Sunday, November 9, 2008

Will G-20 Adopt New Bretton Woods?

The upcoming G-20 meeting on Nov. 15 in Washington may be the last chance to implement the only solution to the ongoing collapse of the global economy. Helga LaRouche wrote the following article, which is in the current EIR. Mike

Will the Great Crash Hit After November 17?
by Helga Zepp-LaRouche

[[Mrs. LaRouche is the chair of the Civil Rights Solidarity
Movement (BüSo) in Germany. Her article was
translated from German.]]

The way things stand now, there are grounds to fear that
the New Bretton Woods summit which French President
Nicolas Sarkozy has organized to take place on
Nov. 15 in Washington, will not lead to an adequate
result. It could easily turn out as one high-ranking
banker, quoted in the French newspaper La Tribune,
imagines it will: that Nov. 17 will be a “black, black
Monday.” But there could also be a “black Monday,” a
“bloody Tuesday,” and a “horrendous Wednesday,”
soon to be followed by a total collapse of the world financial
system. The only possible way to prevent that
from happening, would be prompt agreement on Lyndon
LaRouche’s financial reorganization proposals, as set
forth in his latest paper, “A New Dark Age Is Now Near:
Today’s Brutish Imperialism.”
This gloomy prognosis is based on a number of factors.
All indications are that neither the Bush Administration,
which is heavily infested with former Goldman
Sachs associates, nor British Prime Minister Gordon
Brown, have any intention of agreeing on an actual reorganization
of the bankrupt financial system. Bush
was against the idea of the newly elected U.S. President
taking part in the summit; and since there’s nothing to
contradict the estimation of Les Echos that Wall Street
is throwing in its lot with Obama, despite McCain’s
good connections there, this really doesn’t make much
difference. But even those who are equipping the IMF
with a “Global Regulation Strategy”—which simply
means imposing one or two more rules on the bankrupt
system—are totally misestimating the situation.
Because the idea that, after neo-liberal economic
dogma has totally failed, the nations of Asia and Latin
America will once again permit themselves to be subjugated
by a global IMF dictatorship, is an absurd one. On
the one hand, in the days leading up to Nov. 15, a number
of summits will be held by groups of nations, ranging
from Mercosur, to the Shanghai Cooperation Organization,
to the G-20, etc. Participants in these summits will
attempt to formulate their national interests within the
context of the new financial architecture. The Asians’
experience with the IMF during the 1997-98 Asia crisis
does not exactly inspire trust in this institution, even if
it has “reformed”—and that includes Turkish Prime
Minister Erdogan’s recent declaration that he will not
permit the IMF to “strangle” the Turkish economy.
While spin doctors in political circles and in the
media continue to debate over whether the economy is
gradually slipping into a “recession,” or whether “the
worst is over” (Robert Mundell), the facts speak an altogether
different language: The real economy is in free
fall. Freight transport rates for solid goods—i.e., grains,
ores, and coal—have declined by 90% (!) over the past
three months. In the past few weeks, China has not imported
a single ton of iron ore. The Baltic Dry Index,
which measures freight costs per vessel, has fallen by
92% since the beginning of this year—i.e., trade in raw
materials has declined dramatically. The China International
Capital Corporation Limited reports that orders
for new ships have declined by 66% worldwide.
Now that the auto sector has collapsed worldwide—
Daimler, for example, is halting production of the Mercedes
for five weeks—the full extent of the collapse in
steel production is becoming clear. Arcelor Mittal, the
world’s biggest steel producer, expects to close 13 of its
blast furnaces in Europe during from mid-November
through the end of January. More than 60% of China’s
steel industry is running at a loss, and smaller firms are
closing their doors, since the price of steel in China has
collapsed by 30-40% since June. In the south of China,
more than 50,000 small and medium-sized firms have
declared bankruptcy. This shrivelling of industrial production
has consequences for agriculture and for consumers’
purchasing power. Prices for soybeans fell by
50% in the last three months, and grain by 20-30%.
In this age of (collapsing) globalization, the shrinking
volume of freight transported is an indicator of the
state of the real economy. Alongside the above-mentioned
figures for shipping, sales figures for heavy
trucks are also telling. In the third quarter, net sales of
Volvo trucks plunged by almost 100%, from 41,970 to
a mere 115. New orders for large trucks worldwide declined
by 55%.
Empty Praise for the Free Market
The financial crash has been ravaging the real economy
for some time now, and if the Bank of England
just now says in its Financial Stability Review, that the
instability is as big as it has “ever been in human recollection,”
it becomes clear how dangerous the politicians’
and bankers’ bull-headedness can get—such as
at the recent “financial summit” in Frankfurt, where
instead of taking their own incompetence as the fitting
opportunity to resign from their posts, they couldn’t
get beyond empty appeals to, and praise for the freemarket
The rate of collapse is bound to increase, with new
chasms opening up daily, whether in the position of
hedge funds, which have to dump their assets because
terrified investors want to pull out their money; or in the
so-called emerging markets. Hungary, for example, recently
negotiated a $25 billion package with the IMF
and the EU, after its currency went into free fall—a sum
which goes more for saving Western banks involved in
Hungary, than for the people, who will be subjected to
tough austerity measures. In this connection, Switzerland
and Great Britain could easily turn into new
Swiss banks’ short-term liabilities are now 13
times greater than the country’s GDP; Iceland’s were
only five times bigger.
Thus it should be clear to every normal person, that
unless a new world financial system is immediately put
onto the agenda, humanity will be threatened with a
fate which the yuppies and profiteers of today’s system
could not have even remotely anticipated. Only an orderly
bankruptcy procedure, whereby the probably
hundreds of quadrillions of derivatives would be wiped
out, can solve the problem. The speculators detest this
solution more than the devil hates holy water, but that
should not prevent governments from putting precisely
this onto the agenda for Nov. 15.
If we compare the trillions that have been thrown
down the gullets of banks which have run out of money,
to the paltry sums allocated to the developing countries,
then we see that the protagonists of this system are
bankrupt not only financially, but morally as well. So,
for example, out of the $12 billion which was demanded
at the Food and Agriculture Organization conference in
Rome in early July, only one ridiculous billion has been
allocated. And meanwhile, aid to developing countries
has declined massively, and even out of what remains,
the greatest portion is eaten up by administrative costs,
climate protection, humanitarian assistance, and military
Participants in the Nov. 15 G-20 summit in Washington
will be answerable to history, if they pass up this
opportunity to put a real New Bretton Woods, in the
spirit of Franklin D. Roosevelt, onto the agenda. The
consequences of such a failure would be not only the
early collapse of the world economy, with billions of
people dying of starvation, but also incalculable social
chaos in the G-7 countries—chaos which would be uncheckable
even with the Mussolini solutions envisioned
by some.
While in Italy and France, an open and expanding
discussion is under way on a New Bretton Woods
system, up to now the media and politicians in Germany
have been united in their efforts to prevent this debate
from occurring. This includes the dictatorial repression
and slandering of the program of the BüSo in this country.
If this is allowed to continue, the guilty parties will
surely not enjoy the fruits of their actions.
There is only one reasonable solution: Lyndon
LaRouche’s ideas must be immediately put up for
public discussion.

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