Printer-friendly versionSend to friend

November 9, 2009 (LPAC)-- The Russian interlocutor, who asked Mr. LaRouche a question a week ago (posted on this website) on the significance of the Russia-China agreements, asked a followup question, below.

Question:

I still don't understand. His answer contains two points: 1) This infrastructure development project will increase wealth in terms of physical economy. I agree. 2) This project will increase value of dollar. I disagree.

Let's think about investments required for this project not in terms of paper, but in physical economy terms. Not paper will be invested, but thousands of man-years, incredible amount of resources, technologies etc. Who will be investors in terms of real participation? China and Russia.

Dollars/treasuries in China's reserves is actually nothing but USA debt which has been created from USA huge international trade and budget deficit.

And the project China/Russia are about starting has nothing to do with USA. So this project will not increase power of USA economy and, therefore, will not increase value of USA debt.

It's the same as if I owe you and you constructed a factory with participation of someone else. The factory has nothing to do with my personal debt to you. Your factory is your factory, my debt is my debt.

So, it will be great if Mr. LaRouche provides us with better explanation.

LaRouche responds:

Your argument on the U.S. dollar errs in the respect that it presumes no change from a present world monetarist system to a credit system.

Without an essential change from the present world, British-run monetarist system, to a credit system, all of the currencies of the world would become worthless very soon. The world is gripped presently by an onrushing general economic breakdown-crisis, and that, presently, in a very advanced stage. With a four-power agreement of the type I have specified, and which the recent China-Russia agreement implies, there would be a general change from a monetarist system, the presently, immediately bankrupt system, to a credit system. in which production values, not monetarist values, reign.

The U.S. dollar's ties to China's economy mean that an increase in per-capita value and output of the China economy engaged in the presently agreed China-Russia agreement, would mean a revival of the value of the presently collapsing U.S. dollar through the increased value of the U.S. debt to a rising Russia-China economy.

Think of such changes as from presently ruling monetarist lunacy, to a reasonable amount of international sanity. Even continental western Europe, presently a pitiable victim of the British controlled Euro system, would benefit from the side-effects.

You must re-examine the case from the standpoint of my triple curve treatment, which has been for decades the only competent generally successful forecasting tool in the world market.

— Lyndon.