TUESDAY, JULY 12, 2016

Volume 2, Number 230

EIR Daily Alert Service

P.O. Box 17390, Washington, DC 20041-0390

EDITORIAL

Europe on the Edge of Total Financial Blowout

July 11 (EIRNS)—Europe is facing three triggers for a total blowout of the trans-Atlantic financial system, any one of which could detonate at any moment. And these are by no means the only sources of collapse of the trans-Atlantic London/Wall Street-led system.

First, the Italian banks are on the verge of collapse. It is officially admitted that the leading Italian banks are carrying €360 billion in non-performing debt—and unofficial estimates put that number much higher. As Italian Prime Minister Renzi correctly warned, however, the crisis surrounding Deutsche Bank is “a hundred times worse.” DB is sitting on $72.8 trillion in current derivatives contracts and is carrying a mountain of non-performing debt. On Sunday, DB chief economist David Folkerts-Landau called for an immediate emergency €150 billion bailout of the big European banks—starting with his own DB. Under European Union laws, in effect since Jan. 1, banks must be put through bail-in before any bail-out, and this is itself a certain trigger for a systemic blowout.

As of Monday, major London real estate funds were facing an investors run, in the wake of the Brexit vote, and the prospect of an imminent blowout of the entire British real estate bubble is very real. In a clear panic over the accelerating disintegration, the ruling Conservative Party strong-armed one of the two remaining candidates for party chair to quit the race, so that Theresa May could be installed as Prime Minister on Wednesday, July 13—to have a government in place to deal with the onrushing crisis.

This imminent systemic crash cannot be separated from the growing danger of nuclear war, following the Warsaw NATO heads of state and government July 8-9 summit last week.

It is precisely because of this combined danger of a total collapse into chaos and potential war of annihilation that Lyndon LaRouche has called for a one-time bailout of the German banks, to staunch the bleeding long enough to launch a genuine policy change, based on his own Four Laws for how to revive the world economy, through credits directed at improving the productive powers of labor, through investment in infrastructure, frontier scientific research, led by a massive expansion of the space program and similar actions. LaRouche warned colleagues on July 10 that if Germany plunges into chaos, war is imminent. Germany holds the key to a new European policy towards Russia, based on strategic and economic cooperation, and if this relationship is wrecked, the consequences are catastrophic.

It’s time to face the reality of the current crisis, LaRouche demanded, and to act on the emergency basis that it demands.

STRATEGIC WAR DANGER

Spiegel Online: Send Blair, Bush to The Hague

July 11 (EIRNS)—A column by George Diez in Spiegel Online, posted today, calls for Tony Blair, George Bush, Dick Cheney, Paul Wolfowitz and Donald Rumsfeld to be put on trial at the International Court of Justice in The Hague, just as war criminals from the Balkans and Rwanda were put on trial.

Citing the recent Chilcot Commission report, Diez wrote: “Tony Blair and George W. Bush wanted the Iraq War. Now a Commission has confirmed that it was illegitimate. Just like the wars in the Balkans or in Rwanda. The planners of those wars landed in front of the International Criminal Court in The Hague.”

The column starts about “W” joking with reporters in the White House in 2004 about how he can’t find those weapons of mass destruction; 10,000 were already dead at that point. Then Diez attacks Blair as even more delusory and inhuman than Bush.

Diez notes that a refugee, a mother forced to flee Iraq, filed a complaint in 2013 against Bush in an American court, for waging war of aggression.

The column concludes: “Therefore those responsible for this war belong before a court, like the agitators of the Balkans, like the murderers of Rwanda—Bush, Blair, and the others must go before the International Criminal Court in The Hague; they are not above the law.”

NATO’s Bluff Is Reckless and Stupid

July 11 (EIRNS)—NATO is bluffing. “NATO’s decision to deploy four battalions of troops on a supposedly rotating basis to Poland and the Baltic States is the worst sort of decision,” wrote Alexander Mercouris, a London-based Russia expert and editor of the news website, The Duran on July 9. The 4,000 troops cannot threaten Russia, nor is any attack coming from Russia that they would need to defend against. As for the claim that the new battalions send the message to Russia that NATO is committed to Article 5, they actually have the opposite effect: They “show that the Article 5 commitment is not really cast iron and that neither NATO nor the Russians really believe it is. If it was why would there be any need to reinforce it?” The reality, Mercouris points out, is that the U.S. military is overextended across the globe and everybody knows it. Secondly, “It is because NATO is looking for some way to demonstrate publicly that it once more considers Russia an enemy and these highly provocative and illegal deployments are the way to do it.”

“This is both reckless and stupid,” Mercouris argues. “It effectively scraps yet another agreement and promise NATO made to Russia at the end of the Cold War, which was not to deploy Western militaries in the territories of the former Warsaw Pact. It tells the people and government of Russia—by far the most powerful country in Europe—that NATO considers them an enemy. And it does so with an outrageous bluff that any serious military analyst—of which Russia has any number—will immediately see through.”

“A policy that manages to alarm, provoke and bluff all at the same time has clearly not been thought through,” Mercouris concludes. “The Chilcot Inquiry Report into the handling of the Iraq war lambasted the lack of basic honesty, hard thinking and serious planning behind that war. In relation to Russia—a nuclear superpower—NATO is behaving in exactly the same way.”

Bulgaria Wants Black Sea Demilitarized

July 11 (EIRNS)—Bulgaria is pushing back against proposals to create a NATO Black Sea naval force. RT reports that Bulgarian Prime Minister Boyko Borissov said that increased NATO activity in the Black Sea, which had been one of the measures proposed at the NATO summit in Warsaw, would lead to a counter-reaction from Russia. “The Black Sea should be declared a demilitarized zone,” Borissov said. While Poland and others call for a “show of force” against Russia, Borissov urged the Alliance to de-escalate the tensions, which, he said have hurt economic development in the region. Bulgaria, being an EU member, was impacted badly by the sanctions stand-off with Russia. “What would missiles, ships, and submarines bring to the welfare of our people?” Borissov asked.

China Exposes Partiality of Arbitration Judges

July 11 (EIRNS)—The Communist Party of China’s leading theoretical journal Qiushi (Seeking Truth) on July 4 exposed the fact that the five arbitration judges in the South China Sea case (which is to be released Tuesday) are anything but impartial. Four of the five judges were chosen by Japanese judge Shunji Yanai, with the fifth chosen by the Philippines. According to the South China Morning Post (SCMP), the Chinese language article in Qiushi declares Yanai to be a rightist and unfriendly to China. Foreign Vice Minister Liu Zhenmin is reported to have “questioned the procedural justice of the appointment and the operation of the tribunal.”

Yanai was president of the International Tribunal for the Law of the Sea (ITLOS) when the Philippines filed the case in 2013.

Liu said Yanai “should have avoided involvement given the territorial and maritime disputes between China and Japan in the East China Sea, and Tokyo’s attempts to involve itself in the South China Sea issue,” the SCMP said. He added that among those appointed was one who had ruled against a party holding a position similar to China in a previous case. “Leaving aside the obvious violation of procedural justice, we can hardly make a better explanation of Judge Yanai’s motivation and purpose other than that he did it on purpose,” Liu said. The SCMP added that South Korea also expressed its concerns over Yanai’s presidency of ITLOS as it also has territorial disputes with Japan.

Liu also said that none of the five judges, one African and four Europeans, “had knowledge of the history and international order of ancient East Asia.”

A review of Yanai’s speeches reveals that his lectures on the role of the ITLOS include the fact that “Referrals to the courts are made with the consent of the parties involved,” a rule that was totally ignored by Yanai and the court in this case.

Saudi Prince Turki bin Faisal’s Address at Terrorists’ Rally, Draws Iran’s Ire

July 11 (EIRNS)—Once more the House of Saud has shown its direct link to jihadi terrorists. This time it became evident in Paris on July 9 when the Saudi Prince Turki bin Faisal Al-Saud addressed a gathering of the terrorist Mojahedin-e Khalq Organization (MKO/MEK), the anti-Iran organization that had been originally based in Iraq in the 1980s. Prince Turki was Saudi Arabia’s intelligence chief for many years and had been nurturing these terrorists for a long time. Saudi media gave top coverage to his speech. “The rally was also attended by a number of Western political figures, including former U.S. House of Representatives speaker Newt Gingrich,” Real Iran news website said today.

“The Saudis are resorting to well-known terrorists … as they have also done in Iraq, Yemen and Syria. This shows that they use terrorism and terrorists to further their aims against regional Islamic countries,” an unnamed Iranian Foreign Ministry source was quoted by the official Islamic Republic News Agency (IRNA) as saying. The rally addressed by Prince Turki on July 9 was held by the political wing of the exiled People’s Mujahideen Organization of Iran, which seeks the overthrow of Iran’s clerical leadership established by the 1979 Islamic revolution, reported Reuters.

U.S. POLITICAL AND ECONOMIC

Obama’s Latest Information Warfare Hoax: Pretending He Wants To Reduce Danger of Nuclear War

July 11 (EIRNS)—Josh Rogin, who now seems to be a favored recipient of White House leaks, reports in the Washington Post that President Obama is considering a series of executive actions “to advance the nuclear agenda the President has advocated since his college days.” This propaganda/leak campaign is all part of the increasingly desperate effort to create Obama’s “legacy” before he leaves office in January 2017. Rogin reports that the Principals Committee of top level administration officials has had two meeting in recent weeks, to consider options for reducing the risk of nuclear war. Those include, Rogin’s sources report, a no first use policy, seeking a UN Security Council resolution banning nuclear testing, and an offer to Russia to extend the New START treaty for five years beyond 2021 when it expires. Some officials even want to cancel the new long-range cruise missile that the Air Force wants, and to take nuclear forces off hair-trigger launch-on-warning. In typical Obama style, all of these actions would be taken without consulting with Congress, through executive actions.

The fraud behind the Rogin leak is demonstrated most graphically by the fact that Obama has already approved the wholesale modernization of the U.S. nuclear arsenal, the cost of which, according to some estimates, could run as high as $1 trillion over the next 30 years. He also hasn’t let up on confronting Russia, as he showed at the just-concluded NATO summit. He has ignored warnings from former Vice Chairman of the Joint Chiefs of Staff Gen. James Cartwright, former Secretaries of Defense William Perry and Chuck Hagel and other experts that the U.S. nuclear posture, combined with the confrontation with Russia creates a high risk of nuclear war.

After nearly eight years in office, Obama has done less to reduce the U.S. nuclear arsenal than any President since the end of the Cold War.

COLLAPSING WESTERN FINANCIAL SYSTEM

Europe on the Edge of a Full-Scale Financial Blowout

July 11 (EIRNS)—The trans-Atlantic press is full of coverage of the Deutsche Bank and Italian banking crises, underscoring the importance of Lyndon LaRouche’s intervention, calling for a one-time bailout of Germany to prevent chaos in Europe, but based on the need for major changes in the banking system, to push credits into the real economy and shut down the derivatives and other speculative bubbles.

Russian multimedia network RT picks up on the David Folkerts-Landau interview with Germany’s Welt am Sonntag, in which the chief economist of Deutsche Bank (DB) called for an emergency €150 billion bailout, and also cites statements from Lorenzo Bini Smaghi, chairman of Société Générale, warning the Italian banking crisis can spread to all of the EU. DB stocks are down 48% over the past 12 months, Société Générale stock is down 63%, and the Bloomberg Europe index of 500 banks and financial service firms is down 33%, reaching a seven-year low. A timeline in the Bloomberg article is titled “The Epic Collapse of Deutsche Bank,” which makes clear that the European banking system is now, immediately, on the edge of a crash.

RT also picks up on a recent signed op-ed by George Soros, declaring that the collapse of the EU is “almost inevitable” since the Brexit vote. “The catastrophic scenario that many feared has materialized, making the disintegration of the EU practically irreversible,” he wrote for Project Syndicate (which he heavily funds). He added that the financial collapse in the U.K. following Brexit is the worst in three decades. “The very survival of the European project” is on the line in the negotiations of how Brexit will occur. RT coverage noted that Marine Le Pen met with President François Hollande and pressed for a referendum on “Frexit” and was rebuffed.

Reuters also gave extensive coverage to the Folkerts-Landau interview. CityA.M., a City of London online financial publication, noted that Italian banks are holding €360 billion of non-performing debt, with shares in all the major Italian banks and other Mediterranean banks—Unicredit, Banca Monte dei Paschi di Siena, Banco Popolare and Intesa Sanpaolo—down 25% since the vote for Brexit. Michael Hewson of CMC Markets U.K. quoted “If Italy goes under then it will take the rest of Europe with it.”

The Street website headlined back on July 5 “Deutsche Bank To Initiate the Next Financial Crisis? Stock Could Be Headed to Zero.” The article cited parallels to Lehman Brothers, showing DB in far worse shape than Lehman at the end. The IMF warned that the greatest spillover from DB will hit France, the U.K. and the U.S., which “have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country.” A Wall Street Journal chart cited by The Street shows the bank to bank connections of DB. DB is leveraged over 40:1, far worse than Lehman’s 31:1 at the time of its collapse; and its current derivatives portfolio is $72.8 trillion, 13% of all global outstanding derivatives. “If the domino effect does occur, Germany with its GDP of $4 trillion or the EU with a GDP of $18 trillion will not be in a position to gain control over it.”

New Europe Online weekly headlines “Why Deutsche Bank Is the Most Dangerous Bank in the World,” asking what the price would be for the German government to bail it out, versus the consequences of letting it blow out with systemic implications.

Bloomberg also warned that the London real estate market is crashing and this is another consequence of Brexit. Standard Life Investments announced that as of today, it will suspend its U.K. Real Estate fund, to ward off investors demanding their money back. This is already triggering contagion, with several other big real estate investors announcing similar freezes on client’s funds, and others announcing simply that they are pulling out of existing deals for prime London real estate projects.

Taken together, the situations in Italy, with Deutsche Bank and on the London real estate market are more than sufficient to blow up the entire trans-Atlantic financial sector. It is precisely because of this already-onrushing crisis that emergency actions, precisely along the lines demanded by LaRouche, must be enacted immediately.

THE NEW GLOBAL ECONOMIC ORDER

Russia and India Are Planning Broader Economic Ties

July 11 (EIRNS)—Despite years of close political alliance, Russia and India’s economic ties have remained highly underdeveloped. With the strengthening of the BRICS and associated organizations, seemingly both Russia and India are now in the process of broadening and strengthening their economic relations. Looking to strengthen bilateral trade and fast track investment opportunities, India’s Commerce Minister Nirmala Sitharaman, who is leading a large Indian business delegation to INNOPROM-2016, Russia’s largest annual international industrial trade fair that opened in Yekaterinburg on July 10, told TASS today “India hopes to sign a free trade zone agreement soon with Russia.”

Attending the trade fair, Russia’s Industry and Trade Minister Denis Manturov told TASS “the reinforcement of direct cooperation between regions of our countries is one of promising yet largely unused areas of mutual investments,” and he pointed out that India is developing a global trade and operations zone—New Delhi-Mumbai transport corridor (Delhi-Mumbai Industrial Corridor). “Russia is creating technology parks to facilitate industrial development in Russia,” he added.

Additionally, the Times of India reported today that the country is taking forward “its negotiations with Russia on joint development and creation of the fifth-generation fighter … and is ready for the sides’ equal contribution to the project worth $4 billion at the stage of development work.” The article cited the Indian Defense Ministry as its source. “The project envisions development of a futuristic fifth-generation fighter aircraft (FGFA) as well as upgrading its existing Sukhoi-30MKI jets into Super Sukhois with advanced avionics and Weapons.”

SCIENCE AND INFRASTRUCTURE

Siberian Academy Scientists Propose Ground-Based Laser for Satellite Electricity Charging

July 11 (EIRNS)—Scientists from the Budker Institute of Nuclear Physics of the Siberian Academy of Sciences, in the science city of Novosibirsk, have started experimenting with a “new powerful free-electron laser” to be used to recharge satellites. The head of the lab Nikolai Vinokurov, told reporters on July 7, that the land-based laser would be used to recharge satellites and augment their limited electric power supply. The Budker Institute was a key laboratory in the Soviet development of directed-energy weapons systems in the 1970s.

The short item in Sputnik goes on to quote Vinokurov: “The number of broadcasting satellites is constantly rising, although they have limited reserves of power supply. It is known that solar panels provide about 10 kilowatts [of electricity]. Charging satellites with infrared emission from the Earth could provide about 100 kW. It is very interesting.”

The free electron laser is a tunable system, where the output of coherent light can be varied from low-frequency radio waves and radar, through to infrared, visible, and ultraviolet wavelengths.

Vinokurov mentioned that this technology could lead to a technological breakthrough in areas including space communications. More power would be available with no added weight to the spacecraft.

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