Russian Government Paper Quotes LaRouche On What Was Wrong With Floating-Rate System
Sept. 15, 2008 (EIRNS)In tomorrow's issue of RG-Biznes, the economics supplement to the Russian government daily Rossiyskaya Gazeta, financial journalists Alexei Chichkin and Yevgeni Vasilchuk quote American economist Lyndon LaRouche at length, regarding what was wrong with the post-1971 floating exchange rate monetary system, which is now kaput. Their article, "Attack on the Currency Colossus: Russia and the World Attempt to Lessen Their Dependence on the U.S. Fed's Policies and the Exchange Rate of the Dollar," deals with the urgent need, especially for raw materials-exporting countries like Russia, for a monetary system that protects each country's sovereignty over its own economy. The publication is yet another sign of Russia's potential positive response to any U.S. economic and financial policy overture that were based on the traditions of the American System and Franklin Delano Roosevelt's anti-colonial policies, as framed for our day by LaRouche with his four powers proposal for the United States, Russia, China and India to form the initiating committee of a new monetary system of sovereign nation-states.
Chichkin and Vasilchuk summarize how the current world financial crisis threatens every country's markets and economy, noting especially the link between the volatility of the dollar, and world commodities prices. "Raw materials-exporting countries are in the most vulnerable position," they write, "since world prices for most types of raw materials are quoted in U.S. dollars. World raw materials prices depend, to an ever greater extent, less on supply and demand, and more on Fed policy and world financial, stock, and raw materials markets speculation." It is worth noting, they add, that it was dollar/raw materials speculation, and the collapse of most world market prices for raw materials, at the end of the 1980s, that led to the crash of the financial and economic system of the USSR, Romania, and Albania.
Because of the renewed threat to national economies, the Russian authors write, "some experts are calling to return, for example, to pegging national currency rates to the average world prices for gold or platinum. Here is the elaborated view of the matter, given by the well-known American and German [sic] economist Lyndon LaRouche." Then follows this excerpt from LaRouche's April 15, 2004 lecture, given to students at the Moscow Academy of Finance and Law:
"When we turned the world system into a floating-exchange-rate monetary system in 1972, the Anglo-American financier interest actually established a kind of imperial dictatorship over the world's finances. What happened, is that the London market, which is the center of world speculation, began to run financial operations against the currencies of various countries. What they did, is they'd run the speculative value of a national currency down. Then they would say to the country that was in trouble, they'd say, Call in the IMF for advice, or the World Bank for advice. The IMF and World Bank would suggest to the country, Devalue your currency, officially. And also, accept a new debt, which you didn't incur: By dropping the value of your currency, you would be cheating your creditors. Now you must accept a debt written for you by the IMF, not because you borrowed money, but in order to compensate your creditors, for future lower payment from you."
In subsequent years, the Rossiysaka Gazeta article explains, this mode of relations was made worse, by the inflation of a huge derivatives bubble and the appearance of new institutions, hedge funds, that worked exclusively in this speculative area. Today, the authors report, "many countries are again discussing ways of 'breaking' their currencies out of the basket of currencies of the USA and other advanced-sector countries. These include notions of a gold peg, or the creation of regional currencies pegged to average prices for other precious metals." Chichkin and Vasilchuk trace some of these ideas to post-war schemes promoted by the Soviet Union (after the death of Roosevelt, and the exclusion of the USSR from the IMF, the Marshall Plan, and other global economic projects), such as the April 1952 international economic conference in Moscow, and the establishment of a gold-pegged transferable ruble unit of account in 1950. (In the 1970s, Lyndon LaRouche and his movement proposed a transferable-ruble-based system, in conjunction with LaRouche's International Development Bank proposal and East-West-South triangular trade and investment, as a counterthrust against the post-1971 floating-exchange-rate system.) The Russian authors assert that the experience of the Soviet anti-dollar policy of the late 1940s and early 1950s is being studied, and partially replicated, in China and approximately 20 other countries.
In conclusion, the Rossiyskaya Gazeta journalists say that a gold peg, as such, may not be practical for the present time. Yet, they write, "the costs countries bear in connection with their de facto extension of credit to the U.S. economy have become too great. Therefore, what is urgent is to develop an integrated financial and economic policy, at the core of which is sovereign government direction of the national financial system, and the economy as a whole."