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This article appears in the January 5, 2007 issue of Executive Intelligence Review.

A Narrow Band of Decision

by Lyndon H. LaRouche, Jr.

December 15, 2006

So far, the prevailing mood in the U.S. Congress is a grimly hysterical, Chamberlainesque mood of wishful confidence, the wish-driven obsession with the hope that no great financial collapse will actually happen "in our time."

Since economic processes are reflections of human voluntary choices of actions, or inactions, the exact timing of the onrushing threat of a global, general breakdown-crisis of the present world monetary-financial system is not to be found in the statistical sediment of any Cartesian tea-cup. Nonetheless, the characteristic of any current form of global monetary-financial system predetermines the destiny of that system; delays which do not radically change the axiomatic rules of the existing system, may delay the onset of the crash slightly, but only by making the slightly postponed crash more deadly, less susceptible of correction, than had the systemic issues been faced earlier.

There are cures for this onrushing collapse. The problem is, that time is running out for that opportunity. We must act soon, as President Franklin Roosevelt would have acted, or our ability to act, our ability to launch a recovery would be taken out of our hands.

The current state of the U.S.A.'s mortgage-based securities crisis illustrates the point.

  1. The market for growth of the accumulation of new volumes of mortgages has been in a state of collapse for months. This is true not only in the U.S.A., England, and Spain, but is a radiating global trend within the present world system as a whole.

  2. Nonetheless, the pressure to bring new mortgaged properties on line for sale is growing, since this is the only way in which the chains of stages of investment, between "beginning a development" to the bail-out of the investors by the creation of permanent owners' mortgages, can be brought off. This is the present threatening the U.S. banking system already rotted-out by a massive margin of excess real-estate paper in the banking system as a whole. Given the general state of the monetary-financial system as a whole, this state of affairs means increasingly strong "bearish" pressures through the later phases of the relevant investment cycle; the trend is toward an accelerating rate of decline of nominal values of mortgaged real-estate properties.

  3. This situation is complicated by recent years' increase of the ration of absolutely freakish varieties of mortgage-agreements within the system. Thus, as the market descends, that descent intersects the point at which nominal home-owners and the like have less than zero-equity in those holdings.

  4. One of the recently significant trends which have emerged, quite logically, amid this general financial mess, is the hysterical nominal home-owner who must sell to gain a slight margin of equity out of the sale of housing in a declining level of market-price of properties. The poor fellow, like the old Boston Braves baseball team of yore ("Spahn, Sain, and pray for rain"), keeps his for-sale house off the market, in desperate hope that he might receive a better offer "in case the market should turn up"; in the meantime, his net equity plunges toward somewhere below zero, while the level of actual collapse, and of rate of collapse of the market, by statistical reports which overlook this not-really-hidden, soaring mortage-bubble within the general mortgage-bubble.

In the U.S.A., for example, former Federal Reserve Chairman Alan Greenspan's Fountainhead of speculation in mortgage-based securities, a trick he used in his attempt to hide the actual net performance failure of his post-1987 Federal Reserve policies, became a drug on the market. The drug, like Colombian cocaine or Afghanistan's opium, makes some people rich, by destroying the economic productivity of the population of consumers of the stuff, and thus pushing the economy as a whole more and more toward long-time ruin. The ration of the total Greenspan bubble dependent upon the real-estate speculation promoted through channels such as "Y2K" and Fannie Mae, created the present situation, in which the onrushing collapse of the mortgage-based-securities system has become a major threat of collapse of the entire present world system as a whole.

That case of mortgage-based real-estate speculation, is only an important, typical example of the reasons why a general collapse of the entire world monetary-financial system, is headed toward a general physical-economic, as well as financial collapse, during the early future. The result is the all too typical member of Congress, or others, who says: "But, the Wall Street market is up!" just as many like those gripped by the current epidemic of gambling manias, said on the verge of the 1929 collapse, against which wiser minds had warned.

Out of the Past

Read an illustrative page from my past. During 1957 I spent the better part of a week in Havana, Cuba, in the company of another consulting executive visiting to advise the Banco de Fomento on the matter of physical capital improvement of Cuba's shoe manufacturing industry. The doom of the Batista regime was written everywhere, even in Havana itself. The moral rot was beyond belief. My concern was to promote action to save the relevant industry of Cuba, on the assumption that Cuba would exist as a U.S. neighbor once Batista were soon gone. My problem was to help the industry gain needed capital improvements, without letting Batista's gang simply steal any financial capital provided for the intended purpose.

To sense the situation, I walked around the core of the city, and included a part of an evening observing the behavior at Clark's gambling operations. I also visited the Copacabana, where I studied mature, bejeweled senior ladies in "basic black," helped to a position facing a one-armed bandit by liveried men, a lady who suddenly sprang into action, like a leopard at its prey, on that one-armed bandit. Such energy, the woman showed. The speed with which she attacked the machine, repeatedly, was astonishing in a person of her apparent age.

When I recall that experience there, then, I think of many of the elected officials of our political parties in a U.S. economy and political system, both steeped in an orgy of gambling psychosis, a gambling mania, called "the market," reigning where our farms and industries once stood.

Today, I recall my published general warning to the citizens of Virginia's Loudoun County. I warned against what was being called "development" even then. Without farms and industries to provide the generation of real income within the county, speculative real-estate speculation would create a terrible financial-economic catastrope for the county and its inhabitants. Without emphasis on basic economic infrastructure, including a restoration of an efficient commuter transport system, and build-up of nuclear power, agriculture and industry could not thrive. Speculative "development" would leave the county at the point of becoming a hopelessly bankrupt hulk, at some point during the generation just ahead.

We have reached that shore today.

They call it a "real estate" boom. I call it gambling mania, lacking only those floating bordellos called gamblers' riverboats, sliding along the Potomac.

Problems of this type can be fixed. President Franklin Roosevelt set a precedent for the kinds of remedies needed, again, today.

'The Prospect Before Us'

With rare exceptions, the bankers who knew how to organize a successful form of economy are nearly all gone, for reasons of age, today. The generation of senior political and economic leaders in the U.S.A., for example, today, is limited to those who are willing to recognize two facts. First, that every change in U.S.A. policies since about 1967 was a crucially contributing cause for the economic disasters of the U.S.A., the American Hemisphere, and western and central Europe today. Second, that by going back to rebuilding the infrastructural basis for a return from the awfully failed, so-called "post-industrial paradise," to a capital-intensive, high-technology-driven agro-industrial, infrastructural basis, and adding "crash program" emphasis on nuclear and thermonuclear-fusion technologies, we can proceed, Franklin Roosevelt-style, to build the healthy economy of tomorrow.

The crucial obstacle in the pathway of such now desperately needed changes in direction of policy-shaping, is induced habits of the type associated, principally, with the "68er" variety of "white collar" generation. For them, their "68er" and related cultural legacy, provides the Cartesian-like set of definitions, axioms, and postulates upon which their ideological way of thinking is grounded. Concerned strata of this "White Collar Baby-Boomer" generation, are willing to introduce humane reforms, but they remain unwilling to overturn the "definitions, axioms, and postulates" of what they "feel" to be the work of their generation.

Because this stratum operates on that generational set of "definitions, axioms, and postulates," they have neither the knowledge, nor desire for any actual comprehension of the way in which a successful economic process has actually worked in the past. Only their active perception of imminent doom would open their minds to the real options available for halting a global collapse at this time.

There is nothing as urgent today, as getting across that point which I have just made. Our nation, and the world besides, has a very, very narrow band of options open to us to escaping the onrushing threat of a global new dark age of all humanity. The needed options exist, but those options will not save us, unless those options are both recognzed, and then, rather promptly, adopted.

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