161 



February 1. 1993 THE NEW FEDERALIST 



LaRouche on How To Get Economy Moving 



Special to New Federalist 

 Jan. 26 (EIRNS>-In his weekly 

 interview with Executive Intelli- 

 gence Review's Mel Klenetsky. 

 on Jan. 18, former presidential 

 candidate and political prisoner 

 * - Lyndon LaRouche responded to 

 a series of questions on how 

 Clinton really can get the domes- 

 tic economy going again. 



LaRouche first outlined 

 what's wrong with the current 

 Federal Reserve System 



"Since the formation of the 

 Federal Reserve System gener- 

 ally, the way we get money for 

 our economy, is to go into debt to 

 private international financial 

 circles. 



"The way it occurs, is the fol- 

 lowing way. The banking com- 

 munity, the financial communi- 

 ty, i.e., in New York, discounts 

 paper with the Federal Reserve 

 System. When it discounts, it dis- 

 counts at a discount rate. The 

 Federal Reserve System writes 

 the discounter, or the person 

 who places the paper for dis- 

 count, a Federal Reserve check 

 The Federal Reserve check is 

 processed for collection in the 

 normal way. It goes to the Feder- 

 al Reserve bank. The issuer at 

 the Federal Reserve bank, puts 

 new money into circulation- 

 money which it creates out of 

 thin air. using the paper dis- 

 counted as security for this 

 purpose 



"So the banks get money creat- 

 ed out of tbjn air at, today, per- 

 haps around 3%. They turn 

 around and today, they're loan- 

 ing that chiefly to the federal 

 government, at between 4.5% 

 and 8% for medium-term to long- 

 term bonds, or, in some cases, 

 shorter-term paper. 



"So, every penny that goes into 

 circulation as new money today, 

 goes in as the creation of new 

 debt of the federal government, 

 to these private interests. What 

 the world is saying, is that the 

 process of creating money by go- 

 ing into debt to private interests, 

 to allow the private interests to 

 create money out of thin air and 



charge the U.S. population (the gov- 

 ernment), for that, is not going to work 

 any more, it's going to be hyperinfla- 

 tionary. because of the circumstances 

 in which we find ourselves. 



"Therefore, because of tnat »nu«. 

 tion, which even the New York bank- 

 ers and the Socialists in Germany, and 

 so forth, all agree upon: It is a fact that 

 you can no longer consider the Feder- 

 al Reserve System as the mechanism 

 of monetary policy; but rather we must 

 go back to the Constitution and print 

 money by authorization of Congress, as 

 the Constitution requires. And issue 

 that, not as a debt of the federal gov 

 ernment, but as loan capital to govern- 

 mental institutions and to the private 

 sector at low interest rates on medium- 

 to long-term to stimulate the economy 



'The debt will then be created in 

 those forms of security provided by 

 those kinds of investments, for which 

 the debt is loaned Which means that 

 the government must restrict its lend- 

 ing policy generally, except in emer- 

 gencies, to public utility and related 

 kinds of things, and to the private sec- 

 tor, in areas in which physical wealth 

 is being created, which offers security 

 for the loan. 



"And if you don't do that, there's no 

 way that you can safely expand this 

 economy and recover it from what is 

 in fact a continuing depression— not a 

 recession 



"If you can't get the economy mov- 

 ing, you're going to have a social disas- 

 ter in the coming period The massive 

 cutting of health care, just throwing 

 people out to die, which is what effi- 

 ciency means^in health care at this 

 point— at lea's't in the way it's being 

 proposed— cutting jobs in industries 

 massively, which is going on. IBM has 

 some embarrassing figures to report 

 on its unprofitability recently. These 

 kinds of things are going to sink the 

 economy deeper and deeper. State 

 governments and local governments 

 are going to go into a worse crisis gen- 

 erally, than even the federal gov- 

 , ernment. 



"If we're going to get out of this mess, 

 and get a recovery going, we're going 

 to have to scrap the Federal Reserve 

 System, and go back to the techniques 

 used by Lincoln or by President 

 George Washington and so forth, 

 before 



"So, as long as Clinton is committed 

 to submitting to the bond market and 

 the Federal Reserve System, and as 

 long as he's not prepared to take the 

 measures to bring these boys into line 

 and get the economy moving in the way 

 I've indicated, there's no chance of 

 anything but a failure from Clinton 

 And that's the crux of the matter 

 That s the breaking point. That s the 

 point on which he stands or falls If he 

 doesn t do as I've recommended, he's 

 finished— he's finished before he 

 begins." 



