This article appears in the October 18, 2013 issue of Executive Intelligence Review. Mike
Billington
Japan's Kotegawa Warns of
Imminent Financial Collapse
Oct. 14—The
Russian weekly Zavtra of Oct. 10 published a Q&A with Japanese
economist Daisuke Kotegawa on its front page. The question was, "What is your
evaluation of the current global financial situation?" Kotegawa's
reply:
"My
experience and research indicate that a financial catastrophe, accompanied by
a global collapse, could happen in the immediate weeks ahead, unless the
leaders of the major economic powers adopt certain specific, tough measures.
The crisis is linked with the situation in the United States, where political
disputes have led to a freeze-up of the budget process and a rejection of
attempts to raise the debt ceiling. Because of this, my view of the overall
situation is extremely skeptical."
Kotegawa is a
former executive director for Japan at the IMF (2007-09), a former official of
Japan's Ministry of Finance, and current research director at the Canon
Institute for Global Studies.
Zavtra has a print
circulation of 100,000 copies and is read throughout the Russian political
establishment.
In recent
public presentations during a visit to Europe and the United States, Kotegawa
elaborated on his assessment that an economic collapse could come at any moment.
In addition to the government shutdown/debt ceiling fiasco in the United States,
he warned that Greece is facing a third bailout, and the Spanish banks are
holding vastly over-valued real estate portfolios and lack sufficient reserves
to deal with a further crash of the housing and commercial property bubble. He
warned that the European Central Bank is facing a major crisis, and that the
reckoning could come as soon as a new German Cabinet is formed. Because of the
new crises on both sides of the Atlantic, the financial markets are panicked, he
said. He warned that the investment banks must be dumped if there is to be any
hope of avoiding a systemic crash.
Speaking to
students June 18, 2013 at the National Research University, Higher School of
Economics, in Moscow, he explained the origins
of the current crisis, the fact that Dodd-Frank will give bail-ins to the
banks from depositors' accounts, and the importance of
Glass-Steagall.
"There is big
movement going on in the U.S. Congress," he said, adding that if Congress
approves Glass-Steagall, the effect will be "incredible."
The financial
bubble started in 1999, when the United States abolished Glass-Steagall, he
said:
"This law
was introduced after the big crisis in the 1930s, to separate investment banks
and commercial banks. The difference between those banks: commercial banks get
deposits and they mainly lend money to manufacturers; but investment banks,
like Goldman Sachs, never collect deposits. They raise money in the market by
issuing bonds, very large ones, and they do not lend money to manufacturers;
instead they bet, they gamble. And sometimes, as long as the gambling goes
well, they make huge profits. But they also lose.
"After
1999, lots of investment banks merged with commercial banks. So, for the first
time since the 1930s, investment banks became able to use deposits of
commercial banks for their gambling. Before 1999 they were also engaged in
so-called in-house dealing, but the amount involved was small. But after they
got deposits—which is a huge amount of money—they were able to gamble much
more, especially in derivatives."
He noted that
he was on the World Bank team that came up with the first "put" option
derivative attached to World Bank bonds. "So I know what kind of instrument they
are."
Comments from
LaRouche
"Here is
the area in which the United States comes to the opportunity to play a leading
role, globally, again. What we need, first of all, is Glass-Steagall
renewed in the United States. We also have to do one other thing, which was
not always that clear: We now have to make sure that this is a credit
system, not a monetarist system. What that means, is that we are, the
United States, in particular, going to take leadership on this issue, because
of our history and because of what lies within us; we are the best qualified
on the planet to create an international treaty-agreement among sovereign
nations. What we will do is extend Glass-Steagall, as the basis for
international agreements among sovereign nation-states. We're not going to
take their sovereignty away from them. We are going to agree with them on a
sovereign agreement.
"Because,
what's the reality? Why is this possible? It's possible because every part of
the planet is either bankrupt, or about to plunge into hopeless bankruptcy.
Therefore, we need to cancel the monetarist system. The only way to
cancel it, properly, is to come in and say, 'We forgive you! You can now have
a partnership, with us, as a sovereign nation-state, among sovereign
nation-states, which will create an international equivalent of a
Glass-Steagall system.'
"Now, the
fact is that Europe and the United States and most of South America and most
other parts of the world are bankrupt, or becoming bankrupt. So, they
don't have any basis for saying, 'You've got to protect our interests.'
Because their interests are not protected, as long as they are run under a
monetarist system. Because the whole planet is bankrupt! Some people may claim
they have some credit to their advantage, but when you look at it closely, in
terms of historic functions, it ain't there.
"So what we
have to do, is simply get rid of the monetarist system! The way to do that
equitably, is to have a council among nations, to agree on a system of
sovereign nations, based on a credit system; because there are no monetary
assets. The stuff is so polluted—for example, Wall Street has no actual
net value. Wall Street is simply a farce, they're bankrupt; it cannot be
saved. It is hopelessly bankrupt. It is dead, in
principle.
"So, what
we need, are agreements among sovereign nation-states, which could be made in
a reasonable way, to have the currencies of the planet, each currency as
sovereign, but with guarantees among each other, for regulation. That is the
only way in which we can possibly achieve a recovery, a physical-economic
recovery, from the mess that exists now.
"We in the
United States must initiate that, because if we don't initiate it, then the
other nations will be queasy. They will not exactly go along with this. They
need this as much as we do, probably more. We can defend Japan, we can defend
China's attempts at achievements, we can defend other nations throughout the
planet, on the basis of an international agreement on a system of sovereign
nations, as a credit system. Then we can work together and solve a lot of
problems, because once you have that agreement, it will give us the mechanism
needed to do everything that has to be done. There may be some strong debates
about this, but so what? The fact is, we may have debates, but they will be
debates which will succeed. They may be troublesome, but they will
succeed, because that's the only thing that's going to work on the planet
now.
"This is
our great moment of opportunity! It is a great opportunity for the United
States, because it gives us the opportunity, as the United States, to
contribute what is of utmost value to the world as a whole: the ability to
create a system of that type, a credit system as opposed to a monetarist
system. And that's where we have to
go."
No comments:
Post a Comment