January 26, 2008 (LPAC)-- Defying 25 years of enforcing fiscal austerity, Saturday, the head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, added his voice to the growing chorus urging the US to adopt an economic "stimulus" package. Speaking Saturday at the "Global Economic Outlook 2008" panel at the World Economic Forum in Davos, Switzerland, Strauss-Kahn stated that "just monetary tools," (interest rate cuts) would not be enough to get the world out of the current crisis, and that "a new fiscal policy is probably today an accurate way to answer the crisis." Surprising even (former US Treasury Secretary) Larry Summers, who called the move "mildly historic," Strauss-Kahn urged other "strong economies" (Germany and China), to join in the effort.
Also on the panel, French Finance minister Christine Lagare explicitly stated that, unlike France, Germany has "room to maneuver" within the Maastrict budgetary restrictions, indicating the world is expecting a stimulus program from them as well. Defying the pressure, the German finance ministry came out Monday and said flatly that there will be no stimulus program from Germany. The European Economic Commission is set to meet Tuesday on the question.
Strauss-Kahn's comments come in advance of the release of an IMF report on the global economy. The comments contrast with the IMF's standing policy, stated as recently as a report last October, that "fiscal sustainability" was the greatest concern, even in advanced countries. The IMF has delayed the release of its January report, originally due out this Friday, possibly to reflect the new attitude.
Lyndon LaRouche responded, "the point is, these guys are all crazy. The key thing here, is they've got to redefine the agenda to be debated. My point is, they have to realize we must go to a two-tier international system. There's no way that a single-tier approach can work.
"The preferred sectors will get low interest rates, like those of the 1930s," he went on. "Those who are engaged in speculation, rather than in long-term fixed investment, or similar kinds of government concerns, will pay a borrowing rate above market. In other words, we're going to dry out the speculators. Sooner or later, many of the speculators are going to have to write off a large part of what they consider today their holdings. Because they never earned anything. If you're going to balance things out, now, you're going to have to wipe a lot of foolish stuff off the books.
"And the way to do it is to do it in a calm and orderly way," LaRouche concluded, "and the first thing to do is to set up a two-tier system, which by its very design, tends to help that process. Then think about getting an international agreement on a new monetary system, which will take over the present monetary system, but under management. So we won't have a discontinuity. If we act quickly, we can avoid a discontinuity, which is the thing, the incalculable danger most to be feared. And therefore, we want an orderly process, and we must quickly move to a new control system, based on a two-tier system, combined with international agreements on a new monetary system, more or less close to current currency valuations. And, we'll have to work our way out from there."
