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July 20, 2007 (LPAC)

Lyndon LaRouche held a closed-door discussion July 19 with 25 Washington-based diplomats representing 18 countries from Eurasia, Africa, and Ibero-America. As per tradition, LaRouche's opening remarks were recorded and transcribed, but the discussion following was strictly off-the-record.

"This is not yet August, but as I think back to Augusts in the past, I think of August 1914, August 1939." This is how Lyn began his address yesterday to a private gathering of some 25 diplomats in Washington D.C. from eighteen different countries. Lyn spoke of the "virtual state of war" between Russia and Great Britain. He told of the signs of the onrushing economic crisis, the New York Times today noting that a can of soda in Heidelberg now costs $5.52, and the collapse of Bear-Stearns. "Under these economic conditions, war becomes likely," Lyn said, noting particularly Dick Cheney's drive to start a war with Iran. "It wouldn't be war in the simple sense of World War I and World War II, but something comparable," he said. And unfortunately, it occurs in a situation where you have very poor leadership in the United States, he said. Cheney and the British typify the situation. "It's very dangerous. Anything can happen." "And governments are on vacation," he warned.

After that introduction, Lyn continued: "The world can blow up. Now the alternative is also on the table. It was put on the table in a curious fashion this past spring. A series of events. It happened at the time that I was making a visit to Moscow for the birthday anniversary of a friend of mine, a distinguished figure in the Russian system. I had some meetings there.

"But at the same time, you had the death of Yeltsin in that period, and the events that went along with that. President Clinton was there, former President Bush was there. Other figures were there. And during this interval of this spring, concluding with the meeting at Kennebunkport in Maine, with the Bush family and with President Putin of Russia, there were certain negotiations behind the scenes in which former President Clinton played a key role, and others played a key role.

"We have on the table the option, the opening of the door, so to speak, with the Kennebunkport proceedings, in which we could induce what has to happen. What has to happen is a process under which the United States government engages with the Russian government, the government of China and the government of India, to sponsor emergency action to save the world from a general financial collapse, which is what's oncoming now.

"Let me explain what that means. If the U.S. dollar collapses, as it is collapsing now, the entire world could go into something worse than a depression. If you look at the effect of the collapse of the dollar on world markets, and look at the financial condition of countries throughout Asia as well as elsewhere, a collapse of the dollar would mean a chain-reaction collapse worse than any depression of the last century.

"Now, that could be prevented. We have in United States history, in our Constitution, we have the means to do that. Roosevelt is an example of that, Franklin Roosevelt. But if the government of the United States were to engage Russia, the government of China, and India, as the four major nations who are going to co-sponsor something on behalf of the world as a whole, and say, we're going to freeze the values of currencies among these governments, and other governments, and we're going to go back to a Franklin Roosevelt approach, to organize a general world recovery.

"In other words, we're going to take over in effect, have the nations of the world, take over the IMF system, and put it under a Roosevelt-style administration. Under those conditions, we could manage this crisis and we could work our way, gradually, out of many of the financial and related problems. If we could unite nations around this issue, which has to be addressed now, the economic issue, then their interest would be in preserving that agreement. Every nation on the world would have a substantial interest in maintaining that agreement and making it effective.

"Our problem is we've been moving in part away from -- Western Europe is a junkpile. It is no longer a technological center. The United States has no high technology, except in the military sector which produces weapons. We are exporting production from Europe and from North America, into countries we're exploiting on the basis of their cheap labor. So therefore, we are not really helping these countries--though they may get SOME benefit, as the case of China, for example, illustrates--but the benefit of the people as a whole, the entire population, that does not occur, because the income is not sufficient, the rate of growth is not sufficient, to raise the standard of living around the world. What we're doing is exploiting cheap labor in these countries, or exploiting the population in order to exploit the labor. We're not developing them.

"Therefore, we need to go to a Roosevelt-type approach. We organize the world system, freeze the values of currencies, put the whole system under bankruptcy, prevent a collapse, and then unleash measures for global development over the coming 50 years. We need really a set of 50-year agreements on economic recovery. It can be done, it has to be done. It's not something that would ordinarily be considered now, but only in a time of crisis as grave as this is, are nations capable of making the kinds of sudden, sweeping changes needed to deal with a crisis of this type.

"We're at such a point, in which it's in a sense like August 1914. The British were determined to get rid of a lot of problems, and they prepared the war--it was called World War I--by starting a war of Japan against China in 1894, and Japan's war against China, launched from London, continued from 1894 to 1945. That's a big chunk of history there. We repeated World War I, in World War II. The outcome was somewhat different because of Franklin Roosevelt, but with the death of Franklin Roosevelt, we began to abandon his policies and move in a different direction. And with the assassination of President Kennedy, we began to move in the United States distinctly in that direction.

"So, we've come to a time where we have to change our ways. We also have to recognize, from looking at the month of August, and looking at the ominousness of this month, coming month of August, and compare it with 1914, compare it with 1939. We've come to a very dangerous period, but dangerous periods are times when people who recognize the danger will do things they otherwise would not do. They are willing to make changes they otherwise would not make. They'll make changes for worse, or changes for the better. This is a deadly threat; it's also an opportunity. And that's what I'm concentrating on.

"The point is very simple. My view is that we have to somehow get rid of Cheney. I think if we get rid of Cheney, with what's brewing among politicians here who are really not that courageous; they're not men of principles, they're opportunists. They're not bad people, they're just opportunists. But when an opportunity strikes in this form, where the horror hits 'em, they're capable of accepting the changes that they otherwise would never consider. And the time for those changes is now. The potential is now.

"And what I propose essentially, or have been proposing, is that the four principal nations I indicated must hopefully form a committee to sponsor a general rally of nations to reorganize the system. Because smaller nations do not have the courage or means to initiate these kinds of steps. You need to have a dominant leading power in the world, or combination of power, who opens the door to let other nations participate in this kind of reform. That's a chance. And in that case, we have to go back to a new kind of IMF system, a Roosevelt-type of IMF system, what Roosevelt had intended for the post-war period, had he lived.

"And with that kind of perspective, I think that we could organize cooperation among nations, dealing with some very obvious problems, which will lead to a solution to these problems. We also have to get rid of Cheney. That's clear. Cheney is not an American. He's nominally an American. He's British property. And he's his wife's property. She made him out of nothing, or less than nothing, and he represents the interests who want war. He represents the interests that want a war with Iran, and that could set the whole world afire. So we have to get rid of him. We invite him to go back and grow potatoes in Wyoming. That's his best opportunity.

"But this is the crisis. And the cowardice of my fellow American leaders here, in facing these kinds of issues, is a problem. But the crisis is now. More and more of America's leaders are realizing that this crisis exists. More and more people, Republicans as well as Democrats, behind the scenes, recognize that we've got to change some things here. And the effort is to, by September, or late September perhaps, to have something new in process where Cheney is no longer the landscape. The great danger is between now and September, September at Labor Day, until politicians return to Washington. The great danger is in this month of August, again as in August 1914 or August 1939. A monster could be let out, could be let loose, and maybe the world doesn't have the ability to quickly stop that monster from setting fire to the world. So we have the opportunity and great danger. We have great issues that have to be faced.

"Being a professional troublemaker as I am, I do the best I can."

Jeffrey Steinberg

On July 16, the London Guardian reported that President Bush, under the powerful influence of Vice President Dick Cheney, has tilted in favor of military action against Iran before he leaves office. According to the Guardian account, a series of meetings during June and July, involving top White House, Pentagon, and State Department officials, was used by the Vice President to assert that the diplomatic track, ostensibly pressed by Secretary of State Condoleezza Rice and Defense Secretary Robert Gates, had failed to produce any results, and that no future U.S. administration would have the courage to act militarily against Tehran. President Bush, according to the account, went along with Cheney, and once again, the prospects for a new Persian Gulf preemptive war loom large over Washington.

Highly informed sources contacted by EIR confirmed and elaborated on the Guardian leak, which came from circles close to the White House who are adamantly opposed to the prospects of an American or Israeli preventive strike against targets inside Iran. EIR's sources confirmed that President Bush had, indeed, tilted back towards supporting Cheney's position that Iran's alleged nuclear weapons sites must be hit preemptively, and that one of the most persuasive arguments mounted by Cheney and his neo-con allies, is that unless the U.S. strikes against Tehran, Israel will launch an attack, and this will create an even bigger mess for Washington.

Speaking for some of Cheney's London patrons, Patrick Cronin, director of studies at London's International Institute for Strategic Studies (IISS), a leading Anglo-American think tank, is quoted by the Guardian: "Cheney has limited capital left, but if he wanted to use all his capital on this one issue, he could still have an impact.... The red line is not in Iran. The red line is in Israel. If Israel is adamant it will attack; the US will have to take decisive action. The choices are: tell Israel no, let Israel do the job, or do the job yourself."

In fact, the consensus among American military strategists is that Israel does not have the capacity to do serious damage to Iran's now widely dispersed nuclear research program—unless it were to use nuclear weapons.

The Two Liebermans
As Cheney was making his power play inside Administration circles, he was receiving back-up from "the two Liebermans." In early July, Israel's Minister of Strategic Affairs, Avigdor Lieberman, traveled to Brussels to confer with top NATO officials, and on his return, he told Israeli Army Radio that he had won backing from the United States and Europe for preemptive strikes against Iran's nuclear sites. Lieberman, who is known among Israeli analysts as "Israel's closest thing to a National Socialist," elaborated that, if Israel were to launch air attacks against Iran's nuclear sites, NATO would join in to defend Israel in the event of Iranian retaliation. Lieberman could not have been more blunt: "We're stuck in Afghanistan, and European and American troops are wallowing in the Iraqi quagmire, which is something that is going to prevent the leaders of countries in Europe and America from deciding on the use of force to destroy Iran's nuclear facilities. Therefore," he concluded, "at the end of the day, Israel is going to have to remove the nuclear threat posed by Iran with the means at its disposal, and it won't be able to count on international cooperation." But, the Israeli minister then declared, "Europe and the U.S. will support us."

The very day that Avigdor Lieberman was threatening Israeli preemptive strikes on Iran, July 11, Sen. Joseph Lieberman (I-Conn.) introduced an amendment to the defense spending bill, demanding that U.S. intelligence agencies report to Congress every 60 days on Iran's activities inside Iraq. Although Lieberman's amendment, which contained a string of dubious or outright false claims of Iranian combat support operations against American forces in Iraq, was clearly aimed at putting the Senate on record as supporting a warlike policy against Iran, the entire Senate sheepishly voted, 97-0, in favor of the Lieberman ploy.

Lest there be any doubt that Joe Lieberman's actions were tightly coordinated with Cheney, the text of the Lieberman amendment quoted extensively from Gen. Kevin Bergner, the former top military aide to neo-con Elliott Abrams at the National Security Council, who was dispatched to Baghdad in June 2007, to conduct White House "spin control" over the war reporting. Bergner has put out a steady stream of disinformation and/or exaggerated claims of Iranian involvement in the Iraqi insurgency. Bergner's propaganda from Baghdad, according to Pentagon sources, has infuriated the Joint Chiefs of Staff, who see it as a replay of the "stovepipe" of fake intelligence, funneled from the Pentagon's Office of Special Plans to the Vice President's office, in the run-up to the Iraq invasion. This time, there is no pretense that the war propaganda is being vetted by the Pentagon intelligence services. It is being funneled directly from Baghdad via General Bergner, directly to Cheney, Lieberman, et al., and is increasingly showing up on CNN and other news outlets.

Impeach or Remove Cheney Now
The turn toward war against Iran, coming from the "usual suspects" in Washington, must be assessed against the backdrop of the July 1-2 Kennebunkport, Maine summit meeting between President George W. Bush and Russian President Vladimir Putin. The two days of discussion, hosted by former President George H.W. Bush, represented a potential strategic breakthrough in U.S.-Russian relations. President Putin proposed a long-term strategic partnership between Washington and Moscow, encompassing all of Eurasia in a security alliance, built upon Lyndon LaRouche's original strategic defense proposal, which later became President Reagan's SDI. Just days before Kennebunkport, former President Bill Clinton, in a speech in Yalta, Ukraine, had also signed on to the proposal, indicating a powerful intervention by the institution of the U.S. Presidency—along with that of the Russian Presidency—to avoid war in Eurasia for decades to come.

It was in response to that initiative that Cheney made his move, and set the United States potentially back on a course towards near-term war, a war that would soon spread from Southwest Asia to other parts of Eurasia, and ultimately lead into World War IV—pitting the United States against Russia and China.

It is for this reason that LaRouche, in a dialogue in Washington with a group of diplomats on July 19 (see transcript, this issue), asserted that the only way to avoid war at this late date, is for Dick Cheney to be either impeached or removed from office now—before the guns of August are fired.

It was also in this context that LaRouche reiterated his message to Sen. Hillary Clinton (D-N.Y.), the ostensible Democratic Party front-runner for the Presidential nomination. LaRouche called upon Clinton to take the lead in the fight to remove Cheney from office, promising that if she does so, she will be "virtually acclaimed" as the next President, by an American electorate that is overwhelmingly demanding Cheney's ouster.

LaRouche's message is also resonating among leading Republican circles, who fear a total wipeout in the 2008 general elections, if Cheney remains long on the job—and if the preemptive strikes against Iran take place. While some Republican Party voices, including former Reagan Justice Deparment official Bruce Fein, former Presidential candidate Patrick Buchanan, and retired CIA officer and American Conservative columnist Phil Giraldi, all have demanded Cheney's immediate ouster to stop an Iran fiasco, GOP leaders have so far failed to come forward to confront President Bush and force Cheney's ouster. And Congressional Democrats have chosen to dodge the Cheney bullet and opt for impotent gestures, like the all-night Senate debate over Bush Administration Iraq policy, in which Cheney's name was not mentioned once. The ultimate cowardly act was the Democratic Senate capitulation to the "Buckleyite Damn-ocrat" Joe Lieberman's Iran war gambit. Such cowardice and opportunism, LaRouche has frequently warned, could bring about the doom of the American republic and a global "permanent war" that would engulf the planet for several generations to come.

Cheney and Bandar
While General Bergner's "wurlitzer" continues to churn out war propaganda from Baghdad, pushing the idea of military action against Iran to "save the lives of American GIs" fighting the "Iranian-backed" insurgency in Iraq, U.S. intelligence specialists have alerted EIR that there is growing worry about another aspect of the Iraq insurgency. Saudi Arabia, through Prince Bandar bin Sultan, Cheney's chief ally and the purported national security advisor to King Abdullah, has been pouring money and weapons into Sunni tribes in western Iraq, who have now emerged as what some U.S. intelligence officials brand "al-Qaeda II." These Iraqi Wahabi networks, distinct from the bin Laden/Zawaheri "al-Qaeda in Iraq" apparatus of largely foreign fighters, have emerged in recent months as a significant element within the overall insurgency. According to these sources, "al-Qaeda II" is part of Cheney's scheme—designed in London by the likes of Dr. Bernard Lewis—to promote a permanent Sunni versus Shi'ite conflict in the region.

This Cheney-Bandar effort, the sources warn, is one of the driving factors, provoking Iran, and fueling the prospects of a near-term explosion. Earlier in July 2007, an emissary of Prince Bandar delivered $750,000 to the Mujahideen-e Khalq (MEK), an Iranian exile group that formerly worked for Saddam Hussein, and which is on the U.S. State Department's international terrorist organizations (ITO) list, for having assassinated American military officers in Iran. The MEK is actively engaged in sabotage and assassination operations inside Iran—with the enthisiastic support of Washington neo-cons, typified by Daniel Pipes, who recently attended the MEK gathering outside of Paris where the Bandar money was delivered.

The U.S. Department of Justice is already investigating Prince Bandar for his role in the BAE Systems scandal, involving the $100 billion offshore covert operations fund, established under the British-Saudi "Al-Yamamah" barter deal. At least $2 billion in "Al-Yamamah" funds went directly to Bandar's bank accounts in the United States, and some of those funds went to a range of Wahabi insurgencies, according to U.S. intelligence sources. One question that Justice Department investigators should take up is whether some of those funds are now going to the MEK to fuel Dick Cheney's Iran war schemes.


LaRouche's message to Pelosi, to either get out of the way of impeachment, or resign, was sent loud and clear in her own backyard, with a LYM rally in downtown San Francisco on Friday the 27th. Hundreds of impeachment condoms and thousands of pieces of literature were distributed to her eager constituents in front of a banner demanding that Pelosi stop acting as "Nazi Rohatyn's Condom." The condoms bore pictures of Pelosi and Cheney, and the text: "Tell Pelosi to quit protectin' Dick." Around twenty people called in to her office from our phones while at the rally, and doubtless more made their feelings known later on, prompted by our literature, songs, and briefings given over our megaphone.

Most San Francisco locals knew that Pelosi had taken impeachment off the table, and they were none too happy about it, agreeing that she has no business being in office if she takes a stand so dramatically against the people. Some passers-by could be heard on their cell phones, telling their interlocutors, "Yeah, this sign says that Pelosi is a condom! And they're handing them out!" It was a rare breed of San Franciscan to remain obstinate in telling us, "I like Nancy," as our new canon, "Impeach Cheney, Miss Pelosi" filled the air, concluding with, "Fascist Felix likes the Dick. // Don't blow it, impeach him quick!"

Our two tables were decked with signs demanding Cheney's impeachment, and a new one labeled as a "Military Affair to Remember" featuring Felix [Rohatyn], Nancy, and Dick lying together in bed. Nancy (in the middle) looks shocked, Rohatyn is confiding to her that "All the Democrats like my Big MAC," and Cheney informs the onlooker that "Whittington isn't the only person I intend to shoot in the face!"

Beyond simple displeasure, some people expressed rage at Pelosi, furious that she was doing something so obviously, and inexplicably wrong. Unlike some "Brand X" political movements, the LYM were able to pinpoint why: the control of the fascist banker Felix Rohatyn over Pelosi and other Democrats!


Lyndon LaRouche addressed an international webcast on July 25, in Washington, D.C., which was attended by about 150 guests, and broadcast in full over the Internet, on and, where it is archived. LaRouche's opening remarks were followed by two hours of dialogue. Here is an edited transcript.

Debra Freeman: Good afternoon. My name is Debra Freeman, and on behalf of LaRouche PAC, I would like to welcome all of you to today's seminar. Just a short time ago when we met, Mr. LaRouche took up some profound questions, and the effect of those remarks is still reverberating in the halls of power here in Washington. At the same time, we are sitting on what is clearly a powder keg, in terms of the overall mood of the population, which today is, on a certain level, tired of debate, and wants to see action. I can tell you that, as we come into today's event, Congressman Conyers, who stands as the Chairman of the House Judiciary Committee, which is the venue where impeachment proceedings against Vice President Dick Cheney will begin, has taken the position that if three more members of the House sign on to Dennis Kucinich's impeachment resolution, that he will, in fact, begin impeachment proceedings. We just learned today, that that number has now dropped to two, because Congressman Brady of Philadelphia has signed on. [applause]

Up to this point, every time Lyndon LaRouche has done a presentation in Washington, D.C., within 48 hours, we have seen incredible things happen. To my mind, getting two members of Congress to sign on to this resolution—given the mood of the population, and given the fact that Mr. LaRouche is about to speak—is a piece of cake. So, ladies and gentlemen, please join me in welcoming Lyndon LaRouche. [applause]

Lyndon LaRouche: Thank you. Well, the time has come to make some history, to make a turning point in history, because there is no alternative. We have a military force, naval and others, stationed off the Indian Ocean region, which, contrary to all nonsense from idiots in the U.S. community, is a preparation for Cheney to unleash war against Iran, in terms of massive air attack. You don't move B-52s into the area, you don't move four task forces into that area, you don't do the other things that are being done unless you're prepared, while Congress is away, to launch war. The consequences of launching a war are unbelievable. This would be a different form of World War III; you could not put this back in the bottle. There are too many things that are unstable.

First of all, this occurs at a time when the world monetary financial system is actually now currently in the process of disintegrating. There's nothing mysterious about this; I've talked about it for some time, it's been in progress, it's not abating. What's listed as stock values and market values in the financial markets internationally is bunk! These are purely fictitious beliefs. There's no truth to it; the fakery is enormous. There is no possibility of a non-collapse of the present financial system—none! It's finished, now! The present financial system can not continue to exist under any circumstances, under any Presidency, under any leadership, or any leadership of nations. Only a fundamental and sudden change in the world monetary financial system will prevent a general, immediate chain-reaction type of collapse. At what speed we don't know, but it will go on, and it will be unstoppable! And the longer it goes on before coming to an end, the worse things will get. And there is no one in the present institutions of government who is competent to deal with this. The Congress, the Senate, the House of Representatives is not currently competent to deal with this. And if the Congress goes on recess, and leaves Cheney free, then you might be kissing the United States and much more good-bye by September.

This is the month of August; it's the anniversary of August 1914. It's the anniversary of August 1939. The condition now is worse, objectively, than on either of those two occasions. Either we can make a fundamental change in the policies of the United States' government now, or you may be kissing civilization good-bye for some time to come. That's the reality. Anyone who thinks differently is either just an incompetent, or an idiot, or a raving lunatic: That's reality. Are you prepared to act now? If you're not prepared to act, please leave the House of Representatives. If you're not prepared to act, please leave the Senate; and above all, leave the Federal government, in terms of the key officials, because you'll only make a mess of things. It'll be worse with you there than if you just simply got out, and left it to a minority to solve this problem.

There are two things that must be done. Let's start with the simplest thing, which is on the table now: Remember, impeachment is in the background, but impeachment is not the issue. The impeachment is getting Cheney out. You get Cheney out, now, and the situation can be made manageable. If you do not get Cheney out, you're kissing civilization good-bye. If it survives, it's not to your credit. And any Congressman who says he's not going to get Cheney out now, should leave the premises now, as a final act of decency. If Nancy Pelosi and others—if they can't get Cheney out now, if they're not determined to do it now, this month, before they leave Washington, they should quit now! Submit their resignations, and let somebody who's more competent come in, because it has to happen. Cheney has to go!

The impeachment process is not the process by which we get rid of Cheney. The process by which you get rid of Cheney is that a number of gentlemen and ladies meet, and tell this jerk that he's gone; voluntarily, would be his best option. Get him out of there. Break the command structure. Isolate the idiot in the White House; he then becomes manageable. As long as Cheney is in there, he is not manageable. He has no brains, he has no intelligence, he has no judgment—he's a fool. But he was put into the Presidency because the people who put him there knew he was a fool. They put him in under the supervision of Cheney as his babysitter. Get Cheney out. Cheney is tied to the—I can go more into that. But this is what has to happen.

Pull Back the Troops in Southwest Asia

Now, the first thing we're going to have to do: We're going to make a decision right away, to pull back the U.S. troops in Southwest Asia. You have to pull them back into holding positions. The fundamental thing we have to do, and it won't work by itself: The holding position means you're pulling the United States troops out of the conflict, into holding positions. Therefore, you are changing the positions of the U.S. troops from combatants, and the issue and the target, to a factor, in which a group of nations will make the decision to solve the problem. That, from a military and strategic standpoint, and a diplomatic standpoint, will work: It can be done. The algebra is known; a number of specialists have presented the algebra. It will work! As far as its motion is concerned, its mechanics will work, but, it won't work by itself. Not because it's not a good idea, not because it's not a workable idea, because politically, it's not adequate. You have to come up with something more. You have to come up with a group of nations, a group of powers, who recognize that the instability of this region is a threat to the continuation of civilization. And therefore, a remedy has to be forced through. And the only way, is that a group, a dominant group of nations says, "We agree. We are going to take the concerted power of our nations and insist that this happens. There will be no resistance. It will happen. We're going to have stabilization in this region."

This means what I proposed earlier. It can not be done unless we induce the idiot who's under adult supervision in the White House, without Cheney, to carry forth on what was started at Kennebunkport. Move in that direction, an inclination to move in that direction. Get Cheney out and go back into the Kennebunkport posture. At that point, the President of the United States, or the Office of the President of the United States, has to make an offer to Putin, and Putin will, without question, accept the offer. And that is, to build a coalition immediately, in the context of moving these troops, U.S. troops, away from the area of conflict, where all they are, are targets; they're not accomplishing anything, except being targets. If you want them to be targets, keep them there. The only function they're performing right now is as targets. Get them out of the target range.

All right, now, if we approach Russia and Putin, Putin will accept the offer. If the United States government proposes to President Putin that the United States, Russia, China, with the support of India, become a sponsoring committee to build immediately a group among nations who are going to address these global problems which have to dealt with immediately—because, smaller nations, individual nations can't do it. You have to change the world monetary-financial system immediately, and you can not do that with a couple of small nations. You can only do that from the top. You have to pull together the might of the world, the major powers of the world and those who will support them, and say, "We're going to change immediately the world monetary system. We're going to get rid of the floating-exchange-rate monetary system. We're going back immediately to a fixed-exchange-rate system." Because if we do not go back to a fixed-exchange-rate system, of the Franklin Roosevelt prototype, then there's no possibility of preventing a general collapse and disintegration of the world economy. It can't be done. Therefore, you have to have a power group which says, "We're going to save this planet from Hell."

One of the things which we're going to do, which is a trigger point, is to get something done in Southwest Asia: to get the U.S. troops out of the target range, and pull them into a holding position where they become a factor in negotiating the peaceful reconstruction of the region. That will not work by itself unless you have a power group which includes four powerful nations of this planet, and others, who decide that that's going to work. A power group which agrees that we're going back to a fixed-exchange-rate system, by government decree, as made by governments in concert. We're going to stop the floating-exchange-rate system, we're going to take steps to clean up the financial mess.

Most of the financial claims and the financial assets and obligations in the world today, are worthless. You have play money; the stock market is a fraud. The Treasury Department is committing a fraud. Most governments are committing fraud, and the British government is the worst of them all. The British government and the British system is the worst offender that we have to deal with on this planet. They organized this war, they organized most of the evil that is done in the world today. So, they will not be considered as having any veto rights in this matter. But the major powers are going to say: We're going to have to go back to a fixed-exchange-rate system. We're going to do it immediately, by treaty agreement, by signed agreement among countries. We're going to freeze a lot of things, and we're going make sure that things that have to be paid, things that have to go on, go on. That production is not cut; farming proceeds, food is produced, infrastructure is built, and so forth. And we'll have to build our way out of this process with steps which begin with these measures. And the measures are a matter of the will of a powerful group of nations, not just the four, but a powerful group of nations who agree that this has to be done, because Hell on Earth has to be prevented. And that's the only way it is going to happen.

And therefore, to do this, we must remove Cheney. Anyone who is not prepared to remove Cheney, should immediately leave any official position in the U.S. government—right now! And they should be told to leave; they should be impeached, hounded out of office, or whatever is necessary. Get 'em out of there. They're an impediment! Because we're going to return this government, in particular, to its people. And you see what has happened with this contempt which the leaders of Congress have shown toward the people, the contempt they've shown toward the majority of elected representatives in the Congress; toward the majority of people who are out there who are their constituents? What right do they have to say they represent the people, when they're against the people? The people want us out of Southwest Asia, and anyone who is not prepared to do that is not going to have a hearing with a great majority of the American people. More than three-quarters of the Democrats insist on this; more than half of the Republicans insist on this. Others will insist and join it en masse if they think it has a chance of surviving. That's what they want.

When you say you're going to get us out of that mess in Southwest Asia—that's even what the New York Times said today in an editorial column—when the American people hear that we are determined to actually get out of that mess in Southwest Asia, then, and only then, will the American people respond with confidence to their government. If you don't do that, you're worth nothing. You should get out of office; you're an impediment; you're an embarrassment. For the sake of your descendants, get out of office; don't disgrace them any further. They've got enough trouble with the debt you've left them, on top of everything else. So, that's the general outline of the situation.

So, you have to, on the one hand, if you don't take the drastic action—get out now!—nobody's going to listen to you. You're a fool. Shut your mouth; no one wants to hear it. Don't bother us with your babble anymore. Secondly, that's not going to work by itself. But it opens the door for something else. It opens the door for the President of the United States, under adult supervision, without Cheney, going to Putin and saying, "We need this." I guarantee you, reading the situation in Russia, Putin will say "Yes." The United States will say to China, and Putin will say to China, "We want you in on it." "Yes." China will say "Yes," because China has a number of problems which I understand very well, and they will say yes, if you speak the right way. In terms of India: India will be somewhat reluctant because it was too long under British influence, and they have to get rid of some of that problem. But nonetheless, India is seeing what is happening with the Pakistan destabilization, and Indian leaders who understand what that means, will say "Yes, we, too, have a problem. We are being used as a cat's paw in respect to Iran." The Pakistan situation is a cat's paw in respect to Iran. It's a cat's paw of those who are determined to destroy India, too. And Indian patriots don't like the United States, particularly with the current treaty proposals being shoved down their throats. India will go along, in an Indian way; it's not the same thing as China. China is simpler. If China says they're going to do it, they're going to do it.

All right. Now, four powers on this planet agree that we're going to sponsor this type of approach, to getting out of the mess which has been created in the world today, and say, "The British have to be put under adult supervision." Then we can begin to do certain things.

The Economic-Financial-Monetary Crisis

Now, the big problem we have to deal with, as I mentioned before, is the economic-financial-monetary crisis. The United States is disintegrating. If a depression occurs, the United States will see conditions you won't believe. Nothing in the past century, no depression, is comparable to what will hit the United States if this system collapses now. We don't have industry; we have destroyed our agriculture; we have destroyed our health-care system. We're destroyed almost everything that we've depended upon. And if we lose the power of money—which we're about to lose—as long as the U.S. dollar was around, and as long as world affairs were denominated in U.S. dollar exchanges, we had a certain strength in this world. Not because we were worth anything, we weren't worth anything; we threw that away a long time ago. But we were worth something because the U.S. dollar was, in effect, a reserve currency of the world. Why? Because the currency of China depended upon the value of the U.S. dollar. The currency of many countries depended upon the value of U.S. dollar; the debts were denominated in dollars. And as long as we were respectable, people would respect us, and treat us nicely, because they were afraid of the collapse of the U.S. dollar. Once the U.S. dollar is collapsing, we ain't nuttin' no more!

Now, therefore, we have to put the dollar under a fixed-exchange-rate system again. And we have to start to rebuild what we've destroyed. We have to take what was being shut down, the auto industry—put these hedge funds out of business, foreclose them; they're all swindles anyway. Start to rebuild the infrastructure capacity, the hi-tech infrastructure capacity, which existed in Michigan, in Ohio, in Indiana, in other places we've destroyed. Build up our infrastructure, our mass transportation systems. Restore the growth of our agriculture. Go back to a high-tech economy again, not a Baby-Boomer economy, not a synthetic diaper economy. And therefore, if we do not mobilize to go away from what has happened to us since 1968, to get away from the '68er mentality, to get away from zero growth, to get away from post-industrial society, to go back to high-tech, to proliferate nuclear power—we need it.

I mean, the future of humanity is nuclear power. You want fresh water? You need nuclear power. We're just about to unleash a prototype of nuclear plant which is specifically designed to make not only fresh water for us, but to make fuels, hydrogen-based fuels, made synthetically from water. And the world is going to go to 800-1,000 megawatt power units, which are of a new type, a fourth-generation type, which are efficient for producing fuels from water, hydrogen-based fuels, whose waste product is water. Much better than coal; much better than anything else. And certainly much better than using up our food supply and starving people to death so we can run our automobiles, and still function.

So, therefore, we're going to go back to the American System. We're going to go back to an image of the United States as if we had remembered Franklin Roosevelt and what he did in the 1930s. What he did in the United States, saving the world from Hitler. Because without us, without Franklin Roosevelt, Hitler would have won. The British would have joined him. They already had joined him; they created him, after all. So therefore, we have to go back to that image. The world needs it.

Let's take the case of China. Now, China has a population of 1.4 billion people, and India has 1.1. Now China is—people think China is very wealthy; it's not true. There are some wealthy people in China, there are some industries in China, which are important, but also, the majority of the population of China is extremely poor. And therefore, without a revolution in technology, affecting the infrastructure and so forth, of the masses of China, the massive area, China has not got a future. Therefore, we have to think about that. We have India; we have probably 70% of the population of India, even though about 30% of the population of India, 1.1 billion people, is in fair shape, the majority is in worse shape than ever before. They're short of water, they're short of everything. They're short of the conditions of life. They need development. All of Asia needs development. Desert areas need development. So, we have to go into a period of high-tech nuclear-fission-driven growth in basic economic infrastructure.

Well, for example, one case in which we just had some agreement on, in terms of the Bering Strait Tunnel project. If we proceed—and my proposal, of course, is magnetic levitation—to build this tunnel which connects this tip of Siberia with Alaska. Now, if we do that—and preferably if we use magnetic levitation as the mechanism—we build a line which runs throughout Europe, along the route of what Mendeleyev designed as the Trans-Siberian Railroad. We run a line down through Canada, through the United States, through the Isthmus of Panama, down into South America. We run the other line through the so-called Middle East, Southwest Asia, into Africa, and build trunk lines. If we do that, we can build a transportation system which has certain very interesting characteristics.

First of all, it's fast—200, 300 miles an hour, or something like that. That's good enough, isn't it? It's a lot cheaper than air flight, a lot more efficient, and it can carry more people, and does the job. And no airport jam-ups. It's also for freight. If we can have an efficient system of moving people and freight across borders, across continents, the continent of Eurasia, the continent of the Americas, the continent of Africa: If we do that, we will have transformed this planet. If we do this with nuclear power, and go on to developing thermonuclear fusion technologies, including the management of the supply of our Periodic Table for the needs of humanity, we have then a prospect of a 50-year recovery program, because you're talking about a lot of very long-term investment in very capital-intensive heavy works, among other things. And these are like large river systems, water management systems, power systems, all these types of things, are 25- to 50-years' investment; some are longer. We have to change the character of the planet in terms of fresh water supplies, and things of that sort.

So, we have a 50-year perspective before us if we start it now properly. We have some very good ideas about what to do. We can begin to reverse the post-industrial society, and that's what we have to do. We're suffering from an ideology of post-industrial society.

Now, let's go back one step on this: Why post-industrial society? Why did this disease of post-industrial society come about?

We have a famous play by a great author, Aeschylus; it had three parts, a trilogy, but the middle part is the one we'll focus on: Prometheus Bound. You have this evil bastard, the god Zeus, Olympian Zeus, who proclaims to Prometheus, who has been taken captive, that he is going to be tortured—he can't kill him because he is immortal—but he can torture him forever, sort of the Guantanamo effect. And that he is going to be tortured because he committed the crime of lifting mankind above the level of animals, by allowing human beings to know how to use fire to improve the human condition. That's the crime that Zeus condemned Prometheus for.

The Oligarchical Model

We have lived in this world for most of what we know of it under the influence of what is called an oligarchical model. Sometimes it's called the Persian model, in the times of the Ancient Greeks, but it's generally known as the oligarchical model. The oligarchical model is typified in European history, by the Spartan model in Greece. It's typified by the Roman Empire; it's typified by the Byzantine Empire. It's typified by the Venetian system, with the alliance of Venetian bankers with Norman chivalry, which is a form of empire; and it's typified today by the Anglo-Dutch Liberal system, which has pretty much run most of the world, increasingly, since about February of 1763, when the British defeated the French and some others, and used a war in Europe to make Europe impotent; and the British East India Company—not the British Monarchy, but the British East India Company!—ran India, as a colony, with a private army, as a colony—not the British monarchy, but the British East India Company! The British East India Company ran a war against China! And they did all these kinds of things. And today, the British East India Company exists in the form of the BAE, which is being investigated for its connections to what happened on 9/11. It's the one capability on this planet that could have done 9/11—and probably did.

So, this empire: This is an oligarchical system! And the oligarchy does not like a republican state. It does not like a state in which society's policy is based on raising the productive powers of humanity, through science and technology, and the use of that, to transform the planet, to raise the standard of living, to raise the knowledge, to elevate man; but rather like something out of a nightmare of Quesnay: It's to have peasants who are treated as cows on the estate, on the assumption that the profit of the estate, as Quesnay specified, and Adam Smith admired him for this—the profit of the estate is due to the magical powers of the ownership of the title to nobility! So, you pay your peasants, who work on the farm, on the basis that you support your cows, until you decide to slaughter them. But you don't give them any more—you don't give them any credit for creating wealth. You treat them like cattle.

That's the oligarchical society. Whereas, somehow, the magical powers of ownership bestow upon the owner the riches which are produced by society: the oligarchical model.

So the historical struggle of humanity is centered around the struggle, at least in known history, the struggle for the republic, in which the commonwealth, the well-being of mankind in society as a whole, is the standard of government, the standard of policy. As opposed to government and the masses of people as an object of convenience, for a few wealthy or otherwise powerful landowners, or people-owners.

And that's the struggle. That's the meaning of the Roman Empire. That's the meaning of the Byzantine Empire. That's the meaning of the Venetian chivalry system. That's the meaning of the British Empire. And that's the meaning of every petty, tyrannical regime which has ever cursed this planet.

And therefore, the issue is, the nature of man, the nature of the human individual. Is the human individual an animal, who simply has dog-like characteristics, or cow-like characteristics, certain species-characteristics given by a biological endowment? Or is mankind the human mind? Is mankind the creative being that Zeus hated? The individual who can create, discover universal physical principles, and apply the knowledge of these principles to change the condition of life for humanity, and to conquer man's problems as a whole?

Is the individual sacred? Is the individual human being different than a mere animal? Do we have the kind of society which fosters that fact, and bases relations within society on the basis of the knowledge that the human individual is not an animal, but has a power of reason, the power of discovering new universal physical principles, and artistic principles, which no animal can do? And that we desire a society, a form of society, which we call a republic, or a commonwealth, in which the well-being of all of the people in society, and their descendants, will have a constantly improved condition of life, a constantly improved realization of the meaning of their life in the eyes of their grandchildren, and great-grandchildren, and so forth to come. And of other nations too.

And that's what the struggle is about.

Democratic Desertion

The change came with Roosevelt's death. Roosevelt represented that principle. He was the epitome of that principle, and for that reason, people like Felix Rohatyn hate him. There was a meeting in the Spring of 2005. As you'll recall, I had some success in sparking the Democratic Party and others to lead in the defense of Social Security against George W. Bush. And we had a very successful mobilization in that respect. We did save the Social Security system. But unfortunately, beginning in the Spring of 2005, my fellow Democrats deserted one side of the cause. They continued to defend Social Security, but we'd also raised the question that we had to defend the birthright of the nation, as represented by its automobile industry. Not simply for making automobiles, but for making all kinds of things, like rebuilding river systems, and so forth, which that industry, because of its tool-making capacity, had provided us, during World War II, and so forth. And still could.

We had a rotting system in the United States, and we, the members of the Congress, allowed this capacity, this idle capacity of the automobile industry, which is the machine-tool sector, the infrastructure-building capacity—we allowed that to be disassembled, and destroyed! Instead of fixing up what had happened in Katrina, in Louisiana, and so forth; instead of fixing our rivers; instead of fixing our transportation system; instead of restoring our health care system; we destroyed a precious part of our capability as a nation, of taking care of our own needs.

Who did it? The leadership of this came from the Democratic Party. There was a meeting, in which the subject was me. The meeting was organized by Felix Rohatyn, who is a fascist. He's a guy who played a key role in putting Pinochet into power in Chile, which tells you what his character is. If you knew what he did in Big MAC in New York, you know what his character is. The guy's a fascist, together with George Shultz, and people of the same type. And his argument was very clear at this meeting. His argument was: We don't want a LaRouche. Why? Because LaRouche is like Franklin Roosevelt, and we don't want another Franklin Roosevelt. We have to stop another Franklin Roosevelt.

So the Democratic Party, which Felix Rohatyn considers himself a controller of, moved to sideline what I was doing. Backed off. And you saw the result.

The Democratic Party participated in condoning a takeover of the Supreme Court, or a near takeover, by a fascist organization called the Federalist Society! That fascist organization is built around the ideas of Carl Schmitt, the man who designed the Hitler dictatorship!

Are they Nazis? Of course they're Nazis.

It's just like the Bank for International Settlements is a Nazi institution too—how the thing was organized. So, they're back at it. And Pinochet's a Nazi. Pinochet's also part of the British organization, the BAE. He's dead now, but he's still a part of it. Now his deadness makes him a much more confirmed part of it, and tradition.

Who else? George Shultz created that monster also. Others created it. Pinochet not only was Nazi in his thinking, but his government, with the backing of Shultz, and with the participation of Rohatyn, ran Operation Condor, which was a genocide operation in the Southern Cone of South America, which was run by a third-generation of the Nazis! Who were imported for that reason. This is what we're dealing with.

You say, why is it that Nazis are bad? Well, it's not just that Nazis are bad. Nazis are a product of the belief in oligarchical society. Look back in history. What did the Roman legions do? They ran extermination operations against populations too! That was their method. Exterminations as a method of controlling society. They ran the gladiator system, didn't they? What is that? The same thing.

Now the problem is, you have a mentality which is loose, typified by Felix Rohatyn, and Felix is treated as respectable in the Democratic Party! He may not have a swastika, a Hakenkreuz on his sleeve, but he has one in his heart. That's what he does. Look at what he does. Look at Big MAC in New York. It was a swindle. Highway robbery! They looted the city! They wanted to get the human beings out of there, and you had to conceal your membership card in the human race, and just show you were very rich, and you could live in New York City. Unless you came in as slave labor, or something, to maintain things.

But the problem here is this ideological problem. It permeates this society.

The Physical Conditions of Life Are Collapsing

We have, for example: Look at the United States, look what's happened to it, since 1970-71. Look at what has happened to the lower 80% of the family-income brackets of our households, as opposed to earlier, under Roosevelt, in that Roosevelt tradition. Look around the world at systems. What do you see?

The objective physical conditions of life, the conditions necessary for human qualities of life, of our people, the lower 80%, have been collapsing at an accelerating rate since 1977. Collapsing, consistently: There's been no prosperity in the United States! Not for the lower 80% of family income brackets. Anyone who says so is a fool, or a liar. Everything is worse. Look at health care. Look at the cost of housing. Look at the quality of education. For the lower 80% of the family-income brackets in the United States, everything has become consistently worse. And the means by which we had a higher standard of living, was destroyed, as part of the program of the Rockefeller Trilateral Commission. This policy destroyed the United States: destroyed our agriculture, destroyed our industry, destroyed our infrastructure.

It was continued under the Reagan Administration. It accelerated under the Bush I Administration. Clinton wasn't on to it yet; he didn't understand it yet. Bill Clinton probably now does understand it, but he didn't understand it when he was President. He made the mistake of thinking that Al Gore was human; that's a big mistake. Remember the coal mine—"16 Tons" and the company store. Al Gore owned that place, that got that song written about it. That's Al Gore. The guy's no good, and he comes from a background of a daddy who was no good either. Something that cross-bred with a possum up in the swamps of Tennessee. You know how they are.

Anyway, the problem is, the cultural problem is that our people have come to accept the idea of an oligarchical model in society, even in these United States. We accept the injustice which is heaped upon the lower 80% of our income brackets. We accept the injustice that's done in many other ways, to our own people. We sit in awe about the upper 3% of family-income brackets in the United States. We kiss the butt of some billionaire who's nothing but a thief. That's what we do. We have destroyed the idea of the commonwealth. We destroyed what we prized when we built our Constitution, in terms of Solon of Athens. We tore apart and disregarded every tradition, noble tradition of humanity, particularly of European civilization. And that's what we've done. And we've come to accept that! We've come to accept politicians who think like that. We've come to accept laws that practice that.

We look at other nations in that way. We don't think, as we should, as we used to as Americans: We used to think of how we came here—like I can say, some of my ancestors came here in the early 17th Century, into Massachusetts and related areas, as colonists. People came here, in the original settlements—they didn't flee from Europe, in the sense of having to escape from someplace—some people did fit that category, but that wasn't the way the colonies were built. The settlements were built by people who represented the best of European culture, but an anti-oligarchical sense of European culture. People came here because they were looking for a place in which to take the best of European civilization, and move it out of Europe, where Europe was dominated by oligarchical traditions. To build a true republic based on the commonwealth model, which had been repeatedly tried in Europe, particularly beginning in the 15th Century, but had repeatedly failed, because of the return of the old oligarchical forces, who still represent nobility. You know, you bow before nobility, even to this day, in Germany. You bow to nobility, the Black Nobility, in Italy! These are the most degenerate people you can imagine. The same thing goes on in France. There are more policemen than there are people. And this is Europe. Europe is permeated with oligarchical culture. Look, you have these two Polish twin idiots in Poland, and the Polish put up with this crap.

And therefore, we came here, the founders came here, to bring the best of European culture here, to build a nation, to be a cynosure for nations of the world, as a model republic, the way that humanity should live. This is what is built into our Constitution. This is what is built into our Declaration of Independence. These are the ideas of Leibniz, and people like that. This is what Lincoln did. And we've always had a struggle in our country, between the oligarchical tendencies coming in, particularly, chiefly, from Britain, into the United States, as in New York City and so forth, but we had a republic.

A World Based on Sovereign Republics

And in the case of Franklin Roosevelt: Franklin Roosevelt found us in a low moment. We'd lost 30% of our standard of living, our income, in a short four-year period. And he led in rebuilding our nation, which was shattered. Not only rebuilding our nation, but moving to preserve this, to extend this, to eliminate colonies and similar kinds of oppression throughout the world. To promote a world based on republics, sovereign republics, which are each dedicated to serving their own people, by republican standards, and promoting republican standards of life among people of other nations, knowing that our security, and our well-being, and our purpose in living, depended upon what we did to promote these kinds of ideas, and these kinds of opportunities, among other peoples. The same rights that we desired for ourselves.

We have turned away from that.

This happened at the end of the war. Roosevelt died. Truman, who was a little bit of a pig, came in. (He was. I was there. And I saw the curly tail myself—figuratively speaking of course.) But we turned away.

The United States joined with Churchill and other Brits, in restoring colonialism! We took the Japanese troops out of the prison camps in Indochina, where they had surrendered to a force organized by the United States. Ho Chi Minh was an asset of the United States, an ally of the United States, in the freeing of Indochina from colonialism, and from the Japanese. The Japanese were put into prison camps. The ever-loving British came in, armed the Japanese, and told them to get out and take over the country, until the British could get the French in there to replace them.

We restored colonialism in Southeast Asia! The Dutch went in to conduct a long war to suppress independence in Indonesia. This happened throughout the world, in that form, and various forms. This was the Anglo-American policy. Which is what Truman represented. This is what Eisenhower understood, when he gave the speech at the end of his term as President. He understood what had taken over the United States. He gave it a name: "military-industrial complex." But the military-industrial complex was what was unleashed on the day that Franklin Roosevelt died, when Truman took over. And the thugs who had been originally—like the grandfather of present President of the United States, who'd been one of the people who had put Hitler in power in Germany—this crowd took over power in the United States, under Truman. And we haven't gotten rid of it since.

So we have, in the United States, a tendency, this oligarchical tendency, of preferring an oligarchical society in which, a few of the rich, the beau-ti-ful people—they're ugly as hell, I mean, actually. You see the way they dress. And the stuff they bare at parties. Oh! Disgusting. Anyway.

So that's what's happened to us. So therefore, there's a factor, a rottenness in our culture, which the Baby Boomer generation was brought into, and that's another story in itself, which I've told a number of times.

So, we've come to the point that we have a way of choosing. We can choose to do what I propose, which, from a strategic standpoint, is the only sequence of major developments which will get the world out of what would otherwise be a plunge into a Dark Age, something comparable to the 14th Century in Europe. We could do that. We could return to our character, as Franklin Roosevelt once did earlier, under conditions of crisis. And what I'm proposing could only be done, admittedly, under conditions of crisis. Only when these guys get down on their knees, and people admit that this isn't working, that this is a danger to human life, and they have no choice, no acceptable choice but to do what I say, on this one—then they will choose it. They will be happier. And that's the only chance for humanity.

Without the United States, it can't happen. Europe couldn't do it. Asia couldn't do it. We must be the sparkplug. That is our destiny; that's our legacy. Not to rule the world, but to be the sparkplug by which the world comes to rule itself. We have to be the sparkplug. We have to say: We're going to pull our troops back, unilaterally. We're offering everybody: We're getting out. We'll take the U.S. troops and move part of them out of Baghdad city, into the airport. We'll move them into other holding positions. We're not here to shoot, nor to be targets. Now, we've created a mess for you, haven't we? Uh-huh, good. Now you guys, get yourselves together, we're going to bring this fighting to an end. We're going to bring this to an end.

Then we turn around, knowing that won't work by itself. We'll then go to Putin. The President of the United States, whose one redeeming feature is that he seems to like Putin, or something. You never know, or understand exactly why or what goes on in that funny mind, if there is a mind at all. But this is one thing he seems to do—and we encourage that, not because it's very good, but because it's the only virtue we can find with the guy.

So, he goes to Putin and says, "We, the United States, need your cooperation. We've got to cooperate, and get these Brits under control." And Putin will say, "That's a very good idea." And "We've got to have China involved in this." Putin will say, "Yes, that's true." "And India has to be involved." Putin will say, "That's good, that's good. A better balance." And then four of the most powerful nations on this planet agree that what we're doing in Iraq, in pulling back, is the right thing to do.

But it's not sufficient, because we have a world financial crash coming down. It's fully in progress. Therefore, we have to act also together, in unity, to take certain emergency measures which will stabilize the situation, and enable us to organize our way out of this mess. If we do that, you will find that Germany will probably be the first to desert Britain on this kind of thing. They'd love it, because the Germans are really getting sodomized by the British. And they really, despite appearances, they don't like it. The Italians will laugh, and say, "Ah!" and they will be happy. The French will say, "Mmm-hmm."

But what will happen is that you will find, very rapidly, immediately, and if we solve this problem, we take this whole area of Southwest Asia, which is now a terrible crisis area, and we say, "This thing is going to be settled, peace is going to come here now," it will happen. It will happen.

Because, you know, one of the things that feeds the problems in this region, in particular, is the fact that it's a region of injustice. And the Saudi royal family is not an asset. I tell you, it's not an asset in this area. They have their own agenda, and people like Prince Bandar are really a menace.

But in this area, if we get this kind of agreement, we can bring about peace in the Middle East. It will be tough, but with that combination of power, we can do it. Because we will end the injustice. We will present a plausible, clear alternative to a perpetuation of the injustice.

And by our initiating that, initiating the measures which bring this about, we will give the United States back a position of moral leadership in the world.

Preparing the Next Presidency

Now this is going to create another problem. We have an onrushing Presidential election. We couldn't produce a farce, so we had an election campaign. What I saw this week on CNN, was the most disgusting piece of depravity that was ever concocted in the name of politics. This was absolutely obscene! CNN should run around with its tail between its legs—not somebody else's legs—but its own, for producing this piece of insanity. Completely irrelevant to anything of importance in the United States. Who cares what the price of toadstools is? We've got to get rid of war. Our people are dying for lack of health care. All these problems, and you want to talk about these odds and ends? A diversionary thing. You can have that debate in East Podunk. But we have a world war, a world depression in progress, and an explosion beyond belief. And what is going to be done by the person who is running for President of the United States? What is that person going to do, and represent as leadership, about these problems on which the fate of mankind as a whole depends? Not somebody's local opinion, or special pleading.

What do you do? You produce a clown-circus, a side-show, the most disgusting political sideshow, a complete irrelevance, to anything of importance to this nation or the world. You make the United States disgusting in the eyes of the world, by putting on such a sideshow with that CNN set-up, that clown-show. And I think the candidates should all agree not to participate in such a clown-show, again. The candidates should all boycott such a clown-show; to say, we're not going to attend that clown-show. We're not going to disgrace ourselves.

I should send a message to Hillary Clinton, for example: Hillary, get anybody else who's clean and you guys agree, you're not going to participate in a clown-show like that again. You just walk out. You won't be in it. And say why you won't be in it. We're not going to have the moneybags behind CNN, controlling CNN, dictating the politics of the United States. The politics of the United States belong to the people. The politics of the United States belong properly to those issues upon which the welfare of the nation as a whole depend, particularly when it comes to Presidential elections.

Now, there's another thing to be considered about the Presidential election. We're coming close to that now. This is now Summer. We're going into August; if we survive the perils of August, we are getting deeply into the next Presidential election. Now that has to be prepared. This is not going to be, if successful, a simple partisan election. It's not going to be Democrats or Republicans, up or down, either way. You're going to have a different kind of government. You probably will have to have a Presidential selection as a Democrat, and we have very few people qualified for that position. We're also going to have to include a composition of a significant number of Republicans in the administration. Not as window-dressing. Not as a political package. We're going to have to craft an administration which is practically going to have to run, and be elected that way, of every key position of the Executive branch. Every key cabinet and related position.

Because you need to have a team, which should begin to be built now. A team, to come in with a figure as the President, with a team with that President, who is ready to be deployed, like an army, to attack the several fronts which have to be dealt with, to deal with the problems of the world. You're going to have to pick a State Department, maybe not the Secretary of State, but you're going to have to pick from every top key area of government, a team. The parties are going to have do something about the selection of the leaders in the legislative branches, as teams, with a mission-orientation and a policy which is clear.

Because we have to reorganize this whole planet. We have to reorganize it mostly from the top down. We can not have the kind of silly politics that you've been seeing in recent years. We're now in the worst crisis in modern history; the most dangerous. And this is no time for amateurs. You've got to give the country back to the people. The people have to have confidence that the government that is coming in is their government, not a government of them, but a government which is theirs. A government which represents them and their interests; a government of competence; a government of determination.

You're going to have to come in with, not which enemy you're going to fight abroad, or who you're going to hate and who you're going to love. Who you're going to cut a deal with, and who you're not going to cut a deal with. You're going to have to cut a deal with the world as a whole: To organize an international monetary financial system, which we must do, means you have to get everybody involved in it. You may have a couple of malingerers on the outside, but in the main, most of the countries have to agree. And they have to agree not on tiddlywinks, not on bits and pieces. They have to agree on principle: How is this thing going to work? What's our general plan? What are we going to do with this planet?

And therefore, you have to now think about not only getting through the month of August, but coming out of the month of August, with an idea of what the next government of the United States is going to be. Not based on which candidate is going to win; that will happen, but that's not the point. We need a picture, an image, of what the policy of the United States should be, coming out of August, and what the government of the United States should be coming out of August; what it should be like; what's it going to do. And let's put this nonsense that we saw on CNN to one side. And anybody that runs something like CNN again, any candidate who is good should refuse, with other candidates, to participate in such a debate; refuse. We're not going into the outhouse to discuss politics. We'll have a respectable forum, and we're going to discuss what we want to discuss. We're going to discuss what the great issues are that face the future of humanity.

So, anyway, that's the general outline that we face. And we're going to have some discussion on it soon, but that's the issue. We have to see things in a holistic way, not one issue at a time. We have a planet in deadly crisis; in a breakdown crisis. We have to look at things which are very ugly, and deal with it them summary fashion, as I have indicated. The first thing is that decision on Southwest Asia. We're getting the troops pulled back, now!—in the month of August, not September! In the month of August. That's the beginning. It won't work without getting Russia, China, and India in to support the action. Once you've reached that threshold, and you've got Cheney out, then we can begin to shape up what the world is going to look like for the next 50 years.

Freeman: ...We have a number of questions that came in while Mr. LaRouche was speaking, and some that were submitted even before he began.

Emergency Legislation To Prevent Foreclosures
A number of questions, Lyn, are dealing with the current crisis in housing. The first one that I would like to ask you comes from a senior member of the Democratic staff in the House of Representatives, actually from one of the most powerful committees up there. And what she asks is: "Mr. LaRouche, as you know, several committees on the House and Senate side, including our own, have introduced legislation to rein in the private equity and hedge funds. Regarding the proposals on carried interest and the 15% vs. 35% tax payments, I did see your very cogent comment that 'they should pay their taxes.' Even our limited effort thus far, has caused quite a response from the hedge funds, and from equity fund managers. Beyond what has already been proposed legislatively by the House and Senate committees, what more do you think we should do on this?"

LaRouche: You know, battling hedge funds is like proposing to eliminate prostitution in Las Vegas. You're threatening the income of, shall we say, the procurers. But we are beyond that. We are at the point that we need emergency legislation to provide for non-foreclosure.

Look, you've got two problems. First of all, the whole banking system of the United States, the major banks, are all bankrupt in one sense. And you can't have them closing their doors, so therefore, you're going to have to provide these banks with protection. Now, you have to protect them from that which, essentially, controls them—the hedge funds, and similar funds. Therefore, you've got to protect the bank as an institution against the hedge funds, and other financial interests, which are actually larger and more powerful than they are. Because, we need the banks; we don't need the hedge funds. There's not a single hedge fund or related organization, that we need. As a matter of fact, if they would disappear, it would be much better. I would propose to the hedge funds, "Go! Before we jail you." That's the attitude.

But we have to protect the banking industry. This housing swindle—which is what it is—is run by the Federal Reserve System, because of the appendages which have been tacked to it. Remember that in 1987, we had the equivalent of a 1929 crash. It happened in October 1987. The incoming replacement for the Federal Reserve System chairman said, "Hold everything!" He should have held his mouth. But he said, "Hold everything, because I'm coming in." And you say, "We're locking the door before you get here." But he came in with this business of various methods, and others were accomplices, in flooding the market with phony dollars, with credit systems, with all kinds of things that should never have been allowed; that should have been considered illegal, immoral, and everything else.

So, therefore, what happened is, the system went bankrupt. 1987, October 1987, a 1929-style bankruptcy occurred. I had the privilege of forecasting it, on time. "My baby." They should have shut it down, as I said. We really had to go into emergency measures, Roosevelt-type measures then. Roosevelt-type reforms which would have reversed the decisions made under Nixon, and under Carter, and afterward. They should have been reversed. We should have gone back to a fixed-exchange-rate system, actually to conditions from before 1968. Just reverse the whole legal structure. Say, "This is bad, this is an outhouse, this is a house of prostitution, and let's get out of here before we catch a disease." And get out of it, and go back to what had worked, which is the Roosevelt system of the fixed-exchange-rate system of the Federal Reserve System, with a fixed-exchange-rate system on the dollar.

Then, we should have gone back and repealed all that garbage that went through under Carter, the Trilateral Commission stuff, and gone back to what was there beforehand, which is a protectionist economy, which is the only kind that works. A fair trade economy is the only kind that works, especially one that protects infrastructure. We were destroying our infrastructure, going to cheap shots, gambling as opposed to actually producing. We shut down agriculture, we bankrupted the farmers. We shut down the savings and loan associations in a swindle! Volcker organized a swindle, and the entire savings and loan associations system, which had been the bulwark of the housing rebuilding in the postwar period, was shut down, with a swindle. We allowed usury. Our banks in the United States had anti-usury laws; we shut them down. We shut down the anti-usury laws; we unleashed usury. We turned the thing over to the loan sharks, and so forth. So, this was the problem; this is still the problem today.

Now we come to the point: What is the law of the United States? What's our law? What is the issue of the Declaration of Independence? The principle of law at the center of the Constitution, is in the Preamble. And the Preamble says the same thing which was the intention stated in the Declaration of Independence, on the Pursuit of Happiness. And what is in the Preamble of the Federal Constitution is the same thing spelled out in different words than Leibniz's argument for the Pursuit of Happiness, as the fundamental law of government. Therefore, we should have gone back to it; and we have to go back to it today.

Under our moral law, which is our Constitution, as interpreted from the standpoint of the Preamble, and the implications of the Declaration of Independence—that's our law, not British law—we are not a monetary system, we are a credit system. We do not allow our government to be controlled by money; we control money. We utter currency under the Constitutional provisions. It is a credit system; our money is credit, backed by the U.S. government, the Federal government. We authorize, through the Congress, the utterance of a currency. The authorization for the utterance of a currency, or similar actions by the Congress, especially the House of Representatives, empowers the Federal government, through the Treasury, to utter credit, to print money and to otherwise utter credit.

Particularly, we put the emphasis, wherever possible, on giving credit to the states, or to the Federal government, for large-scale works in infrastructure or other programs, which are capitalized programs. We engage the private banking system, together with the Federal banking system; we engage them in the creation and management of a massive credit, which is supposed to be steered primarily into improvements, which are of two types. Public improvements at the Federal level, or the state levels, or local levels as a subsidiary consideration, or for large-scale private projects which we provide credit for, as we did with the War Production Acts during World War II. We provide the credit; we encourage entrepreneurs to proceed with things that are in the national interest, and we give them preferential treatment. And we manage the system so that it is not inflationary. We also allow laws for things that are more valuable to the United States, to be taxed less than things which are wasteful.

For example: a producer, an employer, a corporation. We invest capital in improving the firm. He's going to be taxed less for his profit than if he takes it out and disperses it. If he disperses it as profits to his stockholders and so forth, he gets taxed more. If he retains the earnings to improve his firm, or to assist through his bank in assisting other firms, he is taxed less, with an investment tax credit type of program. That's how we did things; that's how we did war production; that's how we turned the nation from a junk heap into the most powerful machine the world had ever seen during the course of the 1940s, under Roosevelt.

So therefore, our law is that. Our law is the general law of the nation, and welfare of the people, and justice for the people, is our financial law. Somebody comes in and says, like the British system, "Well, I'm sorry, but the money has to be primary." That's a monetary system. Money becomes the law. Under the American System, money is controlled by the law. Under the British system, money controls the law. Under the American System, the law controls the money. And the law is the moral law. The moral law is specified by the Preamble to the Constitution. Any act, any amendment to the Constitution which defies the Preamble to the Constitution, is inherently unconstitutional, and must be nullified.

So, therefore, that's what we have to do. We're in such a situation. You can never collect and foreclose; you never collect on the mortgage obligations which are outstanding in the mortgages which are collapsing now. The collapse of these values by as much as 20%, essentially bankrupts most of the entire mortgage system, because the equity of the mortgagee is now nil: They don't own anything; they're in negative equity! So therefore, do we want them evicted?

Let's take the case of Loudoun County. Loudoun County is an insane county. I know, I live there, and I saw it at close range. In 1983, they were going with what they called "development," by the Mellons, and people like that, other fruitcakes. Anyway, I said, "This is crazy." You have an area which is largely farming; the ground is no good for anything else except really cattle growing and a few things like that. It has no utility for anything else, and it was being used that way, which was sensible. It needed a mass transit system in there. But we built up, as you can see, if you look around this area; you see we have this great agglomeration of housing, all around greater Washington, D.C. It's insane! You have great residential areas, with no agriculture, and no production—that is, no physical production, or very little. You have people coming from West Virginia, and similar locations, driving along the highways every day, to get to work in the area around Washington, D.C. We built up large highway systems to accommodate this, and they're still jammed.

Obviously, they're nuts! These guys don't know how to manage anything, totally incompetent! The way you manage land use, is, you have decentralized land use. You have communities in which you have a distribution of places which generate wealth, as by production, and you have people who live there, generally, who are associated with those functions. You don't have migration over 60 miles. You don't have one-and-a-half-hour to two-hour commuting to work daily each way. What does it take coming from West Virginia at high-traffic hours? And back and forth? Four hours a day, on the highway, or longer on an "off" day. So, this is insane.

Now, you have no tax revenue base in the areas where people live. The only tax revenue base is housing, habitation. Commuting! Now, you have to pay for all this commuting cost, including highway systems, and so forth, which are enlarged to carry all this commuting. But then; now what happens? You go into a speculation, housing speculation like in Loudoun County. It collapses, and this place is ready to collapse by 40% to 50%. Forty to 50% of the housing of Loudoun County is doomed. That's what you have to estimate as your immediate, very near-term exposure.

Now, what happens when the 40% foreclosures occur, or the equivalent? What about the tax revenue base? Ha, ha, ha! Yes, but you've created a county government with its functions, its municipal functions, which now have a tax base below the cost of maintaining those functions, because of the collapse. Idiots! Lunatics! They call themselves accountants—fire them! They call themselves economists—shoot them! It's insane!

We have all this territory in the United States, we are one of the least densely populated areas in the world, in developed areas. We have vast areas of farming, vast areas of industry which we've shut down. Cleveland is dead. We've shut down much of Ohio; we've shut down Michigan; we've shut down all this vast area which used to have in it, in Roosevelt's time, plants in various areas, and you would travel, you would commute 15 minutes to and from work, at most, in these communities. And the flow was nice. Some people could walk to work and back. And the community had its own tax-revenue base, it had a productive base, industries and so forth in this area, and services all together. You had a decentralized form of utilization of land area, so you didn't have to travel from California to get to your job in New York City, which is the direction we've been going in if something doesn't stop it!

So, therefore, we have to think about going back to fundamentals. There are no "fix-it" things that are going to work. The catastrophe is beyond belief in terms of anybody's usual thinking. You have to say, we're going to have to put this thing through a drastic bankruptcy reorganization. We're going to have to freeze a lot of things. If someone's living in a house, they're living in an area, they're not going to be evicted. We'll convert their obligation to a rent, we'll maintain the thing. We want them to stay there until we can find, in a natu...

Briefed throughout the day on Monday about various manifestations of the onrushing financial crash of the entire global system, Lyndon LaRouche commented: "I'm not impressed with what's happening today. Why? Because it already happened. The system has already come down.'' The outstanding debt on the books of the banks can never be paid. Silly panicked fools are rushing to collect, but they are finding out that the money isn't there. And yet, there are still schmucks out there who protest, "But, I don't see it. Prove to me that the system has already collapsed.''

LaRouche elaborated: You have to look at the "bookends of the crisis," the two extremities. On the one side you have the yen carry trade and on the other side non-payment. The money is not there now to cover the takeovers because the money was not there from the beginning to fund the takeovers. You had a flood of money pumped into the system through the mechanism of the yen carry trade and similar things. Nearly zero interest money went out from Japan into Australia and New Zealand, and on from there to other parts of the world, where it fueled a speculative explosion of hedge funds, private equity funds, etc. The whole system was doomed to blow out, and the timing was largely subjective. When would time run out on the ability to collect on the unsustainable debt? As long as no one tries to collect on the debt, everyone can pretend not to be bankrupt.

That all ended in the recent period. The yen carry trade is blown out, and all that is happening now, is a desperate effort to minimize what has already occurred. The defeat of the Abe LDP government in Sunday's upper house vote in Japan is but one more signal that the whole yen carry trade debacle is over. The money ain't there no more, and now Abe is finished.

Today, the word in Germany was that the collapse of IKB was just a "small bank gone under,'' with no systemic implications. Oh yeah? How long is that fantasy going to last? The explosion already occurred, and the rubble is already falling down from the sky. Just because you haven't been hit on the head yet doesn't mean it isn't so. Stand in the same place for much longer and you will be devastated by the debris. The conditions have existed for some time in the international process, and it has now reached the point of ripeness. Now the storm has hit, and wishful denial of reality is not a very good commodity at this point in time. The present system is dead and the only question is when the undertaker will arrive.

The system is crashing, and Congress is caught up in busy work, of no relevance to reality. That has to change right now. They cannot leave town for the scheduled August recess, or else Cheney and his British masters will unleash a war that will wipe out 40-80 percent of mankind before the dust settles. The rate of collapse of the entire global financial system is going to accelerate now. It is full speed ahead.

In this context, Lyndon LaRouche announced that he will be devoting much of his time in the immediate period head to a draft election platform for the Democratic Party to address what has to be done. This is the context for the immediate removal of Dick Cheney from office. With the system gone, we need a functioning Executive branch, and that means Cheney has to be removed from the premises.


The crash is on and it's too late to escape, comments a French financial newsletter, echoing the evaluation of physical economist Lyndon LaRouche--though without a shred of an idea about the global solution LaRouche has proposed.

"This time, the alert on the credit markets is of unprecedented magnitude," the newsletter La Chronique Agora editorializes. "Understated for a long time ... the current phenomenon marks the end of an epoch, the end of the illusion of inexhaustible world liquidity."

"Another illusion is beginning to die : the illusion that the financial authorities have perfect control over the mass of money and credit they have been creating massively for years..."

The situation is compared to a giant with clay feet (the American economy), balancing on a huge balloon, the real estate bubble. On top of the giant sits the credit and derivatives sector requiring constant injections of new money from the Federal Reserve. "And, way on top of this perilous construction, are the world financial markets beginning to get vertigo."

"Observing this monstrous spectacle, the investors/spectators for the time being are staying under the circus tents. They seem, however, to be half rising out of their seats, ready to leave the room... perhaps calmly and with discipline... but perhaps rushing to the nearest exits, throwing their seats over and stamping over their neighbors as they rush out..."

In another article titled "Stock Market Crash: Can You Still Escape," author Francoise Garteiser responds to those claiming things will cool down and everything will be fine again:

"I don't think so. This time, the crisis is too deep and concern has taken hold."

The newsletter is put out by a group of economic analysts, including Kurt Richebacher, the former adviser to Dresdener Bank who was trained by the pro-American System economic circles in pre-Hitler Germany.


The yen carry trade, the borrowing from Japanese banks at 0.5% interest rates which has fed the speculative bubble, is unwinding. The rise in the value of the yen with respect to most other currencies is effectively increasing the interest rate to the point that this source of cheap liquidity is drying up.

LaRouche has described the collapse of the yen carry trade, and the meltdown of the U.S. mortgage markets as the two bookends between which the speculators are caught. People can't afford to pay the high-interest rate mortgages they were suckered into, and the speculators can't get access to easy money to cover their losses.

"View all of this in the context of a wild gambling casino," LaRouche said today. "You talk about sober bankers. There isn't a sober banker in a carload anymore."

The rise in the yen began last week when western speculators, caught with losses on the sub-prime market and in the hedge funds, scrambled to cash in their bets made with borrowed yen, buying yen to pay back their yen loans. This drove up the yen, causing further losses to yen borrowers, and the spiral began.

Today, with equity markets falling sharply around the world, and the yen continuing to rise in value against all major currencies, the "unwind" of the carry trade continued.

Beyond the rising yen, the Japanese appear ready to raise their interest rate from 0.5%, possibly this month, further squeezing the carry traders.


This Dossier

The Dream World Folds; Reality Hits

Economics: At The End of a Delusion


Upon hearing how much money was dropped by helicopter internationally yesterday in a futile effort to prevent a meltdown of the entire financial system, Lyndon LaRouche observed that in the U.S. alone the rate at which the Federal Reserve emitted money ($38 billion in three separate injections) was an order of magnitude of the annual income of the U.S. Internationally, the total was in the hundreds of billions of dollars. On Thursday, the European Central Bank (ECB) had injected 95 billion euros and on Friday another 61.5 billion euros. Central Banks in Japan and Australia also threw up a wall of money in a desperate effort to stanch the bloodletting. Other Central Banks said they were on standby and would follow the others like lemmings if necessary. But this was all to no avail as markets collapsed in Asia, Europe, and Ibero America. Even in the U.S. the Dow ended down.

As Lyndon LaRouche said, the U.S. and the world at large are entering a phase very similar to what happened in Germany in 1923. Back then the hyperinflationary bubble was relatively isolated to one country--Germany. Thus, it was possible to have an outside intervention through the Dawes Plan to at least temporarily restore some order. However, today, since the crisis is international, no one can provide the equivalent of a Dawes Plan. The world as a whole is now in a condition which requires a general reorganization of the international financial system into a fixed exchange rate system. The entire world financial system must now be put through a financial reorganization. Given the rate at which Weimar 1923-style hyperinflation is now hitting the U.S. economy and also the world economy, an immediate reorganization of the type specified by Lyndon LaRouche is now urgently needed.

The action required is for the United States to call in Russia, China and India as the core nations to deal with the problem. That, of course, requires the ouster of Cheney and the leadership of Lyndon LaRouche.

From the standpoint of the urgency of the situation, what is now required is not commentary, but action.

Lyndon LaRouche developed the moral standpoint from which we must act. We are not going to bail out any of the speculators who have created this mess. Jim Cramer can scream all he wants. We are not going to bail out him or his associates. We are going to act to save the U.S. economy and to create a decent order in world affairs. People better get used to it, because that is the way it has got to be.

We have to have a bail out of the people, not of the speculators. The predatory speculators did this to the world economy. Our government submitted to their predatory regime. The U.S. economy can and must be saved, but only if we don't try to save the speculators. They created the mess. They are going to suffer the consequences. We will save the banks, as opposed to the speculators, because the banks are necessary to keep flows of credit going into the real physical economy. But the speculators created the John Law Bubble and they are going to eat it.

Today, the ghost of Herbert Hoover is speaking through the body of George W. Bush, promising a "pot in every chicken." The only problem is that the price of a dub has suddenly gone up. You now need a wheel-barrel full of $500,000 bills to pay for it.

Don't have any illusions that there are experts somewhere who know what the problem is and how to solve it. People who might otherwise be described as sensible are not answering their phones in the middle of the crisis. They are hiding. They don't want to talk.

In this kind of crisis, which Lyndon LaRouche has uniquely forecast and is uniquely prepared to solve, in which no one else is ready to bite the bullet, we have to say what the nature of the crisis is and what must be done. We are the only ones who can act. Lyndon LaRouche's voice must be heard and heeded. He knows what to do. The others do not. And there is no chance for this planet to survive without Lyndon LaRouche's leadership.

Therefore, as Lyndon LaRouche said: This is not a time for commentary. This is a time for revolution. This is my baby.


The world central banks have poured $323 billion into the monetary-financial system in the last 48 hours, writes the British Guardian on the morning of Saturday, Aug. 11.

Screaming headlines in the British press read: "Central Banks Pour Billions-But Global Slide Continues," The Guardian; "City Hit by Biggest Crisis for a Decade," the Daily Telegraph; "World Markets under Strain of Credit Crisis," and "Dead Mortgages Create Global Panic," The Times.

The London stock market took a battering on Friday, with the FTSE 100 index losing 3.7%, wiping out over 64 billion pounds from leading shares ($130 billion). This compares with -10.84% in October 1987 and -5.72% on 9/11. Mining companies, hedge fund traders, and banks were hit hard. Big losers included Man Group, with 9%; mortgage lender Northern Rock, 9.6%; Lonim, 7%; BHP Billiton, 6.7%; Barclays Bank, 6.4%, wiping out 3 billion pounds of its market value.

The FTSE collapsed 232.9 points to 6038.3, prompting one trader to say, "This is absolutely unprecedented. In the last 15 minutes of trading we dropped 50 points. That's serious 'get me out, I don't want to be in this any more, I'm scared,'" according to today's Daily Telegraph.

Meanwhile the Bank of England has kept a low profile, saying nothing about injecting money. It does not have to make a decision because, according to the Guardian, it introduced a new money market system under which it has a permanent, unlimited standing facility available to commercial banks to draw on if they want to. The rate is, 6.75%, one percentage point above the going rate. But it is not known if it has been utilized yet, since announcements don't have to be made.

Prime Minister Gordon Brown, only last month Chancellor of the Exchequer, is quoted saying, "There will always be issues in the markets and of course we cannot insulate ourselves from events in all parts of the world. I think the important message about the British economy is that we have done everything in our power and will continue to do so to maintain the stability of the economy."


In interview today with the Italian daily Corriere della Sera, former Italian Finance Minister Giulio Tremonti, currently deputy chairman of the Italian Chamber of Deputies, also says that the current financial crisis is a global one.

"For many years," Tremonti answers in the current interview, when questioned about this forecast, "I have criticized the excesses of globalization, warned against 'fatal risks', I spoke about protectionism and Colbertism. For many years, experts and wise men held me for a fool. Let us see today who is a wise man and who is a fool".

"The issue is, that with globalization, the financial economy has decoupled from the real economy and self-multiplied dizzyingly," Tremonti explains. "If a fund offers you 100 for a firm worth 10, you must worry exactly why they are offering you 100! National and supra-national authorities try to exert oversight, but it is a kind of oversight no longer sufficient in relation to the dimension and global power of finance".

On the question of whether Europe will be affected by the collapse, Tremonti answers, "I tell you three things, two negative and one positive. A crisis of the financial economy always becomes a crisis of the real economy. The crisis of America always becomes crisis of the world. The positive thing is that government and monetary authorities, if they understand it and if they want, can still intervene".

Tremonti is not asked during the interview, "what must be done about this crisis?" However, as he stated at a June 6, 2007 EIR public event in Rome, he knows very well, and substantially agrees with the solutions put forth by Lyndon LaRouche. Tremonti's remarks are reported on in the article, "LaRouche Holds Dialogue With Italian Senators on New Monetary System"


Without a dramatic shift in government policies, there is no relief coming; the international banking crisis is heading towards a collapse. After two days of hundreds of billions of dollars worth of central-bank infusions of liquidity into U.S., European, and Asian banking systems, the global banking crisis continued to worsen through Friday, Aug. 10. In addition, a double threat to banks and hedge funds is looming around Wednesday, Aug. 15--the 36th anniversary of the abandonment of the Bretton Woods monetary system by the Nixon Administration under direction of Treasury Secretary George Shultz.

Even after international banks had absorbed about $325 billion in central-bank money-pumping, credit default "spreads" continued to widen on Aug. 11 in various securities markets; stocks of most major banks continued to fall; and the first reports of very large losses by very large hedge funds began to emerge.

On Aug. 15, according to senior banking sources in Europe, many major banks face a deadline for rolling over their Asset-Backed Commercial Paper (ABCP), the infamous debt "conduits" some of which caused the near-failure of the Germany-based Industrial Credit Bank on Aug. 2. This short-term paper, constituting more than a trillion dollars of corporate debt, mortgage and other asset-backed securities (ABS) which have suddenly become very hard to sell, was identified by one European banker as the core of the whole problem which seized up interbank credit worldwide overnight on Aug. 9-10.

But Aug. 15 is also a quarterly date for investors to withdraw their assets from hedge funds; in the deepening crisis, many hedge funds will act to block the withdrawals, worsening the lack of confidence in financial markets. In the first few days of August, the following losses have become known for some of the biggest hedge funds in the world: Goldman Sachs bank's Global Alpha Fund, "worth" $9 billion in late 2006, has lost 40% of its value; the huge $23 billion Renaissance Technologies LLC has lost 9% of its assets in the past week, and 14% for the year; the world's largest publicly quoted hedge fund group, the Man Group, has lost one-quarter of its market value in a month, according to a report in the London Independent; and Deutschebank's ABS Fund fell from $3 billion to $2.1 billion in value by investor withdrawals, according to the Financial Times.

Now that the credit boom has officially gone bust and the financial markets are in meltdown, it's time to assess what is going wrong , and what has gone really wrong. By any stretch of the imagination, this is not a slow leak at all, liquidity is drying up very fast and many deals-in-progress -- including leveraged buyouts, mergers and acquisitions and private equity deals -- are not going to happen because the buyers are beginning to vanish and there are very few bids, and many offers.

Distress selling by hedge funds has emerged as the hidden cause of the contagion spreading through the global financial system. Billions were wiped from the value of listed companies around the world last week, with several major indices experiencing their worst day in more than four years, despite the injection of over USD 2 50 billion of liquidity by central bankers -- most notably the European Central Bank, the Federal Reserve and the Bank of Japan. The silence of the Bank of England has been deafening. Initially, turmoil was limited to credit markets but it quickly spread to global stock markets after central banks were forced to intervene to keep markets from collapsing completely.

It is becoming clear that hedge funds, which from one perspective are supposed to help stabilise the financial system by diversifying risk and providing liquidity, were instead at the centre of the unfolding turmoil at the end of last week. Problems spiralled when top investment banks including Goldman Sachs, Lehman Brothers and Merrill Lynch -- whose prime brokerage arms act as lend ers to the hedge funds -- insisted that the hedge funds settle a greater proportion of their debts at the end of the trading day than they had done previously. Other banks are said to have followed in hiking their margin calls. The increased payments forced hedge funds to perform distress selling of assets to cover their losses. When analysing trading patterns, Thursday and Friday were characterised by remarkably light but very volatile trading with those who didn't have to sell staying at home while those who were forced to sell being ruthlessly punished for doing so.

This appears to have brought about a one-in-a-100-year event in which there are extremely unusual correlations in financial markets that no one appears to be prepared for and everyone is very scared to take or hold on to risk. Financial stability was further shaken as hedge funds' losses mounted, compounding fears that some funds could collapse. Goldman Sachs's Global Alpha fund, the US fund s -- AQR Capital Management, DE Shaw & Co, Renaissance Technologies -- and New York
based Tykhe Capital were significantly down. In particular, Renaissance Technologies, a USD 26bn fund run by the billionaire and former Mathematics Professor -- James Simons -- said it had lost 8.7% of its value in the last 10 days. In a letter to investors, Mr Simons suggested that the hedge funds, which rely on computer models were all reacting similarly, causing ripples of downward momentum. "We have been caught in what appears to be a large wave of de-leveraging on the part of quantitative long/short hedge funds," he said. Many so-called quantitative funds with supposedly low-risk strategies involving investment in both debt and equities were particularly hard hit because weeks of turmoil in the credit markets made it impossible for them to sell debt, forcing them to sell more stable equity assets at a significant loss.

It has also emerged that many funds had invested in the same companies, causing prices in otherwise unconnected companies to fall dramatically. Because hedge funds borrow much of the money they invest from banks, the concern is that contagion could spiral again when the markets reopen.

At the root of last week's uncertainty are poorly performing home loans, mostly those given to borrowers with weaker credit histories or who have overextended themselves by taking on large amounts of debt. These so-called subprime loans are going into delinquency and default at alarming rates, and the worst of the problem is still ahead. The real problem loans are expected late this year and throughout next year. Housing and financial analysts think that lenders dangerously weakened lending standards in 2005 and 2006, when there was a flurry of exotic home loans and adjustable-rate mortgages. Many of these loans are due to bump up to higher interest rates late this year and next year. And since home prices are falling or stagnant, and banks are wary of lending, these loans may prove hard to refinance.

Years ago, banks held home loans on their balance sheets. Today, they're sold on the secondary mortgage market, where they're pooled together, bundled and sold to investors as so-called mortgage-backed securities. The big investment banks such as Bear Stearns, Lehman Brothers and others are deeply involved in this, and may also have extended credit to some of the buyers of these securities. Generally, better-quality loans are sold to Fannie Mae, the quasi-government agency that does some of this packaging. The riskier loans have been issued by so-called private lab el issuers, Wall Street firms that sell these bonds to investors in the US and abroad.

Gavyn Davies, Gordon Brown's former economic adviser and former chief economist at Goldman Sachs, has warned that central bankers around the world would need to address serious deficiencies in the regulatory system once th is crisis had blown over. Meanwhile the Financial Services Authority has beg un to audit UK banks to assess their exposure to the US sub-prime mortgage crisis and to highly leveraged corporate loans following a similar move by the US Securities & Exchange Commission (SEC). The S EC is looking at the books of major investment banks to see how they are valuing their mortgage-backed securities. Regulator s fear that major Wall Street and European banks might be masking the size of their subprime losses.

The International Monetary Fund has weighed in with an appeal for calm, playing down the extent of underlying problems. The Washington , DC, based institution sai d, "We continue to believe that the systemic consequences of the reassessment of credit risk that is taking place will be manageable. The fundamentals supporting strong global growth remain in place." President George W Bush and his economic team are also talking up the US economy and saying that the fundamentals remain strong. Most economists think the housing sector's problems will shave a full percentage point of growth from the US economy this year. As long as employment indicators remain strong and consumer confidence robust, there shouldn't be a recession. But if credit problems in the banking sector become a full-blown credit collapse and people can't get loans to buy homes or cars or to start businesses, the US economy would be hit very hard and the global economy would suffer too.

We are grateful to:

. Dr George Feiger, based in Berkeley, California, USA, for " Two Faces of the Same Coin;"
. The ATCA Editorial Team, based in Canary Wharf, London, for "Contagion and Systemic Risk? ECB Injects Record Euro 95bn post Major Disturbance ;"
. The ATCA Editorial Team, based in Canary Wharf, London, for " Flight to Quality as Markets finally
A ppreciate R isk ;"
. Robert McNally, Chairman, London Chamber of Commerce Property and Construction Group, for "Erosion of Commercial Real Estate as a Solid Asset Class ;"
. Alexander Hoare, CEO, C Hoare and Co, Private Bankers, based in the City of London, for "Destructive Creativity, Leverage and The Derivatives Market ;" and
. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, for " The Fear of Central Bankers -- Flight from Illiquidity, Derivatives and Heightened Risk of Contagio n ; "

in response to, " Are the Currency Markets Warning that there is Trouble Ahead? The Precipitous Decline of the US Dollar and its Impact on the World."

For and on behalf of DK Matai, Chairman, Asymmetric Threats Contingency Alliance (ATCA)

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment ; radical poverty and microfinance ; geo-politics and energy; organised crime & extremism ; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk ; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians ; 1,500 Chairmen and CEOs of corporations ; 1,000 Heads of NGOs ; 750 Directors at Academic Centres of Excellence ; 500 Inventors and Original thinkers ; as well as 250 Editors -in -Chief of major media.


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