The Scissor In LaRouche’s Triple Curve Is Getting Wider
When the financial meltdown hit the world in 2007-2008, the centers of financial power, i.e., the City of London and Wall Street, responded by further hyperinflating their speculative financial bubble with quantitative easing and zero interest rates – instead of shutting down the whole casino. This only worsened the problem that had led to the 2008 crisis in the first place.
Between 2007 and 2023, total world debt of all kinds grew from $150 trillion to $310 trillion — a doubling in those 16 years. Interest rates were at close to zero for most of the time; but then the Federal Reserve, the European Central Bank and other central banks switched over to “quantitative tightening” and interest rates were raised beginning in March 2022 to try and control a hyperinflationary blowout. Today the Fed Funds rate stands at a whopping 5.25 to 5.50%, while the ECB rates are at 4.50 to 4.75%. This interest rate whiplash has caused a meltdown of the bond market and skyrocketing “unrealized losses” on the books of banks on both sides of the Atlantic, since the price of the old, zero-interest bonds they hold would be sharply reduced if they were sold in today’s 5.50% environment.
The other major crisis caused by this policy of keeping interest rates “higher-for-longer”, is that it is nearly impossible for many debtors to refinance their old loans when they come due, and the debt service they have to pay is now skyrocketing. The “everything bubble” could blow out in any number of different debt sectors – real estate, student loans, commodity speculation, or developing countries’ debt.
For the United States, between 2007 and 2023, debt quadrupled, from $8 trillion to $33 trillion. In 2007, the U.S. held 5% of total world debt; by 2023, it was more than 10% of the total.
But the problem is worse still. Total world debt of $310 trillion is only a small part (about 15%) of total world financial aggregates, including derivatives, which is now pushing $2 quadrillion. That’s the real debt bomb that could be set off at any time.
That, in turn, is what is driving the frantic attempts to maintain top-down control of the “unipolar world” through destabilizations and wars – targeting in particular Russia and China, but more generally, the entire dynamic around the BRICS and the Belt and Road Initiative.
The debt explosion presented above would be not so dramatic, if the underlying physical economy had expanded at a similar rate (the bottom line in LaRouche’s famous “collapse function” curve. However, with the exception of China, all major economies have stagnated or contracted.