The following are Lyndon LaRouche's remarks given to a private diplomatic luncheon, July 1, 2009.
LaRouche: Okay. Well, the theme should be today, throughout the world, that the world is in the greatest financial-monetary crisis, and economic crisis, in modern world history. This has been in process since the summer of 2007, when I first forecast this thing. And it's getting worse. It has had political ramifications, of course, throughout the world, and most governments have been resisting the reality of trying to pretend that this was only a financial crisis of some sort, that it would go away, that it could be fixed. And policies have been made on the assumption, that this thing is not going to crash, that there's going to be a recovery after a "period of pain."
Well, it's more than a period of pain. The present world financial-monetary system is about to go out of existence. And the only chance for having a civilization, is to put this world system into bankruptcy reorganization, and to replace the present financial-monetary system, with a credit system. Now, the crucial point here, is that very few people know what a credit system is. Everyone is convinced that monetary systems have ruled the world, and will continue to rule the world. And they assume they call up an accountant, which is the worst thing you can do these days. All you'll get is bad news, and you'll get sickness, and family break-ups and so forth.
But the issue is, that the world is governed by an empire. The empire has existed in European civilization since the period of the Peloponnesian War, in which certain monetary interests, money interests, as such, have been higher in rank than governments. Sometimes this has taken the form of an empire as such. But today's empires are not empires of governments as such, they're empires of consortia of financial interests, and monetary interests. And you have institutions, especially in a so-called free market, which is the worst form of government imaginable: In a free market, so-called, the monetary interests are above government. International financial-monetary interests are higher than government. These governments control the currency, the monetary system of the world, and of nations, and this is what constitutes a real empire. People above government, controlling government, where governments are supposed to respect the "free market" -- and the free market is the system of slavery of governments.
Now, you've seen a manifestation of this, because back in the summer of 2007, I announced this crisis which has been coming on ever since, and indicated there was a remedy, and indicated what the temporary remedy was for the United States: to put the system into bankruptcy reorganization. And actually, we're going to have to cancel, if civilization is going to survive, we're going to have to cancel most of these monetary-financial claims which are outstanding out there, and go back to what was called "the American System." Now, the American System, which was developed in what became the United States, was unique. No other part of the world initiated such a system, as the type we initiated. The problem of our country, today, is, at various points, powerful interests, international interests, have intruded upon and been able to wreck our system. And have brought us into subjugation to an international monetary system, in large degree, especially since 1968-1973.
So, the world as a whole is run by monetary systems. The monetary systems are under a free trade system, are completely international. International financier monetary interests control governments; every government of Europe, every government of the Americas, is today governed by an imperial power called an international monetary system. It fixes the rates.
The United States was unique in its organization from the beginning. Back in days of the Massachusetts Bay Colony, between 1620 and 1688, in that period, the Massachusetts Bay Colony developed a credit system, it was called a scrip system. They uttered a form of money which was negotiable only within the colony, the Massachusetts Bay Colony, and this continued until the British intervened, during the period of King James II and his follower William, of William and Mary, to impose a monetary system on the United States. There was an attempt to return to the Massachusetts Bay Colony, which was actually a credit system, under the initiative of Benjamin Franklin and his proposal for a paper currency. In the 1770s, Alexander Hamilton recognized a problem we had in the United States, which I cite here, again, because it's relevant to our current situation internationally, among nations internationally. Hamilton recognized, first of all, that the problem of the United States, which had just won its victory in a military struggle for Independence, was bankrupt, because each of the states, which had had separate state banking systems, of the separate colonies, were now in dire trouble because of the war debts they had incurred in defeating the British imperialists. So Hamilton said, "Well, there's no way that these states can deal with this problem."
We had a form of constitution in the Declaration of Independence, in which the principle was there, but we didn't have the mechanism. Well, Hamilton said: If we create a National Bank, as a credit-based bank, we can create a National Bank which will take over the backing and reorganization of these separate state-banking systems, under a National Banking system. But he also specified that in order to do this, we had to go to our constitution then, which was the Declaration of Independence, and take the principle of that and apply it, in a form which would deal with this debt problem.
So what he did, and what they did, is they went to have a Constitutional Congress, and the Constitutional Congress gave us the U.S. Constitution, which provided that the United States would not be subject to foreign monetary systems, but would be an independent, national credit system, at that time, headed by a National Bank; that no money can be uttered under law, under Constitutional law in the United States at that time, except by permission of the Federal government. No other authority, higher than the Federal government itself can utter money. This money is uttered with the consent of the Congress, and the administration as executed by the Executive branch.
Therefore, no foreign power -- the same thing happened in the case of Abraham Lincoln's leadership of the revolt against the British Empire, called our Civil War. And the bankers would not allow money to be lent, except at high interest rates to the United States government. So Abraham Lincoln went back to our Constitution, and issued what became known as "greenbacks": No money was allowed in circulation, except U.S. money, printed and guaranteed by the U.S. government. And through that means, we rescued our nation, not only won the war, but created the United States as the most advanced industrial power in the world, right in that period, by use of our credit system, to utilize the productive powers of labor and progress in an effective way.
So, as a result of the domination of the world by the British Empire, which has dominated the world through this entire period, except during the period of Roosevelt's administration. The world has been dominated by an international monetary system, which in terms of the Mediterranean civilization, dates from the Peloponnesian War. There has never been a truly independent system, except for very brief intervals, in the entire history of Europe. And the entirety of the world, insofar as it's subjugated to the British Empire, has been subjugated to that condition, up to the present day!
What happened during the period of World War I, is that we had corrupt Presidents -- who were really traitors in my view -- Teddy Roosevelt and Woodrow Wilson, who introduced the British system through establishing the Federal Reserve Bank, which was actually an intrusion; it was un-Constitutional, a money-creating facility outside the United States. Under Franklin Roosevelt, this was somewhat controlled. But with the death of Roosevelt, we began down the wrong road, and then, with the break-up of the Bretton Woods system entirely, in 1968-73, in that period, then we went to a world free-market system.
It is that world monetarist system, a so-called free-market system, which is now crashing. As long as we continue to accept the existence of that debt, which is the international monetarist debt, under this system, civilization worldwide is doomed. The only way that we'll get out of this mess, the only possibility for recovery, of any part of the world, is to cancel the present, international monetarist system. And have, instead, a system of nation-states, each sovereign, who declare a common participation in a system of national credit, the credit controlled as a sovereign matter of each state. And to combine these nations in a single system, by having a fixed-exchange-rate system among them. And we're talking about, essentially the goal of a fixed-exchange-rate system based on the idea of national credit of between 1.5 and 2%. Because at higher rates of interest, at higher rates of borrowing, you can not develop a balanced recovery of the world economy.
What we need now, today, as you know, we do not have the industry and agriculture development we need globally; we're losing it -- losing it at a rapid rate. We need, largely, for nations to undertake long-term credit operations, in terms of infrastructure development, both rural and industrial, and use this kind of development as a stimulus for developing a full-spectrum economy. And that we must think in terms of 30- to 50-year long-term agreements on treaty agreements for development, each conducted by sovereign nations, but a sharing of credit from a common credit system -- a fixed-exchange-rate credit system -- among governments. For example, let's take the case of Russia and China: China is in a hopeless situation. China was lured into the idea that it was going to have a world market, guaranteed by the United States and the British, especially the United States; and so, China expanded its economy, through an export economy, but they did that by pricing their goods so cheaply that China could not sustain its entire population on that export economy. Because China was working at cheap-labor rates, way below the cost of the U.S. product. The U.S. product was superior, in productivity and other terms. But! China worked very cheap, and therefore, it expanded its market as the United States and Europe, dumped and shut down its industrial economy and shipped production to China.
The same thing happened in other countries, where cheap labor and cheap goods, where income was expanded, but not at rates sufficient to maintain the balanced development of these economies.
So China found itself in a position today, where it had a large economy, based largely on the market in the United States and Europe, and some other countries. But the key margin was the United States, and so forth. And the United States was exporting its industry, deindustrializing itself -- as Europe was -- for this market. When the market collapsed, China found itself with a budget which was based on the assumption that this global market was going to continue to exist, and expand -- and suddenly, that market collapsed. And the collapse of that market means it will never come back. So, China is faced with a crisis.
Russia is faced with a different kind of crisis, but it's similar. It's faced with a crisis where it depended upon export of raw materials, particularly power, natural gas, petroleum, and so forth, this kind of thing. Suddenly, Russia depended upon that -- the market has collapsed! Because the world market has collapsed. So Russia now has a major crisis.
India has less of a crisis, but it has also a very large, poor population. It's more stable, because it's less export-dependent, but it has a large, impoverished population.
So, what is needed is a global system of cooperation, among credit systems, in which we recognize what the world needs, in terms of physical levels of production, physical improvements in conditions of life. It must be sovereign, it must be done by sovereign nation-states. But there must be also a system of international credit-sharing, in support of long-term projects, and we're talking about essentially a 50-year perspective. Which means, you have to design, which can be done very quickly, a 50-year agreement on a credit organization among nation-states, in which we can integrate the aims and objectives of recovery of these nations.
Now, that would mean putting the system through bankruptcy. This would mean that most of the debt, which is currently outstanding, is financial speculative debt. Nations are being bled to death, by a system of speculative debt. Under bankruptcy reorganization, according to U.S. law, most of this debt that is found to be worthless, will be simply cancelled. And the amount of debt will be restricted to a stable banking system, under credit system rules. It's the only possible way. As long as we try to demand, that the world economy be collapsed in order to pay a cancerously growing debt, there is no chance of recovery. Under the present rules, of the present system, and under the rules of globalization, there's no chance for the survival of civilization in any part of this planet, today! So we will have to do this, make this reform, because there's no other chance: Unless you want to collapse the civilization and want to go from 6.7 billion people on this planet, to less than 2 fairly quickly, you're going to do that kind of reform. And that's what I've been presenting and that's what I've been arguing for. I know time is on my side. But time is also against us: Because, if this process continues, the rate of death in this planet, from diseases and other effects, is going to wipe out a lot of the world's population. Whole nations will simply disappear from the map.
Or, if we do it, we'll survive. And it's the only chance.
And therefore, I'm sitting in that situation, where what I'm proposing will work, but if it's not done, then the whole planet's going into a dark age, worse than any on known record! And that's in the short term.
The political crises, as well as the present disease crisis, internationally, are a byproduct of this situation. You know, diseases, like this present flu epidemic, are diseases which are actually promoted by conditions for spread of disease. And therefore, these kinds of things hit, as they did, for example in the 14th Century in Europe, the population collapsed what?-- by 30%!--in a generation, in Europe, in the dark age of the 14th Century. It collapsed, following a collapse of the banking system of that period, which had brought down the entire economy of Europe. The result of that was chaos, and mass death.
All of these kinds of conditions, like the great flu epidemic of 1918, in the world, was a result of wartime-type conditions, especially centered in Europe, and in the fact of U.S. soldiers who had served in Europe, which brought this 1918 flu epidemic upon us. The present international flu epidemic is a symptom of the same kind of thing, and it's going to spread. It's spread, because the physical conditions of life, the physical conditions of sanitation, have reached the point that these diseases break out, not merely because the disease is being promoted, but the conditions to promote the disease and its variation has been that.
So we're at that kind of point. And my concern is, if the United States will change its policy and enter into agreement with other nations, for such a change in policy, we can force through the kind of immediate reform, which parallels the reform designed by Alexander Hamilton, back during the period of the American Revolutionary War and following. It'll work. It's the only chance, the only chance, now. Under the present system, there's no chance for civilization -- we're going into a dark age. This is not a financial crisis. This is not a depression. It's not a recession. It's not a mere financial crisis. It's a breakdown crisis of the system! And if you look at the figures, on employment and production, in the United States and other countries, as in Europe, you look at the rate at which key industries are disappearing, you look at what's happening in agriculture, what you're seeing is a trend, now, well-established, which is going to reduce the world's population, in the direction of about 2 billion people, down from 6.7 right now. So therefore, we have no choice, but to make this kind of reform. This kind of reform will work. The precedent exists for it, especially in the case of the United States' example: When we did this, each time we did this and went back to our system, rather than the British system, we prospered. Each time we submitted to British influence, British bankers' influence over Wall Street, we went down. That's the lesson.
And our mission, as the United States, in my view, is the fact that we have in our experience, the understanding of a credit system, as opposed to a monetary one, where all European experience since the Peloponnesian War, to the present time, has been that of a monetary system. Get rid of the monetary system, use the principle of national sovereignty, of sovereign nation-states in cooperation for a fixed-exchange credit system, and we can recover.