In Full-Blown Banking Crisis, Incompetence Could Destroy U.S.

by Lyndon LaRouche

August 10 (LPAC)--The following are excerpts from my July 25 webcast and items posted on the LPAC website or in internal communications in relevant days following that Webcast. The function this performs is to use a selection of relevant highlights from what has been published on the website since that time, to assist the reader in gaining a "feel" of the pattern of crises in progress since that webcast.

The importance of this is to be seen in the behavior of the U.S. Congress and other influentials, who are showing utter incompetence and a woeful lack of comprehension of either the current economic crisis in general, or the distinction to be made between runaway lunacies as on the China currency issue and many other crucial economic, financial, and strategic issues.

The best way to destroy our U.S.A. is to have our President and Congress combine forces to bring that catastrophe down upon our heads, as we are seeing this under way right now.

Wed. 7/25: FROM MY WEBCAST ADDRESS

First of all, this occurs at a time when the world monetary financial system is actually now currently in the process of disintegrating. There's nothing mysterious about this; I've talked about it for some time, it's been in progress, it's not abating. What's listed as stock values and market values in the financial markets internationally is bunk! These are purely fictitious beliefs. There's no truth to it; the fakery is enormous. There is no possibility of a non-collapse of the present financial system--none! It's finished, now! The present financial can not continue to exist under any circumstances, under any Presidency, under any leadership, or any leadership of nations. Only a fundamental and sudden change in the world monetary financial system will prevent a general, immediate chain-reaction type of collapse. At what speed we don't know, but it will go on, and it will be unstoppable! And the longer it goes on before coming to an end, the worse things will get. And there is no one in the present institutions of government who is competent to deal with this. The Congress, the Senate, the House of Representatives is not currently competent to deal with this. And if the Congress goes on recess, and leaves Cheney free, then you might be kissing the United States and much more good-bye by September.

Sun. 7/29 Internal Communication:

"The entire capital structure from equity all the way to AAA can go to nothing," Steve Eisman, a portfolio manager at FrontPoint Partners, told a July 19 conference call on the subprime mortgage debacle, according to today's New York Times.

Lyndon LaRouche responded: absolutely,-- that's exactly what would happen, basically. Because the claims outstanding far exceed any means of payment, and the bulwarks which have enabled people to hide this growing discrepancy,-- these bulwarks are crumbling. And what happened, is that the overwhelming pressure out of the real-estate market, which had always been the bulwark since Cheney came into office, collapsed. This is the one that hits the banks the hardest. And when you hit the banks, which were being used as the slaves for this operation,-- the banks did not deliver the indicated, requested support for this last wave of speculation. And they didn't do it, because they didn't have it. The reason they didn't have it, is that they had to cover the collapse of the real-estate market.

It's like the tale of the horse. For lack of a nail, the horseshoe was lost. For lack of a shoe, the horse was lost. For lack of the horse, the rider,-- and for the lack of the rider, the kingdom was lost. It's that sort of situation. It was inevitable.

"Even our own idiots were sucked into this thing. They thought it didn't happen yesterday, therefore it isn't going to happen. Wishful thinking run amuck, among our own people, right there in Leesburg. It was obvious that this was happening, in the process of happening, all these years I'd been warning about it. Now it's hit, and they're saying, `What happened?' My answer is, 'You didn't listen to me, you damn fool!' I told you it's happening. But for you: it didn't happen yesterday, therefore it's not happening."

TUES 7/31 LAR Internal Communication:

"I'm not impressed with what's happening today. Why? Because it already happened. The system has already come down.'' The outstanding debt on the books of the banks can never be paid. Silly panicked fools are rushing to collect, but they are finding out that the money isn't there. And yet, there are still schmucks out there who protest, "But, I don't see it. Prove to me that the system has already collapsed.''

In discussions on Monday night, Lyndon LaRouche elaborated. He focused on what he called the bookends of the crisis. You had a flood of money pumped into the system through the mechanism of the yen carry trade and similar things. Nearly zero interest money went out from Japan into Australia and New Zealand, and on from there to other parts of the world, where it fueled a speculative explosion of hedge funds, private equity funds, etc. The whole system was doomed to blow out, and the timing was largely subjective. When would time run out on the ability to collect on the unsustainable debt? As long as someone tried to collect on the debt, you could pretend that the system was not bankrupt.

That all ended in the recent period. The yen carry trade is blown out, and all that is happening now, is a desperate effort to minimize what has already occurred. Today, the word in Germany was that the collapse of IKB was just a "small bank gone under,'' with no systemic implications. Oh yeah? How long is that fantasy going to last? The explosion already occurred, and the rubble is already falling down from the sky. Just because you haven't been hit on the head yet doesn't mean it ain't so. Stand in the same place for much longer and you will be devastated by the debris. The conditions have existed for some time in the international process, and it has now reached the point of ripeness. Now the storm has hit, and wishful denial of reality is not a very good commodity at this point in time.

LaRouche announced, in this context, that he will be devoting much of his time in the next several weeks ahead, to a draft election platform for the Democratic Party to address what has to be done. Jump ahead of what people are thinking now, and say what needs to be done. That is LaRouche's role, and that is the role of the organization as a whole. Treat the crash as the fait accompli that it is.

The system is crashing, and Congress is caught up in busy work, of no relevance to reality. That has to change right now. Bust Congress' balls. They cannot leave town for the scheduled August recess, or else Cheney and his British masters will unleash a war that will wipe out 40-80 percent of mankind before the dust settles. The rate of collapse of the entire global financial system is going to accelerate now. It is full speed ahead. This is why Lyndon LaRouche is drafting a Democratic Party platform that must be adopted right now. LaRouche knows precisely what to do to save the banking system through bankruptcy reorganization. Screw the hedge funds and the private equity funds. They are hopelessly bankrupt and cannot be saved--and have no reason to be saved.

Get out the word now: LaRouche is devising the recovery program now. The present system is dead and the only question is when the undertaker will arrive. This is the context for the immediate removal of Dick Cheney from office. With the system gone, we need a functioning Executive branch, and that means Cheney has to be removed from the premises. His removal from office, by impeachment or resignation, is not a joking matter. It is a solemn affair, and we must convey to Congress and to the American people why it is that Cheney has got to go--now.

This is our moment. We have the accumulated authority of Lyndon LaRouche as our moral authority. And as Helga Zepp-LaRouche pointed out, as the crash unfolds, leading circles in Russia, China, India and other parts of the world are going to be looking, more and more, to Lyndon LaRouche as the only person who saw it coming, and knows what to do.

The crisis that has now reached endgame, began on the day that FDR died. From that moment on, the British moved in to destroy the United States. On the day of FDR's death, the United States had created the most awesome industrial economy in the history of mankind. Truman began the dismantling process. President Kennedy was assassinated by the British when he threatened to attempt a revival of FDR. Kennedy's assassination gave us the Indo-China War, and the cultural paradigm shift to a post-industrial nightmare. Now in the industrial heartland of the United States, in cities like Cleveland and Detroit, we have ghost towns.

Now is the time for resolute action on our part. No desperation. There is going to be enough of that to go around, as demonstrated on Monday by Sen. Chuck Schumer (D-N.Y.), who demanded that the bankrupt financial institutions be bailed out, or else they might flee from New York City. LaRouche said this is really tragic, that he is putting his career on the line for a bunch of desperate Wall Street schnooks. They are finished, but Lyndon LaRouche knows how to save those banks that must remain open to defend the household savings, to keep the country's cities functioning, etc. We will save those key banks, but not the other trash.

The cover story of the EIR that will be written this week will--guess what--focus on the crash that has already happened. The defeat of the Abe LDP government in Sunday's upper house vote in Japan is but one more signal that the whole yen carry trade debacle is over. The money ain't there no more, and now Abe is finished.

LaRoauche is enormously confident and calm. As he said towards the end of the meeting, "This is now fun time!''

Wed Aug 1: FROM Internal Communication and LPAC website:

ECONOMICS AND FINANCE

World's Credit Markets Are Seizing Up

July 31 (LPAC)--Bloomberg reports today that the cost of credit-default swaps on some of the big NY investment banks' bonds, are up by three-fold, just from the end of June to the end of July, and the Financial Times reports that the cost of insuring against default on risky European corporate bonds also rose sharply in the last week. The big NY investment banks' bonds -- for Bear Stearns, Lehman, Merrill, and Goldman Sachs -- are as "good as junk," Bloomberg reported today. They say that these bonds lost some $1.5 billion of face value this month, with the increasing risk, and the credit-default swaps' prices show the bonds' credit ratings are below investment grade, Moody's Investors Service reports. For Bear Stearns, credit-default swaps sold shot up from $30,000 per $10 million in bonds in June, to $110,000 on July 27. For Goldman Sachs, credit-default swaps per $10 million worth of their bonds, shot up by $26,000 to a record $105,000 on July 27.

As a result, Bloomberg reports that there is a $33 billion pile-up of unsold bonds and loans (other reports have said some $40 billion). The real problem is, that these banks had promised to generate $300 billion to fund leveraged buyouts announced this year -- and cannot do it. If the banks' loss of expected income from these bonds continues, they must then find a way to come up with the money themselves.

One broker they quoted stated that "the markets are being driven by fear." Other observers, however, have said that the markets are being driven by "reality."

Real Estate Reality Pops Wall Street Fantasy Bubble

July 31 (LPAC)--American Home Mortgage is today on the verge of bankruptcy. The company's stock, on which trading was stopped yesterday because of news it would likely miss its dividend payment, fell precipitously when trading was resumed at 2:00 this afternoon. The stock lost 90% of its remaining value, and closed at $1.04 per share, taking the entire market into negative territory along with it. (The Dow, which was positive 140 earlier in the day fell, 146.32 points.) The company will likely seek bankruptcy protection, after announcing that as much as $500 million of committed loans would not get financed. As news of this reality spread, trading on related banking stocks such as Lehman Brothers, Bear Stearns, and Goldman Sachs took hits as well. Another victim, who's stock was collapsing even before the AHM news and ended down 15%, was MGIC, Mortgage Guarantee Insurance Corporation, a company which insures lenders.

AHM was the nation's twentieth-largest lender specializing in "Alt-A" mortgages, one step above sub-prime, which were once considered "safe" loans. Bloomberg today also posted a warning that Britain was facing a sub-prime blowout of its own, within months. Cheap "2-28" type loans, which were sold in 2005, are now due to reset at higher interest rates. This was the trigger for the current spreading collapse in the US.

Bear Stearns Halts Redemptions on Third Hedge Fund

July 31 (LPAC)--Bear Stearns announced today that it has halted redemptions from a third hedge fund after investors demanded their money back. Last month, two other hedge funds managed by Bear Stearns collapsed. According to Bloomberg.com, a spokesman for Bear Stearns, Russell Sherman, said that the fund had losses in July and was overwhelmed by redemption requests.

Last Week Toll on Mortgage Crisis "Spread Deeper and Farther"

July 31 (LPAC)--Problems in the mortgage market "spread deeper and farther afield" last week, notes Vikas Bajaj in today's New York Times. On Friday, the New York Stock Exchange suspended trading in shares of American Home Mortgage, after the company announced that it would suspend its dividend payment because its bank lenders were issuing "significant margin calls" on certain debt. This was debt the company had used to buy mortgage-backed securities, that included its own loans and those made by other lenders. AHM specialized in "Alt-A," which is over sub-prime and just under prime borrowers.

Then, at the close of the market on Friday evening, the nation's largest insurer of home loans, Mortgage Guaranty Corporation, or MGIC, said its stake in a business that underwrites and invests in mortgage securities may be worthless. MGIC said it would write down its $516 million investment in Credit-Based Asset Servicing and Securitization, or C-Bass, possibly to zero. Then, the Radian Group, which has a $518 million stake in C-Bass, said it might have to write off its investment completely.

Home Prices Continue Two-Year Collapse

July 31 (LPAC)--Nothing has happened to slow the collapse of home prices, which have been dropping for two years now. This is comfirmed by new data from the the Case-Shiller index of home prices. Their 10-city composite index, reflecting data through May, was down 3.4%, the worst collapse in 16 years. The 20-city composite was only slightly less, down 2.8%, the biggest drop in 6 years. Cities hardest hit were Detroit, Michigan, and San Diego, California, followed closely by Tampa, Florida, and Washington, DC. The latest city to fall into the negative column is Chicago.

Home sales have been collapsing since about June, 2005, and are now down 23% from their peak that year, to a current level of 6.58 million annual sales. Consequently, inventories of unsold homes have grown, prices have fallen, and new housing starts are now down 36% from when they peaked in January of 2006.

Sowood Capital's Hedge Funds Disappeared

JULY 31 (LPAC)--Sowood Capital Management LP, a hedge fund firm run by a former manager of Harvard University's endowment, with more than $3 billion in assets at the beginning of Summer, told its investors that its Alpha funds (Sowood Alpha Fund Ltd and Sowood Alpha Fund LP) lost more than half their value this month amid the turmoil caused by the global credit crunch, and it had to sell its portfolio and give its investors whatever might be left over.

Last week, Sowood's lenders discounted the value of the collateral, and could not find buyers for its junk. Morgan Stanley, one of its prime brokers, put Sowood in touch with Citadel Investment Group, which bought all its portfolio at "a significant discount." Citadel is a vulture fund whose manager, Kenneth Griffin, is described by The New York Times' Jenny Anderson as "a grave dancer." Citadel previously bought Amaranth Advisors, one of the first major hedge funds to go under last year.

Jeffrey Larson, Sowood founder, used to work at the Harvard Management Company (1991-2004) investing the university's endowment in international stock and commodities.

Even France Is Not Immune to the Collapse of the System

July 31 (LPAC)--On Friday, July 27, Le Figaro revealed that three French companies were having problems with some of their funds involved in the U.S. sub-prime market, which is a first for the French financial companies. Oddo Asset Management, a EU23 billion fund, announced yesterday that it will proceed to the "liquidation" of three of its funds, Oddo Cash Titrisation, Oddo Cash Arbritages, and Oddo Short-Term Dynamic. This means that they are no longer valued or traded, and that subscribers cannot leave the funds. The three funds represent EU1 billion. To increase its profits, these funds had invested in CDO's issued by private equity and other "alternative" funds.

Among the other companies mentioned, AXA, the number one international insurance giant, announced that two of its funds, entirely invested in the U.S. real estate market, had substantial losses. In order to avoid panic, however, they are buying up the shares of all clients who want out of the funds. Lastly, BNP Paribas, named in many media articles as being among the most exposed of the international banks to all these "exotic instruments," declared on Friday that the liquidity of two funds, which were said to be in trouble, would be insured.

Thurs. Aug 2: From the Foreword to draft Democratic Party Platform in progress:

- How This Crisis Happened -

As I spoke in my Webcast, now less than a week ago, the present global financial crisis has now erupted: "...at a time when the world monetary system is actually, now, currently in the process of disintegrating."

As the relevant Germany press describes the situation, the crisis at the IKD arm of the Germany's Kreditanstalt fuer Wiederaufbau, involved the use of IKD to attempt to sustain the overstretched and trembling Germany banking system. Apparently, the effort at a clean stop-gap action failed at some point in the chain of arrangements. Such a development within the Germany banking system blows away the efforts of the U.S.A.'s Henry Paulson and others to maintain the illusion that the U.S.A. side of the current global financial panic is only a marginal moment of crisis within the sub-prime mortgage-based securities market.

The fact of the matter is, at the one end, the respective mortgage-based securities markets, and, at the opposite end, the world-wide, Cayman-Islands-centered operations of the "hedge funds." These are the "book-ends" of a global system financial crisis whose most notably complicating feature is the role of the Japan "carry trade." The inability of the banks, at the one end, to play their assigned part in passing margins of money not being supplied to the current rash of hedge-fund takeovers, means a general breakdown of the system as a whole.

Therefore, to understand the current phase of this global financial crisis, we must not let our attention be distracted by chatter which seeks to draw attention from the from the crucial significance of the failure of the current world system at its "book end"-like extremes Such are the "horseshoe nails" whose failure ripples, chain-reaction-style, to the loss of the rider and kingdom alike.

A combination of developments, heralded by events such as the catastrophe in some Bear Stearns accounts, a political eruption in Japan's parliamentary elections, and the crucial developments reported by Germany's Industriekreditbank (IKB) on Monday, July 30, 2007, have been combined, thus, with related developments, to signal entry into a terminal phase of developments now breaking out, chain-reaction-like, in the Transatlantic and other leading financial markets. What stubborn refusal to face essential facts has caused to be the long on-coming, virtually inevitable great, global financial crash of 2007 or slightly later, has now arrived.

That crash could be prevented, as I have explained repeatedly during recent years, but not under the conditions defined by an effort to maintain the present world system.

As a result of that stubborn clinging by current political authorities to misguided policies, especially the now-failed monetary, economic policies, and warfare policies of the recent three decades, the world's present world monetary-financial system has thus begun its death-agony. A new system could survive; the presently existing one could not. What dreamers and false prophets said could never happen, has now happened. Whereas the world's physical economy could be rescued from the presently inevitable bankruptcy of the failed present monetary system, yet the presently dominant world monetary-financial system itself, is now as doomed as the legendary Dodo.

That system was already threatened with a future crisis in the shifts in policies adopted under President Harry Truman, during the immediate period following the end of what is generally referred to as "World War II." However, it was only two decades later, with the U.S. entry into a long war in Indo-China, that the dangers became clear. Today, without a return to the anti-monetarist, American System of political-economy, a return to those principles which informed President Franklin Roosevelt's recovery from the 1930s world depression, the worst outcome imaginable were about to happen to the world at large.

Fri. Aug 3:

- Economics -

The Mississippi River bridge disaster is emblematic of the decay of U.S. infrastructure: 25% of all U.S. bridges are "deficient."

This is the worst banking crisis in Germany since 1931, according to Jochen Sanio, head of the German financial market watchdog agency BAFIN.

American Home Mortgage Investment Corp. plans to shut down, becoming the second-biggest residential lender to fail this year, while Accredited Home Lenders Holding Co. says they may have to file for bankruptcy too.

Is the derivative market set to blow like the sub-primes?

Investment banks are stuck with $500 billion in unsellable junk.

Unilever will cut 20,000 jobs over the next four years, and will sell the North Amercican Laundry division that makes Wisk and other laundry soaps.

Sat. Aug 4 From Internal Communication:

- THE PARTY'S OVER -- BUT THE COLLAPSE HAS JUST BEGUN -

The last 24 hours again proves that the U.S. is ungovernable, and Congress has to remove Dick Cheney, or there will be no U.S. or Constitution left.

Look at the day's developments: --In the wake of the collapse of the Minneapolis bridge, the whole debate over LaRouche's 2006 emergency recovery through capital budget legislation is back on the table. And a fight against this LaRouche/FDR approach from Rohatyn and his Wall Street fascists is in full swing;

--The lid cannot be kept on the IKB bailout, the U.S. mortgage crisis, and other disasters, with the German financial paper Handelsblatt warning that this is worse than LTCM because now "behind every door there is a hand grenade'' about to go off. In New York, after a Plunge Protection Team-engineered rise in Dow on Thursday, Friday saw a drop of 281 points (2.09%);

--On Friday, due to a fit of tyrannical rage from Dick Cheney, George Bush forced Congress to cancel its recess until it delivers a change in the Foreign Intelligence Surveillance Act (FISA) that grants police state powers to the White House;

--Almost in the same breath, Bush threatened to veto an important water bill, called the Water Resources Development Act of 2007, which had passed the House by a vote of 381 to 40. This is the second slap in the face to the victims of the Minneapolis bridge collapse from Bush in two days.

"This callousness is abominable--the President doesn't give a damn!'' Lyndon LaRouche said in discussion with the Intelligence staff about these developments. There are still 30 cars trapped under the Minnesota bridge, and yet the spin doctors are saying that the deaths are "much fewer than expected,'' and Bush is refusing national action on infrastructure. At the same time, Bush is going to Minnesota in "sympathy" for the dead and their families. How callous!

"This shows how much of a Cheney-ac Bush is. He's insane. I wonder how the President would have reacted if he had a mind of his own,'' LaRouche said.

Sunday Aug 5:

- LAROUCHE TO CALIFORNIA CADRE SCHOOL: - - HOW AND WHY MY FORECASTS ARE RIGHT -

Aug. 4-Lyndon LaRouche gave a short address to the California cadre school today, and then fielded questions for about just over another hour.

Q: Hey Lyn, you there?

LYNDON LAROUCHE: I'm sort of here, I think. Yes, I'm here on the line, I believe.

Q: We're up here in the mountains of California. I think we're ready for your higher perspective now. LAROUCHE: Very good. Well, I can say that I've had quite a bit of success as a long-range forecaster. Every forecast I've made in the past years, and it goes back to the middle of the 1960s, actually, and some forecasts earlier, have been correct, have been confirmed: As I presented it.

Now, there's some people have tried to put some spin on what I said, and I didn't say that! [laughs] But because they like a prediction of the dates something's going to happen. You know, sometimes you can get into that, when you see that a definite date is going to be the probable event, because of certain circumstances which indicate how people are going to react to certain developments and that will give you a date. But generally, you don't know exactly when something is going to happen, because you're dealing with a human factor. People can decide to do different things, and that can shift the date. For example, many times in the past period, we've had a collapse situation waiting for us, and that has been postponed, been postponed by a decision, by people of influence in the markets. But what that decision has done, by postponing it, they've made it worse.

So, when you make a forecast, you have to forecast that: You have to say that, if you're not going to make it worse, this is going to happen. And if you do prevent it from happening, it's going to become worse. And you can indicate where you stand in the general perspective, then, and that's about as accurate a forecast as you can make.

Now, the gut of a forecast, which I've always been successful at, is that you forecast the conditions which underlie your forecast. That is, the conditions--you identify the conditions, and you identify the kind of behavior associated with those conditions. And what you're doing, is giving people on the receiving end of your forecast, the way in which they can think about what you're saying, and can, on their own, read the signs, so to speak, and themselves, see where we stand.

Generally, the purpose of a forecast, is to tell people what to do. Is to say, "this is the time to do this, this is the time to do that." And on that, I've always been right. And I've made that forecast again, recently, in updating it. Now, we just had, in the past period, we had breaking out in Germany, of all places, the clearest indication of a general collapse in progress in the world financial and related markets, and in the economies. It was not really an accident. And the significance, of course, is that Germany, because it's the remnant of an industrial economy in Western and Central Continental Europe, that is west of Russia and Belarus, therefore, it's pivotal for the whole world economy. If Germany goes, that can pull down a chain-reaction which can sink the world economy, and we had something very close to that, this past week. And we didn't escape from the effect of that collapse: rather, we went into a new phase, where the potential for collapse is more dangerous and more likely, than it was before that happened.

But what that German collapse did, or partial German collapse did, is show that Henry Paulson of the Treasury in the United States, is absurd, in saying there is no general collapse in progress. There is a general collapse in progress.

You get another reflection of this in what happened in Minneapolis, with the collapse of the bridge. Especially in light of the report on the condition of bridges, and the number of bridges in that condition throughout the United States. We have, essentially, since 1967-68, we have a degeneration, a collapse, in basic economic infrastructure, and long-term science-driver programs inside the United States. As a matter of fact, by the time the first successful U.S. Moon landing occurred, the United States had lost the ability to reproduce that Moon landing, because of things that had been shut down during the '67-'68 period, under pressure, of course at the time, of the costs of the war in Indo-China.

So, since that time, there has been a constant policy of shutting down infrastructure, deindustrializing the United States, ruining agriculture, and so forth and so on. So the U.S. economy has been increasingly worse off, since 1967-68. What happened with a decision under Nixon, which was largely a George Shultz decision to shut down the world monetary-financial system, that is, the Bretton Woods system, in '71-'72, this was a virtually irreversible effect, which I said at the time, which ensured that the United States would, if it continued its present policy from that point on, would head into the kind of situation of a general breakdown crisis.

So, now what you have, is a general breakdown crisis of bridges: You have at both ends of the Mississippi, from Minneapolis down to the Katrina Land in Louisiana: You have a general breakdown of the essential infrastructure of the core of the United States! That is, the Mississippi River system, which covers the Ohio River, it covers most of the area east of the Rockies. This whole area is broken down. But also every other part of the country is broken down. The economy is collapsed: We already have a deep, economic depression, a deep, physical-economic depression. The conditions of life of the typical family in the United States, of the lower 80% of family-income brackets, is far worse off today than it was in the 1970s. In point of fact, in reality, the conditions of life, of virtually all of the communities, and of the lower 80% of family-income brackets throughout the United States, is far worse than it was then, and is becoming continually worse over these years.

There has never been a program of prosperity, in the United States, since 1967-68, not only because of conditions, but because of policies which created these kinds of conditions. Those policies continue to the present day: You have the President of the United States, egged on by his Vice President, who said, "No, no, no, we're not going to do anything. We got to balance our budget." Well, you have to balance the minds of a few people, more than budgets.

And the Congress is still a little bit crazy. I mean, there are good people in there, but overall, from the top down, they're still trying to play the game. They're playing the game of "go along to get along." And unless there's a shocking change, you can not expect anything from the Congress, to improve the economy--or anything from the U.S. government in general: Things are now in the process of bad, very bad, and becoming worse.

This means, also, a general vindication of what we represent, as well as what I represent, in terms of this economy. I'm now producing what might be called a Prolegomena for a State of the Union statement, a new forecast for the coming year, a forecast which will be a forecast statement purposedly for the Democratic Party, or on behalf of the Democratic Party, which has to be in there in September and not sometime down the line in the coming year. Because, at this point, at the time of Labor Day approximately, at the time Congress comes back into session in September, at that point already, the general outline of the Democratic Party's campaign for the 2008 general election must be in place. There must be a statement of perspective, a platform of the party--whether it's presented by the party or not, but on behalf of the party, there must be a platform, which sets for now, to all prospective candidates and others, what the prospect is for the United States for the coming years, as an election-campaign period statement. It's much more important than a State of the Union address, in general. I'm making it. Why? Because I'm the only one competent to make it. So I'm making it! And I'm working on it now.

Tuesday, August 7, 2007 From Internal Communication

- TAKE IT FROM THE TOP: - - FUND A WORLD ECONOMY RECOVERY -

The world is reeling from the effects of the financial-economic breakdown crisis, from Minneapolis to Assam state in India, and there is a wide-open situation for our organizing around the New Bretton Woods and the Bering Strait Conference, to the Economic Recovery Act for the United States. But under these conditions, it is crucial that we keep a clear focus on solving the crisis, from the top down.

Economics:

AMERICAN HOME MORTGAGE FILED FOR CHAPTER 11 BANKRUPTCY PROTECTION, saying there is "no shareholder equity value remaining" at the former #10 U.S. mortgage lender. Seven thousand people have lost their jobs. Asset-stripper Wilbur Ross is going for a takeover, providing up to $50 million in debtor-in-possession financing.

Aug. 6 (EIRS)--According to the Guardian, Britain's top five banks, HSBC, RBS, Barclays, HBOS and Lloyds TSB, made a combined $40 billion in profits for the first half of this year. However, the stock valuation of the same banks has lost a combined $43 billion in the last seven months.

Banks tighten mortgage lendings drastically, but too late.
Mortgage-Backed Securities Prey on Lower 80% of Population
New studies report only part of the infrastructure deficit in the U.S.
Municipal bond market storm brewing in subprime wake.
Minnesota Taxes: How Not to Fund a Recovery.
Bankers Looking for Bailout from Uncle Sam.
Bear Stearns Fires Co-president on Mortgage Carnage, Yet Stock Plummets Further.

Thurs. Aug 9 Internal Communication

- "WE HAVE ARMAGEDDON," MARKET PLAYERS SHRIEK -

As we reported yesterday the world's central bankers have decided to let the "shake-out" of global financial markets proceed without intervention, in the lunatic hope that this will somehow not lead to a general blow-out of the system. As the significance and consequences of that decision begin to sink in, we are seeing responses in the form of freak-outs coming from financial circles that are directly -- and fatally -- affected.

Last Friday, the CEO and the CFO of Bear Stearns held a conference call with Wall Street analysts and investors, purportedly to reassure them about the bank's financial situation. But their hysteria was evident in their report that the "fixed income market turmoil is the worst in 22 years," that their "revenues were under significant pressure in July," and that the bank "needs capital to weather turmoil."

Translation: "Help!!!"

That same day, MSNBC interviewed financial commentator Jim Cramer on the Bear Stearns and general market crisis, and Cramer went ballistic and hollered at the top of his lungs for five straight minutes. Fed Chairman "Bernanke needs to open the discount window. He has no idea how bad it is out there. He has no idea. No idea!" Cramer foamed. "I have talked to the heads of every one of these firms in the last 72 hours.... This is a different kind of market, and the Fed is asleep.... This is crazy. I worked at fixed income at Goldman Sachs. This is not the time to be complacent. We have Armageddon in the fixed income market!" the Wall Street operator wailed.

On Wednesday, EIR received a report from an Italian banking source who confirmed that the Bear Stearns meltdown could trigger a chain-reaction collapse in world markets. "The hole is a large one," the source said.

"I agree," Lyndon LaRouche commented yesterday, in reviewing the day's events. These freak-outs are obviously in response to what the response was of the central bankers to the global crisis. You have a huge elephant lying in the middle of the world bed, and yesterday one of the elephant poops came forth, in the form of the freak-out from Bear Stearns and its apologists, he noted.

Lyndon LaRouche also commented on the raft of bills and other congressional initiatives on the issue of infrastructure, which are occurring in the wake of the Minneapolis bridge collapse, noting that most of them are incompetent, at best, falling right into the trap of fascist Felix Rohatyn chimera of "private financing" for infrastructure. The problem, LaRouche said, is that we have to recognize that the present world financial system is not merely having discomfort; it is blowing out. And the worst mistake we can make is to put money into that kind of investment, into supporting a black hole.