Mr. Coats,
Your idea that state-directed credit does not “stand the test of history” is not at all true. What I would assert does not stand the test of history is the very IMF liberal free trade system you espouse.
The nations that have implemented the IMF conditions of cutting investment in public works, health care, and state-directed credit for the “General Welfare”, have all suffered drastic cuts in living standards and an increase in poverty. All the so-called “structural reforms” called for by the IMF, all under the assumption that if these nations cut their budgets, economic growth would naturally occur, only caused disasters to the nations such as Greece and earlier Argentina, which were forced by manipulated financial circumstances to borrow money with the “deadly financial strings attached”.
The late economist and statesman Lyndon LaRouche forecast the likely breakup of the fixed rate monetary stability of the Bretton Woods System before Nixon took the dollar off the Gold Reserve System in August, 1971, and further forecast that unless a new just economic system was established, the Western international financial elites would create a system similar to the one used by Nazi Finance Minister and Reichsbank President Hjalmar Schacht during the 1930’s to destroy living standards, which would lead to depression, global fascism, and global war.
In 1975, Mr. LaRouche proposed an International Development Bank to replace the IMF, so that credits could be lent to sovereign nations, to build big infrastructure projects to increase the productivity of the physical economy, credits that could be paid back as living standards increased. This proposal was adopted at the 1976 Non-Aligned Nations Conference in Colombo, Sri Lanka.
What the IMF and other Western financial institutions implemented after the fixed rate gold reserve system was destroyed was a policy of looting nations’ wealth by knowingly allowing financial elites to speculate on currencies, while also changing the terms of trade, which then massively increased these nations’ debt, bankrupting them. Then, the IMF comes in with a loan with the deadly conditions, to refinance the manipulated debt, ensuring that these nations can never get out of debt and can never develop.
Such loan-sharking methods, designed to destroy nations, while stealing their wealth, while also arranging for the political destruction or even assassination of leaders who refused to play by the rules of this game, is ably described by John Perkins in his book, Confessions of an Economic Hit Man.
It is quite ironic that the very financial elites and their agents who have carried out such policies are now charging China, which is building real physical projects to increase the standard of living in the nations of the Belt and Road, with creating a "debt trap", which has been the very intent of these financial elites in the West!
So, we are not dealing with a nice academic economic theory. We are dealing with a murderous policy, which has led to the collapse of economic development worldwide, not simply in the underdeveloped world, but in the West as well, where the policy was initially carried out in the late ‘70’s and 1980’s under the name of “controlled disintegration.”.
Behind this policy was a deliberate Malthusian population reduction intent, as the original British Empire’s British East India Company used their employee Malthus to justify the policy of letting the poor starve, and famines to be deliberately created, as in India and Ireland.
The issue is not simply public state-directed credit vs. Private Capital. The issue is for what purpose is money used? The idea that if you just protect property rights, money will regulate itself is absurd. As Mr. LaRouche demonstrated, there is a science to political economy. For societies to grow and develop, the real source of wealth is the promotion of human creativity. There must be new technologies, new inventions, an increase in what is termed “ energy flux density”, and new more productive infrastructure platforms.
To build all this requires credit, and the model for promoting and regulating this credit was termed by Alexander Hamilton and the great 19th Century American economist Henry C. Carey, the “ American System”. It is the use of protective measures against those imperial forces, such as the British Empire, which wanted to destroy sovereign nations, and the use of credit mechanisms to direct credit to productive ends, such as through a National Bank, that the goal of increasing the productive wealth of a nation can be developed, and the “productive powers of labor “ can be increased, to use the term of Hamilton.
Big projects, such as canals, water projects, and railroads were necessary to carry out such a policy. And the idea of leaving to the “market “ to determine if the credit would be made available would be a very sick joke ensuring the continuation of an economic imperialism which did not want to promote the General Welfare, but keep nations down, to better control the world.
So, the method I am promoting is not the failed Soviet model, but the American System model of Hamilton and Henry C Carey, which is the same model for Lincoln and Franklin Roosevelt. For Lincoln, he used the Greenbacks as a source of credit to finance industry and agriculture , as well as the Civil War and the building of the Trans-Continental Railroad, planned during his lifetime but built after his death. FDR used the Commodity Credit Corporation to provide the credit needed to build many of the New Deal projects.
You can have private banks, but they can’t be allowed to speculate and simply make money. The money must be regulated, which is why a restoration of Glass-Steagall is so necessary, in the face of the combined hyperinflationary/ deflationary collapse we are now looking at.
We must use state-directed credit to rebuild the physical real economy, which China is doing with the Belt and Road Initiative. But we must wipe out the speculative derivative bubble of the Western banking system with Glass-Steagall , then issue new credit to build a modern nuclear and fusion-powered System, while we use the existing fossil fuel economy till we replace it with a more energy -intensive mode such as nuclear and fusion, not go back to the literally Dark Agess with inefficient , low dense, and unreliable so- called “ renewables “.
The China Belt and Road Initiative and the interest in joining it by the extended “BRICS-Plus” group of nations is a current day reflection of the once very successful American System. It would do the US well to return to the American System and the Principles of the Declaration of Independence which underlie it, to finish the American Revolution, by extending these principles to the whole world.
That is the real secret of the “New Bretton Woods”. A group of nations, which must include the US, must come together and decide to dump the British System , which includes the IMF, and establish a new system of real economic development, not simply promote “ making money”. To make sure the credit goes to the right areas, please feel free to contact me, to see how Hamilton and Carey answered these arguments, as well as how Lyndon LaRouche did, on an even more advanced scientific level.
Regards,
Gerald Belsky
444-414-5123