Thursday, February 28, 2013

TRANSCRIPT: "Hyperinflation: A Graphic Presentation by Dennis Small"

The following link is a 25 minute video titled:  "Hyperinflation: A Graphic Presentation by Dennis Small."
I strongly encourage you to watch it and circulate it widely.It demonstrates with graphics the fact that the "quantitative easing" in the US (and similarly in Europe) has done nothing but pump more than  $3.5 trillion dollars into the banking system, mostly to bail out nearly worthless derivatives, while the banks have loaned out $1 trillion LESS during the same period, and killer austerity has been imposed on the populations of the trans-Atlantic region. That mass of phoney, printed money is now beginning to flood out into the real economy, with a hyperinflation which will wipe out the savings, wages, and the very lives of millions. Nothing short of a Glass Steagall reorganization can prevent this already unfolding disaster.   Mike Billington

TRANSCRIPT:  "Hyperinflation: A Graphic Presentation by Dennis Small"
February 23, 2013

 On February 15th, Lyndon LaRouche in his Friday webcast,
stated emphatically, that the options facing the United States
and the world, were "Glass-Steagall, or Die!``  -
Glass-Steagall, or genocide. And he went on to explain more
specifically, that a process of hyperinflationary explosion hat
been unleashed, of such proportions, that not only was there no
way to maintain that fictitious bubble, but furthermore, that
growing layers in the British imperial faction running today's
system had become aware of the fact that this was not the case,
and that therefore, what was in the works, what was coming
on-line - regardless of whether those responsible were actually
aware of it - was a situation, where they would be replacing the
existing financial system, the existing money in circulation,
collapsing it down to zero, writing it off, and simply, from one
day to the next, issuing new currency - which they also control -
for the purpose of using that money and that credit, only for
their chosen few, their select few. And the rest of the world,
and the rest of the financial system be damned.
 The consequences of this would be - as has occurred
previously in history - a massive deflationary collapse: a free
fall, like in an elevator (I hope it's never happened to you),
and the thing simply collapses down to the ground. Under those
conditions of a massive deflationary collapse, what would happen
as a consequence, would be that, the physical economy would
plunge down at a rate even exceeding current rates, to a
situation where the population of the world - as per the
actually intention of the British Empire - from some seven
billion today, down to the range of one billion.
 One of the indications of a certain awareness of the
problem, came interestingly at right about the same time, from
one of the world's leading sponsors of the cancer that has
actually taken over the financial system. I'm referring to Bill
Gross - aptly named - head of a company called PIMCO - also quite
aptly named -, which is the world's largest bond-trading company.
What happened is that Bill Gross wrote an article named "Credit
Supernova``, which became somewhat of a scandal in informed media
and circles in Washington and elsewhere, because what he stated,
is that the entire world financial system had become a
self-consuming firestorm, where you had to feed in more and more
financial instruments, simply to maintain $1 in output of GDP.
The way he formulated it was  a little bit strange, which is that
it took, for example back in the 1970s/1980s, $4 of debt to
``produce a dollar of GDP'', and of course I beg to differ which
that verb, because the debt does not produce the GDP. But
nonetheless, what he was looking at, was the relationship of
growing indebtedness - of US debt - and a flat GDP.
 Mr' Gross' graphic, is one that we have available here,
which he called, that of the ``exploding supernova''. What he
shows here, simply, is the rapid growth of total US credit, which
includes household, corporate and government debt, rising from
some $4 trillion dollars back in the 1975 period, up to about
$55-$60 trillion today. His explanation is - as you can see from
this - whereas it would take $4 of the debt in 1975 per unit of
GDP, it's now in the range of $20. And he described this as a
credit supernova. Now, the fact of the matter is that, although
Gross' argument is interesting, and points in the direction of a
problem, it actually vastly understates the nature of the
hyperinflationary bubble which has been built and is in the
process of exploding, today. It is a hyperinflation which has in
fact run amok.
 We have developed the following graphic, just to give an
idea to you, of just how much worse it is, that even Gross'
estimation. [And this] is also clear from Gross' own discussion
of the matter, because in a footnote to his article he states,
that he was excluding from consideration in the figures, what he
calls ``shadow debt''. Now, ``shadow debt'' is in fact a
reference to the existence of an enormous bubble of financial
aggregates - of derivatives in particular - which have grown more
rapidly than the debt has grown, which has grown more rapidly
than the GDP. In other words, the rate of increase of the
financial aggregates has been greater by an order of magnitude,
even than the figures Mr. Gross chose to present. And what we
have here, as you can see in the this graphic representation, the
blue line, which is down near the x-axis - which I showed you
earlier, which is Gross' relationship of debt-to-GDP - but like
they say, ``that ain't nothin'''. You need to look at the
totality of world financial aggregates, which is principally
derivatives, i.e. bets, on bets, on bets. [These have] grown in
the ratio of those aggregates to the GDP not five-fold, as the
Gross number on the debt indicates, but has actually grown
fifty-fold, over this period. [This means], that today you have
$500 of debt per unit of GDP.
 Now, what you've got is a situation which has in fact spun
completely out of control. First of all, let me point your
attention to what the composition is of those world financial
 You'll notice, that these numbers only go through 2005,
which is the last time we did a detailed calculation of this, but
the total world financial aggregates at that time, were close to
one quadrillion dollars, which is 1,000 trillion dollars - which
is as meaningless, actually, as the total aggregates themselves.
But the point that I want to get to here, is that the actual
picture of world financial aggregates, is not made up,
principally, by the stock market - as overvalued as that is -,
it's not made up, principally, by the debt (which is what Gross
was looking at) of the United States, or of all the countries of
the Third World, or all of the other direct debt. The Lion's
Share of the whole thing, are financial derivatives.
 Now, what's a derivative? Good question! Derivatives have
been described, I believe accurately, as, essentially, a way to
lie and cover up about a loss, which you have suffered,
financially. So, rather than saying, ``Oh my gosh, I'm bankrupt,
I can't pay that debt'', what you say instead is, ``no, I'll make
another debt, to cover that loss, in the hopes that eventually I
won't have to pay that increased loss coming from the derivatives
bet.'' So, another way of describing derivatives, is, the
perennial gambler - who's always losing at the Roulette table -
and rather than pay up and call it a day, he says, ``no, let's
play double-or-nothing!'' And he loses again, and rather than pay
he says, ``no, double-or-nothing!'' Derivatives are a
double-or-nothing approach to the massive losses which are being
suffered throughout the economy. And that is the nature of the
financial aggregates which have grown, and which constitute the
explosive charge of this hyperinflationary situation run amok,
which Mr. LaRouche has been talking about.
 Now, let me just say, that the usual definitions of
inflation are complete poppycock - it's nonsense. Especially if
you've studied economics, because what they tell you there, is
that there's different kinds of inflation. Inflation, they say,
is more money chasing fewer goods - which is ridiculous; that's
not where it comes from. Or they say, there's ``cost-push
inflation.'' What they mean by cost-push inflation is that they
blame the rise on prices, on the wages being paid to workers, and
that that cost is supposedly pushing the inflation. So that's
just a transparent excuse for trying to cut wages further. Then
there's ``demand-pull inflation''. If you can understand that
you'll earn at least one or two degrees in economics, and
understand absolutely nothing. ``Demand-pull,'' as far as I'm
concerned, is basically the economists who are pulling your leg,
to try to make you understand that something is going on here.
That's not what is actually going on.
 Nor should people try to locate the process of
hyperinflation today in a simple expression, such as, rising
prices on the consumer market. It does show there too. You do
see, that on Obama's watch, that the price of gasoline at the
pump has doubled. You do see it in food prices at the
supermarket, also soaring. Because this financial bubble gets
translated into the consumer economy, through speculation in
derivatives in the future market, in commodities, and so on and so
 But, what is actually going on with the hyperinflation,
people should think of it rather as a huge pressure-cooker. And
what's going on, is that the hyperinflation is occurring within
the financial aggregates themselves. You can see that, for
example, in this growth here. But it's a pressure-cooker which is
building up and it's going to blow to smithereens, at which point
you'll see the transfer of this thing out into all different
areas of the economy. Right now, what you have is the rapidly
escalating - hyperbolically escalating - financial aggregates,
circulating on the basis of absolutely nothing, increasing on the
basis of the double-or-nothing principle, of covering up losses.
 But the real problem of hyperinflation, occurs when you
actually go and look at what Lyndon LaRouche developed as a
pedagogical way of understanding the process in the economy, his
famous typical collapse function, or ``triple curve.'' [You see
it] on the screen now. Now, really the only surprise in what Bill
Gross said, was that people were surprised about it, because
Lyndon LaRouche developed this representation back in 1995-96. So
this is almost two decades old: LaRouche talking about this
explosive charge within the global financial system, that at some
point was going to blow sky-high, and this was a heuristic model
which he developed, for presentation at a conference which he
addressed in the Vatican, back in that period, in the mid-1990s.
 Now, on the Triple Curve function. The thing that's most
relevant here - and where I think the part where people have the
most difficulty in understanding what LaRouche is getting at - ,
is you're looking at a single unified process, not three
separate distinct curves. A single unified process, where you
have the growth of the financial aggregates, the growth of
monetary aggregates - which, at a certain point, the rate of
growth exceeds the growth of the financial aggregates, if you've
got a cancerous bubble developing, as we have today - and, mind
you, let me just clarify. What we're showing you is not an
increase in absolute amounts, this is the rate of change: the
rate of growth of the monetary aggregates exceeds the rate of
growth of the financial aggregates, because it's simply
required to keep this double-or-nothing bubble growing. But the
crucial figure - and this is where LaRouche's economics is
absolutely singular - is understanding the relationship of this
to the third, lower curve of physical economic input/output.
 The problem of hyperinflation is not too much money chasing
too few goods. This has nothing to do with GDP or gross domestic
product, because GDP does not reflect the actual physical
economy. GDP is a monetary calculation based on basically what
the market will bear, in other words whatever sells. And
therefore you have, for example, the International Monetary Fund
stating explicitly, in published documents, that their argument
is that drug production in countries such as Colombia must be
included in the calculation of gross domestic product, because it
sells! If it sells, somebody wants it, that's called effective
demand, and therefore it's gotta be counted in GDP.
 So, GDP is a completely phony measure; it's phony not only
because its content includes actually unproductive and
destructive things such as, for example, drug production or, for
example, payments made to the economics profession for teaching
at universities - that's almost as destructive as, maybe
more so, than the drugs, because it justifies the drugs in point
of fact - but it's also false in it's axiomatics. The premise of
the whole thing it that there's a one-to-one monetary calculation
that can be made, a monetary unit of account that can be used to
describe an economy, a physical economy, where what actually is
involved in a physical economy, what is really the metric that's
needed, against which you have a hyper-inflationary blowout
going, is the expansion of the productive powers of labor.
 The crucial question in the success or failure of a physical
economy is the degree to which your policies increase the
productive powers  of labor, that is to say, the efficiency of
man's general activity based on creative advances, science and
technology, to be able to mobilize an increasingly dense
energy-flux, in other words growing energy flux density, through

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