THURSDAY, JULY 28, 2016

Volume 2, Number 242

EIR Daily Alert Service

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

 

EDITORIAL

LaRouche: Never Forget the Lessons of Herrhausen

July 27 (EIRNS)—Major financial media in Europe and the United States are warning that the European financial system is on the edge of a blowout, whether the trigger is a collapse of the world’s oldest bank, Monte dei Paschi di Siena, as part of a general bank collapse in Italy, or a derivatives meltdown by Deutsche Bank, recently described by the IMF as the world’s most “systemically risky” financial institution. The entire trans-Atlantic financial system is at the breaking point, and for this reason, a panicked consensus is emerging among some of the key players in the British game—the European Central Bank, the IMF, JPMorgan Chase and Goldman Sachs—that a temporary cancellation of the bail-in law is essential, to allow for a bailout of the Italian banks, estimated at between €210 and €360 billion in currently non-performing debt. Deutsche Bank held an impromptu press conference on Wednesday by one of its directors to “protest too much” that the bank is not considering a split up between its London-centered gambling operations (Deutsche Bank now has $55 trillion in derivatives exposure) and its other units, even after posting a second quarter drop in profits of 97.5%, and a 20% decline in earnings from the same quarter in 2015.

The epic collapse of the trans-Atlantic financial system is, today, the number one factor driving the danger of war—thermonuclear war—provoked by Obama and NATO against Russia. The latest provocation comes from the Bulgarian government, which has accused Russia of violating a fabricated “NATO air space” under Bulgarian control.

The simple reality, expressed today by Lyndon LaRouche in discussions with colleagues is that “Deutsche Bank is dead. This needs to be said plainly and bluntly.” He added that the Germans ought to “ask Putin’s advice.”

While Wall Street continues to go ballistic over the fact that both the Republican and Democratic Parties put the reinstatement of the Glass-Steagall Act in their platforms for the 2016 Presidential elections, LaRouche took the issue one step further. While Glass-Steagall is essential, more is needed. The image of the martyred Chairman of Deutsche Bank, Alfred Herrhausen, must be invoked. Under Herrhausen, Deutsche Bank was an industrial bank that invested in the real economy. Deutsche Bank, even at the height of the Cold War, invested heavily in the Soviet economy, providing loans for pipelines, power plants, roads and railroads. Herrhausen’s assassination, on Nov. 30, 1989, coincided with the railroad jailing of Lyndon LaRouche by the same George H.W. Bush-Margaret Thatcher-François Mitterrand forces that imposed the Maastricht straitjacket on Germany, thus killing the Herrhausen plan to integrate the nations of the former Warsaw Pact into a single European-Eurasian economic space.

The German economy is on the edge of collapse, which is guaranteed if Deutsche Bank goes under. That must be prevented at all costs, but the immediate measures must involve a return to the kind of banking that was practiced by Herrhausen. If Germany goes under, a thermonuclear World War III is virtually guaranteed, and it must be prevented by emergency actions.

Another manifestation of the deadly crisis facing humanity today is the spreading plague of blind terrorism, whether it be atrocities by the Islamic State and other Anglo-Saudi created jihadist cults, or the “new violence” recently seen in Germany and Japan, involving youth who are brainwashed into violent acts by their addiction to point-and-shoot video games.

Helga Zepp-LaRouche, the founder and president of the Schiller Institute, has called for an international coordinated effort to crush this terrorist scourge—in close collaboration with Russia. Last September, in his address before the United Nations Security Council, Russian President Vladimir Putin called for an international effort to defeat jihadist terrorism, modeled on the World War II alliance between the United States and the Soviet Union. On Wednesday, July 27, Putin addressed a meeting of the top Russian security and law enforcement officials and reiterated that call for a global war on terrorism, which is now a civilizational crisis that all nations must combat.

COLLAPSING WESTERN FINANCIAL SYSTEM

Deutsche Bank Turning Into a ‘Zero Bank’

July 27 (EIRNS)—The net profit of Germany’s biggest bank is down to almost zero: in the second quarter of this year, the bank made only €18 million of profit. In the same quarter a year ago, it was €796 million. This implies a loss in profits within one year by 97.5%. At the Frankfurt exchange this morning, Deutsche Bank’s shares dropped by 6%.

In the first quarter of 2016, the bank still made a net profit of €236 million; against that, Q2 brought a loss by 94%. The sector “global markets” had most of the losses in Q2 with -28%, followed by asset management with -18% and other wealth management with -12%; the only profitable sector was Postbank, with a net profit of 13%.

The announced Q2 mini-profit, however, is due to relatively low legal expenses of €120 million from April to July; a year ago, the bank had to shoulder €1.2 billion during the same period. CEO John Cryan, a British banker from the investment branch, said he is content with the performance of the bank to the extent that it is going through a “rather difficult period,” but he did not give any indication that a fundamental change of strategy is considered. Should the bank’s performance not improve, even more streamlining and cost-cutting would be on the agenda, Cryan said in the context of the Q2 figures.

As for “Project Jade,” which, according to recent media leaks, is a new strategy of Deutsche Bank to survive by separating investment and commercial activities from each other, a bank spokesman declared: “Project Jade is not about splitting the bank. It is rather a project that has been running for quite some time, to simplify the bank as such and in its structure.” A similar denial of separation plans was made by Marcus Schenck of the board, saying in a conference call with select media this afternoon, “Some people believe that we are forced to sell Postbank in 2017, but that is not the case.”

STRATEGIC WAR DANGER

Is NATO Trying To Extend Its Control of Black Sea Airspace Through Bulgaria?

July 27 (EIRNS)—Bulgaria, as one of the “New Europe” members of NATO, is the latest NATO member to take on the role of provocateur against Russia. Bulgarian Defense Minister Nikolay Nenchev told Bulgarian television channel Nova TV, on July 24, that Russian military aircraft had entered what he termed “Bulgaria’s area of responsibility” in NATO airspace, four times in the past month, with their transponders off. Bulgaria has demanded an explanation from Moscow over the violations, Nenchev said, describing the incidents as “provocations toward Bulgaria and its air forces.”

At the Defense Ministry in Moscow, spokesman Maj. Gen. Igor Konashenkov expressed complete surprise at the Bulgarian accusations.

“First of all, we, and not only we, would like to have explanations from Mr. Minister how far away from Bulgaria’s air borders the imaginary zone of NATO airspace lies?” Konashenkov asked the next day. “The planes of Russian Aerospace Forces make planned regular flights over the Black Sea. Their flight routes lie in strict compliance with international rules of using the airspace over neutral waters. Besides, all the planes, which have made the flights recently, including in June, had their ADS-B transponders on,” Konashenkov said.

The problem, as Konashenkov indicated, is the definition of “Bulgaria’s area of responsibility” in airspace with respect to NATO. As the Bulgarian government made clear, on July 26, there was no violation of Bulgaria’s sovereign airspace. While the Bulgarian Defense Ministry said in a statement that the ministry does not contest the right of anyone to fly in international airspace over the Black Sea, it nonetheless appears that NATO, through Bulgaria, is, in fact, trying to extend its control over airspace in the Black Sea that is not sovereign.

There appears, in fact, to be no definition in international law of “NATO airspace,” though the term is thrown about frequently, especially in the Baltics and in Turkey since last November’s shootdown of a Russian warplane in Syria by Turkish F-16s.

“What does exist is the sovereign airspace of each country separately,” Andrei Kelin, head of the department of European cooperation of the Russian Foreign Ministry, told RIA Novosti last February, in arguing that airspace issues between Russia and a member of NATO should be dealt with bilaterally, rather than through NATO headquarters in Brussels.

The Economist Warns Turkey’s Erdogan: Don’t Get Too Close To Russia

July 27 (EIRNS)—London’s The Economist weekly has delivered a not-so-veiled threat to Turkey’s President Recep Tayyip Erdogan: Don’t get too close to Russia, because your true friends in Europe, the United States and NATO will not like it. The cover story of the July 23-29 issue of the City of London mouthpiece was headlined “Erdogan’s Revenge.” After detailing the bloody coup attempt-gone-sour, and documenting Erdogan’s move to wipe out all political and military opposition, the magazine noted that, if Turkey were first applying for NATO membership today, it would be rejected, over its crushing of democracy, its human rights violations, and corruption.The Economist warned that the United States and Europe remain Turkey’s vital allies, and recent dealings with Russia will never supplant the security and economic ties to the West. Hopefully, Erdogan will realize this in time and modify his behavior accordingly.

After Terrorists Behead Child on Video, Syrian UN Envoy Demands U.S. Coalition Stop Funding Rebel ‘Moderates’

July 27 (EIRNS)—Syria’s Ambassador to the UN Bashar Ja’afari, who leads the Syrian government delegation in the Geneva political talks, delivered a direct hit against the United States and its allies in the anti-ISIS “coalition” for funding brutal terrorists in Syria who decapitated a 12-year-old boy on video last week. Speaking at a UN Security Council meeting on the “humanitarian crisis” in Syria, Ambassador Ja’afari’s strong statement occurred in the aftermath of the terrorist “Nour-Eddin al-Zinki Movement’s” video of July 20 that showed members of the group slapping around a wounded boy and then beheading him on the flatbed of a pickup truck.

Ja’afari described how the al-Zinki group killed the Palestinian refugee child, Abdullah Issa, in “cold blood,” reported Mehr News Agency (MNA), and then recounted that this very group is designated by “some states” on the Security Council as a “moderate armed opposition” group, and has been backed by the Obama/British-led anti-Assad coalition since 2011.

Naming nine other Western-backed “moderate” groups—especially several created by Saudi Arabia—that are the same as al-Zinki, Ja’afari asked how member states of the UN Security Council could claim to be protecting human rights when they support such butchers. Their support encourages the acts of “killing and slaughtering” by these groups against Syria. He questioned “Why those who perpetrate terrorist acts in Paris, Nice, Munich, Bangladesh and other cities are not called moderate armed opposition and when it comes to Syria they are called moderate?” whereas the Syrian government makes no such distinction in terrorism.

“I firmly believe that each citizen of the states recently affected by the surge of terrorism has the right to wonder” why their governments overlook jihadists travelling to Syria to carry out terrorist acts against the people and government of Syria, Ja’afari said.

When confronted about the al-Zinki incident at a briefing on July 20, State Department spokesman Mark Toner refused to denounce the beheading. Toner merely said that, if proven, the beheading would “give us pause” about further support for the group.

Since Toner’s statement, al-Zinki’s leadership has said that it has arrested their fighters who killed the boy, and the Obama administration is sweeping the incident under the rug.

U.S. POLITICAL AND ECONOMIC

Kerry Echoes Wang Yi in Meetings in Manila—Bilateral Talks, Turn a New Page

July 27 (EIRNS)—At a joint press conference with Philippines Foreign Affairs Secretary Perfecto Yasay in Manila, U.S. Secretary of State John Kerry said the U.S. “encourages all parties, including the Chinese and the Philippines to negotiate, to work through this diplomatically, bilaterally, multilaterally, [and] build up confidence-building measures.”

Kerry referred to Chinese Foreign Minister Wang Yi’s statement during their meeting in Vientiane, Laos this week, in which he had said that it was time to turn to a “new page” in the approach to the South China Sea, since every ASEAN nation had signed on to the communiqué calling for only those nations who are party to the dispute to negotiate solutions—a direct reference to the interference by the U.S. and to the ruling of the Arbitration Court in The Hague.

The South China Morning Post wrote about Kerry’s comments: “While it is seen by some as a deviation from the U.S. position, a senior State Department official said Washington has never opposed direct talks between Beijing and Manila and a bilateral talk has always been an option. That official stressed what the U.S. opposes is using a direct negotiation between claimants as a pre-condition”—a rather weak effort to cover for Obama’s belligerent position.

Kerry added: “Hopefully this can become a moment that we can all take advantage of, where we work out some of the modalities of how do you deal with the fishing? How do you deal with natural resources? How do you deal with the free movement of vessels and protect the rights of everybody?”

Kerry said on Tuesday that China had indicated its willingness and readiness to engage in bilateral negotiation with the Philippines, a day after Kerry had met with Chinese Foreign Minister Wang Yi. Philippine former Senator Kit Tatad said in his column in the Manila Times Tuesday, that he had spoken to former President Fidel Ramos, whom President Rodrigo Duterte has called on to travel to China for negotiations, and that he said he was ready to go.

Second Round of Glass-Steagall Press Coverage Hits U.S.

July 27 (EIRNS)—The conclusion of the Democratic and Republican Party conventions, both of which adopted Glass-Steagall in their Party Platforms, has caused another round of U.S. press coverage and more national discussion.

In USA Today, well-known financial columnist Darrell Delamaide writes that Glass-Steagall’s inclusion in both party platforms will now run up against Senate Banking Committee Chair Richard Shelby (R-AL) and House Financial Services Chair Jeb Hensarling (R-TX), whose objective is to repeal Dodd-Frank as too cumbersome, but who both “have little interest in Glass-Steagall.” But, says Delamaide aptly, “the two objectives are not mutually exclusive … the simple separation of commercial banking and the speculative activity of investment banks would make most of the contortions in Dodd-Frank redundant and superfluous.”

PYMNTS.com website covers the “joined at the hip” Glass-Steagall platforms of the Democrats and Republicans that “[P]erhaps banking may be the industry that brings Republicans and Democrats to work together across the aisle. As the New York Times noted recently, both parties have put language in the respective platforms unveiled at their conventions that would bring back the Glass-Steagall Act. And that legislation, which separated investment banking and commercial banking, is enjoying a bit of resurged popularity…. The article notes Democratic Party honcho Elaine Kamarck’s statement that with Glass-Steagall in both party platforms we can count on seeing a tougher attitude toward the financial industry in 2017.”

Zacks financial research website, contrasted Elizabeth Warren’s bland speech to the convention Monday night—“when the big banks get too risky, break them up”—with no mention of Glass-Steagall, to Bernie Sanders’ follow-up, “I am happy to tell you that the Democratic Platform Committee now calls for breaking up the major financial institutions on Wall Street and the passage of a 21st Century Glass-Steagall Act.” Zacks describes its repeal under Clinton, and says that “it was interesting that Donald Trump adopted the reinstatement of Glass-Steagall into his platform…. Whether or not Hillary Clinton, whose campaign has seen the most financial support from Wall Street banks, will double-down on this rhetoric remains to be seen. For now, it’s beginning to look like Americans are fed up with big banks.”

Forbes magazine’s Norbert Michel starts off reporting that Donald Trump had sent him a letter complaining about the complexity of Dodd-Frank. “He nailed it,” admits Michel, but then goes on say Glass-Steagall had no real effect in the 1930s!

AP financial reporter Ken Sweet in “AP Explains, GOP, Dems, Look To Revive Depression Bank Law,” in the San Diego Union-Standard, writes: “At least the Democrats and Republicans agree on something at their conventions. They both want to revive a Depression-era bank law that was abolished more than 15 years ago. Sweet then explains what it is; how it was repealed in 1999, and then revived after the 2008 financial crisis. He then concludes with the phony argument that since the first institutions that failed were mortgage lenders, Glass-Steagall would not have stopped the financial crisis.

AFL-CIO Now limply writes, “We should celebrate Dodd-Frank’s great accomplishments … but too-big-to-fail banks remain intact.” The AFL-CIO proposes a “Wall Street Speculation Tax to break up the too-big-to-fail banks and … pass the 21st Century Glass-Steagall Act.”

WikiLeaks Documents Expose DNC-Hillary Clinton Money Laundering

July 27 (EIRNS)—An investigation by Politico magazine, based on some of the recently leaked Democratic National Committee emails, reveals that the DNC, in league with the Hillary Victory Fund (HVF), laundered tens of millions of dollars that should have been earmarked for state Democratic parties’ use in local and Federal election campaigns. Instead, funds were passed through state party coffers and routed back to the DNC, which then used the funds to pay expenses for the Hillary Victory Fund. The emails showed that DNC officials went out of their way to conceal the scheme, under which the bulk of the $142 million raised by the Hillary Victory Fund since its inception in September 2015, went to the DNC, to the HVF, or to vendors servicing the Clinton campaign and the DNC. During this entire period, less than one half of 1% of the funds went to the state parties.

The scandal is part of the larger exposé of the deal between the DNC and the Clinton campaign to work together to secure Clinton’s nomination, when the DNC, during the primaries, was supposed to be impartial. The money-laundering scheme, as it was labeled by the Bernie Sanders camp, is one of the big scandals that erupted on the opening day of the Democratic Convention, which forced the resignation of DNC Chairwoman Debbie Wasserman-Schultz on the spot.

THE NEW GLOBAL ECONOMIC ORDER

Putin Urges International Cooperation To Fight Terrorism, a Global Threat

July 27 (EIRNS)—Addressing participants in the 15th session of Heads of Special Services, security agencies, and law enforcement agencies in St. Petersburg today, Russian President Vladimir Putin said: “The session will focus on the fight against international terrorism that has become unprecedented in scale, and, in fact, challenged the whole civilization. I will stress that decisive and coordinated actions of the whole international community are needed to effectively fight against this threat, and the main role will be played by special services and law enforcement agencies,” TASS reported.

Following the massacre in Nice that killed 84 people, injuring at least 200 others, on July 14 Bastille Day, Putin had conveyed the same message while addressing French President François Hollande saying terrorism could be defeated only in joint efforts. “I would like to emphasize once again that terrorism can be defeated only through joint efforts,” Putin said in his “Address to François Hollande and the French Nation.”

In St. Petersburg, the Russian President said that in the conditions that prevail, special services should boost cooperation, exchange experience, use the most advanced methods of preventing and countering terrorist attacks, as well as stopping distribution and propagation of extremism, and ideas of national, religious, and social intolerance, TASS reported “I am confident that the session will focus on a broad range of issues and problems that require joint approaches with reliance on international law, while any proposals will contribute to strengthening security of our countries and international stability in general.” he said.

Japan’s Abe Hints Using New QE Money for $260 Billion Stimulus, Including Reopening of 26 Nuclear Plants

July 27 (EIRNS)—The current world rate of “quantitative easing” money-printing by the central banks of the United States, Europe, and Japan, is at about $2.16 trillion/year ($180 billion/month); Reuters reported today that this is the highest level of “QE” in the eight years since the financial crash. These central banks already hold about 10% of all the debt, of all kinds, in the world. And their rate of new debt purchases is likely to keep increasing, with more “quantitative easing” expected soon from the European Central Bank (ECB) and Bank of Japan (BOJ).

While the Federal Reserve and Bank of England are not currently conducting QE programs, the ECB’s corporate bond program is buying primarily bonds of U.S.-based companies. And the Fed’s is continuing to plow the interest and maturing principle from its $4.5 trillion in bond holdings, back into more government and mortgage bonds; in effect, continuing QE.

The Bank of Japan is expected to increase its QE money-printing further on July 29, perhaps by as much as 25%.

At the same time, Japanese Prime Minister Shinzo Abe today announced that his government is about to introduce new “stimulus” programs totalling $260 billion, whose “details,” he said, would be announced by the Cabinet next week. These programs are likely to span several years, and the amounts of government spending and investment are not clear so far.

Previously such “stimuli” have not worked on Japan’s stagnant real economy. But these programs will definitely include sizeable infrastructure investments, focussed on speeding up high-speed rail building as China has done; on exporting infrastructure; and on the investments necessary to restore Japan’s nuclear power capacity. Abe’s government also estimated today that half (26) of Japan’s shut-down nuclear plants would be in operation by the end of 2017, and that 15 or more would go back online by the end of this year.

If the BOJ announces a large QE increase on July 29, on the scale of Abe’s new “stimulus,” this will be widely called Ben Bernanke’s “helicopter money,” although it is not. Japan’s Finance Ministry publicly rejected Bernanke’s reported suggestion to introduce 50-year Japanese government bonds.

China-Kazakhstan Opens Another Freight Rail Service Along Ancient Silk Road Trade Route

July 27 (EIRNS)—The first freight train service linking northern China’s Inner Mongolia Autonomous Region with Kazakhstan was flagged off today, Xinhua reported. The train, which was loaded with building materials and other commodities, left Jiuyuan Logistics Park in Baotou City this morning. The 4,332-km trip to Astana, capital of Kazakhstan, will take eight days. On its return journey, the train will carry goods such as mineral resources, according to a Hohhot Railway Bureau official, reported Xinhua. The new rail service, which follows the ancient Silk Road trade route, will support China’s northern regional export market, it said.

This route is the third China-Kazakh rail linkage to facilitate China-Europe trade via Kazakhstan. In July 2015, a rail service was inaugurated between Lanzhou, the capital and largest city of China’s northwestern Gansu Province, and Kazakhstan’s former capital Almaty. In December 2012, Kazakhstan completed construction of a 293-km stretch from Zhetygen to Korgas on the Chinese border, integrating it into the existing Kazakhstan Temir Zholy (KZT) national railway network and opening the second China-Europe link across its territory, supplementing the Alataw trade pass, where the first China-Central Asia railway traverses, the now-defunct Silk Road Reporters blog wrote in a July 14, 2015 report. Located 670 km west of Urumqi, the capital of Xinjiang province, Korgas lies 90 km northwest of Yining, the principal town in China’s Ili Kazakh Autonomous Prefecture. Alataw now reportedly handles 15.6 million tons of train-laden cargo a year.

By building these railroads through Kazakhstan, Chinese exporters have succeeded in cutting at least 35 days off the 45-day maritime shipping route to Europe. Kazakhstan accordingly has now emerged as an important hub linking Europe, the Middle East, Asia and Russia. These rail linkages will enable greater trade among China, Kazakhstan, the other member-nations of the Commonwealth of Independent States, and Europe. With almost 12,500 miles of track, the Kazakh railway network is the world’s third biggest using a different rail gauge—the 1,520 mm track gauge used by the Russian rail network, rather than the more common standard gauge used by the Chinese railroad.

 

 

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