The System Is Coming Down; A New One Is Launched in New York Today
April 6 (EIRNS)—Next week’s Democratic debate in New York is liable to be fun, because the genie of breaking up the banks and shutting down Wall Street has been let loose again, and that, within the Federal Reserve! Under the auspices of the Minneapolis Federal Reserve Bank and its President Neel Kashkari, proposals to break up Wall Street have been put forward again. It has been noted that the Federal Reserve itself could break up the banks immediately—before they collapse again—by finding that their statements about their own assets and financial positions are not credible, lies, “a charade.”
Obama’s mouthpiece Hillary Clinton will be defending Wall Street’s inflation of its assets, as duplicitously as she can. And that anti-Wall Street magpie, Bernie Sanders, will be trying to remember how Franklin Roosevelt’s Glass-Steagall Act worked. Voters, out of years of accumulated anger, are making the issue hotter and hotter, and the contest closer and closer.
At the same time, with the so-called “Panama Papers,” a chaotic revelation has begun of how the big London, New York, Zürich and Hong Kong banks really work—hiding hot money and drug money and tax-evading money in shell companies, laundering criminal money, drawing flight capital out of developing countries, breaking securities laws and hiding speculations from national authorities.
These banks themselves are bankrupt. The whole trans-Atlantic financial system is going down, sucking all growth out of the U.S., European, and Japanese economies and the life out of their people. The biggest banks need to be not just broken up, but the hundreds of their speculative units shut down entirely.
A fundamentally new system is needed, of productive credit, modern infrastructure-building, rapid scientific progress, deep space exploration, and nations acting for mutual benefit.
The offer to join and develop that new, “win-win” system is being made right now, by the nations of “the New Silk Road,” led by China, India, Russia.
These are, not by accident, the very countries the Obama Administration calls its biggest threats and adversaries, and seeks to provoke to war!
The Schiller Institute’s conference in Manhattan April 7, “Building a World Land-Bridge—Realizing Mankind’s True Humanity,” launches us toward that new system: The United States must join the New Silk Road. The mobilization for this conference, to restore Classical music and culture, to revive the U.S. space program shut down by Obama, has already changed the way Americans can see the future.
More than anger is required of citizens. Take this opportunity, because a new and worse financial crash, and a global war are threatened. The attention of the nation should be on the Thursday conference in Manhattan, which will be streamed live beginning at 10:00 a.m. EDT.
COLLAPSING WESTERN FINANCIAL SYSTEM
Puerto Rico Governor Announces Debt Moratorium, Praises ‘Patriotic, Courageous’ Legislature
April 6 (EIRNS)—Shortly after noon today, Puerto Rican Gov. Alejandro García Padilla signed into law the Puerto Rican Emergency Moratorium and Financial Rehabilitation Law, sent to him by the Legislative Assembly, allowing him to declare a fiscal emergency and a temporary moratorium on any part of the Commonwealth’s $72 billion debt he considers necessary, in order to preserve essential public services for the island’s 3.5 million inhabitants. The moratorium will extend until Jan. 31, 2017.
The reality is, García Padilla said today, that Puerto Rico is insolvent. This legislation “provides us with the tools to address the highest priority of needs, providing essential services to our people without fear of retribution.” It will also allow the government to address “in an orderly manner,” the crisis at the Government Development Bank (GDB), the government’s financing authority, which is close to insolvency and unable to meet a $422 million debt payment due May 1, or a subsequent $700 million one July 1. According to Associated Press, the bill would allow the bank to enter into receivership if necessary.
Governor García Padilla criticized the U.S. Congress, which has moved at a glacial pace to produce draft legislation to address the island’s crisis, and has mooted a proposal for a strict financial control board, which most Puerto Rican leaders flatly reject. For nine months, García said, only the Puerto Rican people and their leaders have increased their efforts to propose solutions to put the island on the road to economic recovery. He thanked the Legislative Assembly’s majority for responding with “courage to the patriotic call which difficult times have put before us.”
Predictably, Puerto Rico’s action has unleashed a wave of hysteria among bondholders—vulture funds especially—which are threatening lawsuits, warning of financial catastrophe, etc., especially since the moratorium includes General Obligation (GO) bonds whose payment is constitutionally guaranteed. One group of creditors holding $5 billion in GO bonds attacked the government for refusing its offer to restructure debt by extending principal payments and accept a new $700 million loan. Responding to that complaint, the City of London’sFinancial Times reported today, GDB President Melba Acosta warned that “incurring additional debt at a higher cost is not the answer to the Commonwealth’s fiscal issues. Indeed, it is exactly that type of Wall Street solution that led us to the precipice we are now looking over.”
Call To ‘Break Up Wall Street’ Loose Again; Democratic Debate ‘Could Be Fun’
April 6 (EIRNS)—Minnesota Federal Reserve President Neel Kashkari, interviewed adversarily by CNBC-TV anchors April 6, repeated his assertion that the Dodd-Frank Act had done no good in preventing another full bank crash and huge bailout; and again spoke of breaking up the Wall Street banks as a potential solution. Kashkari’s intervention came at the same moment that the anti-Wall Street Sen. Bernie Sanders completed his seventh primary victory over Hillary Clinton in the past eight states to vote.
“The question is,” Kashkari said, “in a stressed economic environment like a crisis when multiple banks are running into trouble at the same time, will we actually be able to haircut bond holders and creditors? I say the answer is no. And the reason is the contagion from one bank to another bank to another bank. No one yet has figured out how to solve that contagion risk. Dodd-Frank hasn’t done it. The [‘bail-in’ idea] hasn’t done it. We see it in Europe…. Those ‘contingent conversion’ securities haven’t added to stability. They’ve actually added to instability and uncertainty.”
And asked why he hadn’t brought up breaking up Wall Street banks in 2010, when he had just run the TARP bailout, Kashkari said he had, but, “What I’m saying, is, and what we in Minneapolis are saying, is, a bunch of these transformational solutions were taken off the table in 2010.” That would be by Rep. Barney Frank, for Obama, on behalf of Wall Street.
Kashkari’s April 4 hearing at the Minneapolis Fed Bank, on ending “too big to fail,” featured Stanford economist Dr. Anaan Admati calling for the Fed to reject the Wall Street banks’ latest “living will” proposals—“a charade,” she said—and then move to break these banks up by ordering them to sell off divisions and subsidiaries which threaten a crash.
Admati is correct that the Federal Reserve has the authority to determine that large banks’ internal controls, including their “living wills,” are not credible, and to order them to change their structure and sell off units. It has this authority as their “safety and soundness” regulator.
EIR Founding Editor and leading Hamiltonian economist Lyndon LaRouche gave this idea his qualified support, because the banks could be broken up quickly, and “the Federal Reserve could write off their bad assets through its discount window function.” The only way “breaking up” Wall Street leads to a productive credit system, LaRouche said, is that the vast majority of its speculative units be shut down entirely, and key to that is writing off all their worthless “assets.”
LaRouche also noted the next Democratic debate, April 13 in New York, “could be some fun” with the Wall Street issue loose: “Hillary will try to defend inflation again, Wall Street inflation of all its worthless debt,” he said.
STRATEGIC WAR DANGER
Russia-Mediated Ceasefire in Nagorno-Karabakh Is Holding, Says Azerbaijan’s Defense Ministry
April 6 (EIRNS)—Azerbaijan’s Defense Ministry today reported that a ceasefire largely held today, around Nagorno-Karabakh, following three days of intense battles involving heavy artillery and rockets. However, the ground situation has remained tense. The ministry also confirmed today that the agreement on ceasefire on the contact line in the zone of conflict was reached through Russia’s mediation, at the meeting of senior military officials of Azerbaijan and Armenia in Moscow on April 5, reported TASS.
The meeting was attended by the chiefs of General Staff of the Armed Forces of Azerbaijan and Armenia, Najmaddin Sadigov and Yuri Khatchaturov. “At the meeting an agreement was reached on ending military operations on the contact line of forces of Azerbaijan and Armenia,” Azerbaijan’s Defense Ministry said in a statement, TASS reported.
Prensa Latina reported today on the Russian initiatives to bring about the ceasefire. Russian President Vladimir Putin spoke over the phone to the Presidents from Armenia Serzh Sargsyan, and Azerbaijan Ilham Aliyev, to achieve a ceasefire in Nagorno-Karabakh, citing an official source. Russian Foreign Ministry spokeswoman Maria Zakharova said today in her weekly press conference, that Prime Minister Dmitry Medvedev also spoke with the heads of government of both countries to negotiate a solution to the conflict. The spokesperson said that Foreign Minister Sergey Lavrov will be in Yerevan, Armenia’s capital, today, to persuade its authorities, and will then go to Azerbaijan’s capital Baku.
Iranian President Hassan Rouhani has made an offer today to mediate between Azerbaijan and Armenia over the conflict in Nagorno-Karabakh, in separate telephone conversations with his Azerbaijani and Armenian counterparts, he said in his Twitter account. Iran borders both countries and has friendly relations with both.
ISIS on the Run in Syria
April 6 (EIRNS)—ISIS is experiencing setbacks in several places in Syria, at the hands both of rebel fighters and of forces loyal to President Bashar al-Assad, reports Voice of America, adding that these accumulating battlefield losses for the terror army represent a serious setback for an organization that once boasted it would “remain and expand.” These include losses to rival opposition groups in northern Aleppo province as well as the Syrian army capture of al-Qaryatayn in Homs province.
“With military pressure mounting on IS and battlefield setbacks accumulating briskly, there are signs of increasing lawlessness in the group’s stronghold of Raqqa, where activists from the anti-IS network, Raqqa Is Being Slaughtered Silently, say there has been a sharp rise in robbery and thefts—an indication that the tight control IS has on the city may be slipping amid a manpower shortage,” says VOA.
THE NEW GLOBAL ECONOMIC ORDER
China Plans To Become a Regional Electricity Hub
April 6 (EIRNS)—China is positioning itself as a formidable electrical power exporter, targeting markets that span from Germany to India along the New Silk Road, The Hindu reported on April 5. What is driving China to achieve that end are its surplus power-generation capabilities and the success it has met in mastering the ultra-high voltage (UHV) power line technology.
A report published in February by China’s government portal China.org.cn said that State Grid, the largest electric power-transmission and -distribution company in China, established a company last year to develop what its president, Liu Zhenya, called a “global energy Internet” through a widespread electricity grid sharing “renewables” from all over the world. According to the report, the state company is studying the feasibility of a pilot program on power transmission, not only among Asian countries but also between Asia and Europe, as well as between Africa and Europe.
What triggered this plan, is the news that China’s power engineers have become world leaders in ultra-high-voltage transmission systems connecting far-off power sources with cities. China already has seven ultra-high-voltage (UHV) lines in operation, more than any other country, carrying power over thousands of kilometers at around 800,000 (800 kV) or even 1 million volts (1000 kV). According to Liu Zhenya, “China has the technical capacity to increase the voltage to 1500 kilovolts, so that it can transport power 8,000 km away. And it is financially viable to expand,” The Hindu coverage reported.
All transmission systems lose energy between generation and the end consumers, on average about 6%; the farther electricity is transmitted, the more energy is lost. However, it is possible to reduce the proportion of energy lost by ramping up the voltage and developing UHV systems to carry power over much longer distances. In the United States, most long-distance transmission lines operate at 230kV, 345kV, 400kV, or sometimes 500kV. In Britain, most of the National Grid operates at 275kV or 400kV. But China’s existing UHV systems mostly operate at 800kV, or even 1,000 kV in some cases.
Aung San Suu Kyi Confirmed as Myanmar Leader, Meets with China’s Foreign Minister Wang Yi
April 6 (EIRNS)—Myanmar’s lower house of Parliament passed a measure making Aung San Suu Kyi “State Counselor” with powers greater than the formal President, Htin Kyaw, who quickly signed the measure.
The position of State Counselor will allow her to coordinate the activities of Parliament and the executive branch. She also holds the positions of Minister of the President’s Office and Foreign Minister. The combination of jobs means that she will oversee the President’s office, determine foreign policy, and coordinate decision-making between the executive branch and parliamentary leaders.
Military members of Parliament denounced the measure as an unconstitutional power grab, stood up in the chamber in protest, and boycotted the vote, but did nothing to actively oppose her installation of Suu Kyi in a position “above the President.”
While the legal formalities were under way, Suu Kyi, in her role as Foreign Minister, met with Chinese Foreign Minister Wang Yi in Myanmar’s capita, Naypyitaw, on Tuesday. Wang said that the two nations should “reinforce high-level exchanges as soon as possible and “properly tackle issues facing their cooperation.”
“China-Myanmar relations are now at a new historical starting point,” he said. Suu Kyi described relations as very important politically as well as socially and economically, AFP reported. The media did not report a meeting between Wang and the Myanmar military.
Reuters reported, without mentioning Wang’s visit, that Chinese state-controlled commodity trader Guangdong Zhenrong Energy Co. has won approval from the Myanmar government to build a long-planned $3 billion refinery in partnership with local parties including the energy ministry. The project, which also includes an oil terminal, and storage and distribution facilities, would be one of the largest foreign investments in decades in Myanmar. The Myanmar Investment Committee granted the Chinese firm approval to build a 100,000 barrel per day (bpd) refinery in the southeast coastal city of Dawei.
Suu Kyi made a point at a press conference after their meeting to stress that she had not had detailed discussions with Foreign Minister Wang counterpart about the Myitsone hydropower project. She replied to a question about the project “that she has not read the contract for the Myitsone project.” She said that the aim of the Chinese Foreign Minister visit was to congratulate Myanmar’s new government and strengthen bilateral relations. “No other issues have been discussed,” she said.
The Myitsome Dam is a leading part of the Confluence Region Hydropower Project (CRHP), which includes seven dams with a total installed capacity of 20,000 MW. The dam is 500 feet high and is expected to provide electricity to Yunnan, China, as well as Myanmar. George Soros’s forces within Myanmar, along with international anti-dam organizations, successfully sabotaged work on this important project under the previous military reform regime. Resumption of work on the dam would be a major win-win for China and Myanmar.
U.S. POLITICAL AND ECONOMIC
‘Panama Papers’ Also Exposes the Banks, Particularly Dope, Inc.’s HSBC
April 6 (EIRNS)—Amid the international furor over the April 4 announcement of a vast collection of “shell company” creation documents somehow obtained from Panama law firm Mossack Fonseca, Bloomberg News on April 5 and 6 carried two interesting reports. They contribute to the judgment of one of EIR’s veteran intelligence sources, that the huge exposure of means of hiding money over the last 40 years, will hit the British financial Empire offshore banks including its Hong Kong and Swiss elements.
Initially, worldwide coverage promised that “Putin” or “Chinese President Xi” were at the center of tax evasion networks. This is clearly not substantiated, has been ignored by those Presidents, and has already been dropped in many media accounts.
One of the Bloomberg reports, was that the United States, U.K., Panama are among very few countries which have not accepted the OECD regulations on reporting foreigners assets held in, for example, the United States. Thus America, with its very large banking system, is the largest tax haven in the world. This despite the United States’ own FATCA regulations, which require other countries to report U.S. citizens’ holdings abroad, and are very strongly enforced by U.S. sanctions.
“ ‘The U.S. doesn’t follow a lot of the international standards, and because of its political power, it’s able to continue,’ said Bruce Zagaris, an attorney at Berliner Corcoran & Rowe LLP who specializes in international tax and money- laundering regulations. ‘It’s basically the only country that can continue to do that.’ ”
“The latest reporting ‘underscores the secrecy in Panama,’ said Stefanie Ostfeld, the acting head of the U.S. office of the anti-corruption group Global Witness. ‘What’s lesser known, is the U.S. is just as big a secrecy jurisdiction as so many of these Caribbean countries and Panama. We should not want to be the playground for the world’s dirty money, which is what we are right now.’ ”
The second report was that the Hongkong and Shanghai Banking Corp. (HSBC), the City of London and Hong Kong’s flagship bank since the Opium Wars and the biggest bank in Europe, is clearly the drug, tax-evasion, money-laundering bank of the world. “A trove of leaked documents casts HSBC Holdings Plc into a harsh light, as a consortium of investigative journalists said it found the bank was among the most active in registering shell companies that move money around the world on behalf of rich and politically connected clients. HSBC and its affiliates accounted for more than 3,300 of the 15,600 shell companies that Mossack Fonseca, a Panama law firm, helped form for clients of hundreds of international banks.”
Nonetheless, the news service also reported from sources that “The U.S. plans to search the millions of documents leaked from a Panamanian law firm for information about people who may have helped companies or individuals evade sanctions related to Russia’s role in destabilizing Ukraine.” But here again, the sword is two-edged: Ukrainian coup-President Petro Poroshenko hid money through the Mossack Fonseca law firm in Panama, while Ukrainian conscript solders were trapped and being killed just before the ceasefire in Eastern Ukraine.
SCIENCE AND INFRASTRUCTURE
India’s Reusable, Hypersonic Spaceplane Will Be Tested Next Month
April 6 (EIRNS)—The Indian Space Research Organization (ISRO) will test a small, reusable space plane next month, in the first step of a program to develop a lower-cost transport system for satellites to orbit. The Reusable Launch Vehicle (RLV) is a scale-model, 1.5-ton vehicle, which will launch vertically on a sounding rocket, and then be released to use its supersonic, air-breathing scramjet engine. It is designed to reach a sub-orbital altitude of 43 miles, land in the Bay of Bengal, and be recovered, blogger Tomasz Nowakowski reports in SpaceFlight Insider industry website.
This is a very ambitious project, and the first experiment will tackle a number of challenges. One, is the hypersonic scramjet propulsion system itself, which, unlike a rocket, does not carry oxygen to burn its fuel, but takes it in from the atmosphere. In addition, the vehicle is designed not only to come back through the atmosphere intact, but to be able to be refurbished and used again.
This first experiment is to test the propulsion system and the autonomous landing under a controlled descent. The RLV is a scaled-down prototype, about 21 feet in length, of a future pilotless reusable spaceplane, called Avatar, which ISRO is designing for satellite launches.
The test program was started in 2012, and is planned to be completed by approximately 2025.