MONDAY, AUGUST 22, 2016

Volume 2, Number 259

EIR Daily Alert Service

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

EDITORIAL

Can ‘Helicopter Money’ Build a New American Infrastructure?

Aug. 21 (EIRNS)—With the U.S. and European economies near zero-growth and zero productivity growth, there are a hundred proposals “for building new economic infrastructure,” nearly all of which ignore science completely.

Really productive new economic infrastructure, built in America’s last century uniquely under the Presidencies of FDR and JFK, was driven by science: the new sciences of atomic fission and particle physics, the challenges of high-voltage electrification and long-distance transmission; those of large-scale water management and transfer; Apollo Project’s exploration of the Moon. Computers? They fell out of the scientists’ back pockets, as just a means to scientific ends.

Today such truly productive “infrastructure” is built and pursued by China. It has planned to make just such “innovation,” and growth, the subject of the G20 summit it is chairing in two weeks. There is no sign that Obama or Europe agree; rather, Obama and Hillary Clinton are on a path of military confrontation with China as well as Russia.

The “Four Laws” needed for future economic progress, formulated by EIR Founding Editor Lyndon LaRouche in 2014, are uniquely suited for the challenge China’s leadership is posing to the G20 leaders.

Otherwise, the current proposals for “infrastructure funds” ignore physical science, which finds its frontiers today in fusion power/plasma and superconducting technologies, in biogeophysics and in deep space exploration. And they ignore the science of credit—the domain ruled by Alexander Hamilton, who found that the purpose of credit and banking was to concentrate the savings of the nation in the service of scientific invention and technological productivity.

Last month a Chicago gathering of nearly 1,000 American elected officials were presented—by Wall Street—with a “new American infrastructure” scheme. It was based on the super-low interest rates the Fed has provided for seven years now. It proposed the U.S. Treasury borrow $4 trillion [!] with 100-year U.S. bonds “for infrastructure,” with an initial interest of about 1%, to be adjusted upward gradually with inflation. Some of the state and local elected officials got excited about it.

Obama’s 2010 “stimulus act” also took advantage of very low interest rates and borrowed nearly $1 trillion—and never has productivity growth in the U.S. economy been lower, than in Obama’s six years since then.

It is only secondary that this new Wall Street scheme is “helicopter money”; but a helicopter even Ben Bernanke wouldn’t fly in. Patriotic Americans buying the 100-year “infrastructure” bonds would immediately see them sink significantly in value, and sell them to debt-speculating hedge funds.

What is crucial is that the “new American infrastructure” scheme from Wall Street—you will hear it very soon also from Hillary Clinton—does not include new frontiers of space exploration in any way; does not mention fusion power or plasma technologies; did not contemplate a continental high-speed and magnetic-levitation rail network.

We don’t need Wall Street inventing money. We need scientific invention, driving and being driven by infrastructure building—that’s what we had through FDR and briefly through JFK. LaRouche noted in a discussion yesterday, “It’s science. It’s all science. It’s not politics; it’s science.”

THE NEW GLOBAL ECONOMIC ORDER

President Xi Will Meet with Obama at Upcoming G20

Aug. 21 (EIRNS)—China’s Ambassador to the United States, Cui Tiankai, was interviewed on the eve of the upcoming G20 meeting in Hangzhou, where President Xi Jinping will also hold an important bilateral meeting with President Obama. China has been intent on focusing like a laser beam on the economic crisis with this year’s G20 theme, proposed by China, being “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy.” There is, however, some concern that this event not be “hijacked” by other sensitive issues like the South China Sea, which will no doubt be made a topic of discussion by the United States in the bilateral discussion between the two Presidents.

Ambassador Cui expressed confidence that the meeting would be positive. “The upcoming meeting between the two heads of state, just as every strategic talk they have held in recent years, will produce very positive and important influence on China-U.S. bilateral relations,” Cui said. “Under the G20 mechanism, the two leaders have already conducted very much coordination and cooperation for years.”

He noted that it is also the world’s expectation that China and the United States can work together to ensure the G20 Hangzhou Summit achieves full success. “The history of their relationship has fully proven that the two global heavyweights must cooperate with each other and must become cooperative partners,” said Cui, referring to building a new type of major-country relationship.

The ambassador also revealed that China has kept frequent contacts with the United States on the South China Sea issue, reiterating that the issue should not be allowed to define China-U.S. ties since the two countries have neither disputes over even one inch of territory, nor a fundamental clash of interests in the South China Sea.

Given the defense of the present bankrupt financial structure by the Obama Administration, and China’s desire to create a new financial architecture, it is hard to imagine the two leaders seeing eye-to-eye on any agreement essentially eliminating the power of the London-Wall Street financial oligarchy over the world economy and placing it back in the hands of the sovereign nations.

Rapid Progress in Chinese-Funded Balkans Transport Corridor

Aug. 19 (EIRNS)—China is making rapid progress in completing the Piraeus-Vienna transportation corridor. As Germany’s Deutsche Verkehrszeitung reports, the high-speed rail route from Belgrade to Budapest will be ready in one year from now—the same timeframe for the highway from Belgrade to the Montenegro seaport of Bar. A huge logistics center is being built in Plovdiv, near the Bulgarian-Greek border.

China is also developing Albania’s airport at the capital, Tirana.

Once completed, the entire Balkans corridor will provide considerable better time for transport: “From Shanghai to Prague via Piraeus takes 26 days, via the northern European route (Rotterdam, Hamburg) 32 days,” Deutsche Verkehrszeitung quotes an official of the COSCO operation in Piraeus as saying.

COLLAPSING WESTERN FINANCIAL SYSTEM

As IMF Said, Deutsche Bank ‘Exports the Most Risk’ to Bank System

Aug. 19 (EIRNS)—Financial press headlines today report the op-ed in the Financial Times by Deutsche Bank whistleblower Eric Ben-Artzi, stating why he is refusing an $8.25 million award for reporting the bank’s manipulating the value of its derivatives ledger in late 2008. The award is Ben-Artzi’s share of a $55 million slap on the wrist paid by Deutsche Bank to the SEC, for criminally fraudulent statements to regulators about the risk of $130 billion in derivatives exposure. Ben-Artzi refuses the award precisely because there was no criminal prosecution and the SEC and Deutsche Bank were literally exchanging personnel through a revolving, in fact wide-open, door. Suffice it to say that Deutsche Bank’s general counsel in 2009-10 became the SEC’s Director of Enforcement in 2012, and stood to suffer significant financial losses if the bank were prosecuted.

It is also important to the present case of Deutsche Bank, that it fraudulently disguised a loss in just this $130 billion part of its derivatives assets, of $10-12 billion, enough to have plunged its capital to a level requiring nationalization. This is reported by Zero Hedge today. If the bank misreported its derivatives assets then, to cover losses and potential insolvency, and suffered essentially no regulatory consequences, it is likely to be doing the same again now.

In 2014, Deutsche Bank sold a significant chunk of its derivatives exposure—with its energy and metals trading division—to a greater fool. The greater fool was Citibank, which is now essentially equal with Deutsche Bank and JPMorgan Chase as the banks with the greatest derivatives exposures in the world.

Moreover, the Financial Times reported Aug. 18 that the U.S. Commodity Futures Trading Commission regulatory agency has charged Deutsche Bank with repeatedly failing to report its swaps derivatives—primarily interest-rate swaps—for various “reasons.” CFTC fined Deutsche Bank in September 2015; has charged it again; and says it is still failing to report, “compromising the CFTC’s ability to gauge systemic risk throughout swaps markets.”

U.S. Farm Belt Productivity Hit, as Land Values, Agricultural Income Drop

Aug. 18 (EIRNS)—Second-quarter 2016 statistics for agriculture states released earlier this month by the Federal Reserve Midwest bank districts and the U.S. Department of Agriculture measure what residents know first-hand in the farm belt, that the situation is heading for a crash, in which mass numbers of remaining family farm operations can’t continue.

The National Farmers Union (NFU) summed up the point, in an Aug. 17 statement, saying that, “As the second quarter report [of the Kansas Federal Reserve] highlights, the situation continues to decline. It found that farm income has continued to fall, there is increased demand for loan renewals and short-term operating loans, and there are declines in repayment rates and falling farmland values….” The NFU issued an appeal, “Congress Must Act To Combat the Deteriorating Farm Economy.”

Chaos threatens the food supply system itself. Net farm income from all sources is dropping, as prices received by the farmer for such basics as wheat, corn, cattle, hogs, milk, continue to fall. Farmers’ receipts are below their costs of production. Increasing numbers are struggling to repay loans taken out to continue farming. More and more are being denied new loans, for operating purposes, because they can’t qualify under present conditions. As many as one-third of Midwest farmers are having trouble making loan repayments, according to the Fed survey in the Kansas City, Chicago and St. Louis districts. Put another way, the share of farm loans that have repayment problems is running at 18% across all states in these districts.

And now, land values themselves are falling. In the states of Kansas, Nebraska, Missouri, and Oklahoma (the Fed’s 10th District), surveys show that in the second quarter of 2016,  the values of non-irrigated land declined 3% from a year earlier, and 5% for irrigated land.

U.S. POLITICAL AND ECONOMIC

Increased Warnings Clinton Is Candidate of War and Regime-Change

Aug. 21 (EIRNS)—In an article published today in the National Interest under the headline “Hillary Clinton Could Easily Push America into Open Conflict with Russia,” CATO Institute commentator Ted Galen Carpenter warns that “most anti-Russian hawks are backing Hillary Clinton, and the implications of a Clinton victory are extremely ominous.”

Carpenter recalls that when Russia “annexed” Crimea, Clinton compared Russian President Vladimir Putin to Adolf Hitler—a “comparison so extreme that it drew dissents even from some usual supporters. Yet there is no doubt that she would take a very hard line toward Moscow.” He points to her intention to provide more financial and military aid to Ukraine.

Russia does not have the characteristics of an “aggressively revisionist power in the international system,” Carpenter writes; but this hasn’t stopped Russophobes from seeing Russia’s unification with Crimea and its support for pro-Russian separatists in eastern Ukraine “as the harbinger of much wider aggression, when there is almost no evidence of such an agenda.” A far wiser policy, he adds, would be for the United States to back off from its provocative actions toward Russia, and accept “a limited Russian sphere of influence.” But Clintonites and neo-cons opt instead for an “inflexible and confrontational” policy.

Carpenter warns that given the likelihood of a Clinton victory in November, U.S.-Russian relations are likely to worsen. “The two countries have been teetering on the precipice of a second Cold War for several years. The danger is that they will now slip into that dark abyss—or plunge into something even worse, an armed conflict with nuclear implications.”

In an article published in Counterpunch Aug. 19, columnist Brian Cloughley recalls Clinton’s gloating over Muammar Qaddafi’s assassination and Libya’s descent into chaos. If elected, he adds, she’s likely to go for regime-change in Syria, dooming that country “to a rerun of the Libya fiasco…. Greater turmoil, chaos and catastrophe lie ahead.” In the same edition of Counterpunch, Gary Leupp sees Clinton as the leader of the “Kill Assad Now Coalition.” But he notes that the emerging alliance of Russia, China, Iran, and now probably Turkey, may make regime change impossible—“Unless of course she wanted to show how strong she is and start World War III.”

STRATEGIC WAR DANGER

Putin Keeps Changing the Strategic Situation in Southwest Asia

Aug. 20 (EIRNS)—Turkey’s Deputy Prime Minister Numan Kurtulmus, on Aug. 17 stated that Turkey’s policy towards Syria is undergoing “a seismic shift.” That description accurately reflects the process underway throughout the entire region, under the influence of the forceful leadership of Russian President Vladimir Putin.

Turkish media outlets are reporting that Moscow has taken diplomatic steps toward establishing a permanent solution to the ongoing Syrian civil war with a trilateral coordination group of Turkey, Russia and Iran. The Turkish Daily Sabah on Aug. 18 noted President Recep Tayyip Erdogan’s stressing the importance of Russian-Turkish-Iranian cooperation and reported that Russian Deputy Foreign Minister Mikhail Bogdanov met with some Syrian opposition representatives on Aug. 16, “initiating efforts to establish the trilateral coordination group with Turkey and Iran to end the ongoing civil war.”

Russia is expected to issue a three-step plan, now. “According to the plan, the first step would be to provide a safe return for refugees to Syria within two years, while establishing safe passage to the Jarablus-Azaz road that Turkey and Russia would jointly control. Furthermore, within the two years it is expected that the Damascus administration will be transformed into a strengthened federal governing system. The system mentioned in the media indicates that it aims to integrate all groups into the political system in Syria.”

Turkish Prime Minister Binali Yildirim stressed yesterday, as did the Daily Sabah article the day before, that Syria’s territorial integrity must be maintained. “One of the most important conditions for going back to smooth sailing in Syria is preserving the territorial integrity of Syria. Syria depends on a governance figure that does not rest on ethnic structures,” Yildirim said, adding that he believed a “noteworthy development on this path could be experienced in the forthcoming months.”

Russia’s initiatives are both diplomatic and military. The Russian Defense Ministry announced yesterday that the corvettes Zeliony Dol and Serpukhov launched three cruise missiles at Jabhat al Nusra from the Mediterranean Sea, destroying a command center and a terrorist base near the Dar-Taaza inhabited area as well as a plant manufacturing mortar munitions, and a large depot with armaments were destroyed in Aleppo province. Meanwhile, Iran’s Defense Minister Brig. Gen. Hossein Dehghan  said that Russia can use the Iranian Shahid Nojeh air base in Hamedan for strikes against ISIS “for as long as they need.” “It is a military decision made in the framework of cooperation in fighting IS and other terrorists, which is organized at request from the Syrian government,” he said.

This Russian display of military power is making some people nervous. “Taken together, the new military moves appeared to be a demonstration that Russia has the ability to strike from virtually all directions in a region where it has been reasserting its power … from Iran, from warships in the Caspian Sea, from its base in the Syrian coastal province of Latakia and now from the Mediterranean,” reported the New York Times.

U.S. Air Force Belatedly Cuts Support for Saudi Bombing in Yemen

Aug. 20 (EIRNS)—According to an exclusive Reuters wire of yesterday, the U.S. Air Force has drastically reduced its support to the Saudi-led bombing campaign in Yemen. A U.S. Navy spokesman in Bahrain said that the U.S. planning cell that had been set up to coordinate U.S. support, including air-to-air refueling and some intelligence sharing, has been reduced from about 45 people to five. The June staff withdrawal, which U.S. officials say followed a lull in air strikes in Yemen earlier this year, reduces Washington’s day-to-day involvement in the genocidal air raids that the Saudis have carried out against the Yemeni population, including the intentional targeting of hospitals run by Médecins Sans Frontières (Doctors Without Borders, MSF).

A Pentagon statement issued after Reuters disclosed the withdrawal, acknowledged that the planning cell, as originally conceived, had been “largely shelved” and that ongoing support was limited, despite renewed fighting this summer. “The cooperation that we’ve extended to Saudi Arabia since the conflict escalated again is modest and it is not a blank check,” a rather defensive Pentagon spokesman, Adam Stump, said in a statement. “Even as we assist the Saudis regarding their territorial integrity, it does not mean that we will refrain from expressing our concern about the war in Yemen and how it has been waged,” Stump said.

A Saudi military spokesman Gen. Ahmed Asseri dismissed the U.S. move, if true, as “tactical.”

OTHER

New Documents Reveal Extent of Soros’s Role in Ukraine

Aug. 21 (EIRNS)—Documents hacked from George Soros’s Open Society Foundation and leaked by the DC Leaks group, reveal that the British agent personally directed the organization of the “New Ukraine,” following the late-February, 2014 Maidan coup which Soros-controlled organizations orchestrated. They were aided by Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland, and other non-governmental organizations in the Project Democracy stable used to promote color revolutions around the globe.

As reported by The Duran and by Sputnik, just weeks after the coup, Soros held “detailed and extensive meetings” at the U.S. Embassy in Kiev “with nearly every actor involved in the Maidan coup: from U.S. Ambassador Geoffrey Pyatt, to Ukraine’s Ministers of Foreign Affairs, Justice, Health and Education. The only person missing was Victoria Nuland, though we are sure those meeting minutes are waiting to see the light of day,” wrote Alex Christoforou of The Duran. In all these discussions, Soros underscored the need to distance Ukraine from any Russian influence, and personally attacked President Vladimir Putin.

Instructive are the minutes from the March 31, 2014 “Breakfast with Ambassador Geoffrey Pyatt,” which included Soros, Pyatt, executives of Soros’s International Renaissance Foundation (IRF) and his Open Society Foundation and the regional director of the State Department’s USAID, among others. Here, when asked by Pyatt what the U.S. government should be doing, Soros complained that Barack Obama was “too soft on Putin,” and demanded that the U.S. impose “potent smart sanctions” on Russia. The Duran noted that that participants at the meeting “cannot stop fixating on Russia and Putin throughout the meeting.” Both Pyatt and Soros called for providing “professional PR assistance” to the Ukrainian government to be directed against Putin, and Pyatt pointed to the problem of moving toward “decentralization” that would not “feed into the Russian agenda.”

Soros also expressed his expectation of “close contact and cooperation” between the U.S. Embassy and the International Renaissance Foundation. The IRF has in fact been deeply involved in reforming Ukraine’s educational system, in order to remove all “Soviet” influences and produce an uneducated population amenable to working as slave labor.

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