BELIZE CITY: Mon. November 3rd, 2008 — The leading Saudi international daily, Asharq Al-Awsat, posted a comment by Hussein Askary of Iraq on November 3rd under the report of British Prime Minister Gordon Brown’s visit to Saudi Arabia, Qatar and the UAE.
In Asharq Al-Awsat, Hussein Askary wrote: “Don’t support the British Empire! Anyone who harbors the illusion that America is the sole controller of the world and that it is the power which dictates to the Arab states their policies, should carefully study what Brown is doing. He is trying to save the international financial system which is controlled by the hedge funds based in the British islands, such as the Cayman Islands, through the creation of a world government under the umbrella of the IMF and run by Britain. This would supposedly be financed by the money from the Arabs, which is not enough and will never be enough to save the global financial system which was declared dead by Lyndon LaRouche a year ago. The British Empire is not a nation. It is not England. It is a group of financial and economic interests that need nations and armies to impose their control over all nations.”
The way things stand right now; there are grounds to fear that the New Bretton Woods summit which French President Sarkozy has organized to take place on November 15th in Washington, DC, will not lead to an adequate result. It could easily turn out as one high-ranking banker, quoted in the French newspaper La Tribune, thinks – that November 15th will be promptly followed by a “black, black Monday.” But there could also be a “black Monday,” and then a “bloody Tuesday,” and a “horrendous Wednesday,” soon to be followed by a total collapse of the world financial system.
This gloomy prognosis is based on a number of factors. All indications are that neither the Bush administration, which is heavily infested with former Goldman Sachs associates, nor Britain’s Gordon Brown, have any intention of agreeing on an actual reorganization of the bankrupt world financial system. Bush was totally against the idea of the newly elected U.S. President taking part in the summit; and since then has insisted that he sets the agenda. But even those who are equipping the International Monetary Fund (IMF) with a “Global Regulation Strategy” – which means more brutal austerity as Eastern Europe is now experiencing – are totally mis-estimating the situation.
Because the idea that, after neo-liberal economic dogma has totally failed, the nations of Asia and Latin America will once again permit themselves to be subjugated by a global IMF dictatorship, is an absurd one.
Every competent economist now know that what has started as a global financial crisis has now turned into a full-fledged global systemic economic collapse as the data from all corners of the world shows, regardless of the spin-doctors.
Earlier, I wrote that the Baltic Dry Index had fallen 90% in the last 3 months. It is now down another 5% for the month of October, as ships lay idle at anchor in Singapore, Greece, Shanghai, and Hong Kong. Lack of demand and lack of letters of credit are given as answers. China Int’l Capital Corp Ltd reports that orders for new ships have declined by 66% on a worldwide basis. In the last 4 weeks, China has not imported a single ton of iron ore. Vale do Rio Doce, the world’s largest iron ore producer, said in October that they will cut production by 30 million tons as world steel demand has fallen by 20% in October. They, as the 2nd largest world producer of nickel, are cutting production by 21% in Indonesia, and similar reductions in manganese ore and aluminum at their other mines around the world.
In Indonesia, tin mining and smelters are in free-fall as world demand is off by more than 20% in just the month of October. Prices have fallen from US $ 25,500/ton in May to US $ 15,300/ton. The current cost of production is US $ 18,000/ton, while production has fallen from 137,450 tons to 76,890 tons. Indonesia, along with Thailand and Malaysia, are the world’s 3 largest rubber producers, accounting for 70% of global output. Since June, prices are down by 51%, and now the 3 countries have agreed to cut production by 210,000 tons by cutting down old rubber trees covering an area of 420,000 acres.
Also in the 3 countries, palm oil, an edible oil which is a major source of protein for poor people, has seen its prices fall from US $ 1,266/ton in May to US $ 427/ton. Both Malaysia and Indonesia, the largest producers in the world, had been frantically increasing production to take advantage of raising prices in a “bio-fool” frenzy. Palm oil farmers in Costa Rica are in the same boat as Malaysia and Indonesia – they borrowed heavily against land and future earnings to buy new vehicles, raise their living standards, and increase production – now they have seen prices fall 66% in just the past few weeks, and cannot service their debts. In Indonesia, in the last 2 weeks, over 23 farmers have committed suicide.
The collapse of the auto sector is worldwide. Today, GM reported sales for October was 45% off from last October. Ford and the other major producers were down about 32%, as total sales were 838,156 in October compared to 1.23 million in October 2007. In Germany, Daimler is stopping production of its Mercedes cars for 5 weeks. In the heavy truck sector, Volvo is the industry leader, but for the first 9 months of 2008 its sales collapsed an unbelievable 100%. Sales fell from 41,970 to just 115 trucks. Overall, global sales of new trucks fell 55%.
In China as steel prices have fallen about 40% in the last 8 weeks, more than 60% of its steel factories are now bankrupt and closed. Hebei Iron & Steel Group, the largest steel producer in China, cut production 20% in September and a further 20% in October because of the sudden collapse in demand. Some 90% of its steel was for ship building, automobiles, and building construction, which are all down by more than 65% in the last 6 weeks. In the south of China – the Pearl River Delta area between Hong Kong and Guangzhou – over 54,680 factories have closed their doors, putting over 60 million workers out of work in the last 4 months. These factories produce clothing, toys, plastic goods, electronics, and machinery. Two-thirds of them were owned by investors from Taiwan, Singapore, and Hong Kong, who simply drove across the border and abandoned their businesses, leaving the workers un-paid up to 3 months. China’s government had to pay the workers’ wages, as a lot of the owners had gambled their firm’s money on the stock markets, which have all fallen over 65% in the last 6 weeks.
All grain prices are about 35% to 52% below the prices in June. Soybeans suffered the largest decline at 52% below its June price. Farmers are in a Catch-22, because while incomes have fallen by over 45% in the last few weeks, the cost of production has remained high, due to high fertilizer, chemicals, and fuel prices which have not fallen much. Already, the FAO in Rome has stated that more than 1 billion people are now at the edge of starvation and that while the industrialized countries have promised in June US $ 10 billion in food aid, less than $ 1.1 billion has been received by the FAO, even though the major Central Banks and treasuries have given over US $ 1.6 trillion to bail-out banks, while people die of starvation.
The production of wallboard in the United States is now down by 60% as construction has grind to a halt. The giant West Frazer Timber Co. in Vancouver has cut production of lumber by 13% in October as the housing collapse eats its way through the supply chain.
In the October 31st El Universal, Carlos Villanueva, president of the World Association of Mexicans Abroad, estimates that by December this year, some 1 ½ million Mexicans will return home from the USA because of no jobs and no houses to live in. According to Mr. Villanueva, since August 150,000 Mexicans have already returned home, while in that same period, 550,000 Mexicans who are legal US residents have lost their jobs, and over 600,000 illegal’s have also lost their jobs. Most were employed in construction, hotel and restaurants. He cites as examples, cases in which 8 persons lived in a home and contributed to the mortgage payment, but with 6 now unemployed, the remaining 2 cannot meet the monthly payments, so they are about to lose the house.
The question is how to solve this global economic break-down crisis? The French, Italians, Russians, and Chinese want a solution based on regulation of financial institutions, outlawing of hedge funds, closing of offshore havens, fixed-foreign-exchange rates, capital controls, and massive technological help to the less developed nations. In other words, they want a return to Alexander Hamilton’s American System, or the New Deal of Franklin Delano Roosevelt (FDR). The opposing viewpoint is the imperialism of the Anglo-Dutch financial oligarchy of John Maynard Keynes and Milton Freidman.
Today’s reading of the world press, especially the London Telegraph, gives the impression that the Bretton Woods Conference was dominated by Lord Keynes and his economic views. In 1935, Lord Keynes published his General Theory of employment, interest and money. In his 1937 German edition, he wrote in its preface that his theory can work best in a totalitarian state like Hitler’s Germany. In a famous letter to American President Roosevelt, he advised that while in depression or recession, the state must be engaged in deficit spending, it is better to let men dig holes and fill them back up, rather than let them engage in productive activities. In his General Theory, he wrote: “Two pyramids, two masses for the dead, are twice as good as one; but not so two railways from London to York.” In other words, never spend on any productive venture.
President Roosevelt rejected the advice of Lord Keynes and the British Empire. In fact, at the Casablanca Conference, FDR told Churchill: “The colonial system means war. Exploit the resources of an India, a Burma, a Java; take all the wealth out of these countries, but never put anything back into them, things like education, decent standards of living – all you’re doing is storing up the kind of trouble that leads to war… Imperialists don’t realize what they can do, what they can create! They’ve robbed this continent (Africa) of billions, and all because they were too short-sighted to understand that their billions were pennies, compared to the possibilities! Possibilities that must include a better life for the people who inhabit this land.”