LaRouche's collapse function explains the systemic crisis

+ The BRICS "took responsibility for the future of the world" + Lula to BRICS: it is time to adopt changes in the financial system

Today I am providing my English translation of three articles, originally in Italian. (Emphasis mine in all of them).

The first one is an article published on Movisol.org on 2nd November 2024:

LaRouche's collapse function explains the systemic crisis

The indicators of the “typical collapse function” published by Lyndon LaRouche in 1994, representing the trajectory of the transatlantic economy, continue to worsen. The gap between the upper curve (that of the soaring financial aggregates) and the lower curve (of the plunging physical economy) is approaching threshold levels. While the data for the lower curve are roughly available, for the upper curve only the tip of the iceberg is visible, which in any case is already severe enough to set off alarm bells.

The overall debt is spiralling out of control, while the production of physical goods, which should compensate for the financial debt, is collapsing. When we talk about debt, we mean aggregate public (government) and private (companies, banks and households) debt. A recent report by the International Monetary Fund, published before the annual meeting, focused on the growth of global public debt, which is expected to exceed USD 100 trillion in 2024. The most alarming figure is the growth of the US debt, which has risen from $20.2 trillion in 2017 to $35.8 trillion today, with the deficit in the April-August period of this year doubling compared to the same period last year: $9.8 billion versus $4.3 billion. For the first time in America's 235-year history, in fiscal year 2024 (1 October 2023 - 30 September 2024), net interest spending on the US public debt, at $881.6 billion, exceeded military spending, which was $841.8 billion.

In addition to the US, EU government debt is also a source of concern for the financial markets. The French government, in particular, has come under scrutiny, as French debt is, in absolute terms, the largest in the Eurozone: €3.2 trillion, followed by Italy (€2.9 trillion) and Germany (€2.4 trillion). Confidence in the Paris government's ability to implement the €60 billion austerity programme announced to reduce the deficit (currently at 7%) is low, as Prime Minister Barnier has no majority of his own and has to beg support from opposing factions in Parliament.

However, it is not good that the IMF and the financial markets only focus on public debt, ignoring the much larger private sector debt. The latter is mostly hidden in the inflated value of bank assets, equities and the hidden volume of derivative bets. Although the Bank for International Settlements estimates the notional value of OTC (Over The Counter) derivatives at $667 trillion, the real figure could be several trillion.

We also see the tip of the iceberg, for instance, in the so-called “unrealised losses” of the banking system, i.e. the losses incurred due to the depreciation of assets in the banks’ portfolios, the value of which has fallen sharply as a consequence of the central banks’ rate hikes over the past two years. Until now, banks have been allowed to hide these losses by accounting fraud, i.e. by writing these assets on their books at purchase value, instead of market value. US banks' unrealised losses, although slightly down to $513 billion in the second quarter of 2024 from $517 billion in the first quarter, are still higher than the $478 billion in the last quarter of 2023.

Instead of verifying the bankrupt state of the financial system, the IMF and central banks focus on reducing government debt, because refinancing debt will absorb liquidity that they want to reserve for the financial sector instead, while at the same time exerting upward pressure on interest rates that will further depreciate bank assets. In the corrupt logic of the financial oligarchy, governments must therefore be prepared to bail out the system again at the expense of the citizens as in 2008, which is difficult to do with over-indebted nations.

Yes, because a repeat of the 2008 crisis, even worse, is just around the corner. Returning to LaRouche's “collapse function”, while the financial curve has soared steeply upwards, as we have seen, the physical curve is literally collapsing. Figures published by Brussels show that EU industrial production has been contracting for 24 months (https://ec.europa.eu/eurostat/statistics-explained/images/e/ec/EU%2C_Industrial_production_for_total_industry_and_main_industrial_groupings%2C_2010-2023_15-11-2023.png) [see image below]! Regarding the largest EU economy, Germany, the Statista database recently wrote: “The upward trend in German industrial production has been at a standstill for years. The corresponding indicator line has been on a downward trend since 2018. Previously, industry had grown almost steadily since the end of the last economic crisis” (https://de.statista.com/infografik/28510/produktionsindex-des-produzierenden-gewerbes-in-deutschland/).

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While the West collapses, the Rest of the World thrives, as shown in the next articles.

The second article of today was published on Movisol.org on 30th October 2024:

The BRICS "took responsibility for the future of the world"

The BRICS Summit of 22-24 October was “the most successful in history”, South African President Ramaphosa said at the end of the three-day event in Kazan, Russia. Ramaphosa especially appreciated the efforts to strengthen financial and political independence among the member countries, which now “lead global change”. In turn, Chinese President Xi Jinping emphasised that it is “for the overall trend of peace and development that we BRICS countries have come together”.

Opening the restricted meeting of the nine member countries of the group (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates), Russian President Putin said of the BRICS that “we have taken responsibility for the future of the world, not only in words, but in deeds... The BRICS states possess truly immense potential in terms of political power, economy, science, technology and human development. Moreover, we are united by shared values and a common vision of the world”.

The next day it was announced that the nine leaders had decided to offer the new “Partner State” status to 13 more countries (Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Vietnam, Uganda, Uzbekistan). If all are admitted after the consultations, the enlarged BRICS will represent over 4.6 billion people, or 57% of the world's population (for comparison, the population of the G7 countries is about 780 million). But more important than the numbers themselves are the policies and principles they are committed to, in particular the right to development for all.

There was much discussion among the regular members of the group about the options for creating alternative means of payment, but the decisions taken so far were clarified by President Putin at a press conference at the conclusion of the summit. How to regulate trade, he said, “is indeed a critical issue and that is why we are using our respective national currencies, which is a well-known fact. As for payment systems, we are using the financial messaging system created by the Central Bank of Russia. The other BRICS countries also have their own systems, which we will use, are already using and will continue to use”.

Two other Russian initiatives were put on the table during the various meetings. The first is the creation of a new BRICS “investment platform” to promote the economic growth of member countries and “provide financial resources to countries of the global South and East”. The idea is to ensure “security” for investments in emerging markets, including by shielding them from sanctions and illegal seizures of assets abroad, as the US and Europe have done. Secondly, the establishment of a BRICS Grain Exchange to “protect domestic markets from negative external interference, speculation and attempts to create artificial food shortages”.

During the official proceedings and in the numerous bilateral meetings on the sidelines, concrete development projects in progress or proposed in the different countries were presented. According to many reports, some Western leaders and so-called observers were surprised, and some very concerned, by the success of this year's BRICS gathering, as they were forced to admit that their strategy of isolating Russia and spreading fear of China did not work, quite the contrary.

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The third article was published on Movisol.org on 31st October 2024:

Lula to BRICS: it is time to adopt changes in the financial system

Brazilian President Luiz Inácio Lula da Silva was unable to travel to Kazan in person for health reasons and connected via video conference, stating in no uncertain terms that the Bretton Woods system, i.e. mainly the International Monetary Fund and the World Bank, has failed in its task with regard to developing countries. The BRICS must ensure that the international financial system serves the new anti-hegemonic world that is emerging around the BRICS. Action is needed and cannot be delayed, he argued.

Lula pointed out that, contrary to what most believe, financial flows around the world “continue to go to the rich nations. It is a Marshall Plan in reverse, where emerging and developing economies finance the developed world. The BRICS initiatives and institutions break with this logic”. The New Development Bank [NDB], for example, “is designed to succeed where the Bretton Woods institutions continue to fail. Instead of imposing conditions on its loans, the NDB finances projects aligned to national priorities. Instead of deepening inequality, its governance is based on equal voting rights”. The Brazilian president echoed other leaders of the original BRICS group, calling for the creation of “alternative means of payment for transactions between our countries”, pointing out that “it is not a question of replacing our currencies”.

At the same time, the world must overcome the “technological apartheid” imposed on the global South and work for peace. “Many insist on dividing the world into friends and enemies. But the most vulnerable are not interested in simplistic dichotomies”, he reminded. “What they want is abundant food, decent jobs, quality public schools and hospitals with universal access. They want a healthy environment ... a life of peace, without weapons that kill innocent people”.

In this regard, he denounced the genocide in Gaza, which has become the “largest cemetery of women and children in the world”, and the destruction that is spreading in the West Bank and Lebanon. “At a time when we are facing two wars that have the potential to go global, it is crucial to recover our ability to work together towards common goals”.

What Lula outlined is the path he intends to follow in 2025, when he will take over the BRICS presidency from Russia. At that point, Brazil will no longer be the only Latin American country to join, as both Bolivia and Cuba were invited in Kazan to join as partner states.

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