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Step back from the abyss

By James Cumes - posted Thursday, 11 August 2011

We are at the edge of a financial and economic abyss to which our "leaders" have fecklessly led us. We need only a relatively gentle nudge now and we will plunge over the edge and be confronted with political, social and strategic catastrophe.

That situation carries special menace because our leaders – Presidents, Prime Ministers and our most distinguished "experts" - have demonstrated so convincingly that they do not have a clue what to do.

My most recent book whose title drew attention to the central issues of our present dilemma was appropriately called "America's Suicidal Statecraft: The Self-destruction of a Superpower." It was published in 2006 before the Global Financial Crisis hit us with the Lehman collapse of September 2008.


Since then, virtually everything our "leaders" have proposed or implemented has added to the severity of the crisis by piling up the world's debts - United States and everyone else's – by "rescuing" zombie banks and other financial institutions and by failing to understand the fundamental nature of the financial crisis that confronts us and the way in which that crisis can be resolved.

Resolution of the crisis must include putting an end to the sort of Ponzi and related schemes, policies and practices which are at the heart of the crisis. Resolution must return us to an unqualified acknowledgement that growth of real wealth and income of us all depend on fixed-capital investment – public and private – dynamic productivity and actual production.

We must return to these realities before we can build a stable and healthy national economy and before we can negotiate a similarly stable and healthy global economy and financial system. The speculative, casino-like economy must be returned to the periphery of the economy and society to which it properly belongs.

Such fundamental reform and transformation of the economy as it has developed over the past two or three decades will take time. The means will be particularly hard to design and implement in the frenzy of the instability, disruption and many-sided corruption left particularly by the cowboy banks and financial institutions of recent decades.

We must give ourselves a period of relative calm during which we can contemplate our problems more thoroughly and devise solutions in the way we did towards the end of the Second World War. We need new negotiations and new Articles of Agreement, for example, for the International Monetary Fund and the World Bank. We need to bring the Food and Agriculture Organisation and the World Trade Organisation into the twenty-first century. Even more, we desperately need to look again at our treatment of labour – the right to unite, the right to strike, the right to a fair wage and a fair and respected place in each of our communities.

For this national reflection and global negotiations we need time.


The only way we can get it is by placing at least a partial moratorium on payment of debt whether national or international. The moratorium should run for at least six and preferably twelve months and apply especially to those debts that are crucial to the recreation of a vigorous growing national and world economy.

The terms for the lifting of the moratorium should attend to the needs of all members of national and international communities to the extent that this can be arranged without damaging the health and stability of those economies.

The period of the moratorium should be utilisedfully by creating a working congress or congresses to define ways and means by which we may achieve the rebirth of a global economy and financial system at least as stable and productive as that which we achieved in the two or three decades after World War Two.

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About the Author

James Cumes is a former Australian ambassador and author of America's Suicidal Statecraft: The Self-Destruction of a Superpower (2006).

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