Lyndon LaRouche issued the following statement, in response to a question about the specifics of how to reinstate Glass-Steagall and reestablish a Hamiltonian credit system. LaRouche’s lengthy response was written on Dec. 4, 2010.
The proper response to your proposition must be a bit long, but it is the only competent response. Since you declared that you intend to pass my response along to your circles, I am assuming that my reply is worth my efforts here.
The notion of a credit-system is the peculiar legacy of the U.S.A., and involves the principle which makes our original Federal Constitution the remedy for dealing with the mental and economic diseases which, while peculiar to Europe, are diseases often imported into our United States by way of, chiefly, London’s Boston and Wall Street financier centers.
It first appears on our continent in the form of the Pinetree Shilling practice instituted under the authority of the original Royal charter of the original Massachusetts Bay Colony, up to the point that the circles of James II and William of Orange moved toward the suppression of the original Massachusetts charter. That credit-system of the Pinetree Shilling which had been established within Massachusetts, was later resurrected as an intention by Benjamin Franklin’s “modest proposal” for a paper currency of the colonies. It was launched as a full-blooded constitutional principle through Alexander Hamilton’s design of a credit-system based on national banking, which was to serve as the prompting and essential design of the original Federal Constitution of the United States. Today, it represents the most crucial of the differences of design of our American constitutional system embedded in our Federal Constitution, which is also a design explicitly contrary to the monetary systems still dominant in Europe and elsewhere.
The installation of Hamilton’s design as the kernel of the U.S. Federal Constitution, came about in response to the prevalent, war-prompted bankruptcy of separate banking systems of each among the U. S. states. Hamilton’s response to this critical situation was to unify the chartered-banking-system of the new U.S. republic under a national system of public credit tied, essentially, to public improvements which would generate produced wealth adequate to meet the terms of the debt obligations of the national banking system, while promoting leaps upward in agriculture and industry. This need for a national credit-system required the design of a system of Federal government which could be adequate for securing the obligations of the newly defined national banking system. The entirety of the original Federal Constitution depended on calling into being the existence of a Federal Constitution consistent with that mission. Hence, the U.S. Federal Constitution featuring the extended implications of such a national, republican reform.
This national-banking feature of the U.S. Federal Constitution was terminated by the termination of the Second National Bank of the U.S.A. by a puppet of Wall Street’s Martin van Buren, Andrew Jackson. The van Buren designed Jackson reform produced the ruinous Panic of 1837.
Various forms of institution of the net effect of Hamiltonian national banking were introduced through the significant influence of former President John Quincy Adams, and by the principal authors of what became known as “The American System of political-economy” by such as Mathew and Henry C. Carey, as in that “Greenback policy” which established the United States as a world power under the principal Republican presidencies of the late Nineteenth Century.
This reform was suspended under Presidents Theodore Roosevelt, Woodrow Wilson, Calvin Coolidge, and Herbert Hoover, but revived in an almost full-blooded expression by the 1933 Glass-Steagall reform. Relics of that latter Franklin Roosevelt tradition persisted in diluted form, as under President John F. Kennedy’s intentions, prior to his assassination. Kennedy’s death, which cleared the way for eliminating Kennedy’s and General Douglas MacArthur’s opposition to “a U.S. land war in Asia,” wrecked the U.S. economy to a degree than the actual net physical state of the U.S. economy has been deteriorating ever since. The triumph of Britain over the fixed-exchange-rate system, and the coordinated launching of Lord Jacob Rothschild’s Inter Alpha system, in 1971, has sent the physical economy of the United States into a presently persisting, if varying rate of net physical collapse, since 1971, to the present time.
The election of Presidents George W. Bush, Jr. and Barack Obama has defined an increasingly downward collapse of the real, physical economy of the United States to the present time, and has, indeed, been a crucial factor within the accelerating rate of decline of the U.S. and European economies since the agreements bearing on Germany and the former Soviet Union, instituted by France’s Francois Mitterand, Britain’s Margaret Thatcher, and George H.W. Bush, during the 1989-1990 interval.
Presently, the entirety of the trans-Atlantic economies are in a state of generally accelerating general bankruptcy, for which there are no remedies available under the presently rotted-out condition of the post-Bretton Woods and post-Westphalian systems. China and India are still vigorous economies, but, given the ration of very poor in those and related Asian nations, even China and India could not withstand the presently imminently threatened general collapse of the trans-Atlantic national economies.
Before returning to the kernel of your question, it is necessary to supply the following comment on the implications of a presently most urgent return to a Glass-Steagall reform.
– A 2010 Glass-Steagall Reform –
In July 2007 I presented an urgently required reform of the U.S. banking system, as intended to prevent the outbreak of an imminent, chain-reaction collapse of a massively polluted U.S. real-estate venture. To that end, I proposed what was named a Homeowners and Bank Protection Act of 2007. Had that act not been blocked by interests represented by Representative Barney Frank, no “Bail Out” scheme would have been allowed. That continued “Bail Out” operation has ruined not only the credit of the United States, but has infected the entire planet, especially the trans-Atlantic side, with a rampant, upward-spiralling, hyper-inflationary, financial-monetary bubble from which no escape were possible today, under a continuation of presently maintained trends in policy-shaping. Presently, without a sudden, 1933-style, Glass-Steagall Act, there is no possibility that the United States will escape a general hyper-inflationary breakdown-crisis as the essential characteristic of the weeks and months ahead. There would be, indeed, very little to consider after a matter of weeks or possibly months ahead.
A renewed 1933 design of Glass-Steagall is absolutely urgent as the only, presently feasible approach to halting the general breakdown of the entire trans-Atlantic economic system. The separation of regulated commercial banking from the presently continuing, hyper-inflationary spiral of current Federal Reserve and related merchant banking, is not, in itself, the solution, for the presently on-rushing, general breakdown-crisis of the trans-Atlantic sector; but, it is an indispensable precondition for introducing other measures which will actually generate a revival of these economies.
What that reform accomplishes, at least implicitly so, is a return to Hamilton’s constitutional, credit-system solution for the U.S.A. crisis of the 1780s.
That means closing down the virtually bankrupt system of gambling casinos presently orbiting around the British Inter-Alpha, global banking system, and moving the world toward the only available, unique remedy for the immediate existential threat to the planet as a whole. Gambling debts are not fungible, and, when existing as claims against lost bets, have no legitimate claims against a national economy.
What is required in this presently desperate circumstance of the trans-Atlantic community, is a return to a combination of a Glass-Steagall reform and a system of fixed-exchange agreements among participating, respectively sovereign nation- states, as had been envisaged by President Franklin D. Roosevelt in such settings as the temporary triumph of President Roosevelt over Winston Churchill and John Maynard Keynes, in the 1944 Bretton Woods conference.
– Now! –
Presently, for the United States and its immediate partners in such ventures, the function of a return to a Glass-Steagall standard provides means for two most urgent immediate reforms:
1. The reestablish of U.S. Federal credit according to the intention of a Glass-Steagall reform.
This enables the succor of Federal states of our Union from the social crisis which present U.S. Federal policies have imposed upon the various Federal states.
2. The immediate launching of a high-technology project of the relatively greatest rate of prospective physical economic gain for the United States and its most immediate neighbors, Canada and Mexico, represented by a NAWAPA reform which, in its direct and indirect effects on the economies as a whole, means the relatively immediate employment of about four millions persons in the combination of that high-gain project with the capital improvements, elsewhere, which are required for support of the project itself.
There are available commitments of a comparable nature, in Africa, in Central and South America, and in Eurasia.
The principle so expressed is precisely the credit policy on which the constitution of the U.S. economy was premised in the adoption of the national banking and credit policies made practicable through the crafting of the U.S. Federal Constitution. Presently, that is the only remedy which could prevent the planet from continuing its currently accelerating plunge into a general new dark age of humanity as a whole.
The world’s economies, and the existence of the political nations of which the planet is composed, are presently being destroyed by the policies radiated from the circles and ideology of the pro-genocidal World Wildlife Fund whose policies, including the essentially clinically insane policies of windmills and solar panels. Only the resumption of physical-economic policies premised on science-driver and capital-intensive programs of development through productive investments could enable this planet to sustain even its present levels of population-densities. This fact is being recognized in nations forming a pattern of continued acceleration of nuclear-power investments, nuclear programs without which the existing nations of the planet could not be sustained. The Promethean commitment to reliance on increased “energy-flux densities” of power generated and applied is the standard of performance and policy-shaping on which any continued form of what might be termed “civilization” presently depends.
The relevant principle of national and related credit is that the continued existence of civilization depends upon the coordinated role of increased physical-capital-intensity of combined public and private investments and the intellectual prowess of our people continues to be the only sane method of maintaining a human race in a morally, intellectually, and otherwise productive condition, a condition which continues to depend, for all humanity, on a science-driver orientation in performance.
Not only is a NAWAPA reform an immediately feasible means for reversing the presently accelerating collapse of the economies of North America, the transit of elapsed time has brought great advances in realizable benefits of that project into reach today. It echoes, in some respects, the legacy of the TVA; but it is a giant qualitative leap, in both scale and technology over the invaluable achievements of the TVA. It is potentially the greatest science-driver leap forward in economy known as possible in the world today. Technically, the project’s feasibility is virtually immediate.