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LAROUCHE ANSWERS A QUESTIONER ON THE 'BIG FOUR' AND FUTURE PROSPECTS FOR THE U.S. DEBT TO CHINA

November 2, 2009

A very large U.S. debt to China is secured in the form of a promissory note backed by nothing but the current nominal price of that debt. At this moment, the value of China's asset would appear to be relatively worthless over the short to medium term. If the price of that merely nominal debt collapses, through a collapse of the market value of the dollar, China loses.

However, if China converts that debt into the form of physical productive values of goods purchased and produced, the intrinsic (physical) value of the debt is relatively secured by the intrinsic physical worth of the investment in physical product actually produced by conversion of the paper asset (the debt) into real values.

However, additional complexities come into play. If, as is implicitly intended, the related economic reform occurs as a treaty-arrangement among a block of a "Big Four," the U.S.A., Russia, China, and India, and also other, relatively smaller participating nations, the relative value of goods within the "Big Four" group becomes the dominant factor in the world economy, thus superseding the nominal values within any non-participating group of nations which continued to cling to the London-centered, presently disintegrating IMF monetarist system.

Were China to have failed to enter this form of cooperation with Russia and other relevant nations of the group, the value of the physical economy would collapse through lack of a market sufficient to sustain the present scale of China's population and related requirements.

In summary: wealth is produced, not by trade, but, by growth and rising rates of productivity through investment in relatively increased, combined rates of both capital-intensity, and energy-flux density of modes of production. E.g., a “neo-malthusian world” is a “self-doomed world.”

-- Lyndon.