Question: What is the alternative to replace the IMF and the World Bank system, and what would be the mechanism for financing it?

LaRouche: What has to happen now is that the leading nations of the world, or a group of them, must put the banking systems of their respective countries in bankruptcy reorganization, with the possible exception of China, and must together put the entire IMF system into bankruptcy reorganization. This means that the governments are putting entire financial systems, both international and national, into receivership. This means that, immediately, we are eliminating, in fact, the system of independent central banking systems, because the banking systems that are members of the central banking systems, or the financial systems which are members of these banking systems, are bankrupt. Therefore, you cannot continue the obligations of these financial interests on the books, because they are not honorable. Therefore, some agency -- that of government -- must intervene to reorganize these debts, and say which will be paid and which will not be paid, and when and if and so forth.

Now this also means other things. When a government puts a banking system into bankruptcy reorganization, the government under the general welfare principle, and under the principle of sovereignty, must make sure that essential functions performed by banks and similar institutions, are continued. That is, the savings of families, the flow of credit to farms, businesses, manufacturing, and so forth, must continue. The general welfare must continue; public payments, public services must continue. Therefore, the government will order the banker, even though he's sitting in a bankrupt bank, to deliver these financial services as before, in a normal way, especially in these priority areas.

Government in turn must mobilize the credit needed to be conduited through these banks, to make sure of the continuity of the functioning of these elements in society. This means that all creation of money and national debt is in the hands of governments, not the banks. This also means on an international level, that there's an agreement among governments on control of finances, which will create a new international monetary financial system, much like the 1946-1958 phase of the old Bretton Wood system. A gold reserve system of fixed exchange rates and so forth and so on. For example, under such an arrangement, as Dennis Small and others have done this work, you take the debt of the Americas that is illegitimate. That is, the amount of the accumulation of debt to the international monetary system, which was imposed immorally, and by fraud upon these nations since 1971, using fluctuations in the monetary financial system as a pretext for forcing governments to devalue their currency and then to compensate for devaluation by accepting a new artificial debt which they had not actually incurred on their books. This has been sucking the blood of Central and South America since that time.

So that kind of credit will be wiped from the books, as illegitimate, as immoral from inception. Honorable credit, honorable debt will be honored as much as possible, with certain priorities. So that is essentially what we have to do. Now, in addition to that, we have other forms of credit, as I mentioned in response to another question earlier. We have international treaty agreements. To give you an example, let's take the case of Europe and Asia. Now, you have two pivots in Europe and Asia which are key to a revival of the economy throughout the Eurasian continent and also, potentially, the United Kingdom. One is an alliance, which is having a meeting in St. Petersburg right now. This is Russia, Germany and France. They are the linchpins of the Western European economy, and Spain could join in if they got rid of Aznar, who we think is some kind of a creature different from someplace different than this universe. Western Europe would make a combination -- not just the European Union as such, but something which would have the same effect -- a combination of partnership among respectively sovereign nation-states, who would enter into partnership for the purposes of long-term cooperation with countries in Eurasia.

Then, on the other hand, you have Russia, China, India and other countries of Asia who also now have a growing partnership in cooperation for economic and other security and progress issues. Therefore, you would have long-term treaty agreements between Western Europe and a group of nations in Asia, such as the Southeast Asia group, India, China, the North Asia group, which includes China, Japan, Korea and Russia -- these groups would each engage with one another in long-term treaty agreements. This would mean twenty-five to fifty year agreements on multiple projects of types of projects, under fixed exchange rates at fixed borrowing costs, over that period.

Now, in this case, those treaty agreements would create credit among states because they promise payments. The promise of one government to pay another, or the people of another government, is also a form of monetary creation. This monetary fund based on this kind of credit, can be used to promote increases of employment. For example, Germany is crushed by the fact that it has a four million plus level of unemployment. If you increase the level of employment in Germany to reduce the unemployment, Germany, which is potentially bankrupt at present, would become healthy again. Therefore, these long-term agreements, which increase employment and increase investment, are solid things.

Let's take the Americas. We have a group of nations in the Americas -- let's take from the United States south, start with Mexico and work south. As we discussed this with circles around Jose Lopez Portillo at the time he was present, on the question of the 1982 crisis, as I presented this in the Operation Juarez proposal, this means we would create a facility of cooperation among consenting states of Central and South America, a credit facility, a monetary facility for agreement among themselves. This facility would then be used to negotiate long-term credit agreements with other parts of the world, such as the US, Canada, and so forth. This is what we would get into strategically in this kind of reorganization. This means that not only would we reorganize the International Monetary Fund accordingly, with a group of treaty blocs, reconstruction blocs, but we would also have created in effect a new kind of world political arrangement, which is based on the idea that the world must be a community of sovereign nation-states, each perfectly sovereign but joined together by sharing certain common principles. And that's what the reform means.

-30-