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Now Is the Time for a New Bretton Woods, not More Purely Monetary Manipulation

Aug. 22, 2019 (EIRNS)—The Jackson Hole proceedings involving central bankers and investors sponsored by the Kansas City Federal Reserve District begin Aug. 22 and will run through Aug. 24, with Fed Chairman Jerome Powell scheduled to speak tomorrow. The race is on between purely monetarist solutions to the oncoming financial crisis, and the late Lyndon LaRouche’s proposal for a New Bretton Woods monetary regime, channeling credit to infrastructure and other capital-intensive projects with collaborative investments on the frontiers of science and technological transformation embodied in fusion energy and the exploration of space.

The monetarist solution under conditions of collapse can only end in austere command economies, functioning pursuant to ideological myths, such as those of Hitler and Mussolini and the Green regimes presently being proposed worldwide, a fact admitted by the king of modern monetarist theory, Abba Lerner, in his debate with Lyndon LaRouche in December 1971. LaRouche alone predicted the collapse of the Bretton Woods system in August 1971 and a collapse into fascist systems if monetarist solutions were allowed to prevail.

The negative interest rates imposed in the wake of the 2008 collapse by Sweden, the ECB, Switzerland, and Japan were aimed, it is claimed, at heading off deflationary collapse while stimulating inflation. The stimulus regime ostensibly would force lending by banks and encourage citizens to spend money rather than hoard it. Additionally, it would alleviate speculative pressures on national currencies.

Lawfully, these policies have only resulted in recreating the gigantic bubble which collapsed in 2008, as banks, hedge funds, and speculators used the easy money regime for stock buybacks, corporate debt, and interest rate speculation in derivatives. They are creating a new housing bubble. Most of these geniuses do not know how a productive economy works; others have consciously worked to create precisely the mess we now face. Germany’s offer of a 30-year bond with a below-zero coupon spectacularly flopped at auction Aug. 21. The reason why these schemes end in disaster is because they are based, ultimately, on the idea that humans are beasts and, accordingly, behave in terms of fixed patterns of behavior, which can be manipulated based on a calculus of pain and pleasure. The sociology of money behaviors is the most studied of all.

The countries which implemented easy money policies are now said to be hooked on them, as speculation drains all economic activity away from production. A rise in interest rates would, potentially, provoke a crash under these conditions. This is the context for the Standing Emergency Fiscal Facility (SEFF) proposed by BlackRock’s Philipp Hildebrand, the former Swiss National Bank president and current BlackRock vice-chair heading the BlackRock Investment Institute; Stanley Fischer, former Federal Reserve vice chairman and former Bank of Israel governor; and Jean Boivin, former Bank of Canada deputy governor, and aimed as an emergency measure for discussion at Jackson Hole. SEFF is a scheme for central banks to print large issues of money and directly hand them to government treasuries for use in “creating inflation.”

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