fwd.: Larouche was right about the crash

[dulc...@juno.com]

Subject: LaRouche was right about the crash
From: ral...@juno.com
Date: 1997/10/29
Message-ID: <8781722...@dejanews.com>

Welcome to EIR Talks. I'm Mel Klenetsky. We're on the line with
Lyndon LaRouche from Virginia. How are things going today, Mr.
LaRouche?

LYNDON LAROUCHE: Well, we're in a-- one of the most
important periods in history. We're in the middle of the greatest
financial crisis of the 20th Century, which is presently ongoing
as a {global} financial crisis. What's happened in the past week--
Monday and Tuesday of course, we had the massive spillover from
Asia and Europe, into the New York markets. We had a massive
collapse, unprecedented in point count, in the Dow Jones
(sometimes called the Davey Jones, or Down Jones these days),
then on the following day on Tuesday, or at least overnight on
Monday, after shutting the market down to prevent it from going
through the basement, you had a number of large firms, private
interests, featuring the role of IBM, in a massive operation for
propping up the market on Tuesday.

What they did, is you had massive buy-back operations by
corporations. You also had, on the evening before the market
opened, while everything was shut down, you had-- buy orders were
being arranged by a massive phone-bank operation by brokers
around the country who were brainwashing their clients by saying,
"Come in tomorrow morning; the greatest day in history for buying
stocks at the cheapest possible price." And thus the following
day, they recovered about-- oh, about two-thirds in the nominal
index values that they had lost on Monday. But of course, that's
purely temporary; it's considered in Washington, in government
circles, as a very bad joke--not only in poor taste. But this
simply makes everything worse; makes everything more unstable.

In the meantime, you had an order of magnitude of 10%
collapses of markets around the world. You have days on which
over a trillion dollars, or up to a trillion-and-a-half dollars
of value are {wiped out} by these market transactions. What
you're looking at is a bubble which involves, including
off-balance-sheet liabilities, at least $100 trillion equivalent,
of which about $30 trillion are obligations of the United States,
that is, of private interests in the United States.

You have, in addition to that, maybe up to $30 trillion of
additional assets which are in jeopardy. Either one of two things
is going to happen: Either a spontaneous process, which will
continue, will ultimately-- this may be weeks, could be days (I
doubt it will come that way), but weeks, maybe months--you will
have a continuation of this crisis, like earthquake waves. You
know, in an earthquake period, you get one, three on the Richter
scale, one on six, one maybe on eight, or something like that,
then back to another five, six, whatever, the aftershocks. And
this will continue to go on until either the U.S. government
succeeds in taking leadership of a group of nations, as partners,
to shut this whole present monetary system down, by putting it
into government-supervised bankruptcy, or, in the alternative,
before the field is clear, you will have over $100 trillion of
nominal values, fictitious values, paper values, wiped out
worldwide!

Now, this $100 trillion or more, represents several times
the total annual product of all nations combined on this planet!
That means that what you're looking at is the potential which has
been built up gradually over the past thirty years, most
intensely over the past 15, and most, most intensely since 1987,
when the derivatives bubble really began to take off. The
greatest financial bankruptcy in all history. There is not a
bank, at least in most countries -- China has some sovereignty
protection which will tend to minimize that -- but, in virtually
every other country, particularly those economies which are
{globalized}, part of the global economy, every banking system in
the world is bankrupt, right now.

Right now, from the past week, I can report that in the
United States, leading circles in the United States, in leading
circles in Europe, in leading circles in various countries in
Asia, in leading circles in various countries in South America,
this past week I have been hailed in the press and in private, as
a prophet, as the one person who really understood what was
happening, and people say, "Well, you were the one who saw this,
you saw how it was going to happen when we doubted it; now it's
happened. What do we do about it?"

So, I'm being pressed to-- which is my activity now -- to
respond to my well-established expertise by suggesting, what
should we do about it.

Now, I would recommend to people who want to understand what
I am saying, to look back at what a senior economist of the
United States, John Kenneth Galbraith, said about the great
crisis of 1929-31-- Oh, we can come back to this....

[commercial break]

- It's Only Paper -

EIR: Mr. LaRouche, you were starting to mention the many,
many places around the world that recognize your forecasting
ability and expertise in these areas, the fact that you have, for
many, many years been speaking of this problem, and putting
forward answers, solutions to these types of problems. You also
started to mention Galbraith, and what he thought about the
1930s-- '29-'31 period.

LYNDON LAROUCHE: Galbraith made a famous statement in
saying that you have to realize that it's only paper. Now, there
are several values which we have to accept as being in jeopardy
and unsalvageable. In general, derivatives should not be
defended. Not a penny's worth of government credit should go to
bail out any derivatives loss. That means, you've got $100
trillion equivalent on this planet, which is going to collapse.
Not a {single penny} of government assistance or credit should be
supplied to bail out that bubble. Let it collapse. If $100
trillion are {wiped out} of nominal values, or notional values,
are {wiped out} as a result of the collapse, {let it go!} Don't
try to cling to the anchor of a sinking ship.

Number two: You have mutual funds and stock market values,
prices. Let 'em go. Don't bail them out. Wipe them off the books.
Just write 'em off the books. This, of course, should not be done
by individuals, it should be done, essentially by governments and
national banking institutions, who have to put this whole thing
through bankruptcy reorganization. In other words, there are
certain things we have to cover. We must protect {real values.}
We must protect our industries, our agriculture, the economic
process. We must continue to have people employed. We must
maintain pensions. We must protect the savings of the smaller
people, in terms of cash savings. We must, above all, protect the
Treasury securities of governments, especially the U.S. Treasury
securities, like the 30-year long bonds, and things like that.
Those things must be protected.

You must let the derivatives collpase. You must let stock
values collapse. Don't worry! Let 'em collapse! If the stocks
pertain to an industrial company, so what? As long as the company
functions, we don't care what the price of the stock is. Let is
go back to almost zero, or pennies, as it did for example, for
many people, back in the '30s. Let it drop. Don't try to bail it
out. And let people buy the stock more cheaply, or let the
companies own their stock at a cheaper price. Purge the system.
There are certain real estate speculation-- if real estate values
collapse, so what? We're going to have to protect the home owners
to keep them from losing their homes. We'll take action in that
direction, but we're not going to protect the {prices}, which are
{bloated}, of real estate at present levels. Can't do it. Which
means that what we're talking about is essentially, writing off
the books, albeit in an orderly fashion, in most cases, as it
affects important institutions, write off $130 trillion of values
in a relatively short period of time. If we do it in an orderly
fashion, yes, under government regulation, under rules of the
game that we establish. But we do it {that way}, rather than let
it happen spontaneously, and create chaos and shatter the whole
system, so that we don't have an economy, and people are dying
all over the place because of that.

So we have to protect the nations, we have to protect the
integrity of the currency, and securities of governments. We must
protect industries, keep them functioning. We must protect
agriculture. We must maintain the continued functioning of basis
economic infrastructure, and we must do all the things which
defend the lives and well-being of the people. The main thing is
to get back into {real} economic growth, and say, with a sigh of
relief, "It's only paper; it collapsed. We wiped out value, but
it really wasn't value anyway. It was only fictitious value." Let
it fall, but let it be done in an orderly way through government
bankruptcy reorganization of the relevant institutions.

Meantime, the great threat right now-- let me give you an
example of this: You have people like George Soros, who actually
are British agents (George Soros is called an American by people
who don't know how to-- who can't count --they call him an
American). He's actually British, he's British-trained, he's
British-deployed; he does not act in areas where he pays American
taxes, at least not much. His money runs through the drug-money
laundering centers in places like the Dutch and British West
Indies, where Russian is spoken frequently, where drug-money
deals are made, and so forth, and so on. So he's that kind of a
swindler. He's a parasite. He's a pirate, just like the pirates
the British used to send out against the Spanish interests, and
so forth, like Sir Francis Drake, or Sir Henry Morgan, the guy
who was the Governor of Jamaica for the British for awhile. These
are {pirates.}

Now these pirates, backed by big-money interests, have
concentrated in Asia, upon Southeast Asia (where the currencies
were dollar-pegged, until they were broken by this kind of
operation), on Hongkong, which has about $80-odd billion of
reserves, and on Japan, ultimately, which has $100s of billions
of U.S. Treasury and currency reserves. They just cracked Taiwan,
which is one of the great giants, in terms of Asia, in terms of
U.S. dollar reserves. They cracked it in a raid recently. Now
they're trying to crack Hongkong.

{If} these guys succeed, what would happen is, you would
have the Japanese, ultimately {forced into a situation} where
they would dump U.S. Treasuries, that is, dump hundreds of
billions of dollars from those countries, and other countries--
oops, we'll have to come back to this....

[commercial break]

- To Save the Nation, Bankrupt the Speculators! -

EIR: Mr. LaRouche, you were just describing the intense
battle that has been going on in Asia in the financial markets.

LYNDON LAROUCHE: This is the center of the whole present
phase of the world crisis, and it's a global crisis. It's not an
Asian crisis. But in any case, what do we do about this threat?
Because if hundreds of billions of dollars of U.S. Treasuries
start to be dumped on the markets, and U.S. Treasuries are
depressed, under those circumstances, you have an impossible
situation. The problem is, that you have not only people like
Soros and other sharks doing this, trying to loot the U.S.
economy, the U.S., and destroy us, but this is backed by the
British government, the Blair government. It's backed by the
French government at present. And there are people in other parts
of Europe who are lined up with the British {against the United
States}, trying to crack the power of the United States. That's
what's behind this so-called European Union operation.

So, my advise is: Bankrupt these guys!

Now, I'll give you an example: Back in 1957-58 (this was the
first recession which I forecast on time; I forecast it and it
came in when I said it was coming in, and I became somewhat of an
expert in forecasting as a result of my success in designing the
method of making that forecast) --but, the recession began
actually in February of 1957. I won't go into the details of how
it happened, but then, in 1958. you had a major run by
speculators against the U.S. Treasuries. At that point, in the
spring of that year, the U.S. Treasury, and the Federal Reserve
System collaborated, and {stung} the speculators. They gave them
a slapping, which put a few in the poorhouse, or more or less in
the poorhouse, and scared the rest off.

The way that governments deal with speculators, when
governments are intelligent, is to {bankrupt} them. That's how
you protect the government. How do you do it? Use the {power of
government to regulate,} to create a situation in which you catch
the speculators--forgive the expression--with their pants down.
{You bankrupt them.} Now my advice, is that various governments
should combine forces, not to pay any tribute--not to allow the
IMF to dictate it--but not to pay {any tribute} to these
speculators. Not to allow somebody to come in and say, "You've
got to devalue your currency. You've got to do this. You've got
to buy us off." We're not gonna buy these guys off -- we're gonna
bankrupt them! And that includes George Soros. And if the United
States and a couple of other governments, such as China, decide
to collaborate together to bankrupt George Soros, he's gonna be
bankrupt! And you'll find that the nations of Southeast Asia,
China, and the special case of Hongkong, and perhaps, I would
hope my friends in Japan, would agree: Let us bankrupt George
Soros, and what he represents, and teach them a bloody lesson!
Because we are going to defend the integrity of the currency and
national security of nation-states against these pirates. We're
not going to {allow} this kind of global economy to go on. And
that's what I'm pushing.

I mentioned the case of 1958 just to give an example: This
works! It's not some hare-brained scheme that I just dreamed up.
This has been done historically, and the time has come to do it
again! And I would hope that our President would get the support
he needs, which he's not getting now -- not from the Congress.
They're running around like chickens, with their heads cut off,
in the barnyard, or at least like chickens which have been doused
with buckets of water! They don't want any part of it. They're
not taking any responsibility.

But, this is characteristic of legislators and parliaments
and congresses who do not function well under conditions of
crisis. It is the {executive branch} of government, and {only} the
executive branch of government, which has demonstrated
historically the ability to deal with this kind of crisis.
Therefore it's up to President Clinton, if he gets the support,
if the Treasury Department and he get the support they require,
and if he has the guts to do it, we can beat these guys,
particularly if he can reach an agreement, of the type I believe
he can reach, with the President of China. Under those
conditions, that the United States and China, can very easily
represent the {core} of an alliance of a group of nations, and
we'll destroy these guys, which is what has to be done.

I have the temperment for it, and I hope that my temperment
will spill over to the President and a few other people to get
this job done. I'll be writing a good deal about this in various
locations, but I thought, since we're on the air with this, just
to {indicate} the kind of advice I'm giving.

Finally, as most of you know, my proposal is, that as this
crisis reaches a point where you citizens are out there screaming
in the streets, demanding that government do something about
something you can't face, at that point, the President of the
United States -- Oh, we're have to finish this off next time....

[commercial break]

- Forget Everything Else--We're Talking About {Survival} -

EIR: Mr. LaRouche, if governments do as you say, and get
together, and give these speculators--people like George Soros--a
bloody nose, put their foot down, and say this is not gonna
happen again, what do they do afterwards?

LYNDON LAROUCHE: Well, what they do immediately-- you've got
this high point of the crisis, and what we're talking about is a
policy made under the conditions of what I call the "Pearl Harbor
effect" --is that, it was not the mobilization of the United
States for war did not occur as a result of the attack on Pearl
Harbor. The mobilization, and its success occurred because of the
leadership which President Franklin Roosevelt supplied {in
response} to the shock effect of the attack on Pearl Harbor. And
we have a similar situation now.

As of this moment, the American people are not yet ready for
the President of the United States to do certain things he must
do, so he's got to sit back there, and like a good commander in
warfare, hold onto his nerve until that moment to act comes. But
at that moment he must act! What he must do, is simply get on the
horn and say, "We're going to act." Now, how does he do this? If
he has a relation with China, with countries of Southeast Asia,
and with certain other countries on the planet, he says, "If the
crisis goes on this way, will you gentlemen agree, for your
countries, that we're going to do this?" That is, to put the
present system into bankruptcy, put the governments in charge of
putting the thing through bankruptcy, and to set up a new set of
rules, which will have many similarities to the kind of rules we
operated under, under the old Bretton Woods agreement, say prior
to 1959, that kind of [], since that was a successful precedent,
it's something you can use, and get people to agree upon, as
opposed to something which is entirely new-fangled, shall we say.

Okay. Let's call that a "New Bretton Woods agreement." The
President of the United States, as a spokesman, or co-spokesman
for a group of nations, says to the American people, and the
people of the world, "Here's what we're doing. We're setting up a
new system," And it goes into effect immediately, hmm? --under
the emergency powers, here, of the President. He has these kinds
of powers for this kind of emergency, as any government should
have emergency powers for a genuine emergency -- it was very well
specified. Then, we have to have a project in which to get the
world moving. Well, the project exists in a vast infrastructure
project, which is {centered} in Eurasia, already underway, which
would involve all of those countries, would involved Africa, and
Europe, {and} the United States, {and} Central and South America,
as a great {recovery} program, economic recovery program for the
world.

So, while we're cleaning up the mess of the worthless paper
from derivatives deals, mutual funds that have gone sour, totally
sour, stocks that have collapsed to a fraction of what their
present prices are, real estate values, mortgages which have been
written off because they can't be paid under present conditions.
In that shambles, people will live, and we will progress and move
ahead. That's what's required.

{If we don't do that;} if the opposition to that is
successful, then this whole planet is going to go into a new Dark
Age, and you can forget-- if you've got children, forget 'em,
because they're going to die. The kinds of conditions that are
going to occur on this planet unless we do this, are unthinkable.
It's a new Dark Age, resembling, in some respects, what happened
in Europe when the banking system collapsed in the 14th Century.
What was called the "New Dark Age." That can happen again, and
worse, on a planetary basis.

So, that's what we're up to. That's what we've got to do.
And what we need, of course, is people who've got more guts than
most, in the population, who will take leadership among their
friends and neighbors, and move people to support the President
if, and when he decides to make this kind of move. It's the one
chance we have. And that's what we have a President for, under
our system of government. He has the power to do this, with your
support. Forget everything else. We're talking about reality.
Forget paper; forget mortgages; forget derivatives; forget stock
values; forget mutual funds. We're talking about {survival}! And
coming out of survival into something that's worth talking about
-- something our descendents can be proud of. It's like fighting
a war, only this represents the alternative to war. Fight this
thing now in this way, so we don't go into some kind of crazy
post-modernist hell on this planet.

So that's what I'm working on, and I've told you. And I'm
very optimistic about what we can do. I'm very concerned about
our getting about doing it. And I hope that my sharing this with
you will encourage some of you to join me in this effort.

for more information:
http://members.aol.com/eusebius7

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