World Monetary Reform: Regional Organisation under a New Bretton Woods

(Continued) ...

The Rope in the House...

The most dangerous implication of the onrushing world financial collapse, is the continued unwillingness of the U.S. government to face this reality of the situation. In Washington, D.C., it appears to be the rule, that "one does not mention the rope in the house of the hanged." The President apparently hopes, against all evidence of past performance, that a President Al Gore would honor a commitment to defend an ex-President Clinton from the murderous Bush machine. However, even if Gore were the honorable man he is not, there is virtually no chance that an Al Gore could be elected President after a pre-November 2000 global financial collapse, nor that the U.S. could survive for long under a President George W. Bush. So, when Gore enters the room, the band strikes up the Nashville, Tennessee ditty, "Born to Lose," whereas the President were appropriately greeted by a ditty entitled, "Tell Me It Isn't So."

Among people who desperately need to convince themselves that they are behaving rationally, purely arbitrary blind faith in a delusion, is not sufficiently reassuring. To make their delusions appear credible, they require a rationale or two. Since President Clinton, unlike his Vice-President, is an intelligent, rational person, his clinging to his current officially proclaimed delusion about the world economy, demands the typically Baby-Boomer style in pseudo-rational doctrines, the "Third Way" and "New Economy." It also demands a third sort of reassurance, the belief that the majority of popular opinion still shares his delusion. The best way to avoid thinking about the rope, is to accept the delusion that it does not exist. If customary fools, popular opinion, share that delusion, so much happier the wishful thinker will be—for at least a moment or two longer.

Start from the reality of the present world financial situation. Then, pin-point the delusion which prevents a President Clinton—and many others—from seeing the reality they desperately wish to deny. Start with the reality of the Triple Curve, and also the reality of the fact that the world financial system is, at this moment, in the midst of a hyperinflationary spiral like that of Germany 1923. Then, examine President Clinton's expressed belief in the delusion of a "new economy;" look at this delusion in light of the global financial reality which the President has refused to face—since no later than October 1998.

Look at two versions of the Triple Curve. The first, is the general version which I first presented in graphic form in the setting of a Vatican conference of Autumn 1995 (Figure 1). Then zoom in on a close-up of the area of the same curve at a critical point, the point at which the rate of monetary expansion rises more rapidly than the rate of financial expansion (Figure 2). The latter is the condition into which Germany had entered over the interval March-October 1923. The latter is the phase at which the rate of hyperinflationary spiral of financial assets, itself fed by wild-eyed monetary expansion, erupts as an accelerating form of hyperinflation of commodity prices. The latter is the point recently reached, a point comparable to Germany of March-April 1923 (Figure 3).

This situation is comparable, in the domain of mathematical physics, to the Riemann shock-wave "front" which Riemann defined in his "The Propagation of Plane Air Waves of Finite Magnitude" (Figure 4).[2] The transition from the general pattern shown in Figure 1, to the local condition shown in Figure 2, is analogous to that shown by the Riemann shock-front of Figure 4. The March-October 1923 development in Germany, as depicted by Figure 3, is comparable.

Look at this in terms of the price of a barrel of petroleum.

To understand this comparison, make a distinction between the physical costs of production and distribution, including the direct costs of administration of the processes of production and physical distribution, and the additional costs added to prices by inflation of the financial-capital nominally invested in title to ownership of that entity. Typical are the current financial charges incurred by mergers and acquisitions of entities producing, processing, and distributing petroleum and petroleum products. Then, examine the rising portion of total price per barrel represented by the purely financial charges which mergers and acquisitions add per barrel produced and distributed.

Look at similar patterns of financially-driven inflation in areas such as real estate, and primary materials generally.

In such cases of combined "privatization" and mergers and acquisitions generally, one must recognize the fact that a hyperinflationary expansion of total financial accumulations, leads, by a significant factor of delay, toward a self-feeding inflation in the amount of tax which mergers and acquisitions superimpose on each barrel of oil, etc. At the point, this factor of increase of gross price greatly exceeds the underlying, physically-incurred costs of production, distribution, and management, a hyperinflationary expansion of gross financial capital, explodes as an emerging and generalized commodity-price inflation.

Thus, during 1997-1998, the world financial system entered the terminal phase of its existence. As of October 1998, this assumed the form of a general hyperinflationary growth in monetary expansion. Approximately the close of 1999, the general hyperinflationary trend began to assume the form of a self-feeding trend toward the eruption of commodity-price inflation. While we can not, presently, determine the way in which the March-October 1923 Weimar Germany process compares, in scale, to the presently emerging global hyperinflationary trend in key commodity prices, the fact that a comparison is to be made, is already sufficient evidence on which to base the most crucial observation; the world is entering the shock-front phase of a general post-1997-1998 global hyperinflation in nominal valuations of financial assets.

The present financial system as a whole is hopelessly bankrupt. There is no way in which present financial obligations outstanding could be paid. Over-the-counter derivatives must be the first to go, followed immediately by other forms of derivatives and junk-bond indebtedness. In addition, long-term debt generally, must be frozen and rescheduled at nearly zero-interest rates. Other financial assets, such as personal saving accounts and pensions, must be maintained as currently liquid, but only as is required to optimize social stability of family households and employers.

The world requires a new monetary and financial system, rebuilt from the ground-level of expanded present levels of physical output measured in quantities of employment and output in production of physical goods of newly produced infrastructure, agriculture, and manufacturing. A sudden and sweeping cancellation of all changes in monetary, financial, and economic policies since August 1971, is mandatory.