It’s Not China – Time To Learn The Lesson of August 15, 1971

ChinaHarley Schlanger – With legitimate warning signs that a “significant correction”, or even a global financial collapse is imminent, the usual gaggle of idiots pontificating in mainstream media venues are madly pointing fingers at President Trump. He is wrong, some proclaim, for focusing on the Federal Reserve and interest rates, while others point to launching a trade war against China as the cause of the present deepening crisis.

They blather on about the danger of “inverted yields” on bond markets, while they argue about whether the U.S. or China is “winning” the trade war, putting forward a blizzard of talking points which are minimally confusing, and ultimately designed to convince listeners that there is no alternative but to “batten down the hatches,” and “stay the course.”

These pundits, and the politicians who cite them for their own opportunistic purposes, should rather take a moment, before they run their mouths, to study the real history of the last five decades, familiarizing themselves with the works of the preeminent economist of that period, Lyndon LaRouche.

The starting point for that study should be an event which occurred 48 years ago today — August 15, 1971 — when Richard Nixon broke with the Bretton Woods financial system of President Franklin Roosevelt, by taking the dollar off a gold-reserve basis, thereby ending the fixed exchange rate system which had been largely responsible for the extraordinary post-World War II economic expansion.

Nixon’s action, taken under pressure, from London, against the dollar, and under the advice of London-Wall Street operatives such as Arthur Burns, Paul Volcker, George Shultz and Henry Kissinger, ushered in the era of the speculator-friendly floating exchange rate system which continues today.

LaRouche, who had forecast that such an action was coming, warned that Nixon’s decision would lead to the deindustrialization of the advanced sector, demands for brutal austerity, which would require fascist enforcement to be realized, and genocidal depopulation of the developing sector, under the direction of the International Monetary Fund and the central banks, which rejected any notion of sovereign control over national economies by governments.

Time has proven that LaRouche was right. The series of economic shocks in the 1970s, ’80s and ’90s, the bubbles which ballooned and then popped in 2000-01 and in 2008, were the direct result of the neoliberal monetarist policy imposed following Nixon’s decree. The seeds for the collapse today were likewise planted following Nixon’s folly, as the same swindling bankers who created the speculative bubble economies of the last 50 years, were allowed to continue their radical monetarist practices after the 2008 crash, with increasingly disastrous results.

Deindustrializaion

The net effect of these policies has been an accelerating deindustrialization of the Trans-Atlantic economies, as the goods-producing sectors have been shipped offshore, in search of ever-cheaper labor costs, under the guise of “free trade”, in which the productivity of labor in the developed sector has been sacrificed. As the machine tool sectors and heavy industry were replaced by a “service” economy — sometimes called “consumer society” — a parallel “greening” was imposed, through targeting first nuclear energy, and now the use of all forms of “fossil fuels.”

As early as the late 1960s, LaRouche identified the “limits to growth” movement as green fascism, a policy of radical population reduction sold under the guise of “saving scarce resources”.

As the engine of prosperity of the real economy, scientific and technological advance, realized through increases in the Energy Flux Density of power generation, was replaced by “sustainable” energy production — i.e., less efficient means, such as windmills and solar power, which required large government subsidies to function — western nations were driven into a post-industrial world, characterized by extreme wealth inequality, and dependence on cheap goods produced by U.S. corporations, employing low-wage workers in poorer countries.

Under this post-industrial regime, the wealth production of manufacturing was replaced by “trading”, characterized by “financialization,” a fancy name for betting in a casino economy. New “financial instruments” were created, and a slew of legislative and regulatory changes diverted credit from goods-production to the buying and selling of these new instruments. Under slogans which were justified by the academic fraud of Modern Monetary Theory, and new rules of trade dictated by the free trade agreements enforced by the World Trade Organization, the historic model of the American Economic System, based on directed credit into physical production, was trashed, replaced by speculative swindles, fueled by cheap credit flowing to the swindlers.

The banking reforms of the 1980s accelerated this process, capped by the repeal of Glass Steagall banking separation in 1999. These “reforms” were pioneered by City of London bankers during the Thatcher era, then imposed in the U.S. by both parties, and enforced in Europe after the fall of Communism by the European Union, through its banker’s dictatorship in Brussels.

The net effect of these reforms in the U.S. has been a loss of between five and six million industrial jobs since 2001, resulting in a substantial reduction of purchasing power by American workers. The median hourly wage, which in 1973 was $22.07, measured in 2014 purchasing power, had fallen to $20.74 in 2014.

The loss of purchasing power has been minimized to some extent by the extension of consumer credit, but this bubble has been stretched to the limit, and default rates are increasing. Similarly, large volumes of student debt, mortgage debt and automobile debt, are moving into default, threatening the whole system.

Further, the shutting down of manufacturing in the once-industrial heartland of the Midwest created a “Rust Belt”, inducing city and state governments to impose austerity due to declining tax revenues, reducing investment in infrastructure, education, health care and public safety.

Despite the efforts of President Trump, who promised to reverse this process if elected, the latest figures show that the small gains in manufacturing and wage growth from 2017-18 have leveled off.

Instead of introducing a policy, as advised by Lyndon LaRouche in his Four Laws, which would have re-established a Hamiltonian, national banking credit system, to provide flows of low-interest credit to rebuild industry and develop new platforms of infrastructure, the President has been reduced to cheerleading a stock bubble, demanding that interest rates be lowered to assure a flow of funds to speculators, feeding a new, bigger stock bubble, which he touts as a sign of “prosperity” — something which he had properly ridiculed during the 2016 campaign, when it was hyped as the basis of the “Obama recovery.”

This bubble has been further inflated by corporations borrowing to buy their own stock, thereby increasing their debt to levels reported to be 60% higher than in 2008, while meaning that no funds are available for investment in research and development, new plant and equipment, job retraining, etc.

One result of this process has been a growing trade deficit with China. In 2017, when U.S. firms sold $130 billion in goods to China, the U.S. imported $505 billion in goods from China. This imbalance, the result of the nearly-fifty year shift away from a competent U.S. economic policy, is behind the efforts of the President to get a new trade deal with China.

While Trump has properly said that this growing deficit is not the fault of China, but of his predecessors, whose free trade agreements and economic policies made America increasingly dependent on replacing lost goods-production with the importation of products manufactured in China, the use of tariffs alone will not lead to a rebirth of American manufacturing.

Larouche’s New Bretton Woods

At every point in this devolution, Lyndon LaRouche offered solutions, which began with scrapping the failed monetary theories which starved the physical economy while feeding the cancerous bubbles.

An important example of this, for understanding the present financial and strategic crises resulting from this radical transformation, was presented in speeches he delivered on January 4, 1997, and again to a Schiller Institute conference on February 15, 1997, “Toward a New Bretton Woods Conference.” (Footnote #1.) In this speech, and in subsequent interventions, LaRouche developed the concept of a Four Power agreement, between the U.S., Russia, China and India, as the basis for reversing the process underway of global economic collapse.

These four nations possess the capabilities needed to move the global economy to new platforms of development, he said, especially through emphasis on advances in “science-driver” projects, such as nuclear fusion and space exploration.

A rapid transition away from monetary speculation to Hamiltonian credit policies would not only allow for improvements in living standards for the entire world population, but would offer the added benefit of putting an end to the power of the financier oligarchy of the City of London and Wall Street, thus eliminating their ability for destabilizations based on neo-liberal economic/financial policies, and geopolitical maneuvers, such as regime change, in the strategic realm.

The global rebellion against these British Empire policies of neoliberalism and geopolitics has dominated world politics in the last three years, with Brexit and the election of Trump as the two most significant, among many, developments.

Trump’s stated intention to pursue peaceful, mutually beneficial relations with Russia and China, and his overtures to establish cooperative relations with both Putin and Xi, represented an existential threat to the Empire. With China’s adoption of the Belt-and-Road Initiative as the means for “globalizing” the process of scientific industrialization which lifted hundreds of millions out of poverty in China, the British and their allies reacted with a fury.

This is what was behind the Russiagate fraud, with its anti-Russian McCarthyism, and the continued anti-Trump hysteria among U.S. politicians and media. It is also the source of the escalations in hot spots around the world, with Color Revolutions being attempted in Hong Kong and Moscow, and threats from U.S. war hawks Bolton, Pompeo and Pence, against China and Russia, as well as targeting North Korea, Iran and Venezuela.

The seemingly sudden recognition of the outbreak of a full global economic/financial crisis, and the prospect of support from many nations for the science and infrastructure policies of China, has also fueled this drive for confrontation and provocations.

To some extent, President Trump, despite his good intentions, has been swamped by this dynamic. While working with President Xi, for example, on denuclearization of North Korea, his subordinates, such as Bolton, continue to fan the geopolitical flames, while his trade team, especially Trade Representative Navarro, has undermined his efforts to finalize a trade deal with China.

This confused dynamic has been evident in recent days. Trump rejected the counsel of those anti-China hawks, who insisted that he deliver a stern warning to China over the riots in Hong Kong, praising Xi, tweeting that he has “ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it.” He was immediately attacked for “coddling authoritarian leaders.” As Trump issued such statements, State Department officials were meeting with leaders of the Hong Kong rioters, and many in Congress demanded that he make threats against China.

And on the trade front, while Navarro insisted that he should move ahead with new tariffs against $300 billion of imported Chinese goods, Trump postponed them from September 1 to December 15, citing both concerns about increasing costs to American consumers, as well as his hope to revive the trade deal. He said that an August 12 phone conversation between U.S. and Chinese negotiators was a “very, very productive call,” adding “I think they want to do something dramatic….They really would like to make a deal.”

But despite good intentions, no such deal is possible within the constraints of the presently collapsing global system. While volatility in stock markets reflect the economic uncertainty resulting from the shift to a speculative economy, the combined effects of lost physical economic capability in the advanced sector, and the unsustainable volume of debt in the banking and financial sector, mean that no amount of “tweaking” will work.

More low-interest credit, and Green financial swindles, will only provide a short-term prop to the bubble, as the whole paradigm which created it is rotten, and cannot survive without inflicting mass murder, through both the effects of austerity and war.

As President Trump undoubtedly knows, it is not China that caused this problem, but the commitment to his predecessors, especially the Bushes, Clintons and Obama, to carry out the marching orders of the City of London and Wall Street, which is responsible for this existential crisis.

His personal relationship with President Xi offers a crucial opportunity for the President to move away from geopolitics and neoliberalism, into full collaboration with China and its allies, on the Belt-and-Road Initiative, and in cooperation in space.

LaRouche’s prescience, as seen both in his forecasts pinpointing the causes of the crisis, and his solutions, embodied in his call for a New Bretton Woods, to be enacted through collaboration with the Four Powers, and his Four Laws of economics, based on the scientific principles of Leibnizian dynamics and Hamiltonian credit, offers the only viable option for the future.

Footnote

“LaRouche Calls for New Bretton Woods System” (Executive Intelligence Review, January 17, 1997).

SF Source Dave Janda Aug 2019

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