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China Sci & Tech Daily Covers Interview with LaRouche on Dollar Crisis

Dec. 5, 2006 (EIRNS)—China Science and Technology Daily published LaRouche's warning of a general chain-reaction collapse of the world financial system, if the United States allows the dollar to continue its downward spiral, in its Dec. 4 issue. Science and Technology Daily is associated with the Chinese Ministry of Science and Technology, with a subscriber base of 200,000, mainly going to institutions in science, research and technology development, or with the development of science policy. The article refers to LaRouche's extensive political activity and organizations, and cites his Nov. 16 webcast.

Below is the interview as given to the China Science and Technology Daily journalist.

Q.: You warned that if U.S. dollar were devaluated for more than 30%, the America economy would go down, so would the economy in China and India, even the whole world. Would you please specify the reasons?

A.: There is a relevant conceptual problem, a problem of of scientific incompetence among most economic forecasters. They forecast like a mathematician forecasting the trajectory of a billard-ball on a table-top. Theirs is the method of mechanistic-statistical forecasting, of trajectories in Cartesian space-time.

Competent economic forecasting takes into account long-term cycles of physical-capital investments within the economy considered as a dynamic process. That is my method of forecasting, which is consistent with Riemannian methods.

Competent forecasting in today's world must take into account the lack of coherence between monetary-financial values and physical values considered independently of monetary-financial assumptions.

Thus, in the Transatlantic economy of the recent three and a half decades, the monetary-financial capital has soared at an accelerating rate, whereas, the physical values per capita and per square kilometer have been collapsing at an accelerating rate.

What has kept the world market functioning since the 1971-1972 termination of the Bretton Woods system based on the U.S. gold-reserve-denominated dollar, has been the assumption that dollar-denominated values are in some way sustained by general belief among nations and traders, that the dollar will remain negotiable over the long term in approximately current values.

If, the dollar suddenly collapses to levels about eighty percent below current estimates, the collapse of the dollar will mean a collapse of every currency holding dollar-denominated monetary-financial reserves. This would not stop at an eighty percentile collapse; that collapse would be the trigger for a global panic. In that condition, unless the specific reforms which I have outlined are promptly adopted, the entire world-trade system would go into a chain-reaction collapse to some low percentile of current levels.

Nothing can save the present form of International Monetary Fund system. It is inevitably doomed, in one way or another. It is doomed, either to disintegrae, or doomed to be replaced by a new system installed under emergency conditions.

Q.: Last month, a Japanese economist, who was interviewed by my colleague in Tokyo, said U.S. dollar crisis was approaching silently. The dollar was facing the devaluation and in the worst scenario it could collapse, which would bring a great shock to world economy, if expanding U.S.'s trading deficit and debt were not stopped or solved. What is your comment to this and at what circumstance, this terrible assumption might be a reality?

A.: This fear is a reality. Were I the President of the U.S.A., which I am not, and will almost certainly not become soon, and had I support of the leading U.S. political party in the Congress, I would be prepared to take appropriate cooperation action with some leading nations, and this could halt the collapse-process, and would lead to a new, global fixed-exchange-rate monetary system through long-term agreements, of a quarter to half century, among leading nations and groups of nations. As long as we have the current U.S. President and Vice-President, safe escape from a likely global chain-reaction collapse is not probable.

Q.: At present, U.S. government is pushing Chinese RMB (Yuan) very hard to be increased in value. How to explain this practice against your willing not to devaluate U.S. dollar and what are the impacts on both U.S. and China if RMB's value continues to climb up?

A.: While I would wish a lower rate of China's dependency on cheap exports, and more concentration on China's internal development, any devaluation of the U.S. dollar, as by increasing the relative price of the RMB, would tend to unleash a catastrophe. Unless the U.S. agrees to the kind of reform I have indicated, there are no current remedies for the crisis presently in sight.

Q.: In order to prevent U.S. dollar from devaluation too much, what must the international community do in your opinion, especially from China side?

A.: Long-term trade and investment agreements, based on physical, rather than current monetary-financial values, especially for projects in technologically progressive investments in basic economic infrastructure, are always correct steps of reform. Such steps will tend to minimize the effects of a crisis, and will provide the bench-marks for needed general agreements of reform among nations.

Q.: China now is one of countries in the world with a huge amount of U.S. dollars reserved. What are the potential risks to China? What are your suggestions for China to use effectively those dollars?

A.: Were I a citizien of China, I would emphasize the use of such monetary assets as long-term credit for technologically progressive investments in creating (physical) basic economic infrastructure, both within China, and in joint Eurasian development programs.

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