Glass-Steagall Is Urgent Now, Before the Trans-Atlantic System Blows Out
Aug. 30 (EIRNS)—Lyndon LaRouche warned on Tuesday that unless the U.S. Congress acts—in September—to reinstate Glass-Steagall as just the first step in a much larger overhaul of economic and monetary policy, the entire trans-Atlantic system is headed for a blow out. Even as China prepares to take the lead, at next week’s G20 heads of state summit, to bring into being a new, just global financial system, British stooge Barack Obama is running around in a delusional state, pushing the already doomed Trans-Pacific Partnership (TPP) and other equally insane dead policies. White House officials Ben Rhodes and Josh Earnest told reporters this week that Obama will put TPP at the top of his agenda when he meets with world leaders in China at the G20. His other key agenda items are: pushing for war in the South China Sea, based on the illegal ruling of the Permanent Court of Arbitration in The Hague; and ramming through the Paris Climate Change accord.
All of the clear signs of an imminent trans-Atlantic financial blowout before the end of the year are present. The last-minute deal to save Italy’s Monte dei Paschi di Siena bank is now unraveling, and JPMorgan Chase is now pushing a private sector bail-in, to avoid a wipe-out of the Italian banking sector. Italian Prime Minister Matteo Renzi is meeting with German Chancellor Angela Merkel on Wednesday in yet another effort to strike a rotten deal to preserve the bankrupt banks. Bloomberg News warned on Tuesday that the derivatives market is set to blow. Under the headline “Did Brexit Turn the Derivatives Market Toxic?” Bloomberg noted that no one betting on currency-rate fluctuations between the British pound and the euro anticipated the Brexit vote. CNBC reported Tuesday that “banks are getting ready for economic nuclear winter,” devising worst-case contingency plans, which envision the complete bust-up of the Eurozone and the end of the European Union, through a string of other exit votes all over Europe.
Glass-Steagall is the indispensable first step, in both the United States and Europe, to avert a financial avalanche. With bipartisan bills in both Houses of Congress, and with both the Democratic and Republican Party platforms calling for Glass-Steagall’s reinstatement, the moment is right for serious and properly conceived action. Congress returns to Washington next Tuesday, Sept. 6. There can be no revival of genuine productivity in the dying U.S. and European economies without first wiping out the entire derivatives bubble and re-establishing functional commercial banks, through which tremendous amounts of credit can be directed for vital infrastructure, and research and development. Above all else, the space program must be fully revived, so that the United States can join with China, Russia, India, and other nations that are already committed to what the great space scientist Krafft Ehricke called the “Extra-terrestrial Imperative.”
Friday and Saturday, the Vladivostok Eastern Economic Summit takes place, followed the next day by the start of the G20 heads of state meeting Hangzhou, China. A global realignment is already underway, centered around the Eurasian development imperative. But for that realignment to truly succeed, the United States and Europe must be brought onboard. That means abandoning all of the policies associated with the British Empire, most recently expressed by President Obama’s delusional schemes to revive an already-dead system.
THE NEW GLOBAL ECONOMIC ORDER
Shanghai-to-Hamburg Expressway: 2018 Begins Russian Construction
Aug. 30 (EIRNS)—Citing the Russian website of Smolinvest, Russia Beyond The Headlines (RBTH) today reported that the work on the Russian section of the proposed Shanghai-Hamburg Expressway will begin in 2018. “At the moment we are at the last stage of the planning process,” Director of the Department of Investment Development of the Smolensk region, Rostislav Rovbel, told Smolinvest. “We managed to come to an agreement with almost all landowners affected by the construction work. The design of the road should be ready by 2017 and construction should begin in 2018,” he said.
The international transport route will pass through nine regions of the Russian Federation. The length of the route will be more than 2,000 km. The permissible speed limit is 130 kph, Smolinvest reported.
Rovbel said the expressway project would help generate jobs in the construction, engineering and transport sectors. The international highway will strengthen our competitive advantage in dealing with potential investors, he added.
New Delhi Is Pleased To Note Chinese Firms Have Sped Up Investment in Indian Companies
Aug. 30 (EIRNS)—A significant growth in investment of China in the Indian companies since June of this year has been reported by the Indian media. India’s Business Standard, citing a report by VCCircle, pointed out today that the Chinese firms have invested more than $2.3 billion in four Indian companies during the past three months, as compared with the $1.35 billion that came into India by way of foreign direct investment (FDI) from China between April 2000 and March 2016.
VCCircle report noted the major Indian beneficiaries of the $2.3 billion in Chinese investment were included ad tech startup Media.net, drug maker Gland Pharma, and electrical equipment maker Diamond Power Infrastructure Ltd. Media.net, incidentally, was one of the largest deals in the advertising technology sector, in which a Chinese consortium led by Beijing Miteno Communication Technology bought out the startup floated by brothers Divyank and Bhavin Turakhia for $900 million.
Ever since the Narendra Modi-led National Democratic Alliance government came to power in May 2014, it has sought to woo Chinese manufacturers to set shop in the country as part of its flagship Make in India initiative, which aims to attract foreign money into the manufacturing sector.
Despite the surge, Chinese investment in India remains woefully small. However, the last three months’ trend indicates that the Modi government’s easing of policies to attract investments from China has begun to bear fruits.
China Plans To Turn G20 from Crisis Mechanism to International Policy Coordinator
Aug. 30 (EIRNS)—James Laurenceson, Deputy Director of the Australia-China Relations Institute at the University of Technology, Sydney, welcomed China’s efforts to turn the G20 “from a crisis response to one that drives long-run improvements in living standards,” in an interview with Xinhua published today. “China is the world’s second largest economy and is responsible for 30% of global growth. That makes it an ideal candidate to play a leadership role in ensuring the G20 makes a successful transition and delivers widespread benefits,” Laurenceson told Xinhua.
That includes turning the world away from short-term stimulus and monetarism, to what Chinese economists call “supply-side structural reforms,” which focus on increasing physical production and technological innovation—a different animal entirely from the austerity and government-reduction which the IMF and Western financiers mean by “structural reforms.”
“Short-term stimulus measures to encourage demand such as rapid credit expansion and zero interest rates have hit their limits. Structural reform is now the most realistic way to achieve sustainable improvements in living standards,” Laurenceson told Xinhua.
An overview of Chinese thinking on this front was made available to U.S. policymakers on Aug. 28 by the Washington-based publicationThe National Interest, in a column on “What To Expect from China’s G20 Leadership,” authored by Wang Wen, the executive director of the influential Chongyang Institute for Financial Studies at Renmin University in Beijing. Wang laid out China’s intent to prioritize innovative approaches to growth, and “step up global governance and transform development mechanisms to facilitate production flows on a global scale.” China believes in cooperation on international production-capacity, he wrote, and wants to “forge an inclusive global industrial chain to enable all countries to fully realize their comparative advantage.”
Financial governance reforms, and an “open world economy … [to] balance the developmental needs of countries at different stages of economic development,” are likewise priorities. “Urbanization and industrialization in developing countries is restricted by inadequate technology, equipment and infrastructure. And, in developed countries, equipment and infrastructure rejuvenation is complicated by a shortage of funds and high costs.” Here, China’s “One Belt, One Road” is put forward as exemplary of approaches for resolving these imbalances.
U.S. POLITICAL AND ECONOMIC
Obama’s Delusional Plans for Asia Summits
Aug. 30 (EIRNS)—Top White House officials promised that Barack Obama will take Asia by storm during his 10-day trip to the region for the G20 and East Asia Forum/ASEAN summits, riding upon the British Queen’s free-trade, war, and climate-change agenda, which the majority of the nations attending those summits intend to bury.
But will anyone be listening?
Deputy National Security Advisor Ben Rhodes did the heavy lifting at Monday’s White House press briefing on the trip. He told reporters Obama will “make the case” at every opportunity that the Trans-Pacific Partnership (TPP) “is a litmus test of U.S. leadership,” which “allows us to establish the rules of the road for trade and commerce”; were the U.S. not to do so, “we would be ceding the region to countries like China.”
No matter that the TPP doesn’t have a snowball’s chance in Hell of passing the U.S. Congress right now, and that the nations of Asia are not interested in the TPP, but are signing agreements right and left with China on major infrastructure projects under China’s “New Silk Road” concept. Obama is determined to make this failed project “a litmus test for U.S. leadership,” Rhodes stated.
Obama’s second hobbyhorse will be the South China Sea “dispute” concocted against China, which he will raise generally, Rhodes said, and will be the leading issue on Obama’s agenda when he meets with President Rodrigo Duterte of the Philippines on the sidelines of the ASEAN summit in Laos—joined by lectures to Duterte against human rights violations and “derogatory remarks.” Duterte had just stated that he will discuss the Philippines’ dispute with China over the South China Sea with China alone.
While Chinese diplomats are juggling schedules to ensure that President Xi Jinping can meet with the many heads of state attending the G20 Summit seeking bilateral meetings on the side of the G20, Rhodes reported that Obama has one bilateral meeting scheduled outside of his meeting with Xi, and that’s with Turkey’s President Recep Tayyip Erdogan.
“We anticipate there will be additional bilateral meetings, and we’ll keep you posted as they are scheduled,” Rhodes assured reporters. Maybe even President Putin will “find an opportunity” to spend some time with Obama.
Senior Advisor Brian Deese announced that Obama will “be able to interact directly with the wildlife” in the Papahanumokuakea “Marine Protected Area,” where Obama will stop on his way over to China! Obama just announced the quadrupling of that area, first created by George W. Bush, prohibiting commercial fishing and use of natural resources within an area twice the size of Texas, stretching from Hawaii to Midway Island.
Sixty Members of Congress Sign Letter Opposing Saudi Arms Sale
Aug. 30 (EIRNS)—Sixty members of Congress have signed a letter to President Obama calling on the administration to delay the recently announced $1.15 billion arms sale to Saudi Arabia. According toForeign Policy, which has obtained a copy of the letter but didn’t publish it, the document cites the growing number of civilian casualties in Yemen caused by the Saudi-led military coalition, and the Obama administration’s failure to rein in the Saudi air campaign.
“This military campaign has had a deeply troubling impact on civilians,” the letter says, citing several instances of civilian casualties, including the bombing of a Médecins Sans Frontières (MSF, Doctors Without Borders) hospital. “Any decision to sell more arms to Saudi Arabia should be given adequate time for full deliberation by Congress,” wrote the lawmakers. “We are concerned, however, that the timing of this notification during the August Congressional recess could be interpreted to mean that Congress has little time to consider the arms deal when it returns from recess within the 30 day window established by law.”
Foreign Policy doesn’t list all of the signers of the letter, but does name six of them as indicative of the bipartisan nature of the list: Reps. Ted Lieu (D-CA), Justin Amash (R-MI), Jerrold Nadler (D-NY), Chris Van Hollen (D-MD), Ted Yoho (R-FL) and Jared Polis (D-CO). (Rep. Lieu’s office issued a Dear Colleague letter last week, listing 52 Members who had already signed the letter, and indicated a deadline of Aug. 26 for new signers.) Lieu’s letter named a long list of human rights groups that support the actions to cut off the arms sales to the Saudis, including Amnesty International, Oxfam, Physicians for Human Rights, the American Friends Service Committee, Just Foreign Policy, and Jubilee Committee U.S.A.
Rep. Ted Lieu Leads Charge Against U.S. Arms Sales to Saudis
Aug. 30 (EIRNS)—The Intercept has published an interview with Rep. Ted Lieu (D-CA), who is a leader of the fight to block the $1.15 billion latest arms sales to the Saudis, and who has been pressing for months for the Obama Administration to abandon its blatant military backing for the Saudi war crimes in Yemen. Lieu is a Colonel in the U.S. Air Force Reserves.
“I taught the law of war when I was on active duty,” he told The Intercept. “You can’t kill children, newlyweds, doctors and patients—those are exempt targets under the law of war, and the coalition has been repeatedly striking civilians.” After the Saudis resumed bombing of civilian targets in Yemen in August, after peace talks broke down, Lieu charged that the Obama Administration was “aiding and abetting what appears to be war crimes in Yemen.” Less than 24 hours after Lieu issued that statement, the Saudi coalition bombed the Médecins Sans Frontières (Doctors Without Borders, MSF) hospital in northern Yemen. It was the fourth Médecins Sans Frontières hospital that the Saudi coalition had bombed in Yemen in the past 12 months. Since September of last year, Lieu has written to Joint Chiefs of Staff Chairman Gen. Joseph Dunford, President Obama, Secretary of State John Kerry, and Secretary of Defense Ashton Carter, calling for a full investigation into the “indiscriminate nature” of the coalition operations in Yemen. A Pentagon spokesman wrote back, claiming that the Saudis were “trying harder to comply with the Laws of Armed Conflict.”
Lieu warned in his Intercept interview that continuing to back the Saudi war crimes in Yemen is going to backfire against U.S. security: “By aiding a coalition that is killing civilians, the U.S. is going to create another generation of people who hate the U.S. and who are going to want to do very bad things to us…. It’s actually creating more terrorists by killing all these civilians.”
In response to efforts by Congress and human rights groups to expose the crimes of the Saudis in Yemen, the Saudis are doubling their lobbying efforts in Washington, particularly since the July 15 release of the 28-page chapter from the Joint Congressional Inquiry into 9/11. Al Monitor reported yesterday that in the past year, the Saudis have hired five new public relations firms to defend them in the United States, doubling their lobbying price tag to $9.5 million a year. In May, the Saudis hired DLA Piper, a major Washington lobbying firm, to save the Saudi reputation. The same month, the Saudis also hired former Republican National Committee chairman Haley Barbour as another lobbyist. Their longstanding chief lobbying firm, Qorvis (now renamed MSLGROUP), has been working for the Saudis for 14 years, hired in the aftermath of 9/11.
COLLAPSING WESTERN FINANCIAL SYSTEM
JP Morgan Pushes Bail-In Through Back Door of Monte dei Paschi
Aug. 30 (EIRNS)—The bailout scheme for Monte dei Paschi di Siena bank (MPS) has lasted barely a month. CEO Fabrizio Viola proposed a new bail-in scheme in a board meeting yesterday, involving €3 billion in subordinate bonds owned by institutional investors and retail customers. Those bonds are to be converted into shares, thus reducing the target of capital increase that was initially set at €5 billion. Indeed, the new target is higher—Viola said that with the new scheme the bank needs “only” €3 billion of new capital, thus adding to the €3 billion converted bonds for a total of €6 billion.
According to reports earlier published in Il Sole 24 Ore, the new scheme is a product of the advisory team composed of JP Morgan, Lazard, and Mediobanca.
By way of reminder: A few minutes before the publication of the stress tests result on July 30, MPS announced a deal for a capital increase of €5 billion, subscribed by a consortium of international banks: Mediobanca, JP Morgan, Goldman Sachs, Santander, Citi, Crédit Suisse, Deutsche Bank, and Bank of America Merrill Lynch. Those banks had agreed to bail out MPS on the condition that the bank be cleaned out of its non-performing loans (NPL). This was to be accomplished by the “Atlante” bad bank scheme, whereby €27 billion in NPL were purchased at a price of €30 cents on the euro, securitized and sold on the market under government guarantee. It was clear that the deal was aimed at controlling the damage of the stress tests, which, as expected, pulled a red card for MPS.
Since MPS’ capital is currently under €1billion, the deal amounted to its sale to a consortium of foreign banks. However, EIR wrote at the time that when vampires decide to donate blood, there is something foul afoot. The new claim for a bail-in is the first evidence of that. Through the conversion of bonds into stocks, JPMorgan and the other banks reduce their bailout effort by 40%. Morgan is known for recommending the scrapping of European constitutions because they are too much “socialistic.” JPMorgan’s role in dictating the bail-out and bail-in of Monte dei Paschi should prompt a political, if not a judicial reaction.
Drop in Air Transport Joins Drops in Truck, Train, and Inter-Modal Transport; Call It a Depression
Aug. 30 (EIRNS)—Sharp drops in sales of, and new orders for planes led Boeing to announce yesterday that it would not raise its catalogue prices on planes this year. The last times it took such a measure were in 2009 (in the wake of the financial system blow-out) and 2001 (in the wake of the 9/11 economic shock).
According to Zero Hedge, the market for aircraft sales has dropped 20% so far this year.
“In 2016 Boeing has booked new orders for 335 planes though Aug. 23, much fewer than the 418 jetliners in the first seven months of 2015, according to company data. The Boeing slowdown, however, pales in comparison to the plunge in global demand for Airbus products: sales at the European conglomerate have slowed to a net 323 through July this year. That compares with 1,080 in all of 2015,” Zero Hedge wrote.
Both Boeing and Airbus announced earlier this month that they either will, or may, cut production of various plane types. “The industry is a poster child for deflation at this point,” aerospace consultant Richard Aboulafia told the Seattle Times yesterday.
STRATEGIC WAR DANGER
Aleppo: Jihadis Refuse Cooperation with UN Humanitarian Relief
Aug. 30 (EIRNS)—According to a report in Gulf News yesterday, Russia has offered “the unprecedented suggestion” of offering ground troops to help provide security to UN convoys bring humanitarian relief supplies to the embattled city of Aleppo. Their main focus would be to man military checkpoints, surveillance centers, and intelligence units on the Castello Road from government-controlled territory to the northeast. Al Masdar News reports, this morning, that a Russian military convoy has already arrived in Aleppo, from the Russian base in Latakia. According to the report, numerous eyewitnesses saw the convoy arrive on Monday, via the Castello Road, with approximately 120 soldiers.
There is no confirmation from any Russian source, as of yet, that Russia has offered or is sending troops to Aleppo to secure the Castello Road route. In any case, the jihadi groups that control eastern Aleppo are reported to be opposed to the use of that route, demanding, instead, that the UN bring relief supplies into the city via the Ramouseh road, which runs to southern Aleppo from territories that the jihadis control to the west.
Russian Foreign Ministry spokeswoman Maria Zakharova denounced the jihadis for their refusal to cooperate on humanitarian relief, in no uncertain terms in a statement issued by the Foreign Ministry yesterday.
She accused the West of being silent on this sabotage “by militants, who feel they are going unpunished and have gone to the length of shamelessly blackmailing UN humanitarian officers,” including by refusing to guarantee the security of aid convoys using the Castello Road.
“It is also obvious that the sponsors and patrons of the Syrian armed opposition have again failed to do their ‘homework assignment’ with regard to the work with their subjects,” she said. “We expect our colleagues in the International Syria Support Group to finally restrain ‘unbridled clients’ to avoid full disruption of UN humanitarian efforts in Aleppo.”