EDITORIAL
Economies and Markets Crashing: LaRouche’s Policy Must Go Through Now!
Aug. 2 (EIRNS)—The collapse of, not just the credit markets, but the overall economies of Europe and the United States, is now fully underway.
The insertion of Glass-Steagall into both U.S. political parties’ platforms is discussed everywhere; but it is only one step towards a goal which has to be reached immediately. There is no waiting until a lame-duck session, or the next Congress: It must be put through.
Why? Because Glass-Steagall is an essential part of a national credit policy to revive production and productivity and cooperate with Asian powers’ global infrastructure investments. Without that policy, the trans-Atlantic economies have entered an irreversible collapse much worse than a mere “bank panic,” although a bank panic is underway.
The unfortunate faked “stress tests” of major European banks have triggered their general crash on the markets, with trading in the leading Italian banks halted on Tuesday after they had just supposedly been bailed out! An expert calculation of “real bank stress,” conducted on an emergency basis and reported in the Financial Times that day, found that the big European banks need an immediate bailout of €900 billion—a $1 trillion-plus emergency “TARP” recapitalization—to survive.
The loss of growth, and complete loss of productivity in the trans-Atlantic economies are driving this collapse. In the United States: GDP growth for the past 12 months is 1%; labor productivity has dropped 1.5% so far this year, and hasn’t risen in six years; business capital investment has dropped in five of the past six quarters; real weekly wages are again falling.
Leaders of the Federal Reserve—including New York Fed President William Dudley on Tuesday, Federal Reserve System Chair Janet Yellen last week—are making speeches bemoaning the loss of economic productivity, which they have helped bring about by incessant money-printing to bail out bankrupt banks.
Growth in more fundamental aspects which measure the effect of new technologies on labor productivity, has completely disappeared.
The markers in Europe are worse, and public investment has dropped across Europe in the past year by €115-€120 billion, or about $135 billion.
Another $1 trillion TARP will cure nothing about this collapse. Italy, for example, currently an epicenter of the bank crash, needs a national law to allow creation of national credit for growth—a step currently prohibited by European Union regulations!
Glass-Steagall separation and limitation of insured commercial banks opens up the cure. That cure is national credit institutions that create both credit for new and more productive infrastructure and industry, and the demand for additional credits from private lendingbanks. Glass-Steagall enforcement opens up the successful banking and credit policies of Treasury Secretary Alexander Hamilton.
One Senate supporter of the Glass-Steagall bill in that body believes that if it can be gotten to the floor of the Senate, out of the committee sitting on it, the legislation could pass right now. The national debate and discussion now swirling around Glass-Steagall in the party platforms, has to be turned into action to put the Glass-Steagall legislation through.
American and European societies have sustained tremendous losses since the 2008 financial crash, often described in terms of tens of trillions of dollars, but really measured by the loss of a future for younger generations. This collapse will make that irreversible, unless it is stopped by national action now.
Every citizen can become a creative force in this effort.
STRATEGIC WAR DANGER
LaRouche: ISIS Threat to Putin Could Have Strategic Fallout
Aug. 2 (EIRNS)—The circulation this week of a videotape by “ISIS” promising attacks on Russia, and presenting the personal threat, “We are coming to get you, Putin,” involves a greater danger than most “experts” realize, EIR Founding Editor Lyndon LaRouche said today.
“This is a shock,” LaRouche said. “Do they realize what and whom they are threatening? This is being deployed! This is not ‘ISIS,’ it is a Chechen-centered complex of terrorism groups and operations. And it was created and is used by the British, by Obama, against Russia, using Saudi Arabia as an instrumentality. Putin has been fighting this, successfully, for nearly two decades. Effectively this is Obama.”
LaRouche did not rule out that, “this might lead Russia to respond, at some point, even strategically. It could contribute to world war!”
LaRouche’s extraordinarily prescient 1999 film documentary “Storm Over Asia,” was produced to expose exactly this Chechen-centered terrorism as being aimed by London at the potential “Russia-China-India strategic triangle,” and carrying the threat of a thermonuclear world war. That was the point at which Putin took office and began the long fight which defeated the terrorists in Russia, and is aimed at defeating them internationally now.
Of the “ISIS” threat video against Putin and Russia now, LaRouche observed, “This is a shockingly irrational decision by some party, just when rational negotiations by Russia and America are needed to produce greater security in that area.”
Cass Sunstein Joins Ash Carter’s Search for Wunderwaffen against Russia and China
Aug. 2 (EIRNS)—On March 2, 2016 Secretary of Defense Ash Carter announced the creation of the “Defense Innovation Advisory Board” (DIAB), a panel of experts that is to provide him with advice on “the best and latest practices in innovation that the department can emulate,” said DOD Press Secretary Peter Cook at the time. “The board’s mandate is to provide department leaders independent advice on innovative and adaptive means to address future organizational and cultural challenges,” Cook went on, all with the goal of identifying quick solutions to Defense Department problems. At the time, Cook announced that Eric Schmidt, executive chairman of Google’s parent company Alphabet, would be the chairman of the DIAB; he and Carter began adding members.
Prominent among the nine new DIAB members announced by Carter on July 26, is Cass Sunstein, Harvard Law School professor, and a co-author of, among other things, President Obama’s health reform law.
Sunstein is an advocate of the pseudoscience of behavioral economics, which is essentially psychological manipulation of the population to accept policies which are detrimental to them. Until 2012, he was an official in Obama’s Office of Management and Budget. Sunstein was in charge of executive orders and regulations for Obama’s White House; and was called an “expert” in government techniques for disrupting opposition to government actions.
Sunstein is the husband of Samantha Power, Obama’s representative at the United Nations, where she most recently denounced the effort of the Syrian government and the Russian military to get civilians out of Aleppo as “chilling.”
Both Sunstein and Power are original members of the Chicago dirty operations, that concocted Obama as a political figure in the first place. Both promote regime-change wars, branding them as “humanitarian interventions,” under the slogan R2P—“responsibility to protect.”
What exactly Sunstein’s contribution to the DIAB will be, is not yet clear.
Other members of the DIAB, besides Google’s Schmidt and Sunstein, include Amazon founder and Washington Post owner Jeff Bezos, LinkedIn co-founder Reid Hoffman, Instagram COO Marne Levine, Code for America founder Jennifer Pahlka and astrophysicist Neil deGrasse Tyson.
Carter’s establishment of the DIAB followed his instigation of the Defense Innovation Unit experimental (DIUx), first in Silicon Valley in May, and then extended to Boston last month. According to its own description, DIUx “serves as a bridge between those in the U.S. military executing on some of our nation’s toughest security challenges, and companies operating at the cutting edge of technology.” That is, it’s supposed to “innovate” the technologies that will allow America to dominate all domains of conflict from cyberwarfare to undersea warfare, in a world where Russia and China are challenging American hegemony with technological development of their own, and terrorists are using the internet to plan and command their attacks.
The DIUx is manned by a combination of technologists from the Pentagon and Silicon Valley-type firms, and reports directly to Carter’s office in the Pentagon.
COLLAPSING WESTERN FINANCIAL SYSTEM
European Banks under Acute Stress after ECB Stress Tests; LaRouche Stresses, Go for National Self-Defense
Aug. 2 (EIRNS)—In a long interview with CNBC-TV, Italian Prime Minister Matteo Renzi said that his government will oppose a bail-in with all its force. In his broken English, Renzi said, “Italy is totally fighting for avoid bail-in because also soft bail-in could be a disaster for the credibility and for the confidence.” Renzi also said that the only solution for Italian banks is “growth,” and that how to achieve growth is “my dream and my nightmare.”
Well, now that he has violated EU rules requiring bail-in, Renzi should take the next step and violate EU budget rules in order to implement a growth program. In a discussion this morning, Lyndon LaRouche stressed that although this is not a national but a global crisis, Italy must implement a law for a national credit program for recovery, and European nations should cooperate for national self-defense. This will then “cause the whole [EU/euro] program to be re-examined,” LaRouche said.
Anything else is not going to work. Take the “solution” announced for Monte dei Paschi di Siena (MPS) on July 29, which nobody trusts. Yesterday and today, Italian banks, as well as other European banks, were hit by head-for-the-exits selling. Unicredit stock trading was suspended both days, after having fallen almost 10% on Monday and 5% on Tuesday. The 70% discounted price for MPS’s non-performing loans has been seen as a benchmark for future deals, thus forcing other banks with NPLs to recapitalize.
The Financial Times has published a chart with the loss in value of five major European banks since the stress tests results were published on July 29: Unicredit −15.9%; Commerzbank −11.2%; Deutsche Bank −6.6%; Credit Suisse −6.1%; Barclays −5.4%.
In the context of no economic growth and a zero/negative interest rate policy, there is no chance that any bank can recover. And now the European Central Bank is also driving corporate finances into bankruptcy. Bloomberg has reported that the ECB purchases ofcorporate bonds are driving down yields, which last week were at an astonishing 0.7%.
Second quarter figures for Eurozone GDP show a 0.3% growth, i.e. non-growth, while a review of public investment rates relative to GDP shows a decline of greater than 1% in the 2009-2016 period. This means a loss of €115-€120 billion in investments.
Academics Do Real Stress Test, Find Banks Need $1 Trillion TARP!
Aug. 2 (EIRNS)—In an ironic counterpart to the panic in bank stocks all over Europe today, following the unfortunately faked “stress tests” by the European Banking Agency (EBA) last week, three academic economists performed a kind of “real stress test on an emergency basis.” Their findings were published July 30, and reported by theFinancial Times and AFP: The big European banks would need close to €900 billion, about $1 trillion, in new capitalization to withstand the crisis.
The investigators were Sascha Steffen of Germany’s Center for European Economic Research, Prof. Viral Acharya of New York University’s Stern School of Business, and Diane Pierret of the University of Lausanne in Switzerland. They reported “The market has a very different view on how risky bank portfolios are” than the Basel supervisors. The 34 listed banks have lost a full third of their book value since the last EBA stress tests in 2014, so investors had no confidence in them. The Aug. 1-2 crash in bank stocks showed these EBA stress tests were faked as well.
The three academics found that the big European banks (including those headquartered in London) would need €882 billion in new capital to survive the losses from their risky assets in a serious crisis like this one.
They acknowledged such an immense “recapitalization” could come only from a Europe-wide government bailout, essentially a European TARP 30% larger than the 2008 original. And they wereassuming that bank bondholders got bailed in as well!
France comes out of the economists’ analysis worst, with the three French banks in the 2016 stress tests needing €250 billion, followed by the U.K.’s four listed banks, whose requirement would be €185 billion; Spain’s six listed banks, €116.6 billion; Germany’s two listed banks, €114.4 billion. In a surprise to some, Italy’s five listed banks were the least needy of a capital bailout, €96.6 billion.
U.S. POLITICAL AND ECONOMIC
Wall Street: Glass-Steagall Will Hit Hard
Aug. 2 (EIRNS)—Confirming that Wall Street is the driver and location of resistance to restoring Glass-Steagall through the Congress, a Wall Street consulting firm has whipped up a study of the impacts to be expected from reinstating Glass-Steagall. The report by Keefe, Bruyette & Woods (KBW) is a direct response to the appearance of Glass-Steagall planks in both parties’ presidential platforms. The study was reported on the Wall Street TV network CNBC on Aug. 1, under the headline “Glass-Steagall’s Return Threatens Wall Street.”
KBW finds that restored Glass-Steagall would impose “penalties” on all the big banks, most severely on JPMorgan Chase, Citigroup, and Bank of America (which would lose Merrill-Lynch).
And they do understand what it would do: “Re-instituting Glass-Steagall as law could include fully splitting investment and commercial banking businesses, limiting commercial banks’ subsidiaries to underwrite only government-issued securities, prohibiting investment banks from taking deposits, and forbidding interlocking roles between investment and commercial banks for directors or managers. In other words, it would undo a lot of things that have changed in the banking business.”
KBW also advises that “investors” should not expect increased valuation of the speculative operations that get broken off from the commercial banks—just the opposite.
The fact of the matter—which they do not recognize—is that most of these speculative shops would go bankrupt in the current economic and financial collapse.
28 Pages Released, Next Step Is Veto-Proof JASTA Vote in House
Aug. 2 (EIRNS)—With the July release of the 28-page chapter from the original 2002 Joint Congressional Inquiry into 9/11, with relatively minor redactions, the stage is set for the next phase of the battle to fully expose and dismantle the entire Anglo-Saudi Empire. The release of the U.K.’s Chilcot Commission report—a damning condemnation of Blair, Bush and Cheney for crimes against humanity—and the ongoing exposure of HSBC’s role in the world dope trade and terrorism, mean that the conditions are now set for the top-to-bottom dismantling of the entire Empire apparatus.
A priority is the mobilization to ensure that the Justice Against Sponsors of Terrorism Act (JASTA), H.R.3815, is passed by the House of Representatives by a veto-proof majority as soon as Congress returns Sept. 6, after Labor Day. JASTA would give the 9/11 survivors and families their day in court, and by reinstating the Saudi Royal Family as defendants, it would open up opportunities for investigative discovery that are long overdue and vital to the full exposure of the authors of 9/11. Given that Prince Bandar bin Sultan is all over the 28 pages, his role in the 1980s creation of the Al Yamamah project is a critical piece of the 9/11 puzzle, and this brings the British Monarchy fully into the story.
Several months ago, a British Tory MP warned that if JASTA passes, the British Crown can also be sued. He was not talking about the Crown’s safehousing of jihadists from Chechnya and the Middle East, but the Al Yamamah deal with the Saudis that created a slush fund for global terrorism.
Other measures are pending; some members of Congress are talking about holding a symposium over the Summer to explore the full implications of the now-declassified 28 pages. A Federal judge in Sarasota, Florida is still plowing through the 80,000-plus pages of FBI documents on the Sarasota Saudi hijackers cell, including Mohammed Atta, who frequently visited the home of wealthy Saudi businessmen.
Other avenues of further investigation have never even been initiated, including the support apparatus for cells in Paterson, New Jersey, and Herndon, Virginia. Former Sen. Bob Graham, one of the driving forces behind the fight to expose the full scope of the Saudi Royals’ involvement, has argued that none of the hijacker cells could have operated alone, and all had to have received significant support from agencies unknown.
CDC Travel Ban for Zika-Infected Miami Neighborhood; Control Measures Show Poor Results
Aug. 2 (EIRNS)—The Centers for Disease Control and Prevention (CDC) yesterday issued a travel ban for pregnant women to the one-mile area of Miami’s Wynwood neighborhood, in Florida, after the number of Zika cases jumped to 14 there, up from 4 last Friday, July 29. A CDC emergency response team was also deployed to Miami, CDC Director Tom Frieden announced in yesterday’s press conference.
According to Dr. Frieden, the attempts to control the Zika-transmitting Aedes aegypti mosquito in Wynwood is proving difficult, suggesting it could be resistant to the insecticides being used, or the mosquito is finding other sites of standing water in which to breed, Associated Press reported. Michael Doyle, director of the Florida Keys Mosquito Control District, described the Aedes aegypti as a “little Ninja. It’s always hiding. We have to totally re-think mosquito control for Aedes aegypti.” This mosquito can breed in just a bottle cap of water, and hides in tiny crevices, he said.
Dr. Frieden pointed out that in the U.S., “we really dismantled the mosquito monitoring and control infrastructure over the past few decades.” Thus, “we have blind spots where we don’t know where the mosquito populations are and what the susceptibility is to different insecticides.” He reported that testing results on the effectiveness of individual insecticides being used in Miami won’t be available for another one to two weeks. And, if insects prove resistant to one insecticide, mosquito-control officials can’t easily switch to another compound, because of environmental regulations governing which chemicals can be used as insecticides, AP notes. “The Aedes aegypti is a really tough mosquito to control,” Frieden warned, urging citizens to take every precaution to avoid being infected.
Greatly heightening concern about Zika’s spread, as reported by the Caribbean360 news website July 28, a Brazilian research team has found that a more common species of mosquito, the Culex quinquefasciatus can also carry the virus. This species is 20 times more common than the Aedes aegypti; it is more prevalent in America and can tolerate cool, non-tropical conditions.
THE NEW GLOBAL ECONOMIC ORDER
China and Russia To Deepen Anti-Terror Cooperation
Aug. 2 (EIRNS)—Willful fools, such as the RAND Corporation, who argue Russia would not significantly weigh in, should the United States launch a war on China, might wish to take note of today’s remarks by China’s Ambassador to Russia, Li Hui.
Ambassador Li told reporters that Vladimir Putin’s return to China for the G20 Summit in Hangzhou on Sept. 4-5, followed by Chinese Premier Li Keqiang’s trip to Russia for the 21st regular meeting of China and Russia’s heads of government on Nov. 7-8, are “two important political events [which] will be a further step in expanding and developing the comprehensive strategic cooperation and partnership” between their two countries, TASS reported.
Li emphasized the expanding cooperation between the two countries in the fight against terrorism, regionally and globally. Citing recent Russian-Chinese anti-terrorist drills as evidence of successful development of bilateral cooperation in this sphere, Li said that Russia and China, “intend to continue strengthening practical anti-terrorist cooperation, fight against international terrorism, defend peace and stability in the region and in the world…. Russia and China have been for a long time developing close and very effective cooperation in the sphere of anti-terrorism with the help of bilateral mechanisms, as well as on multilateral platforms, such as summits of the Shanghai Cooperation Organization and BRICS member countries.”
Sputnik’s interview with a Moscow-based military analyst today, mooting stepped-up joint Chinese-Russian collaboration on anti-ballistic missile systems (“Sino-Russo Duo: China Mulls Ramping Up Its Missile Defense With Russia”), serves to remind the cognizant that already on May 3, China and Russia made public that they were conducting joint anti-ballistic missile defense exercises, in direct response to ABM systems being deployed around their borders by the British-run Obama Administration.
Which Japan Will Emerge from Crisis, a Militarist or Developer?
Aug. 2 (EIRNS)—Japan released an annual military White Paper this week including an attack on China as “high-handed,” and expressing “deep concern” that China is “making steady efforts to turn these coercive changes to the status quo into a fait accompli.” The same report expresses concern that, “the zone of activity of the Russian armed forces is increasing, including in the area of the Northern Territories” (the Southern Kurils).
China’s Defense Ministry responded sternly: “The paper distorts China’s justified and reasonable defense construction and heightens regional tensions. It stirs up trouble between China and its neighbors, and deceives the international community.”
Asked to comment on this exchange by Iran’s PressTV, EIR’s Michael Billington noted that as long as Japan is forced to deal with Obama’s mobilization for military confrontation with China, the militarist forces in Japan would have their way— including the effort to change the Constitution to allow Japan to join the U.S. in a war on China. But, he said, there is another Japan, which not only conducts huge trade and investment in China, but also is committed to restoring relations with Russia. Abe will meet with Putin in Vladivostok in September as part of the conference on the development of the Russian Far East.
Billington added that Japan is the only G7 nation which still believes in infrastructure development, both within Japan and around the world. This, he said, is the basis for China, Russia and Japan to cooperate in their common interests, and break the war-mongering in the West and in factions within Japan.
