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LaRouche Warns of Imminent Hyperinflationary Blowout

Jan. 22, 2008 (EIRNS)—This release was issued today by the Lyndon LaRouche Political Action Committee (LPAC).

The fevered efforts to save the financial system, typified by today's panicked three-quarter-point interest rate cut by the Federal Reserve and the Bush/Paulson stimulus plan not only will not work, but will backfire spectacularly, and soon, economist Lyndon LaRouche warned today. The financial system is dead, and any attempt to save the fictitious values of the trillions of dollars of worthless financial paper will not only fail, but will destroy any nation foolish enough to attempt to do so, LaRouche said.

The global financial system, emphatically including the United States, is entering a period comparable to that of Weimar Germany in the Autumn of 1923, but on a far larger scale. Whereas the damage from the runaway hyperinflation in Weimar Germany was largely restricted to Germany itself, the current crisis is global in scale. No national system will survive its effects, and the nations might not even survive the present year, he warned.

Under the Versailles Treaty ratified at the end of World War I, Germany was hit with war-reparation payments so high as to make it impossible for the nation to function. To meet its obligations, Germany began printing money, funding its reparations payments and the needs of its economy at the cost of debasing its currency. The monetary stimulation soared to such unprecedented heights that the term hyperinflation was coined to distinguish its debilitating horror.

As the German economy began to shut down, the government responded by printing more money as a stimulus, and the value of the Reichsmark began to plummet. During the 1913-1915 period the Reichsmark was in the range of four to the dollar, rising to some six to the dollar in 1917 and 1918. The situation began to deteriorate badly thereafter, from 20 Reichsmarks to the dollar in 1919, to 63 Reichsmarks in 1920, and 105 Reichsmarks in 1921. Then the bottom fell out, jumping to 1,886 Reichsmarks in 1922 and an astounding 535 billion Reichsmarks to the dollar in 1923. During that same period the cost of living index soared, from 100 in 1913 to 1,019 in 1920, and a staggering 657 billion on Nov. 23, 1923, according to the German Statistical Office.

The world is now approaching a Weimar-style hyper-inflationary collapse, for similar reasons. The actions of the Federal Reserve and the European Central Bank, as well as other central banks and the governments themselves, their determination to try to stimulate the dead corpse of this financial system back to life, their blind refusal to recognize the truth, is the making of a classical tragedy. Gripped by fear, these modern-day Hamlets are choosing to destroy all they hold dear, rather than break with their belief in failed monetary policies.

The nations of Europe, under the sovereignty-killing Maastricht treaty agreements, have abandoned their capabilities to react to this crisis, so it falls to the United States, under the powers and responsibilities vested in it by the Constitution, to lead the rescue of not only itself, but the world as a whole. Rather than continuing the foolish attempts to stimulate the corpse, the United States Government must use its sovereign powers to put its own financial system through bankruptcy proceedings, setting a precedent and providing the context in which other nations can act. The crucial first step is the passage of LaRouche's Homeowners and Bank Protection Act, which will erect the fire-walls necessary to protect the public and essential aspects of economic infrastructure to keep the economy functioning as the damage is sorted out.

Lyndon LaRouche and his political action committee will have more to say on this vital issue in the coming days, as the scope of the disaster now engulfing the nation begins to sink in to the public's consciousness.