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Financial Crisis Shutting Down World Trade
Increase DecreaseNovember 17, 2008 (LPAC)--Cargoes are rotting on the docks around the world, unable to be delivered, due to a lack of financing. The shipping business depends upon letters of credit: for cargoes to move, the shipper needs to know when he puts a cargo on a ship that the buyer at the other end will be able to pay for it, and this is where the banks come in. Banks provide the guarantees of payment through letters of credit and related credit lines, so that the goods upon which the world depends can move. This system has functioned for hundreds of years, but is now breaking down. Due to the collapse of the banking system, banks are increasingly reluctant or unable to issue these letters of credit, and charge significantly more for the letters that they do issue. The result is that an increasing number of shipments are sitting on the docks, in warehouses, or in the cargo holds of ships, orders are being canceled, or not even placed. The global supply chain which connects producers with consumers is breaking, and the consequences will be dire indeed.
The leading edge of this trade crisis is in bulk commodities, which have been hit with a dual whammy of plunging commodities prices and trade-finance shortages. Adding to the difficulty is that many bulk cargoes are financed in dollars, and dollars are increasingly difficult to obtain due to the demands of the multi-quadrillion-dollar derivatives market.
The world depends upon trade, especially during this age of globalization, with nations more dependent than ever upon foreign suppliers for the necessities of life. When this trade slows, people begin to die. When the wheat doesn't get exported, the mills cannot produce flour, the bakeries cannot produce breads, and the stores have no bread to sell. When the iron ore doesn't ship, no steel can be produced, which means factories begin to shut down, and so on, until the entire economy grinds to a halt.
We can live without the derivatives markets, the CDOs, and the other alphabet-soup financial gimmicks, but we cannot live without global trade, and we cannot survive if the supply chain breaks. That means we need a functioning banking system, one which can meet the needs of the population. What we have instead is a system that has failed to the point that it can no longer meet its basic responsibilities, and must be reorganized according to the principles outlined by Lyndon LaRouche.
The consequences of a collapse of the global supply chain would be catastrophic for all of mankind--death, famine, pestilence, the breakdown of civilization itself. The failure to solve this problem, whether by incompetence or deliberate intent, is genocide. The Anglo-Dutch Liberal financial system has failed, and we must abandon it in favor of an American System credit system, quickly