Subscribe to EIR Online
This transcript appears in the March 4, 2011 issue of Executive Intelligence Review.

The Science Behind Glass-Steagall

[PDF version of this article]

On Thursday, Feb. 10, as extraordinary events were unfolding in Egypt, the American economist and statesman Lyndon LaRouche addressed a private gathering of approximately 75 individuals, gathered in New York City.

The gathering included international representatives from Russia, China, India, Egypt, and Ireland. They were joined by a large group of leading American economists from California, New York, New Jersey, Massachusetts, and Connecticut, most of whom comprise what has been referred to as the greater Stanford Group.

Joining Mr. LaRouche was Sky Shields, the leader of his organization's science group (referred to here as the "Basement Team"). The event was moderated by Mr. LaRouche's national spokeswoman Debra Freeman.]

We begin with Mr. LaRouche's opening remarks following Freeman's introduction.

LaRouche: Okay. I should say, first of all, I have an associate of mine with me here in the studio, Sky Shields, who is the leader of the science group for our organization, because I thought perhaps that some of the international people, as well as others, would like to hear his response, when questions which might be directed to him, come up. So, he's here in the studio, and he's watching me—I suppose I need watching, or at least some people think so. So, that's it.

Now, I think the topic we ought to consider is this: We are now, actually, with the rate of hyperinflation inside the United States, and also in Europe, in particular, and in Brazil, also, we have generally, in the trans-Atlantic region, we are dominated by a rising rate of hyperinflation. There is no sign of any recovery of the U.S. economy in sight for the years ahead, as of now. And my view is, as long as this current President remains President of the United States, there is no chance for the United States to recover, and also for Europe, because if the United States goes down, then, knowing the situation in the British system and other systems, Europe will not survive a collapse of the U.S. economy. We are now actually in a hyperinflation.

There are remedies. But they are remedies which must be chosen. And that's the situation.

I know the President is telling lies, our President here; well, he's good at that, but not much else. But we are in, actually, we're on the scale of a hyperinflation, which is comparable in general mathematical terms, to what happened to Germany in 1923. The difference is, Germany, in 1923, was under attack by the Allied forces, led by Britain, and therefore, the hyperinflation, then, was essentially confined to the boundaries of the German nation. Therefore, the process of unfolding of the hyperinflation was more predictable, once it started.

Now, we're dealing with a hyperinflation of the world economy. That is to say, that outside of the Asian sector, in which there still is some progress under way, that in the trans-Atlantic sector, we're dealing with a general breakdown crisis. That is, we're dealing with a kind of hyperinflation, which is concentrating money, as counted, in pure speculation. At the same time, the amount of physical production, per capita and per square kilometer of territory, is rapidly declining, at an accelerating rate. We are already in a significant part of an accelerating hyperinflationary process, in the trans-Atlantic region. We're vulnerable to a sudden breakdown, of any significant instability of certain types.

In other words, you can not, as I have always insisted, you can not predict results in an economy. You can forecast the effects of a choice of alternative policies. But you can not predict something mathematically. You can examine what the conditions are, and determine what the likelihoods are, but the ultimate result depends upon the choice.

In the case of Germany in 1923, there was no room for choice! We now have a situation globally, where there is room for choice. But one of the choices has to come from the United States, which, at this stage, really, means this President should be thrown out of office for mental incapacity, and the 25th Amendment of the Federal Constitution provides for that, under Section 4 of the 25th Amendment of the U.S. Federal Constitution. And this man who is President, is fully qualified to be ejected from office, on the grounds of mental incapacity to serve.

As long as he remains in the position of President, and as long as the Republican Party behaves as it's behaving itself, and the Democrats continue to be as cowardly as they are, we are looking at the prospect of a general breakdown of the planet, starting in the trans-Atlantic region, which may be triggered first in Europe or in the United States; but the collapse in either Europe or the United States, will mean a complete trans-Atlantic collapse of the whole system. That means that you will have, even Asian nations, such as China and India, which are somewhat more stable and actually having some growth, in that event those nations could not withstand the effect of a collapse of the trans-Atlantic system.

As I've indicated, I have Sky Shields here—I remind you of that—because we may have some interesting questions. The nature of the questions is largely, as many people know, what I've been pushing for over the past, most of the recent months, into the year, have been pushing for the installation of a general reform called NAWAPA, the North American Water and Power Alliance. This would result in a recovery of the United States, provided we went back to a Glass-Steagall operation first.

In other words, if the United States declared the Glass-Steagall principle as operative, we would then stop the hyperinflation inside the United States. The hyperinflation is what's called the "bailout," which has actually been in progress for a longer period, but it's been explicitly the case, since the Autumn of 2008. If the bailout were reversed, and it could be reversed by simply the adoption of the Glass-Steagall Act, which was initially introduced by President Franklin Roosevelt in 1933: If that Act were installed, you would immediately cancel—cancel—several trillion dollars, or more, of absolutely worthless waste, which is on the books presently. I would estimate about $7 trillion would be eliminated from the debt of the United States, by the enactment of Glass-Steagall.

Now, as you should know, the British Empire has threatened the United States, that it will not tolerate the United States reenacting Glass-Steagall. That threat was delivered, prior to the Nov. 2 [2010] election inside the United States. And as of now, under this current President, the Glass-Steagall is blocked, and some idiots in the Congress are also committed in the same direction.

But, at the same time, we have a worsening situation, an alarming situation, which means that sheer panic may cause people to go to Glass-Steagall as a way of saving the nation, and saving the world. Because, if the United States goes down now—and it could go down in weeks or months, which, I don't know; nobody can know, because that depends upon what the decisions are, but we are in a trend-line—if this trend-line continues, the United States is going down, if Europe doesn't go down first. And if Europe or the United States goes down, you're going to have a chain-reaction effect in the trans-Atlantic region which will sink the entire planet into a dark age.

This is where we stand.

So, the situation is extremely serious. And the only remedies for this lie in reenacting Glass-Steagall, and the present commission [FCIC], investigating the history of this collapse, leads to that conclusion—that is, the evidence is clear on that.

So, if we do that, we can make it. If we don't do it, then either the collapse will occur in the United States first, or Europe first, and then the whole planet goes. And it could happen weeks from now, it could happen months from now; these things can not simply be predicted statistically. But if the mistake is made, or if these remedies are not applied, then it is going down. And if the United States continues on its present policy, under this present President, I can guarantee you, that before the year is out, the world will have gone into a breakdown crisis. So, that's the point.

Now, to indicate what the remedies are, go back to the Glass-Steagall question, and also to the NAWAPA program. The states of the United States—and our system in the United States is different than any European system; the Constitution is different. Europe in no case—you've had periods where Germany for example, would go in this direction, other states would go in the direction of the United States model. But if the United States goes under—it's the only system which could actually spark a general recovery in any part of the world. First of all, under our laws, under Glass-Steagall, we would cancel 7 or more trillion dollars of debt officially on the books of the United States, now.

The cancellation of that debt would enable the United States, under its policy, to utter new credit, by going to a credit system, not a monetary system—new credit which would enable us to, first of all, save the states of the United States. Every state of the United States is now either hopelessly bankrupt, or on the verge of going into bankruptcy. The whole nation is bankrupt! The rate of increase of unemployment is accelerating. The conditions of life in the states, elementary conditions, are being ruined. And in the meantime, the President, and the idiots who support him, are pushing, again, more and more hyperinflation!

So, it's a short fuse.

But, with Glass-Steagall installed, we could immediately resuscitate the stability of the several states of the United States. Federal credit, as credit, could be uttered, under our laws, under our Constitution, immediately, to pull these states out of destruction!

NAWAPA Would Change the Planet

But we would then need a major project, to reverse the post-industrial trend in the U.S. economy. That would be done. NAWAPA would do it. Now, Canada in the past, is not too supportive of the idea of NAWAPA. But now, they face a situation, where they don't have any choice. It's either they adopt NAWAPA, if the United States offers it, or they die! They have no alternative. And it is beneficial to them, so there's no cheating of them in NAWAPA.

This project would change the planet. This project would mean a change in, instead of using existing resources on the planet, we would organizing a system which would, by increasing the power and water flowing through the U.S. system, would generate a revolution, not only in the United States, but elsewhere.

For example, the development of NAWAPA would mean the Bering Strait Tunnel, between Alaska and Siberia. The development of that tunnel would mean opening up parts of Siberia, in Russia, which have valuable mineral resources within them. And under a credit system, Russia would be able to have the credit, to open up those facilities. These facilities are necessary for China, in particular, and also for India and other Asian countries, because you have large populations like China and India, who are short of essential raw materials.

There is, in the northern part of Eurasia, there are essential raw materials there! The Russia science, or the Vernadsky tradition, is capable, with financing to do it—is capable of opening up the opportunities for development of raw materials, mineral forms, which are essential for the future of China, India, and other countries of Asia; which would be a stimulation immediately, for South Korea, for Japan, and for other countries in Asia.

Now, this would mean a new system.

Then, you go to the other side of the thing: The same concept means—let's take Africa, or let's take Egypt, right now: Egypt has been suppressed in its potential, since the collapse of the program for Egypt in 1982, which the United States and Britain collapsed! At that point, Egypt had a bold, imaginative, and capable program, for development of its economy. Since 1982, at the time that, under pressure from Henry Kissinger and others, Egypt backed off from this policy, the quality of Egypt's life has deteriorated.

Now, we take Egypt together, and give it a chance to get back on its feet, with these kinds of programs. And then, you look at Eritrea, you look at Ethiopia, you look at Sudan, and the adjoining territory of Chad, which is a very interesting territory, a very poor country with a very interesting potential, as the so-called Transaqua policy project indicates. We can then, on the basis of this kind of thing, with the development of railway systems, new kinds of railway systems, we can open up the development of Africa.

We can actually connect every part of this planet, by rail line, or something superior to rail, landlines, with means like an evacuated tube, up to 1,000 miles an hour—that's what the potential is. It's a little bit over the horizon, but it's a known potential right now. This means we can connect Eurasia, and Africa, and the Americas, in a continuous land-based system of transport for development. The Darién Gap between South and North America is a connecting point.

So these are the options before us. They require a recognition, that we have to get out of what is called a monetary system.

Now, the United States' Constitution, which is unique in its concept, unlike the imperialist relics which still run Europe—the monetary systems, the monetarist systems which dominate Europe, and Asia, and Africa, today—the U.S. credit system is based, not on trying to assess a value on money, of a monetary asset, but is assessed on the basis of the physical improvement, per capita and per square kilometer of territory, of a nation. So the nation utters credit, based on its scientific confidence, that a certain kind of project, undertaken by the United States, will actually more than pay for itself, if it's given a certain estimated time to do that job.

We can extend this principle, through the cooperation with nations which are now hanging on the verge of bankruptcy. We can extend that, through cooperation among sovereign nation-states, to create a fixed-exchange-rate system, a fixed-exchange-rate credit-system, by which we can wipe out the worthless debts, the pure monetarist debts of the world; organize the world on a fixed-exchange-rate credit-system, which is actually what Roosevelt's intention was for the post-war period, before Truman came along, and in that way, we have a chance to go ahead, not only to recover what we have lost in recent years—we have the chance to take mankind to heights that mankind has never dreamed of before!

These are practical considerations now. This can be done. We're on the verge of doing it. Give us 20 years—we'll change the planet. We can bring justice to every continent on this planet, even the ones that are not connected, like Australia and New Zealand. We can do it! And that should be our mission.

But to do that, means we've got to change some of the rules of behavior. We've got to put the world out of the present monetary system, because the monetary system of Europe is just as bankrupt, as that of the United States! Europe will never recover, without cancelling the present monetarist system. Europe can only recover under a credit system.

Take the case of Germany in the post-war period, when [Hermann] Abs was leading in the reconstruction of Germany. Germany was operating on a credit system—the so-called "German miracle" of the immediate decade and a half of the post-war period was on a credit system, modeled upon the U.S. credit system.

So if we can go back to Franklin Roosevelt, and reach agreement on establishing an international credit system, as a fixed-exchange-rate credit system, on a global basis, among sovereign nation-states, we have the means to revive science. It's going to take time, because we killed a lot of the science over the past 30, 40 years. But if we go back to a dedication to revive a science-driver approach to humanity, we can solve these problems before us. And in the meantime, once we start down that road, we're on the road to security, and the threat of a crash of the world system, comes to an end.

And part of the work we're doing, which is why I brought Sky in today, to have him available—Debra knows what the score is on that!—because he's involved, first-hand, on teams of scientific workers who are engaged in much of this kind of work to which I've referred today.

So, back to you, Debbie.

Back to top