Fw: Financial system headed for late June/July blowout

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----- Original Message ----- From: CEC Media Release

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Sent: Tuesday, June 15, 2010 11:39 PM

Subject: Financial system headed for late June/July blowout

Citizens Electoral Council of Australia

Media Release 15th of June 2010

Craig Isherwood‚ National SecretaryPO Box 376‚ COBURG‚ VIC 3058Phone: 03 9354 0544 Fax: 03 9354 0166Email: cec@...Website: http://www.cecaust.com.au Financial system headed for late June/July blowout

“The whole world system will go into a chain-reaction disintegration, either during late this month, or the beginning of next month, unless something other than stupidity, the prevailing stupidity, takes charge!†declared Lyndon LaRouche on 12th June. LaRouche is the world’s leading economic forecaster. He was one of a tiny handful of economists to forecast the current global financial crisis, but he was the only one to forecast the actual nature of the crisis—a global economic breakdown crisis, of the nature of the hyperinflationary explosion of Weimar Germany in 1923, but on a scale not seen since the 14th Century Dark Age. LaRouche was speaking from Germany, the most important economy in the eurozone, which is the epicentre of the impending blowout. The panicked U.S.$1.1 trillion bailout of the euro in May, dictated by the City of London, has only made Europe’s sovereign debt crisis a trillion dollars worse. The Bank for International Settlements’ quarterly review, released 14th June, compared the European debt crisis with the onset of the U.S. subprime crisis in 2007. Whilst this is a flawed comparison, as both crises are manifestations of the one, worsening, global financial meltdown, it shows the BIS has at least a ballpark recognition that the present eurozone crisis is as serious as the crisis which blew out the U.S. and U.K. banking systems. The BIS was especially concerned with the rising levels of risk in the London Interbank Offered Rate (LIBOR), the rate at which banks lend to each other overnight. The LIBOR started rising sharply last month, sparking panic of a repeat of the 2008 “credit crunchâ€. It was that 2008 credit crunch which blew out the world’s banking system, because it froze all of the short-term inter-bank lending that all banks relied upon to roll over their crushing debts. All national banking systems were on the verge of collapse, including Australia’s, so governments stepped in to bail them out (in Australia, Rudd’s guarantees); however, the bailouts transferred the debt from the banks to the governments, thus pushing governments into bankruptcy, a.k.a. sovereign default—the present manifestation of the crisis.

Glass-Steagall

Many financial insiders recognise the threat of a near-term monumental blowout, unless “something other than stupidity†takes charge. In the U.S., this is fuelling the fierce battle being waged for a return to the Glass-Steagall regulations of 1933-1999, under which essential banking functions were kept separate from speculative investment banks, and no bank was allowed to become too-big-to-fail [TBTF], and thus expect the government to bail them out of their derivatives gambling debts. Wall Street and the traitorous Obama administration are working feverishly to stop Glass-Steagall from being inserted into Obama’s otherwise pathetic financial reform bill, in its “conference†negotiation stage between the U.S. House of Representatives and the Senate. They are also trying to squash Arkansas Senator Blanche Lincoln’s strong, anti-derivatives amendment, prohibiting banks from engaging in proprietary trading in derivatives, and other similar activities. Among the voices for a breakup of the TBTF financial institutions are at least two regional U.S. Federal Reserve Bank presidents, a former International Monetary Fund chief economist, and New York University Stern School of Business Prof. Nouriel Roubini. One senior U.S. intelligence source confirmed in discussions with LaRouche’s EIR news service this week that “there are significant numbers of people at the Fed, and even at the Treasury Department, who support a return to Glass-Steagall.†He added that, if the ongoing House-Senate conference fails to produce a financial reform bill with real teeth, “the backlash could be overwhelming, and could be the driver for Glass-Steagall being implemented.†In a 10th June document, circulated by Glass-Steagall advocate Nouriel Roubini’s Roubini Global Economics, former IMF Chief Economist Simon warned that Wall Street was out to kill the Lincoln derivatives regulation, and that President Obama and the White House team, led by Larry Summers, are totally in lockstep with the mega-banks: “We will learn a great deal in the coming weeks, not just about the future stability of our financial system, but also for what President Obama really stands.†LaRouche insisted that only a Glass-Steagall reform can reverse the crisis: “An instant Glass-Steagall reform now, is absolutely urgent, and anybody who doesn’t agree with that, is either very poorly informed, or is being stupid, or corrupt.†To find out about the massive fight to reinstate Glass-Steagall regulations in the U.S., click here.

For more information on “Glass-Steagallâ€, click here for a free copy of the May/June 2010 New Citizen, “LaRouche on Global Debt Crisis: ‘Enact Glass-Steagall, Now’â€, plus the DVD “Glass-Steagall or Dieâ€.

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