The following is part of a discussion between Lyndon LaRouche and his associates on Oct. 20 on the significance of the recent Russia-China agreements as a stepping-stone to LaRouche’s proposed Four Powers Alliance.
QUESTIONER: One of the things you said in response to this Russia-China partnership, was that the action by China to invest in these development projects in the Far East will tend to bolster the physical value of the dollar, as almost a flank on what’s being done by the Fed and Geithner. Can you elaborate on that?
LYNDON LAROUCHE: Yeah, sure. What you have, is you have a virtual bond issue kind of thing in China. That trillions of dollars of U.S. debt to China have been institutionalized in the form of a bond issue and similar kinds of things. Now, the point is, the bond issue as such, is one-sided, it’s just the debt of the United States. The only thing that secures that debt of China, is the debt of the United States. so if the United States goes down, with just that bond issue sitting there, as presumably against the U.S. dollar, and the dollar sinking, that bond issue isn’t worth much. However: If the government of China takes the U.S. dollars which are owed to it, in terms of the bond issue, and uses those dollar assets as credit for a large-scale railway and related agreement with Russia, and with other nations of that region, implicitly, suddenly, since that money, represented by the bond issue, used for that purpose, is actually invested in something which has worth, you have now effectively monetized it. That is, you have made it, negotiable, it’s a negotiable asset. It’s not an asset hoping to be rescued by the debt on the United States which will never pay it. Now, those U.S. dollars, designed involved in this Chinese bond issue, being invested in this cooperative operation with Russia, on rail and related developments, has now got some intrinsic worth to it, in terms of these physical assets it’s creating. So that, in itself, is a very important, and a very significant step. It is specifically a step in the direction of what the Four Power agreement would represent. And we don’t mean just four nations, we mean the four nations-plus ― that is, the nations who will jump in on the same package, together with the Big Four. So that is a step in that direction. It’s a substantial step, not just a step, not a gesture. It’s a substantial step in that direction. All that’s required now, since India will easily come into this thing, and since nations such as Korea, including North Korea, Japan, Mongolia, and other countries will come into this game, this is a very significant development. It’s not one that’s going to solve all the problems in the world. If the United States joins this thing, as a Four Power agreement, the way I’ve indicated, then we’re on the road to rescuing the world from the greatest threat to civilization in known history.
QUESTIONER 2: Let me just see if I have this straight: Is that you have China’s investing hundreds of billions of dollars into this project, and other projects, but it’s essentially denominated in dollars. And by tying up dollars in that way, then they’re actually giving it value.
LAROUCHE: That’s right. You’re giving security to those dollars, which it does not have from the United States. Once the stuff is out there, once it’s fungible ― it’s fungible. And once it’s all packed into this investment, that investment is an asset, a real asset, a productive asset. And that has intrinsic value. So you take the dollar, which, the only value of the thing was the United States’ Treasury. Now, the United States’ Treasury can’t carry that right now. But once you take that same value, the same bond issue, and now you’ve securitized it, by committing it to an investment in a real asset, so it’s a physical asset then. The problem is, at present, the bond issue of the U.S. debt, has no security to it, because the U.S. dollar is collapsing. And therefore, every time the dollar collapses another notch, its debt is worth less and less. But! If that debt is invested, in something that’s worthwhile, then that debt, itself, has value ― independent value, because it’s being invested in something.
QUESTIONER: Are you saying, that otherwise, you have these Treasury bonds that are devaluing. And now they’re taking these assets, they’re taking this money, and they’re actually using it for developing actual skilled labor. Is that what you’re saying?
LAROUCHE: Yeah. You’re actually putting it to work, in large-scale infrastructure projects which have productive value. I mean, these transportation systems, and other kinds of systems they’re talking about, have intrinsic productive value, stand-alone value. So now, the United States has, in effect, invested its debt to China, implicitly, by this means, in these kinds of investments. Which otherwise ―
QUESTIONER: That’s the same thing that you would do with the assets which conform to the Glass-Steagall standard in the United States to give them creditworthiness.
LAROUCHE: That’s exactly it.
LAROUCHE: In other words, what you’re doing, is you’re changing monetary dollars, into credit dollars. And this is a part of the same thing you do with Glass-Steagall, it’s an integral part of what you do, to clean up a system, like a Glass-Steagall operation