The Global Crash Has Begun-Only Glass-Steagall Will Save the People!


A Breakdown Crisis Beyond What FDR Faced; Take the Right Steps, and Take Them Now

EIR Founding Editor Lyndon LaRouche forecast what is now occurring, “the biggest financial crisis in modern history.” He had stated in public discussions over this weekend what was apparent to him on Friday: That the biggest crash of the trans-Atlantic financial community in modern history had occurred, and would become rapidly manifest.

That was stated in the LaRouchePAC report Do You Have the Guts to Face the Truth—And Act in Time?, and on Monday LaRouche’s forecast was confirmed and will continue to be confirmed in coming days.

The Wall Street institutions are blowing out completely. This is a total collapse of the financial system from which no normal recovery is possible, only extraordinary measures as LaRouche has defined them. The degree of destruction to the lives of the American people and those in Europe, and to their children’s futures, is far worse than has happened before, even in the Great Depression precedent.

The breakdown is incurable by any bailouts or similar schemes. Wall Street has to be shut down, now.

The crisis can have an optimistic outcome, if the American people are organized to support action now, and international cooperation takes place.

An FDR-modeled clean-out of those assets and shutdown of those Wall Street/London banks is necessary—as with President Franklin Roosevelt’s first actions after his 1933 inauguration. The Glass-Steagall principle is the principle upon which to launch this action, in order to avoid panic and chaos.

SEE “Glass Steagall”

This crisis is far greater than what FDR faced. As LaRouche stated Monday morning, while markets plunged as he’d said they would:

“We have to cancel all debt obligations of those categories that are crashing now. Shut Wall Street down! We now must go back to FDR’s policy for dealing with the Wall Street crisis of his time. But this Wall Street crisis is far beyond what he faced. It is going global, from the trans-Atlantic center of the breakdown. There is far more worthless debt. We’ve got to take the right steps, and take them now.”

What is required is immediate creation of a new system of credit — again as FDR did — to restore productivity and productive work, attack the great needs of modern infrastructure, and deal with the lack of productive skills, especially among younger people. We have to restore the confidence of the American people, which has been ruined with the destruction of their employment and their qualifications.

This is the worst financial breakdown in our history. In effect, the “100 Days” of a new Presidency must now start; these actions cannot be taken with Wall Street’s Barack Obama in office.

LaRouche said:”We’re on the edge of thermonuclear World War III, unless we can stop Obama…And the key to the answer, is the financial breakdown crisis. Restore the confidence of the American people, by getting Obama out.”

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Markets Manifest the Systemic Breakdown Collapse

On “‘Black Monday’: Hundreds of Billions Wiped Off World Stock Markets in Worst Plunge since 2008,” headlined the London Irish Independent.

Asian stock markets fell by 6-8%; Europe’s by 4-6%; the Wall Street exchanges by just under 4%, or almost 600 points; Mideast markets plunged even more steeply; Brazil’s Bovespa exchange lost 6%.

The commodity collapse accelerated. West Texas crude oil is below $39/barrel. Bloomberg’s Commodity Price Index of 22 commodities is falling at 2-3%/week, according to Bloomberg News Aug. 24, and is now at 1998 crisis levels. That index has dropped by 51% since the end of 2013 as economic growth disappeared in trans-Atlantic, then in Russia and Brazil; but the drop is clearly accelerating this Summer. It was the trigger in Spring-Summer 2008 for the bank blowout of the Autumn.

One of the largest categories of corporate debt has gone “underwater” in the crash. The larger U.S. corporations have borrowed $1 trillion/year since 2013, overwhelmingly (90-95%) for the purpose of buying their own stocks, or other company’s stocks in takeovers. The markets’ plunge has now pushed that several trillion in corporate debt into hundreds of billions in unrealized losses, which will expand further.

Credit default spreads for major banks widened in an accelerating way, indicating “counterparty risk” — their assets are bad. The high-yield bond spread (the difference between corporate/muni bonds and junk bonds, mainly in energy) zoomed up through 5%.

Wall Street banks were plunging faster than the market. On Aug. 20-21 combined, Citigroup shares lost 6.06%; JPMorgan Chase 6.01%; BOA 7.95%.

World trade shipping rates are in collapse, having fallen 60% in three weeks and 27% in the last week alone, to $467/TEU on the Shanghai Containerized Shipping Index. About $800-1,000/TEU is a profitable level.

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