|This transcript appears in the May 12, 2017 issue of Executive Intelligence Review.
The Future of the Americas
Dear Friends of the Schiller Institute,
I will speak to you on the theme, “The Future of Ibero-America Lies in the New Silk Road.” I send my most heartfelt greetings to you who are watching the video in Peru, Guatemala, Mexico, Argentina, Chile, Colombia, the Dominican Republic, the United States, and maybe elsewhere.
We are only days away from an event that will make clear to the whole world that the world is changing, that we are already in the process of developing a completely new paradigm, that of the New Silk Road, otherwise called the Belt and Road Initiative. In Beijing, between the 14th and 15th of May, a summit will take place. Already 28 heads of state and government leaders have agreed to attend, and the heads of state include those of Argentina and Chile, but also there will be high-level representatives and delegates from 110 nations, altogether 1,200 delegates; there will be 60 international organizations represented. And in the context of this summit, China and 20 countries will sign a cooperation agreement that will define the goals and principles; it will develop an new international platform for science and technology, for exchanges and training of talent among the participating countries.
This Belt and Road Forum will be an historic event. It will be the consolidation of a process which started three years and eight months ago, when President Xi Jinping in Kazakhstan announced the New Silk Road. And in this period, the true conception of “win-win cooperation” among altogether almost 70 nations, has become a reality, where it is clear that no longer is this a zero-sum game in which one gains an advantage at the expense of the other, but rather, this is a true “win-win cooperation,” in which each country is to have equal benefits from such cooperation.
The significance of this conception of the Belt and Road Initiative lies in this, that for the first time in human history, it overcomes geopolitics—which was the cause of two world wars in the Twentieth Century—because it establishes a higher level of reason, and since it is open to every country, it can reach into the farthest corners of the world. It is open to all nations of the world, including the United States and the European nations, even though they are still not so clearly in favor of it, or at least it’s a mixed situation.
Since this program has been put on the agenda by Xi Jinping, it has led to an unbelievable explosion of development, absolutely unprecedented in history. China has signed more than 130 bilateral and regional transport agreements. It has opened 356 international road routes, for both passengers and freight; there are now 4,200 direct flights connecting China with 43 Belt and Road countries; there are now 39 China-Europe freight train routes; there is now a cargo train departing Chongqing daily for a European destination.
Meanwhile there are six major industrial development corridors and the 21st Century Maritime Silk Road. The six are:
And, there is also the development of an entire railway network in Eastern and Central Africa.
This is unprecedented in human history. After literally centuries of suffering colonialism and poverty and underdevelopment, for the very first time, through this Chinese initiative, there is the prospect for the developing countries to overcome poverty, hunger, and underdevelopment, and to realize their true potential.
Well, it is most astounding. But then, it is not so astounding—if you think about it—that there is almost nothing being reported in the mainstream media about this greatest infrastructure project in all history, at least not in the United States and Western Europe. Forbes magazine is one of the very few exceptions: It had a six-part series about the potential of the New Silk Road. All of the other mainstream media pretend it doesn’t exist. So the populations of Europe and the United States know very little about it, and once they realize it, mainly through our efforts—the efforts of the Schiller Institute—they realize that this is a tremendous potential also for their future. For the most part, people get extremely angry that they have been deprived of this knowledge.
It is very clear that the forces of the old paradigm, the paradigm of geopolitics—a system based on so-called globalization, which emerged after the collapse of the Soviet Union, based on the “special relationship” between the British and the United States, this system which was based on profit for the rich, making the gap between the rich and poor ever wider—these old geopoliticians regard this new system as a complete threat to their existence. They see a system which is now specifically aiming to overcome poverty in the whole world and have a “win-win” relationship among equal nations with equal rights, equal respect for their sovereignty. So they try to maintain the illusion that it does not exist.
A very interesting article, “,” by Robert Parry, appeared just today. Parry is a U.S. investigative journalist who became rather famous through his coverage of the Iran-Contra affair. He writes, “The looming threat of World War III, a potential extermination event for the human species, is made more likely because the world’s public can’t count on supposedly objective experts to ascertain and evaluate facts. Instead, careerism is the order of the day among journalists, intelligence analysts, and international monitors—meaning that almost no one who might normally be relied on to tell the truth can be trusted.” He says—and I fully agree—that what replaces objective reporting is “groupthink,” where experts “have sold themselves to . . . powerful interests in order to keep high-paying jobs and . . . don’t even seem to recognize how far they’ve drifted from principled professionalism.”
Well, that will not help them, because the positive alternative of the Belt and Road Initiative does exist, and it is also the remedy to the two existential crises facing human civilization at this point: First, the danger of a global nuclear war, which is now most obvious in the crisis around the two Koreas, and naturally, still to a certain extent the situation in Syria; and secondly, the danger of an uncontrolled economic crash possibly to occur this year, which if it were to occur would lead to uncontrollable chaos, out of which the danger of a nuclear war would arise as well.
Let’s briefly look at the second danger. On July 25th, 2007, my husband, Lyndon LaRouche made a truly history forecast: He said, this present global financial system is hopelessly finished, and all you will see now are the different elements coming to the surface. And it will not be resolved until you have complete, total reorganization of this bankrupt system through a number of measures—Glass-Steagall, a return to a credit system, and the American System of economy.
Exactly one week later, the secondary mortgage crisis in the United States erupted, which then, since it was not dealt with by the measures that LaRouche proposed, escalated into the big financial crash of Lehman Brothers and AIG in September 2008.
At that point, for a very short period of time, actually some days and weeks, the leaders of trans-Atlantic world were absolutely convinced that it was a systemic crisis, and some of them, such as President Nicolas Sarkozy of France, even called for a New Bretton Woods, because they were so afraid that the whole system would disintegrate. Unfortunately, this shock did not last very long, and at the next G20 meeting in Washington, on Nov. 15, of the same year, they decided in effect to paper it over, go for quantitative easing, and use other so-called “tools” of the central banks. Rather than going for the Glass-Steagall separation law of Franklin D. Roosevelt, which my husband has prescribed, they went into Dodd-Frank, which was just a cover story to keep the high-risk speculation of the big banks going.
In the meantime, the European Central Bank (ECB), the central banks of Great Britain and Japan, and the U.S. Federal Reserve decided to go into quantitative easing, and they created $15 trillion in lending facilities to the too-big-to-fail banks; that has meant a de facto zero-interest rate for about ten years. They spent part of this money for so-called bailout packages, which supposedly went to countries such as Greece, but in reality 97% of these bailout packages went back to the big European banks and the American banks.
In the United States, this liquidity pumping has increased so much that, for example, corporate debt has risen since 2008 from $8 to $14 trillion—that is an increase of 75%—of which almost $9 billion is in commercial mortgage-backed securities (CMBS). Since 2013, 80% of the corporate borrowing has been used, not for productive investment, but so-called “financial engineering.” That is, corporate firms buy up their own stocks to drive up the price, or they’re buying other firms in so-called mergers and acquisitions (M&As) for the same effect. They are using $500 billion per year to drive up those stock indexes, while at the same time, betting on the derivatives of these manipulations.
Despite all of this, the total non-financial corporate profits have not increased since 2011 and began falling in 2013. Morgan Stanley just put out a report in April that the ratio of non-financial corporate debt to cash from operations is at an all-time high, at a ratio of 3.2 to 1.
With this situation, in which debt is going through the roof relative to the operating cash and profits are declining,— normally, what firms used to do, is go to the banks and borrow more, but this is no longer happening; the banks won’t give any more credit because they know this whole system is coming to an end, and it’s not maintainable.
At the April annual meeting of the International Monetary Fund (IMF) in Washington, it put out a 2017 Global Financial Stability Report, in which it wrote that the U.S. debt-service-to-income ratio of the non-financial corporations has gone up 37% in 2014, to 41% in 2016; and those corporations have $7 trillion more debt than in 2008, but $3 trillion less equity invested in them. As a result, a wave of defaults has already started. The default rate for the non-financial corporations jumped from 3% at the beginning of 2016 to 5% at the end, and it is expected to be 5.6% in June. The IMF warns that if interest rates go up, as they did in the period from November to January, then 20% of all U.S. corporations could default. Now that is higher than the highest mortgage default rate in the crash of 2008.
This gigantic bubble of corporate debt is made the more unpayable because of the complete lack of growth in the real economy. The miserable 0.7% growth in GDP, published for the United States—and remember that the GDP statistics are always manipulated, and every knowledgeable person in Europe, for example, makes jokes about it—it went up only 0.7% in the first quarter of this year, and that does not pay for this huge bubble.
But the problem is not only in the United States, it is also in Europe. Just recently, the Italian Banking Association put out the figures of the Level 3 derivatives in the European countries; the highest ratio is in Germany, it was 25.5%; British banks, 25.4%; French banks, 20.5%. And Italy, which is always scolded for having the biggest commercial losses, has only 15%. Now, Level 3 derivatives are derivatives that don’t have a market price because nobody wants to buy them; people know they are completely toxic. So they are assets collateralized with debt and therefore pretty worthless, but the ECB has allowed each of the banks to price them according to its own bank model and count them as assets. In the recent stress tests of the European central banks, they left out Level 3 assets, so this is a complete illusion which is being maintained because an admission would basically reveal the complete bankruptcy of the system.
There is only one way to prevent a chaotic blowout, and that is to implement the Glass-Steagall law, which Franklin D. Roosevelt implemented in 1933. There are at present Glass-Steagall bills in both Houses of the U.S. Congress, and the director of the National Economic Council, Gary Cohn, recently told a group of senators that the Trump administration is absolutely committed to realizing Glass-Steagall soon, and that President Trump will fulfill his election promise to go for Glass-Steagall. As a result, there has been a flood of articles in the last three weeks attacking Glass-Steagall, saying it would not have solved the problem of 2008—which is a complete lie—and obviously, this expresses the complete nervousness of Wall Street and the City of London because it would bankrupt them and cut their power down to size.
The situation in China is different. Unlike the asset-based economy of the United States, and partially of Europe, where there is great diversity among the EU members and therefore the whole Eurozone does not function, where basically the situation is completely unsustainable as well, China on the other side, in the first quarter of 2017, had a surprisingly high growth in GDP of 6.9%, compared to the first quarter of 2016. All the agencies—Bloomberg, PricewaterhouseCoopers, and others—agree that the primary driver of this Chinese economic growth is the extraordinary investment in infrastructure, both in China domestically, as well as in the Belt and Road countries.
There was a study of PricewaterhouseCoopers in February that said the great infrastructure projects grew in the last year by 50% in value, and there is a new study by the U.S. National Bureau of Economic Research that says—based on physical economic factors such as the illumination seen by night from space—that the Chinese economy is actually growing faster than even the Chinese government reports.
Chinese factory output is up by 7.6% in the first quarter also, compared to the first quarter of 2016. Household disposable income went up by 7.5%; retail spending up by 10.4%.
Xinhua reported that the goods trade between China and the Belt and Road countries went up by 26.2% in the first quarter. Chinese exports to Belt and Road countries went up by 15.8% in the first three months. Imports to China went up by 42.9% from the 60 countries of the Belt and Road. There are 781 new companies with investments in the Belt and Road countries. Chinese enterprises signed 952 contracts in 61 countries along the Belt and Road.
The Chinese economy and the Belt and Road Initiative has long since become the real engine of the world economy.
So for the United States to come out its present financial danger, there is only one way out, and that is to implement the of Lyndon LaRouche: First, Glass-Steagall. Separate the commercial and the investment banks, write off the unpayable debt and toxic paper of the investment banks, put the commercial banks under protection. Then, go to a credit system in the tradition of Alexander Hamilton, implement a National Bank, and increase the productivity of the economy by making a massive investment in fusion technology and space cooperation, and other vanguard technologies to increase the productivity of the labor force.
This could be massively helped by the Chinese cooperating with America on the Belt and Road Initiative, which was offered by President Xi Jinping at the recent Florida summit of Presidents Trump and Xi.
Trump has said he wants to invest $1 trillion in infrastructure in the United States. The American Society of Civil Engineers estimates that the real need for infrastructure investment is $4.5 trillion, but Chinese experts estimate that what the United States really would need is $8 trillion. And China could easily help America to rebuild its infrastructure because it has extraordinary expertise from having done the Belt and Road project for the last three and a half years. China also has already offered to invest its $1.4 trillion they’re holding in U.S. Treasury bonds. If this were to be channeled, let’s say, through either an infrastructure bank in the United States or a National Bank in the tradition of Hamilton, this could help to revive the American economy.
Now, the same goes for European nations: They urgently need Chinese investment, because the EU has not been providing it, and that is why right now, you have the complete turning around of European nations—they want to be part of the New Silk Road. Greece, Serbia, Hungary, the Czech Republic, Belarus, but also Italy and Portugal, have all stated that they want to become “hubs” of the New Silk Road. So there is a complete change in the wind, representing the potential to realize this fantastic new perspective.
However, the second existential crisis, the danger of nuclear war, is obviously centered right now very massively around the North Korea crisis. Again, there, the solution will be the integration of the two Koreas into the New Silk Road. But the situation is now extremely dangerous. Pope Francis just put out a statement saying, “the situation has become too hot,” that the world is at the brink of war, and he said, “We are talking about the future of humanity. Today, a widespread war would destroy—I would not say half of humanity—but a good part of humanity, and of culture, everything, everything. It would be terrible. I don’t think that humanity today would be able to withstand it.”
If you study the logic of thermonuclear war, the danger is not half of humanity, the danger is that it could lead to the extermination of all life, of all human life on this planet.
This danger is the result of the old geopolitical manipulation, because the situation in Korea is not insoluble at all. In the 1990s and again in 2002, we were very close to establishing a permanent peace on the Korean Peninsula. North Korea, at that time, in the 1990s, had signed the Nuclear Nonproliferation Treaty (NPT); it agreed not to build a nuclear weapons plant, and in return it was allowed to build a peaceful nuclear energy facility. Then at a certain point, U.S. Defense Secretary William Perry in the Clinton Administration was convinced that Pyongyang was diverting plutonium, and he was actively considering the option to take out the North Korean Yongbyon plant in a surgical strike.
At that point, former President Jimmy Carter went to Pyongyang and met with North Korean leader Kim Il-sung, and they reached an agreement which was supported by the Clinton administration, South Korea, and North Korea, with the support of China, Japan, and Russia, and they called this the Agreed Framework, which included the idea that North Korea would take down its Yongbyon plant in exchange for which the United States would help North Korea build a full-scale 1,000 MW nuclear plant and would also provide North Korea with oil until this plant was ready. Inspectors from the International Atomic Energy Agency (IAEA) went there and started to monitor, and there were pledges that they would move very quickly towards a peace agreement surpassing the armistice which still existed—and still exists.
But then, unfortunately, the Clinton administration came to its end, and was replaced by the Bush and Cheney administration, which immediately started this talk which we know only too well from more recent days, that they couldn’t cooperate with a “brutal dictator.” That put a cloud over the whole project. But still, in 2002, South Korean President Kim Dae-jung adopted the “Iron Silk Road” proposal, initially proposed by Lyndon LaRouche, who had always maintained that the way to solve the Korea crisis is with the New Silk Road, that you have to build the railroad from Busan at the southern tip of South Korea, through North Korea, all the way to Rotterdam. And that once you have South Korean and North Korean engineers working together building railways, the real basis for peace could be established.
So work on the two railroads began, with a line going from Seoul, via Kaesong in the south of North Korea, to the old Silk Road, the Chinese railway. And one was supposed to go up the east coast to North Korea and then link up in Vladivostok with the Trans-Siberian Railroad. Also in 2002, in the village of Kaesong, the two governments started to build an industrial park, where South Korean companies deployed very highly skilled North Korean labor to set up factories and build up industries, and things actually went along very well. Meanwhile, there were Six-Party Talks supporting this Sunshine Policy of the South Korean President.
At the time, Bush and Cheney reluctantly went along with it, but always kept nagging North Korea as cheating, saying “don’t believe them,” and so on. At a certain point, the Six-Party Talks ended, and when Obama came in, and started his “Asia pivot” policy—which was not aimed at North Korea, but really aimed to isolate China and encircle it—they started to build up military forces aimed against China.
So under pressure from President Obama very recently, South Korean President Park Geun-hye cancelled the Kaesong industrial park and agreed to the deployment of the Terminal High Altitude Area Defense (THAAD) missiles; again, these missiles are not deployed against North Korea, but aimed at China and Russia. Because the North Korean border is only 30 miles from Seoul, North Korea would not need to send ICBMs into space to hit Seoul; North Korea has sufficient artillery for that. But the THAAD missiles have X-band radar, which can see deeply into the territory of China and Russia, which is why both countries have identified the THAAD missiles as an existential threat to their national security.
This is a very dangerous situation. Were North Korea to strike Seoul, all of North Korea would be wiped out in return, the entire North Korean leadership would be killed (as has been stated by many U.S. sources), and the population of Seoul would most definitely also be wiped out. If this war were to escalate, it would clearly have the potential to escalate to Japan and the United States, and it could also lead to a global thermonuclear war.
Right now that danger is absolutely real. The only sign of hope is the positive relationship between Presidents Trump and Xi. At their April 6-7 summit in Mar-a-Lago, Florida, a very positive working relationship and almost friendship developed between the two Presidents. The summit has been called by the Chinese a “complete success.” Secretary of State Tillerson has said it has absolutely enhanced mutual trust and both sides have stated that their common aim is the de-nuclearization of Korea, that they want to resolve the conflict through peaceful dialogue.
Now that also requires the implementation of the recent Chinese proposal for a so-called “double suspension”—meaning a suspension of the missiles and nuclear tests on the side of North Korea, and a suspension of the joint military drills on the side of South Korea and the United States. Russia has stated that it completely supports this Chinese policy of double suspension. That would be the first step.
What is needed then, is a comprehensive approach of the New Paradigm, of “double suspension,” to include North Korea in the Belt and Road Initiative and integrate the Sunshine Policy with the New Silk Road. The key to it is the collaboration between Xi Jinping and Trump. It can absolutely work, because there are elections on May 9th in South Korea, in which the likely winner has already come out against the THAAD deployment; so the hurried deployment now makes absolutely no sense. And, in the past month, the relationship between Prime Minister Shinzo Abe of Japan and President Putin of Russia has developed in a positive direction, so that you have joint Russian-Japanese investments in the Russian Far East. Therefore, the elements of a solution are absolutely there.
What has to be put on the agenda, therefore, is the Greater Tumen Initiative, which we included in the World Land-Bridge report. This is a regional development project centered on the Tumen River, which forms part of the border between China, North Korea, and Russia. The project would build up the Greater Tumen River Region, including not only China, North Korea, and Russia, but also Mongolia and South Korea, and develop the entire region around it. North Korea was a part of this project until 1993, at least in its initial forms.
So, what has all of this to do with the future of Latin America, and why does my speech have the title, “The Future of Latin America Lies in the New Silk Road”?
I have personally believed for a very long time that the great German mind, the philosopher, statesman, and natural scientist Nicholas of Cusa, in the Fifteenth Century, was absolutely right when he said that the solution to fundamental problems cannot lie in partial remedies, but that you have to find the solution at a higher level of reason, which he called the “coincidence of opposites” or the coincidentia oppositorum. You have to establish a level of reason in which the One has a higher reality than the Many, and that is exactly the “win-win cooperation” of the Belt and Road Initiative today.
In the age of nuclear weapons, of the Internet, of air travel, which can bring you in a few hours to any part of the globe, the world has become a very small place. And unlike in previous periods, in which you had one culture going under and some other culture in some other part of the world didn’t even know about it, because it would take years to travel from one region to the next, at this time, we are sitting in one boat, and therefore, people have to start to think strategically and not think that the financial crisis of the trans-Atlantic sector—or the North Korea crisis—is something alien to them, but that we have to solve all of these problems simultaneously, or else there will be no solution for anybody.
The only way for Latin American countries to solve the problem of the drug epidemic which is haunting some countries in an existential way, or of poverty, or of underdevelopment, is to revive the development plan of Lyndon LaRouche, which he called in 1982 Operation Juárez, when he worked with President José López Portillo to integrate all of Latin America into a single, large infrastructure network. It can be realized today, and it is possible because of the Chinese Belt and Road Initiative.
We have to build a fast train system from the southern tip of Latin America, in Chile and Argentina, going all the way up through Central America and North America to the tip of Alaska, connecting with Siberia through the Bering Strait Tunnel, and in that way linking the trans-American transport corridor with the trans-European-Eurasian infrastructure network.
The infrastructure offered by China is already going in this direction. China has offered financing and other help in the construction of the Bi-Oceanic Railroad, as you will hear in the next presentation—a railroad between Brazil and Peru, and between Brazil and Bolivia.
China is already building a science city in Ecuador. During the recent state visit of President Xi to Ecuador, Peru, and Chile last fall, Xi met with the former President of Ecuador, Rafael Correa, and the two leaders stated their intention that very soon China and Ecuador will both be on the top rung of science and technology, reflecting the state of the art. This is a very ambitious and very hopeful intention.
That Chilean President Michelle Bachelet will go to the Belt and Road Forum in Beijing and then remain for a state visit, represents the potential of bringing all of these projects a big step forward. Chile’s former ambassador to China, Fernando Reyes Matta, says that the world leaders who are attending the Belt and Road Forum are betting on the future. He said: Should we think, from Latin America, about linking with the One Belt and Road if it will have the same effect as the Marshall Plan had on Europe? Well, the answer is obviously, yes, because the Belt and Road Initiative is already twelve times larger than the Marshall Plan was in its time, and it is open ended and can be extended without limit.
This fantastic economic development perspective also has—and must have—a cultural dimension. Bolivia, Mexico, and Peru are among the ten member states—all countries with very old cultures—of the Ancient Civilizations Forum, and they sent their foreign ministers to its first ministerial conference in Greece on April 24. These are countries with very proud, ancient traditions that they intend to revive and connect to their ambitions for the future. For the New Silk Road/World Land-Bridge project to succeed, we must revive the best traditions of each nation, of each culture on this planet, and then maintain a dialogue, so that each nation knows about and finds out about the treasures that universal history has so far accomplished.
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If we have win-win economic cooperation, it will uplift every human being from poverty, it will unleash the tremendous potential of human creativity, and it will lead—I am absolutely certain—to a new cultural renaissance.
The people of Latin America must absolutely know that we—the human species as a whole—are close to a decisive branching point in human history—that the New Silk Road allows for a completely New Paradigm.
Under the New Paradigm, for example, we will be rid of the old idea of money—the idea that you earn virtual money, and the money figures could disappear from your bank account instantly in a financial crash. That’s the idea that what you never really owned, because it was always virtual, you could also never lose.
This wrong idea will be replaced by the concept of a meaningful life in which each person can unfold the fullness of his or her creative potential, something that so far has only been possible for a very few individuals—such geniuses as Dante, Kepler, Schiller, Beethoven, Vernadsky, Einstein. Very few people could reach that level of creativity. Up until now, most people have been so burdened by what they had to do to earn their livelihood, by the constraints of managing their daily lives, that they could not fulfill their potential.
Now it will be possible to change this, and we will have a society, increasingly, on our planet, in which more and more people—and eventually all people—can be truly human by developing all of their inherent potentials.
So, provided we can solve the two existential crises that I mentioned, we are looking at a very bright future. If Latin America links up with the Belt and Road Initiative, this potential can be realized for all of us in a very short time.