Failures Of 1989 part II
What happened, therefore, in 1989—at a point where I, in 1988, had proposed here in Berlin, the imminent collapse of the Soviet system, and the imminent reunification of Germany, and the imminent designation of Berlin to be again the capital of Germany, and had proposed a system of cooperation to take up the slack left by the bankruptcy of the Comecon system, for a general Eurasian revival of economy based on new ideas in cooperation, based around things like food, transportation, and so forth—that was not done. That was proposed by the last effective banker of Germany, Alfred Herrhausen, who had intended to make that proposal to a New York conference which he planned to address but could not, because he was assassinated in the meantime. Since that time, there has been no policy, generally, in the United States, or Europe, in that direction.
What happened was: Under the initiative of the British and with the support of Mitterrand and the consent of Bush, it was agreed (under Bush's pressure, acting under pressure from the U.S. ambassador to Germany, Vernon Walters; Vernon Walters said to Bush in effect, don't be an idiot, let Germany be reunified, otherwise you'll cause a crisis). So, Germany was reunified, with the consent of President Bush, despite the strong objections and hatred of Germany by Margaret Thatcher and by François Mitterrand. But, the conditions that were imposed upon not only Germany, but on relations of Germany with other countries, such as those of Eastern Europe and Russia, was such as to ensure, not the great economic revival which could have occurred at that point, but instead, a vast destruction of resources, such that—apart from the improvements in some of the public infrastructure, entertainment centers, housing, and more freedom in the eastern part of Germany—there has been no significant gain, economically, by the populations of the former Comecon sector to this date. In general, it has been a ruinous state, far worse than these people had experienced under the Soviet rule, at the concluding phase.
So we have entered the phase 1989-91 of the Thatcher-Mitterrand-Bush-dictated conditions upon continental Eurasia, terms dictated in order to establish and consolidate an Anglo-American world empire of a form called globalization. The elimination of the nation-state as an institution, and its replacement by global institutions controlled through financier syndicates which would loot the world according to their pleasure.
Now we have come to the point that that system, that post-1989 globalized system, as an aggravation of the disease called the floating exchange-rate system, has now combined its effects to bring the entire world to a point of disaster.
System That Worked Was Abandoned
Obviously to us, the first reaction must be, looking at this period as a whole, the past three centuries, or more, of European-Eurasian history, looking more narrowly at the picture of the 20th-Century disaster—this geopolitical disaster called World War I and its succession, World War II, and other geopolitical disasters orchestrated in the same way: We must say, that in the more recent period, since 1945, what we had for the first 15 years following the close of war was a fixed exchange-rate system, which worked, with all its shortcomings, and errors, and follies. [But rather than maintain] ... that system, in the middle of the 1960s, we replaced it with what became, in 1971, the floating exchange-rate system: which was based not on economic interest—not the economic interest of the nations, that is, the physical-economic interest of the nations—but rather, on a financier interest, which said, "We come first, and you get the leftovers that drop from the table, if there are any."
This system underwent a series of changes—successive changes. The worst was under President Carter—deregulation, which caused more damage to the U.S. economy in four years, than all Presidencies since. Then we had globalization; in 1989-91, began the process of globalization, which accelerated this process.
We have now come to the point that the floating exchange-rate system, the globalized system, is finished. Any attempt to provide a solution, remedies, improvements, reforms, in the system, which does not go back to 1965 and earlier, to reverse most of the leading policy changes introduced by governments and international institutions in that period, would be a catastrophic mistake, would ensure disaster.
The key to this problem is twofold. First of all, we have a very simple problem. We have a bankruptcy of a financial system. The financial system is hopelessly bankrupt. There is no reform, no negotiation, which can keep the values, the present financial values outstanding, intact. There must be a consent to a general reduction, of a very large percentile of most of what are considered financial assets today: stock-market values, financial claims, mortgage claims, and so forth. Simply to forget them, because they could never be paid under the present system.
Is it not fraud, to take credit from governments and others, to try to continue a bankrupt investment, in shareholder values which are not collectible? Is it not a fraud, to pretend that Argentina can be bailed out, by saving the present obligations imposed upon Argentina? Is this not true in other parts of the world? These are hopelessly bankrupt situations. You have to decide whether you are going to try to pretend to save the system, which you can't, because you can not get milk by killing the cow. The cow must be fed, otherwise it doesn't produce milk. You kill the cow: no more milk from that cow. Therefore, you can not kill the cows, called the nations that produce the milk, on which these financial interests depend.
Therefore, we are in a state, where the financial system is bankrupt. Therefore, governments must declare the financial system bankrupt, and use the sovereign authority of governments, individually and as combinations of sovereign entities, to reorganize the system in bankruptcy. It's what we did at the end of World War II. We reorganized the world in bankruptcy. The United States had the power to do it, and therefore, we did it. And we've now come to the point where we have to do it again
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No Economy Without The Nation-State
But, there's a second aspect to this, apart from cancelling the accounting system, and starting a new one, based on the best precedents from the past. The second thing is: We must understand the significance of the sovereign nation-state. The greatest danger to Europe and other parts of the world now, is the destruction of the sovereign nation-state. The greatest danger to any economy. No economy can work in Eurasia, unless it is based on a sovereign nation-state, as the sovereign authority over its national credit, over its banking system, and over its trade policies.
Why?
The function of the nation-state has been twofold: The nation-state, which was first founded in France, and then later in England—in France under Louis XI, and in England under Henry VII—was the first form of society which established modern society: a state which was absolutely sovereign, and which was not controlled by some interest, such as a feudal interest, or financier interest, but a state which was accountable to what was called the general welfare, or common good of the entire people. Therefore, the state became a personality, embodying the personality of the nation. And, as a personality, was responsible to the entirety of the population, to its past heritage, and to its future opportunities, to that people. It must serve the common good. It must promote the general welfare.
This kind of state, which is sovereign, had the power to create credit, as Louis XI did, in a limited way, in France. To create credit, public credit, against what? Not against existing money. Not against existing physical assets, but against future assets, yet to be created. Public credit. This public credit must be created with foresight into the general welfare. You can not create credit without anticipating the production of wealth, which will secure the credit issued as debt. Only the nation-state can do that.
For example, in the case of the United States Constitution: What we do under the Federal Reserve System is totally unconstitutional. The Constitutional provision has never been repealed, and therefore, the Federal Reserve System is an outlaw; it's illegal, under Constitutional law. The provision of the U.S. Constitution is, that the only person, that can issue money is the President of the United States, through the Treasury, with the consent of Congress. That the issuance—the power to create money, of the state, becomes the basis for national banking. So, state credit is used to provide the margin of increase over private credit resources, to insure a general growth for national purposes.
Now, in the case, now of Europe, of the United States, of Russia, and elsewhere: There's no possibility that on the basis of the present flows of production, that Europe could survive. Europe is now producing below breakeven. If the infrastructure, which is being used up, were to be maintained, if the essential industries which we depend upon today were allowed to be decayed, were not maintained, if the maintenance of the general infrastructure were not extended, there's not a possibility that Germany, France, Italy, etc., could survive as economies. The money does not exist, in the form of money-capital, to bring these economies out of this desperate, hopeless state. Only the nation-state can create credit, and apply that credit to such uses as large-scale needed infrastructure, and to other special projects, to extension of credit, on the long-term to medium-term trade, to former customers, or future customers, such as China, India, Russia, and so forth. This is the only hope for Western Europe.
For example, Germany today: Its only future lies, in terms of trade, on the trade relations which are improving with China and Russia. In every other part of the world, Germany is going down, in losing its markets. This will increase. This is the condition of all of Europe; of Italy, of France, so forth. The markets in Eastern Europe and Asia are the primary hope of survival, and even continued existence of these European nations. These nations are not rich nations. They're poor nations, which desperately need technology to enable the poorest part of their population to raise their standard of productivity in the future. This is to speak of 25-year investments, or 10-year investments, and corresponding amounts of credit.
Put The System Into Bankruptcy
Therefore, somebody must create the credit on long term, credit secured by states, and by agreements among states, and used according to policies among states, to create a secure line of credit, of public credit, at between 1 and 2% simple-interest lending rate, over periods of up to a quarter of a century, or a generation. Under those conditions, using the lessons we should have learned from the post-war reconstruction in the Americas and Europe, in particular, from 1945 to the middle of the 1960s, we could do well! The opportunities in Eurasia are tremendous. The market potential on a 25-year future prospect is tremendous. The building of railroads, of new types of railroads, of transportation systems, of power systems, of transforming an area which contains some of the richest supply of mineral natural resouces in the world, in Central and North Asia. These are areas that can be productively developed for the benefit of Eurasia as a whole. These are the future markets. This is where the future lies!
Only by changing the system, to put the present system into financial bankruptcy, to reestablish the principle of the sovereign nation-state, to reestablish the principle of scientific and technological progress, and to create systems of credit and finance, looking a generation ahead, backed by nation-to-nation state agreements, to make this work, in creating mass employment, to absorb the mass unemployment growing today, in productive ways. To create thus, around this, the concept of doing this, as a new system, and use accounting, and use money, not as an absolute standard for the economy, but as a tool, to assist in the administration and conduct of private relations among entities within the economy.
That change in system, that change in thinking about mankind and systems, is the key to the future. Therefore, we must stop thinking about how to fix a financial system in terms acceptable to that financial system. We must stop thinking about globalization. We must reverse globalization immediately, as a price of survival. You don't want to reverse globalization? Then, tell me when you intend to die! Because, with globalization, you will die. Nations will die, and people within them. It must be reversed, back to a nation-state.
So, think of the world in terms of systems, long-term systems, based on axiomatic qualities of assumptions by peoples and governments, respecting their internal affairs, and their relations. Return to a physical standard of performance. The welfare of the individual personality, the future of those personalities' children, the future of that nation, in those terms. That is what the best that modern European civilization has produced as a standard. Return to it, and take the freak-shows which have dominated the world for more than a century, since 1901, since the assassination of McKinley, and put these things aside, and say: These were mistakes. These ideas were mistakes. We must learn the lessons of history, and design now, with the governments we have (which are not too good, I admit), with the people we have, who are not well-educated; with all those other things—we must survive. Our children and grandchildren must survive. Our nations must survive. Put that foremost.
You learn the lessons of history, of centuries. The human race has probably been on this planet for 2 million years, or more. We know a little bit about prehistoric existence in crucial things. We have known much about the historical period; not enough, but much. Learn to think of humanity as something very ancient in its origin, and think of humanity in what we hope will be a much longer future than an antiquity. Think in terms of history! Look at what we're doing today as a system, from the standpoint of historical criticism. That's what we need to do. All the other criticism doesn't amount to anything, because it does not address the problem. |
