requires legislative action, but it requires a living, breathing President. A real one, like Franklin Roosevelt, or someone of Franklin Roosevelt's inclination. Maybe you should talk to John Kerry about something like that. He might be interested in that. I understand he's running again, or about to run again. But the point is, what do you have to do?

Look, the banking system is bankrupt. What does that mean? Think! What does it mean? The international banking system is not only bankrupt, it's hopelessly bankrupt. There's no simple ordinary adjustment that will work. You're not looking at a depression. You're looking at a general breakdown crisis, whose precedent is what happened with the Lombard League in the middle of the 14th Century. Every central banking system of Europe, the United States, Japan, is hopelessly bankrupt. Nothing you can do about it. It's bankrupt. Therefore, the banking system has to be taken into receivership, for bankruptcy reorganization by the federal governments.

Now, this means, in the United States, the Federal Reserve System is bankrupt. Period. That's a fact! You don't want to believe it? It's a fact. The fact will hit you in the back of the head, if you don't pay attention to it. It's coming. It's inevitable. It could happen this month. It could happen by September. It's that close.

Once it starts, it's going. And the rate of collapse is accelerating rapidly, at an accelerating rate. Just the same kind of overall underlying rate as the German 1923 crash of the deutschemark. The same rate of increase of increase. You've got a combination of acceleration of prices as in raw materials, so-called, and you have at the same time an acceleration of the rate of collapse of even whole hedge funds. And the big problem today, is people are trying to cover up the magnitude of the hedge-fund collapse. Hedge funds are going under. They're over-bidding. What's being run in association with the speculation in primary materials, is a ponzi scheme! The major banks, with hedge funds, are running a ponzi scheme in inflationary acquisition of assets. And when one falls by the wayside, the other banker comes along and eats him! Or the other hedge-fund eats him! Or the banks order the hedge fund to call in the deposit and collapse the thing.

So, you have a process of hyperinflation and hyper-collapse going on at the same time. You're in the terminal state of turbulence of a bankrupt system. There's only one thing you can do: You have to say, money has no intrinsic value. The monetary system of the world is dead. You have to go back to the American System, in which the monetary aggregate is controlled by the principle of Federal control over the issue of currency. We are a credit system, not a monetary system. We've been corrupted by monetarist policies, but we are a credit system.

Therefore, the Federal government has to put the Federal Reserve system as such into bankruptcy receivership. And this is to prevent disorder. The prime thing is to prevent disorder. You've got to keep things that must function from day-to-day functioning. People are not going to be mass-evicted from these properties, if they're living there. If the property is for rental, it's on speculation, and nobody's there, okay, foreclose on it, right then. Wipe it out. If the property is occupied, you want to keep the occupant in occupancy, if possible. You do not want to create a social disaster.

You must maintain employment. You must do the things that maintain stability in the communities and in the states. You must defend the states. The states can't do anything with this. The idea that the states should handle this is pure idiocy. There's nothing the states can do with this. It's beyond their capacity. The states can not utter currency!! The ability of the state to create monetary credit is limited by the power of the Federal government, under our Constitution. And that's the way it should be! The problem lies with the Federal government.

Now, if you don't do that, when the crash comes, it won't be just the housing crisis, it will be everything. It will be chaos. It will be a 14th-Century-type disaster, like the collapse of the Lombard League. Because the only way to stop this, if the United States takes Federal action, takes the Federal Reserve system into receivership, which is the way of taking the member banks into receivership—you can put it under regulation! And the point is to prevent chaos. Your greatest danger is chaos. You say, everybody is going to stay on their job. The stores are going to open. Essential things are going to be open. Everything is going to function. You live in a house, you stay there.

What do you want? You want the alternative? Do you know how massive this thing is? Do you realize that you've got places, shacks, at $800,000 in the Loudoun County area, which are worth less than $200,000, which are barely held together with tacks which are poorly aimed, by unskilled labor? You're kidding! You can't do it. Do you realize that the entire state of Virginia could go bankrupt as a result of this thing? You want to have the state take care of the problem? The state can do nothing about it. The Federal government must act. You've got to have a President, the right President in there, quick! Because it's coming on fast. So you do what Roosevelt did. You declare bank holidays. You take the whole thing under Federal control.

And how do you bail out? Well, there's only one way you bail out, without going through hyperinflationary methods, which you already have enough of already. What you do is you create large-scale projects, of the type that I've outlined, for legislation now. You employ a large number of people in order to bring the actual operating level of production in the U.S. economy above breakeven, for the economy as a whole. In other words, if you've got enough people producing wealth, so that the value of wealth being currently produced, exceeds your current obligations, you can manage the problem. The only way you can do that is Roosevelt's method. You go to the Harry Hopkins method.

Now you create an employment program which takes people off white-collar work, and off this kind of nonsense that they're going to be out of anyway, and puts them into productive jobs. What do we do? Well, how can we do that? The Federal government can give credit to the state. For what? For infrastructure projects! How many water projects do you have on state level that are crucial right now? How many power stations are required to keep the United States in shape? How many hospitals have to be rebuilt? How many railroad systems have to be built, to get this nation functioning? This would more than absorb the total capacity, idle capacity of the automobile industry. And it will enable us to rejuvenate the aerospace industry. We're going to have to rebuild this economy that's been wrecked over the past 40 years. So, get at it!

And this means long-term financing, at 1 to 1-1/2 to 2% simple interest rates over a long term. The money has to go into, not bailouts; the money has to go into investment in employment of people in productive jobs. And the way we can start it with the Federal government as we have in the past, you start with basic economic infrastructure—power, water, transportation, and so forth. And you do it that way. We want to keep people where they're living now. You can not unemploy people in one area and—they have a family! What do you want to do? Create a "Baltimore effect"? You create a situation where a family is broken up because one person was earning a living and no longer has a job. The family is struggling to get by. He leaves home to take the burden of his presence off his family, he goes into a slum or criminal-type behavior, and you have people wandering all over the country in this kind of state? Do you want that? You can get it! The way the Congress is thinking now, you'll get exactly that!

No! If we put people to work in things where they may not be too productive right away, but in which they'll become productive, and you issue 1-1/2 to 2% credit, of Federal credit, based on the monetary power of utterance of the U.S. Constitution, we can get enough work going so that we can say that, on current account, we are now producing more physical net wealth than we are consuming. Once you are above breakeven, you can manage your way out of the crisis. If you're not above breakeven, you'll never manage your way out of the crisis, except through a lot of dead people.

So therefore, that's what we have to do. So, forget all the other problems. That's what we have to do. It's not a housing collapse.

The housing collapse is an integral part—remember, the housing collapse is the Greenspan bonus. We had a 1929-style collapse of the stock market in October 1987. Volcker was on the way out, and Greenspan was on the way in. So, they brought this guy Greenspan in—"Bubbles" Greenspan—who went to the methods of the Pyramid Club and similar kinds of ponzi schemes, and he created a giant ponzi scheme called financial derivatives. Fannie Mae and Freddie Mac were two of the targets which he used to pour in credit of this type, through the housing market, through the financing and purchase of bundled mortgages. And this created a speculative boom in the housing area. In terms of physical values, there was nothing to hold the thing up, except a ponzi scheme. And that's what happened.

The result is, the entire international financial system is tied into a bubble of credit and related derivatives beyond what anybody knows. You have a market which is registered, and you have an unregistered market. This ponzi scheme is beyond anyone's imagination. You're going to have to wipe out hundreds of trillions of dollars of so-called assets, because they're purely fictitious. One guy has an asset which is another guy's debt. No good. So, there's only one thing that can be done. The Federal government, action by the President with the support of the Congress, takes legislative measures in emergency action, using precedent, to put the whole thing into bankruptcy, to put the Federal Reserve system into bankruptcy, and match that with a Harry Hopkins-style program of increased job production in things which start with basic economic infrastructure. If you start with basic economic infrastructure, you will stimulate the entire productive sector of the economy.






 



About LaRouche - the American economist and statesman that has become a legend in our time in the fight to advance civilization, protect mankind, and create a new renaissance: 

" We are at a point in world history. 
At the present time, the international monetary financial system
of the world is in the process of disintegration. That does not mean the end of the world. It means that we either make certain changes, or this
planet will go in fact into a prolonged new dark age, comparable
to what happened to Europe during the middle to late part of the
14th century." (LaRouche, June 15, 2006)


About the series:  Truth versus Guns,
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About Rolf A. F. Witzsche

 

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Rolf A. F. Witzsche, is an independent researcher, publisher, and author of eleven novels. The novels are focused on exploring the Principle of Universal Love, the principle that is reflected to some degree in every bright period throughout history, with the added challenge for today to give our universal love an active expression with a type of 'Universal Kiss' for all mankind. 

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