On the Edge of October;
The Fuse Is Already Lit
by John Hoefle
Sept. 25—As of this writing, we are just days away from the end of the Federal fiscal year, the point at which the U.S. Federal government, must attempt to settle its accounts. That will be difficult. The Federal government is hopelessly bankrupt, having destroyed the nation through deregulation, a deregulation which opened the door to the greatest looting and pillaging the world has ever seen. What's more, that looting and pillaging has already bankrupted 49 of our 50 states, and bankrupted countless cities, counties, and other local governments, as well as a large swath of the population. Our nation, once the most productive industrial power in the world, has been reduced to a shadow, run by financier parasites with neither the slightest clue about how economies actually function, nor the slightest interest in the welfare of the citizenry.
It took us four decades to get to this point. We stand on the edge of the cliff, peering down into the abyss, poised to take a fatal step forward.
Globalization Has Failed
Nothing has been resolved. The great bailout—the biggest swindle in history—is said to have saved the day, when in fact it has only made matters worse.
Our economic problem is two-fold: We have destroyed the economic productivity that generates our wealth, and we have substituted for it the creation of history's largest debt, a debt so vast that the mere thought of paying it all back is absurd.
The mechanism which made this possible was globalization. And globalization is really just a polite name for empire. What we have really done, is to betray the principles upon which the United States was founded, and turn our nation into a financial playground for the Brutish Empire. The U.S. became the world's leading consumer, the buyer of products produced all over the world—including many that we used to produce domestically—and in the process helped create a group of corporate cartels which now control the necessities of life for nations across the globe. To pay for our purchases, we went into debt. And to fund that debt, the Brutish Empire created a giant debt machine, based upon a dizzying array of derivative securities. Debts were magically turned into assets, and sold everywhere. It was a sight to behold, and it grew unimaginably large, before it collapsed.
But collapse it did, because under its gleaming facade, it was really a looting machine, a pyramid scheme which made its controllers and operatives seemingly rich beyond measure, by looting the rest of us.
The proper response to the collapse of this perverse system would have been a sigh of relief, and commitment to repair the damage it had done. Instead, our so-called leaders rushed to bail out the criminals, at the expense of the victims. They took a horrible situation, and made it far worse.
Debt Reckoning
The fools tried to solve a debt crisis by creating more debt: huge, hyperinflationary amounts of debt, which they pumped into a dead system and its zombie banks. In doing so, they laid waste to much of what was left of the underlying economy. Households were thrown into turmoil as jobs were lost, access to credit curtailed, and the safety net which people thought would protect them was ripped to shreds. The faster the debt grew, the faster the capability of the economy to repay that debt shrank.
Now comes Sept. 30, the end of the fiscal year, to a nation choking on its own debt. Some of this debt is legitimate, tied to real physical-economic activity, but most of it is bogus, the result of gambling in the empire's derivatives casino. And it is the bogus debt, the fictitious claims of the casino, that our government is protecting, while letting the rest of the economy collapse. It is any wonder that the nation is bankrupt?
Lyndon LaRouche recently compared this to playing with "nitroglycerine on a hot day. Because, the day that somebody decides that that fictitious debt may never be paid, and that the guy next to them may not believe it's worth buying, you have a far different condition."
The value of the derivatives and related instruments is based upon what financiers call the "greater fool theory," which says, in essence, that there will always be some fool out there willing to pay you more than the paper you sell them is worth. As it turns out, they were the greater fools, holding worthless paper after the game stopped.
Thus our commercial banks, our investment banks, our insurance companies, our mutual and money market funds, our pension funds, ad infinitum, are stuck with staggering amounts of worthless junk, still carried on their books at high values. They had counted on the bailout process to restart the markets so that they could unload their crap on the greater fools, but it never happened. A few institutions favored by the empire have been saved, for now, but the rest have been left hanging out to dry.
Reality Bites
As we enter the new fiscal year, the claim of the government is that the bailout has worked, the recovery has arrived, and that we must now turn our attention to putting our nation in fiscal order. The bailout mechanisms are being wound down as no longer needed, we are told.
This is pablum for the masses, the claims of "all is well" designed to lull them back to sleep. However, the insiders all know it is a lie. They say so openly, if in more discreet language. That is clear from the "leaders" assembled in Pittsburgh for the G-20 meeting this week: Their main message is, don't stop the bailout!
Think about this from the position of a speculator on Wall Street, or in the City of London, or anywhere else in the world, who is sitting on a pile of this worthless paper. Without a buyer it has no value, and the only buyer in sight, the governments, are talking about scaling back. If you're not panicked, you're not paying attention.
The whole system is ready to blow up. The collapse of the economy means legitimate debts won't be paid, and there are no buyers for the toxic waste. The fuse has been lit, and the explosion is imminent. It is a question of when, not if.
Glass-Steagall
The only solution at this point, LaRouche says, would be the immediate re-enactment of the Glass-Steagall law on Sept. 29, to stabilize and protect the commercial banks.
Otherwise, LaRouche said, you go into a new phase of the collapse, a different phase-space where the state of affairs is different, even if the numbers look the same. He compared this to "a man whose pulse is still functioning and he's breathing, but he is in the process of dying. Therefore, his pulse reading, as such, and his breathing are not the decisive thing. It's what underlies it. It's the condition which is going to threaten his pulse and his breathing, which is what's important. And that's the comparison here."
People who are waiting for "something to go wrong" have missed the point. That something has already happened. The financial system has entered its death phase, and its final gasp is imminent. It's a dynamic process, not a chronology—causes and effects playing out in ways that are often not immediately visible.
The "cause" has already occurred, and the effect is coming, relentlessly. The debts cannot be paid. And as that scary reality dawns on the toxic waste holders, panic will set in. The runs will begin, as the parasites race each other to cash out. There will be no safe haven, as the world as we know it disintegrates in a chain-reaction collapse.
The empire is pushing austerity, letting people die to save itself. Saner heads must prevail, and quickly.
