LaRouche's call for a New Bretton Woods
In an address to a forum of the Franklin Delano Roosevelt Political Action Committee (FDR-PAC) in Washington, D.C. on Jan 4, 1997, Mr. LaRouche called for the U.S. President to convene an international conference to establish a "new Bretton Woods system".
"The general nature of the solution is obvious," LaRouche said. "We had a financial system and a monetary system, from 1946 through 1966, which more or less worked. It was called the old Bretton Woods system. The system was based, not on gold currency, but on a gold reserve system. The function of the gold reserve system was to keep currencies, relative to one another, at fairly constant values. This meant that if you loaned money to someone, that the currency of the fellow to whom you loaned, would have approximately the same value five years from now, that it had today. So you didn't have a borrowing premium that you put on the loan, based on the expectation of the fluctuation of the currency.
"To promote long-term trade and investment in international markets, requires stable relations among currencies. And, the function of the Bretton Woods system, the original one, was to provide that mechanism, and to induce governments to maintain stable relations, that is, discipline among their currencies on a gold reserve basis.
"Under that policy, we in the United States operated on what was called a national economic security policy, which was a key part of our postwar national security policy. That is, we had a protectionist policy, in effect, and we encouraged other governments to have protectionist policies, because it was our desire that we be able to trade with these countries, which we could not do, in a stable way, unless they had fairly stable currency values. Therefore, if they needed something, if they needed to protect a certain industry, we would encourage them to do so, with tariffs and other protective agreements. We would enter into multilateral agreements, or bilateral agreements, with various countries for the purposes of mutual economic protection, to protect their sugar growth, or to protect this particular industry, and so forth, because we knew that the protection of that industry as a source of income and wealth inside the country, and on the international markets, was essential to maintain the value of that friendly country's currency. And that's the way we did it.
"Also, long-term borrowing was cheap in the international markets. If you wanted to invest in a country, the long-term costs were cheap, at 1-2%, for example, in many cases. Or, you would have agreements of various kinds, which would reduce it, effectively, to that. So therefore, we could export, as the Germans could, and so forth — we could export capital to developing countries, at fairly favourable terms, particularly those which had some labour force, an agricultural industrial labour force, with some potential."
The return to such a system, LaRouche said, means that the President of the United States must launch a general monetary and financial reform, to prevent a financial collapse from plunging the planet into chaos. "That means, the President must say, 'We are going to proceed to put what we know to be bankrupt financial and monetary institutions, into bankruptcy, that is, into receivership, for financial reorganisation under the supervision of government,' the same thing you do with a local bank if it goes bankrupt. The relevant state or Federal institution must come in and put that bank into receivership, take it over, and process it, try to protect some of the depositors, and things of that sort, to prevent social chaos, to prevent that thing from becoming a spreading disease within the society, and to try to see what we can salvage out of it, in an orderly way, as opposed to a chaotic way.
"Therefore, the United States must act, together with other powers, to put the world into bankruptcy reorganisation. Every financial system, every banking system in the world, is presently bankrupt! Particularly those that are involved in derivatives.
"Therefore, the United States must take leadership, international leadership, in proposing a new Bretton Woods, which would be a good term for it, which is what I've proposed — that we're going to go back to the principles of the Bretton Woods system in its best years, and the United States, as the principal prospective partner in such agreement, will try to get every nation that's willing to go along with this idea, to assemble and do it. And, those that don't wish to go along with it, that's just tough, we're going to go ahead with it anyway.
"That means that we have to create new banking systems, which is very simple to do, on the basis of the Hamilton model. We go to national banking. We use the relevant article of Section I of the Federal Constitution, to create new issue of currency, not calling in the old one, the old Federal Reserve notes, but terminating further issuance of Federal Reserve notes, using that currency on deposit with the National Bank, as a means of credit to get the U.S. economy going, and get some other things going in international trade.
"Our concern is not who's got a favourable or unfavourable balance of trade; our concern is to make sure that all the members of a community of nation-states become prosperous. And, therefore, our concern is that they become prosperous and secure, just as their concern is that we should remain prosperous and secure. And, therefore, we can make trade agreements and tariff agreements on that basis...."