|This memorandum appears in the June 16, 2000 issue of Executive Intelligence Review.
WORLD MONETARY REFORM
Regional Organization under
a New Bretton Woods
by Lyndon H. LaRouche, Jr.
June 3, 2000
Despite the hysterical efforts of the U.S. President's
Working Group on Financial Markets ("the Plunge Protection Team"), the world's
present financial system is already in the last phase of a terminal collapse.
Only lunatics, and other desperate fools, such as U.S. Treasury Secretary Larry
Summers, are still hoping to keep that system from collapse. All of the world's
intelligent and well-informed government officials, leading bankers, and
economists, are preparing for the kind of world which will come into existence,
very soon, after the present IMF system has been wiped out.
As I have warned, repeatedly, no one can predict the exact
hour of the day the present system's bankruptcy will be made official. Since the
fateful blunders of the October 1998 Washington monetary conference, the system
as a whole has entered fully into its terminal phase of collapse. Exactly how it
will collapse--whether by deflationary chain-reaction, by hyperinflationary
explosion, or by being placed in bankruptcy-reorganization by governments--is a
"Utah death-sentence" style of choice, still to be made by relevant
governments; but the collapse is now
inevitable, and will occur soon--very soon, perhaps before November, perhaps
before the August U.S. Democratic Party nominating convention. Really
intelligent people, around the world, are treating that oncoming collapse
virtually as if it had already occurred. This is the time for all intelligent
monetary systems to dictate their bequests to their prospective heirs. What
remains chiefly in doubt, is whether or not the post-crash governments will be
able, or willing, to honor such a last will and testament of what is presently
the already doomed system.
As of September 1998, it would have still been possible,
although admittedly difficult, for U.S. President William Clinton to have
brought about a comprehensive reorganization of the existing International
Monetary Fund. In the aftermath of the October 1998 Washington conference,
especially after decisions on the Brazil crisis of February 1999, that approach
to monetary reform had been virtually destroyed, by the Clinton Administration
itself. Now, the establishment of the urgently needed, new international
monetary system, were more likely to be built up from a combination of regional
groupings, such as the proposed ASEAN-Plus-Three association aired at a recent
Chiang Mai, Thailand meeting, or not at all.
In the situation defined by the presently inevitable early
disintegration of the current international financial system, the imperative of
even simply national economic survival, requires cooperation among the
relatively most interdependent regional trading blocs. The maintenance of even
the barest essentials of trade-cooperation, requires treaty-facilities of a sort
needed to provide for short- to medium-term trade of some essential portions of
hard-commodity traffic. The ASEAN-Plus-Three meeting, typifies the lines of
cooperation which are urgently wanted in various regions of the
The case of the Chiang Mai meeting, and its revived
deliberation on the 1997 proposal for an Asian Monetary Fund, reflects the
specific form of political hysteria caused by the desperate actions of the U.S.
"Plunge Protection Committee." In the effort to postpone the inevitable global
financial crash until after the U.S. general election of November 2000, at least
until the Democratic Party Convention of August, the U.S. launched predatory
actions against both Japan and the continental European currency-bloc, the Euro.
The points of vulnerability focussed upon by the Plunge Protection Committee,
were the respective "Yen carry-trade" and "Euro carry-trade."
Thus, the hysteria of the Gore-campaign-dominated Clinton
Administration, came very close to breaking the quarter-century-long
"Trilateral" arrangement of 1975, among Wall Street, Tokyo, and continental
European finance. This Gore-prompted savagery against Wall Street's crucial
Tokyo and European monetary partners, represented a threat of an irreparable
break among the leading elements of the present world monetary system. Although
neither China nor Japan was then prepared to risk an open break with the U.S.,
the question was posed. The mood at the Chiang Mai meeting, is to be regarded as
a relatively mild warning-shock, a warning of a likely, oncoming political form
of the major monetary earthquake, a warning of the threatened break-up of the
existing IMF-dominated system.
The Rope in the House ...
The most dangerous implication of the onrushing world
financial collapse, is the continued unwillingness of the U.S. government to
face this reality of the situation. In Washington, D.C., it appears to be the
rule, that "one does not mention the rope in the house of the hanged." The
President apparently hopes, against all evidence of past performance, that a
President Al Gore would honor a commitment to defend an ex-President Clinton
from the murderous Bush machine. However, even if Gore were the honorable man he
is not, there is virtually no chance that an Al Gore could be elected President
after a pre-November 2000 global financial collapse, nor that the U.S. could
survive for long under a President George W. Bush. So, when Gore enters the
room, the band strikes up the Nashville, Tennessee ditty, "Born to Lose,"
whereas the President were appropriately greeted by a ditty entitled, "Tell Me
It Isn't So."
Among people who desperately need to convince themselves that
they are behaving rationally, purely arbitrary blind faith in a delusion, is not
sufficiently reassuring. To make their delusions appear credible, they require a
rationale or two. Since President Clinton, unlike his Vice-President, is an
intelligent, rational person, his clinging to his current officially proclaimed
delusion about the world economy, demands the typically Baby-Boomer style in
pseudo-rational doctrines, the "Third Way" and "New Economy." It also demands a
third sort of reassurance, the belief that the majority of popular opinion still
shares his delusion. The best way to avoid thinking about the rope, is to accept
the delusion that it does not exist. If customary fools, popular opinion, share
that delusion, so much happier the wishful thinker will be--for at least a
moment or two longer.
Start from the reality of the present world financial
situation. Then, pin-point the delusion which prevents a President Clinton--and
many others--from seeing the reality they desperately wish to deny. Start with
the reality of the Triple Curve, and also the reality of the fact that the world
financial system is, at this moment, in the midst of a hyperinflationary spiral
like that of Germany 1923. Then, examine President Clinton's expressed belief in
the delusion of a "new economy;" look at this delusion in light of the global
financial reality which the President has refused to face--since no later than
Look at two versions of the Triple Curve. The first, is the
general version which I first presented in graphic form in the setting of a
Vatican conference of Autumn 1995 (Figure 1). Then zoom in on a
close-up of the area of the same curve at a critical point, the point at which
the rate of monetary expansion rises more rapidly than the rate of financial
expansion (Figure 2). The latter is the condition into which
Germany had entered over the interval March-October 1923. The latter is the
phase at which the rate of hyperinflationary spiral of financial assets, itself
fed by wild-eyed monetary expansion, erupts as an accelerating form of
hyperinflation of commodity prices. The latter is the point recently reached, a
point comparable to Germany of March-April 1923 (Figure 3).
This situation is comparable, in the domain of mathematical
physics, to the Riemann shock-wave "front" which Riemann defined in his "The
Propagation of Plane Air Waves of Finite Magnitude" (Figure
4). The transition from the general
pattern shown in Figure 1, to the local condition shown in Figure
2, is analogous to that shown by the Riemann shock-front of Figure 4.
The March-October 1923 development in Germany, as depicted by Figure 3,
Look at this in terms of the price of a barrel of
To understand this comparison, make a distinction between the
physical costs of production and distribution, including the direct costs of
administration of the processes of production and physical distribution, and the
additional costs added to prices by inflation of the financial-capital nominally
invested in title to ownership of that entity. Typical are the current financial
charges incurred by mergers and acquisitions of entities producing, processing,
and distributing petroleum and petroleum products. Then, examine the rising
portion of total price per barrel represented by the purely financial charges
which mergers and acquisitions add per barrel produced and distributed.
Look at similar patterns of financially-driven inflation in
areas such as real estate, and primary materials generally.
In such cases of combined "privatization" and mergers and
acquisitions generally, one must recognize the fact that a hyperinflationary
expansion of total financial accumulations, leads, by a significant factor of
delay, toward a self-feeding inflation in the amount of tax which mergers and
acquisitions superimpose on each barrel of oil, etc. At the point, this factor
of increase of gross price greatly exceeds the underlying, physically-incurred
costs of production, distribution, and management, a hyperinflationary expansion
of gross financial capital, explodes as an emerging and generalized
Thus, during 1997-1998, the world financial system entered
the terminal phase of its existence. As of October 1998, this assumed the form
of a general hyperinflationary growth in monetary expansion. Approximately the
close of 1999, the general hyperinflationary trend began to assume the form of a
self-feeding trend toward the eruption of commodity-price inflation. While we
can not, presently, determine the way in which the March-October 1923 Weimar
Germany process compares, in scale, to the presently emerging global
hyperinflationary trend in key commodity prices, the fact that a comparison is
to be made, is already sufficient evidence on which to base the most crucial
observation; the world is entering the shock-front phase of a general
post-1997-1998 global hyperinflation in nominal valuations of financial
The present financial system as a whole is hopelessly
bankrupt. There is no way in which present financial obligations outstanding
could be paid. Over-the-counter derivatives must be the first to go, followed
immediately by other forms of derivatives and junk-bond indebtedness. In
addition, long-term debt generally, must be frozen and rescheduled at nearly
zero-interest rates. Other financial assets, such as personal saving accounts
and pensions, must be maintained as currently liquid, but only as is required to
optimize social stability of family households and employers.
The world requires a new monetary and financial system,
rebuilt from the ground-level of expanded present levels of physical output
measured in quantities of employment and output in production of physical goods
of newly produced infrastructure, agriculture, and manufacturing. A sudden and
sweeping cancellation of all changes in monetary, financial, and economic
policies since August 1971, is mandatory.
President Clinton's Delusion
The delusion which President Clinton has shared publicly with
his unfortunate choice of Vice-President, Al Gore (and many others of the
Baby-Boomer class), is the interchangeable notion of what is called either "the
new economy" or an "information society." The political-cultural connections
underlying that delusion, are multifarious. The common root is an utopian
delusion, typified by the collaboration of H.G. Wells and Bertrand Russell, a
delusion associated with Russell's public endorsement of Wells' The Open
Conspiracy. As current U.S. Secretary
of State Madeleine Albright bragged, in her Oct. 14, 1999 New York address, she
has been an active follower of the ideology of Wells' The Open
Conspiracy, in her entire career, including her official Cabinet roles
as UNO Ambassador and Secretary of State. The principal delusions shared between
Mrs. Albright and Al Gore, have their proximate origin in that "Open
Conspiracy," as defined by Wells and Russell.
The principal categories to be considered are:
"globalization," as defined by the practices of Clinton, Gore, Albright, and
London's Tony Blair--with some equivocations by Clinton; "information theory," a
concoction of Russell's devotees Norbert Wiener and John von Neumann; and the
Wellsian doctrine of post-Morloch ("post-industrial") society, as advocated by
Gore, under the rubric of "ecology," and by
both Clinton and Gore, under the rubric of opposition to "dual use" forms of
alleged "weapons of mass destruction." All of this, of course, is consistent
with the neo-Confederacy Romanticism of Robert Penn Warren's and William Yandell
Elliot's Nashville Agrarian hatred against the American Whig legacy of President
Abraham Lincoln. Henry Kissinger's and Zbigniew Brzezinski's character as
protégés of Nashville Agrarian Elliot coincides with
Vice-President Gore's expressed ideological bent on such accounts.
From the founding of the U.S. republic, the American System
of political-economy, and its sundry European and other admirers and imitators,
have been, like Alexander Hamilton, Abraham Lincoln, Franklin Roosevelt, at al.,
followers of the science of physical economy as defined by Gottfried Leibniz.
Indeed, the related notions of France's King Louis XI and England's Henry VII,
in founding the modern nation-state economy on the principle of the general
welfare, or commonwealth, reflect the same commitment of all modern rational
political-economy, to the principle that the general welfare requires a constant
increase of mankind's power in and over nature, as measurable, physically, in
per-capita and per-square-kilometer terms. This increase has always depended
upon those improvements in applied technology which are derived from validatable
discoveries of universal principle.
The notion of "information," as defined axiomatically,
mathematically, by Russell devotees Norbert Wiener and John von Neumann,
excludes the existence of discoverable universal physical principles, just as
their master Russell did. "Information theory" reduces society, axiomatically,
to the administration of man by man, or, in other words, the reduction of
society to the mangement of a mass of virtual cattle by an oligarchical minority
and its attending lackeys. The mentality is that of those shipmasters who
improved the unsinkable and doomed Titanic, by reducing the number of
life-boats far below the quantity needed to accommodate the ship's passengers
and crew--a fact which is, indeed, something to remember.
Thus, the notion of economy in the mind of Al Gore, and
implicitly the doctrine adopted by President Clinton, is something out of
Tolkien's Baby-Boomer's fantasy, The Lord of the Rings. For that
doctrine, real economy does not exist, only rearrangements of the
seating-arrangements at the dining table (as long as seats are still available),
thus, as by current U.S. health policies, following Adolf Hitler's health and
welfare policies, of shortening lives deemed "unworthy to be lived." Such are
the implications of the Vice-President's statements and practices on education
and health policy--as, ostensibly, endorsed by the President, policies which
have contributed to a state of affairs under which approximately half our
current eighth-graders are virtual Yahoos, illiterates. Today, under such
influences, a majority of maturing adolescents would not be employable at
family-income-level wages, in the industries and related work-places of the
Granted, there are various hints that President Clinton does
not believe such nonsense--at least, not privately. However, publicly,
especially since mid-1996, the President has acted is if he believed he were
obliged to pretend to believe such Gore-y nonsense, that as a precondition for
outliving both his incumbency and retirement as President.
There is a simple political correlative to this delusion. Of
the upper twenty percent of today's family-income brackets, representing more
than half the total national income, at least half, probably more, are virtually
economic parasites, living off the back of the eighty percentile of the lower
income-brackets. Such types from the so-called "new suburban" class, are the
principal voter-support for the candidacies of both George W. Bush and Al Gore.
This same upper-twenty-percentile stratum, is also the hard core of what Gore
and his ally Dick Morris, like England's Tony Blair, have defined as the
"middle," those who are depended upon as likely to vote in state-wide and
national elections. This upper twenty-percentile thus represents the stratum of
"public opinion" perceived by the pollsters, and by most of the mass
entertainment and news media.
In effect, whatever the President's actual views, he has
locked himself into a public posture of basing the conclusion of his Presidency,
and his personal survival thereafter, on the prospect of benefits from the
election of sure-loser Al Gore. He has sought to secure his long-term position
in history, by a shallow, pragmatic reliance upon short-term, largely illusory
estimates of momentarily popular delusions.
Last days of Pompeii, anyone?
Once we take into account, that the existence of nations, and
most of their populations, depend upon the continuation and growth of such
physical output as infrastructure, food, and manufactured items, the failure to
base assessments of the performance of economies upon anything but the rate of
physical consumption and output, per capita and per square kilometer, is
effectively lunacy, a wild-eyed delusion.
The Day Money Vanishes
If we except the third alternative--my alternative, a New
Bretton Woods system, then we must see the U.S.A., in particular, as headed
toward the early day, when money has ceased to exist, as in 1923 Germany, or in
which only a tiny fraction of current levels has survived a crushing
deflationary depression, worse than 1929-1931. What do you do then, Little Man?
Where are all those popular opinions you expressed so lavishly until
What do you need, then, Little Man?
You need basic economic infrastructure: transportation,
power, water management, sanitation, and also schools, medical facilities, and
kindred public facilities and services. You need food, which must be produced
and delivered. You need manufactured items, physically distributed to where they
are needed. You need places of employment, especially in the production and
maintenance of basic economic infrastructure, agriculture, and manufacturing. If
you do not have these things, then, of what use is money?
If, however, we can secure the production of such required
materials and conditions, and if the physical cost of that production and
maintenance is less than what is delivered, can we not issue sufficient
currency, and lend it through banking channels, to ensure the continuation and
growth of such physical output? In other words, even if money were wiped out by
a hyperinflationary explosion, we can survive quite nicely, if the physical
conditions of infrastructure, agriculture, manufacturing, and related employment
are available. If those conditions of growth--as measured in physical terms--can
be met, then government can generate and supply the state credit, as in the form
of issues of lendable governmental currency-notes, to sustain those physical
preconditions of continued economic growth.
In light of the nature of the present global division of
labor in the production of these physical conditions of economy, it should be
obvious, that agreements on trade among nations are an essential feature of any
successful recovery effort. It should also be clear, that regional cooperation
has pre-eminent importance. Then, those facts taken into account, the crucial
added requirement, is cooperation among nations which are leading exporters of
capital forms of improved production technology, and sections of the world which
are naturally the principal medium- to long-term importers of such
To that end, we require a system of stable, relatively fixed
exchange-rates among currencies: otherwise, medium- to long-term loans are too
costly. We require, also, a system of protectionist agreements, by means of
which national industries are protected against cheap imports, and also against
the state of pauperdom to which "free trade" condemns exporting
The net result is, that the optimal form for a new global
monetary system is one modelled on the best features of the 1945-1958 Bretton
Woods relations between North America, Europe, Japan, Australia, et al. A
fixed-exchange-rate, pro-protectionist system. A more or less global monetary
facility should coordinate among regional and cross-regional partnerships, as
the case for an Asian Monetary Fund typifies such lines of
Optimal would be a system including the following keystone
elements. A continental European partnership. A trans-Eurasian system of
cooperation including Russia, China, India, Japan, and the ASEAN group. An
Ibero-American group. A Middle-East/North Africa group. A Sub-Sahara development
association. A general system of collaboration among the U.S.A., continental
Europe, a trans-Eurasia group, et al.
The sovereign member-states of the new global system would be
parties to their regional associations, and also represented in the global
system through these regional associations. That political-economic structure,
echoing the post-war intentions of President Franklin Roosevelt, should take
over the bankrupt remains of presently existing international monetary and
related institutions, and conduct both the processes of
bankruptcy-reorganization of the present world system, and the launching and
direction of the new one.
The problem to be emphasized, is the following.
When three powers of the four-power authority occupying
Germany--Thatcher's Britain, Mitterrand's France, and George Bush's
U.S.A.--acted, during 1989-1992, to impose, upon both Germany and the world, a
caricature of the Roman Empire, as a ruling, Anglo-American imperium upon the
world at large, a situation developed, over the course of the recent decade, in
which the world had wasted the great opportunity represented by the events of
1989. The good will which might have been mustered, among former "Cold War"
adversaries, the NATO powers, and the developing sector generally, has been
greatly dissipated over the course of the recent decade. The most recent folly
of the U.S. government, in pitting itself against the vital existential
interests of both Japan and continental Europe, for sake of that worthless
enterprise known as the Al Gore Presidential pre-candidacy, leaves the world no
likely option, but reliance upon developing cooperation among regional blocs as
the means for bankrupting and replacing the existing world monetary and
 Formerly, under a famous,
then-standing Utah law, a convict condemned to execution, was permitted to
choose the method by which he would be killed.
 Über die
Fortpflanzung ebener Luftwellen von endlicher Schwingungsweite, "On The
Propagation of Plane Air Waves of Finite Magnitude," Bernhard Riemanns
gesammelte Mathematische Werke, H. Weber, ed. (New York: Dover
Publications reprint, 1953).
 H.G. Wells, The Open
Conspiracy: Blueprints For A World Revolution (London: Victor Gollancz,
 Albert Gore, Jr.,
Earth in the Balance: Ecology and the Human Spirit, 2nd edition (New York: Houghton Mifflin, 2000).