EIR Daily Alert Service

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EDITORIAL

The West Can No Longer Hide the Collapse of the Trans-Atlantic Financial System

Oct. 4 (EIRNS)—Headlines in the leading press in Europe and the U.S. make it very clear that the Financial Lords of Wall Street and the City of London can no longer hide the impending, and inevitable, collapse of their financial system. Consider today’s German daily Die Welt: “Deutsche Bank Threatens U.S. Government with Systemic Collapse.” Or Bloomberg: “Existential Threat to World Economic Order Clouds IMF Talks.” The Bloomberg article is reporting on the IMF’s World Economic Outlook, the annual Fall overview of the world economy which was released today ahead of the annual IMF Fall meeting which takes place this weekend in Washington D.C.

It would be best to refer to the current crisis as “One Minute After Midnight,” rather than one minute before. “They can’t cover it up,” said Lyndon LaRouche today. “They are hopelessly bankrupt.”

The problem with the pronouncements by the IMF on the crisis, however, is that their proposal of what to do about it is simply more of the same policies which caused the breakdown in the first place. To justify this, they have to lie about the cause. The transformation of the major Western banks into unregulated gambling casinos by the takedown of Glass-Steagall in the 1990s is never mentioned, while the panicked implementation of massive money printing and negative interest rates to hold the too-big-to-fail banks together over the past years, at the expense of the real economy, is prescribed as the solution rather than the cause.

Ironically, the emergence of populism across Europe and the U.S. is described as the cause of the crisis, rather than the result. “Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that International Monetary Fund Managing Director Christine Lagarde says is already ‘weak and fragile,’ ” writes Bloomberg.

The IMF calls for three policy solutions: more loose money (negative interest rates), more government spending (quantitative easing, or QE), and structural reforms (a euphemism for anti-labor policies). Indeed, that is what is already happening across the trans-Atlantic. The Financial Times today acknowledged, that “In the final three months of the year, the U.K., Japan and Europe are expected to mint a combined $506 billion to purchase assets—the largest quarterly sum created since the early days of the U.S. Federal Reserve’s QE program in 2009.”

Just as the reality of the collapse cannot be hidden from the public, so also the only possible solution can and must be brought before the people and the legislators across the U.S. and Europe—putting the current bankrupt system out of its misery in precisely the method implemented by Franklin Roosevelt upon assuming the Presidency in 1933. The immediate restoration of Glass-Steagall is the only means to save the commercial banking system of the Western nations. It will mean the demise of most of the Wall Street and London TBTF banks—but the only way to salvage the lives of the real people caught up in that massive bubble is to oversee its collapse in an orderly, legal fashion, allowing emergency regulators to distinguish between the gamblers and those who were fooled into trusting the criminal institutions with their savings and pensions.

Then the real work begins—the joyful work of nation building. Through the restoration of the “American System” of national banking developed by Alexander Hamilton, and the issuance of credits through that system to create productive employment and an increase in real productivity through increased energy throughput, the nation can be restored. Restoring America’s lost commitment to the frontiers of science, through fusion power development and a revival of our space program, will provide the necessary future for our children, freed from Obama’s drug-infested counter-culture, and re-introduced to classical music and classical culture, both our own and that of our natural allies in China, Russia, India and the Middle East, as well as the newly prosperous nations of Africa and Ibero-America.

It must be addressed, however, that the failure to achieve these developments now, before the insane election process is completed in the U.S., will lead us rapidly to global war. Never has the world been closer to nuclear war, as Obama and his Defense Secretary “Nuclear Ash” Carter are moving the world’s most advanced military weaponry up to the Russian and Chinese borders, while launching a $1 trillion program to rebuild the entire U.S. nuclear arsenal. Carter insists that the U.S. must maintain a “first strike” nuclear capacity to meet the threat of an imagined conventional invasion of NATO by Russia. In fact, Obama and his war party are now making preparations for war on Russian and Syrian forces in Syria, which could provoke world war immediately.

This madness has nothing to do with the non-existing threat of military aggression from Russia or China, but the very real “threat” to the Anglo-American financial empire being created by Russia, China, India and their BRICS partners. With the support from nearly every developing nation on Earth, these nations are creating a new paradigm for the world, centered on China’s New Silk Road development policies and cooperation on crushing drugs and terrorism worldwide.

The exposure of Obama’s open support for terrorists and their sponsors in his (overridden) veto of the JASTA bill opens the path to his removal from office for “high crimes and misdemeanors.”

The U.S. and Europe can and must end the madness, and join the new paradigm.

STRATEGIC WAR DANGER

Lavrov: U.S. Policy Threatens Strategic Stability

Oct. 4 (EIRNS)—In a sharply worded statement issued yesterday, Russian Foreign Minister Sergey Lavrov made clear that the unsatisfactory performance of the U.S. implementation of the plutonium treaty was not the only reason behind President Vladimir Putin’s decision to suspend Russian participation in it (the U.S. did not fulfill the agreement to re-process spent plutonium to non-weapons-grade status, as Russia did).

“I would like to stress that this is a measure of last resort. We considered the agreement an important step towards nuclear disarmament,” Lavrov said. However, “Washington introduced large-scale economic and other sanctions against Russia, citing unsubstantiated claims. NATO military infrastructure is expanding, with an increasing number of U.S. troops in proximity to the Russian border. The United States and its allies openly and freely discuss transitioning to a policy of containing their relations with Russia. They even threaten terrorist attacks in Russian cities.”

So clearly, Putin’s decision to suspend the plutonium treaty is a function of the overall collapse of U.S.-Russian relations brought on by President Obama’s policy of geopolitical confrontation. “All these actions taken by Washington are leading to a major shift in strategic stability and are increasingly limiting possibilities for Russian-U.S. cooperation on reducing nuclear arsenals,” Lavrov went on. “Our decision is a signal to Washington that it cannot use the language of force, sanctions and ultimatums with Russia, while continuing to selectively cooperate with our country only when it benefits the U.S.”

The response at the State Department to the Putin decision, yesterday, was the usual combination of lies and arrogance. State Department spokeswoman Elizabeth Trudeau said during yesterday’s briefing, “I would note this is the latest in a series of steps by Russia to end longstanding cooperation on nuclear security and disarmament….” She said further that Russia “continues to engage in destabilizing activities….”

Some 40 Million Russians To Take Part in ‘Nuclear Disaster’ Drill

Oct. 4 (EIRNS)—Some 40 million Russian citizens, as well as 200,000 specialists from “emergency rescue divisions” and 50,000 units of equipment are to take part in a four-day civil defense, emergency evacuation, and disaster preparedness drill, the Russian Ministry for Civil Defense reports on its website. It will start on the morning of Oct. 5 in all constituent territories of Russia and last through Oct. 7.

The drill is entitled “Organization of Civil Defense during Large Natural and Man-Caused Disasters in the Russian Federation.” Although nuclear war is not mentioned explicitly, the ministry said that the civil defense drill will involve participation of federal, regional and local authorities.

The website adds that, “the main goal of the drill is to practice organization of management during civil defense events and emergency and fire management, to check preparedness of management bodies and forces of civil defense on all levels to respond to natural and man-made disasters and to take civil defense measures.” Oleg Manuilov, director of the Civil Defense Ministry, explained that the exercise will be a test of how the population would respond to a “disaster” under an “emergency” situation.

Meanwhile, according to Pravda coverage from Sept. 30, representatives for the Russian Emergency Situations Ministry (EMERCOM) said that all bomb shelters and underground shelters in Moscow meant for the evacuation of people in case of a nuclear attack or other emergencies, “were prepared and will be able to accommodate the entire population of the capital.”

“As a result of the introduction of new approaches to civil defense, an inventory of underground facilities of the city was conducted. The Moscow underground facilities will be able to protect 100% of the population of the city,” deputy head of EMERCOM in Moscow, Andrei Mishchenko, said.

Also the Ministry for Communications, the Finance Ministry, the Ministry for Industry, the Russian State Reserve, and the Bank of Russia earlier took part in a sudden inspection of the Russian army. These departments worked in a “wartime” mode to test their systems for a possible war.

Russia Now Heads UNSC, Plans Ambitious Anti-Terrorism Fight, Which France Seeks To Wreck

Oct. 4 (EIRNS)—Russia assumed the presidency of the UN Security Council this week, and Russian Ambassador to the UN Vitaly Churkin, during a press briefing yesterday, laid out an ambitious schedule of work over the next four weeks of his term, including a Russian initiative to target the extremist ideology behind terrorism.

At the same time, France and Spain began circulating a draft resolution on Syria which is intended to embarrass Russia. Churkin stressed that any UNSC resolution on the conflict must include concerted action against terror groups. “If the idea of the draft resolution is to move us towards a cessation of hostilities regime, then a just resolution would not really work,” he said. “What might work is if we’re to agree on stronger concerted actions against terrorists, because cessation of hostilities is not supposed to apply to terrorist groups.”

However, the French-Spanish draft resolution calls for stopping Russian and Syrian air force flights over Aleppo—they say “all military flights,” but it clearly applies only to Syrian and Russian military flights. And they call for a new UN-supervised truce monitor, and threaten “further measures” should any party fail to comply with the truce.

Churkin dismissed the grounding of aviation as a non-starter. To have a resolution “singling out aviation, where terrorists (on the ground) would be allowed to do whatever they want, would not be a very attractive proposition,” he said. But the French clearly hope to back the Russians into a corner with the resolution. According to Reuters, French Foreign Minister Jean-Marc Ayrault has even said that any state that opposes the resolution would be deemed complicit in war crimes.

U.S. POLITICAL AND ECONOMIC

Die Welt: ‘Deutsche Bank Threatens U.S. Government with Systemic Collapse’

Oct. 4 (EIRNS)—On the day when Deutsche Bank CEO John Cryan is travelling to Washington, D.C., the daily Die Welt delivered a message from the German establishment, in an article headlined “Deutsche Bank Threatens U.S. Government with Systemic Collapse.”

It is a chicken game, Die Welt writes, explaining what this means from the famous James Dean movie “Rebel Without a Cause.” John Cryan plays the role of James Dean, and is going to tell the Americans: if you push too much, Deutsche Bank will go bankrupt and pull you down, too.

Die Welt has two important charts: one showing foreign bank investments in German banks, and another one showing German export of derivatives.

Foreign bank investments in German banks amount to €1 trillion. Leading the charge are British banks with €316 billion; second, come the French banks with €259 billion. Then come Luxembourg, the Netherlands, and the U.S.A. with between €70 and €130 billion each.

In the list of world export of derivatives, German banks are in the first place, head to head with Britain. Third is Switzerland and fourth is the U.S.A. “German banks have twice as many cross-border derivative contracts as U.S. institutions,” says a strategist at Nomura. “The DOJ [U.S. Department of Justice] cannot afford to claim a fine that is much too large, if it does not want to risk a new banking crisis in its own country,” Die Welt writes.

“Therefore, Cryan must play the ‘chicken game’ with the U.S. officials so long, until the fine is reduced to $4 billion.” Anything above this will be problematic for DB, writes Die Welt, although reducing the fine will in fact do little to resolve Deutsche Bank’s crisis.

The idea, says Die Welt, is to avoid a fine so high as to absorb the entire planned capital increase. It is a difficult path, as per shareholder mandate, DB can increase its equities by only 50%, which makes a net capital quota increase of €5.6 billion on the current capitalization of €15 billion (in a capital increase, shares are usually devalued by 25%).

If the U.S. Congress Had Passed Glass-Steagall, There Would Be No Wells Fargo Mess

Oct. 4 (EIRNS)—Prof. Mitch Edelman, writing for suburban Maryland’s Carroll County Times yesterday, recounts the “horror show” of Wells Fargo’s “millions of bogus accounts, generated fraudulent fees and other illicit activities.”

He says, “Repealing Glass-Steagall tore down the wall that kept commercial and investment banking separate. The Commodities Modernization Act deregulated those banks even further and removed the safeguards that kept financial institutions from playing roulette with investors’ money, and now we have the Wells Fargo scandal.”

That’s the point. Illinois State Treasurer Michael Frerichs suspended $30 million in state investment activity with Wells Fargo for one year yesterday, in the wake of the scandal. Frerichs said it would cost Wells Fargo “millions.” Wells Fargo brazenly replied, “No, only about $50,000.”

California bank regulators took similar “slap on the hand” action last weekend. California and the Federal government fined Wells Fargo $185 million—but the bank makes $25 billion a year. “Would you risk a $7.50 fine against a $1,000 profit?” Edelman asks. “That’s what Wells Fargo did, just on a larger scale.”

LaRouche PAC activists are now storming campaign events, as Congressmen are in their home districts for the election period, to put forward the necessity of Glass-Steagall now.

The U.S. Fusion Program Is Barely in Operation

Oct. 4 (EIRNS)—The crippled U.S. fusion program has temporarily lost the use of one of its only two operating large magnetic fusion experiments.

Due to what is likely a manufacturing flaw in a magnetic coil, the Princeton Plasma Physics Lab’s National Spherical Torus Experiment Upgrade (NSTX-U) had to be shut down in July. Scientists expect that it could be offline for a year. Thanks to White House and Congressional cut-backs and near dissolution of the U.S magnetic fusion program, and the plan to shut down MIT’s Alcator tokamak, the U.S. now has only the tokamak at General Atomics operating.

Steve Dean, president of Fusion Power Associates, told Nature, as reported Sept. 30, that the MIT Alcator should not be shut down, at least until the Princeton machine is back online. “It’s not a good situation for our scientists to only have one machine running,” Dean said.

Earl Marmar, in charge of the Alcator at MIT, said that he is ready to restart the Alcator, which was scheduled to be shut down on Sept. 30. Alcator, he said, “is planned to be put into a safe shutdown state, but if desired, could be brought back into service on short notice to support the U.S. and international fusion community.”

Meantime, in Australia on Sept. 30, the ITER Organization signed a Cooperation Agreement with the Australian Nuclear Science and Technology Organization, a national research organization, according to the Oct. 3 ITER Newsline. Australia has a firm tradition of fusion research, going back decades, and has various small plasma devices, and research projects in operation.

COLLAPSING WESTERN FINANCIAL SYSTEM

Quantitative Easing Hit a Record High Last Quarter 2016

Oct. 4 (EIRNS)—Just as the Western financial press is openly admitting the collapse of the financial system, the Financial Times revealed today that the level of quantitative easing is hitting a record high for this last quarter of 2016.

“Central banks are embarking on the largest quarterly purchase of assets since quantitative easing was introduced following the financial crisis, as policymakers double down on monetary policy despite growing concern it has reached its limits,” writes the London-based daily. “In the final three months of the year, the U.K., Japan and Europe are expected to mint a combined $506 billion to purchase assets—the largest quarterly sum created since the early days of the U.S. Federal Reserve’s QE program in 2009.”

Since the Brexit vote, it writes, “the Bank of England has joined European Central Bank and Bank of Japan in cutting interest rates and creating money to buy assets,” typically saying the purpose is to “spur investment” rather than bailing out the bankrupt banks.

Adding some humor, the Financial Times reports that central bank governors, “including the BOE’s Mark Carney and ECB’s Mario Draghi,” praise the QE as having “prevented catastrophe.”  It acknowledges, however, that the QE has “pushed the collective balance sheets of G4 central banks  to more than $13 trillion. Citi estimates that the collective balance sheets of central banks is now equal to about 40% of global GDP, a move that is shrinking the universe of securities available for investment.”

Bloomberg: ‘Existential Threat to World Economic Order Clouds IMF Talks’

Oct. 4 (EIRNS)—Under the above title, Bloomberg today bared all in regard to the reality of the collapse of the entire Western financial system. The article is a report on the IMF’s World Economic Outlook (WEO) released today, as they do every year preceding the annual IMF meetings in the Fall and Spring; this year’s Fall meeting will be held in Washington from Oct. 7-9.

The WEO totally ignores the bankruptcy of the entire Western banking system (which is perhaps why Bloomberg says their vision is “clouded”). Instead, it argues, the danger comes from the reactions to the collapsing economies: the anti-trade deal movement; protectionism; tepid growth; China’s “increasing mercantilism”; and anemic demand despite the negative interest rates.

Bloomberg argues that populism (referencing the Brexit and Donald Trump), fueled by the collapse, is the cause of the collapse: “Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that International Monetary Fund Managing Director Christine Lagarde says is already ‘weak and fragile.’ ”

The IMF reduces their earlier forecast (from this Summer) for U.S. growth from 2.2% all the way down to 1.6%—a 27% drop in the forecast in a few months.

The IMF solution? More of the same: keep the easy money flowing through negative interest rates (and a warning to the U.S. Fed to hold off on any rate rise); more government spending (meaning more QE); and structural reforms, which they spell out to mean busting labor unions and the rights of labor.

Not a whisper of the financial bubble nor of the only solution that could possibly work—Glass-Steagall.

THE NEW GLOBAL ECONOMIC ORDER

Russian and Kazakhstan Presidents Meet on Infrastructure Plans for Eurasian Economic Union

Oct. 4 (EIRNS)—Preliminary reports of the meetings of Russian President Vladimir Putin with Kazakhstan President Nursultan Nazarbayev today, in Astana, and the attendance of both Presidents at the Russia-Kazakhstan Business Forum and the Russia-Kazakhstan Interregional Cooperation Forum, indicate that cooperation between the two countries has been expanded and deepened. Kazakhstan President Nazarbayev is currently the head of the Eurasian Economic Union (EAEU).

Many infrastructure investments were discussed. Russian Transport Minister Maxim Sokolov proposed the establishment of a high-speed railroad network across the EAEU at the 13th Russia-Kazakhstan Interregional Cooperation Forum focused on EAEU transport and logistics. The planned Moscow-Kazakh high-speed network would be part of the Moscow-Beijing transport corridor; Sokolov stated, “In this regard, it would be possible to examine the prospect of creating a network of high-speed highways, and agree on a common approach in the Eurasian region,” Sputnik reported. The EAEU members are currently Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.

The Russian nuclear agency Rosatom, the Kazakh Energy Ministry, and Kazatomprom signed a memorandum extending strategic cooperation in the nuclear fuel cycle area until 2019, TASS reported today. The parties signed a protocol amending the 1996 intergovernmental agreement on the legal regulation of railway companies.

The Russian and Kazakh sides also agreed to focus their efforts on the further development of the partnership relations using the existing infrastructure of joint factories, including in the spheres of uranium mining, conversion, enrichment, fuel fabrication, and the final stage of the nuclear fuel cycle.

China-Europe Civilization Dialogue Conference in Athens

Oct. 4 (EIRNS)—The China-Europe Civilization Dialogue Conference, the first of its kind, opened in Athens at the historic National Archeological Museum on Oct. 3, the same day that marks the 150th anniversary of the museum’s opening. Co-sponsored by the Chinese and Greek Culture Ministries, and the Chinese Embassy in Greece, it aims to promote broader and deeper cultural understanding between China and Europe. It also marks the anniversary of the establishment of the Chinese-Greek Strategic Partnership.

Among the guests was Chinese Communist Party Central Committee member Liu Yunshan, several Greek government ministers and European experts. Speaking of dialogue to further the China-EU partnership, Liu Yunshan said in his keynote address that, “We need to replace the clash of civilizations with the harmony of civilizations.” He outlined a plan for cultural exchange.

Greek Culture Minister Aristides Baltas said, despite its heavy debt burden, Greece is working hard to restore its place in the world, and the forum is highly appreciated as a vote of confidence by the Chinese government. Baltas said, “It is fortunate that our Chinese friends chose Greece as the first country to launch their dialogue with Europe,” he said.

Liu said that the long history between the Chinese and European civilizations has constituted progress for the whole world. He described how China’s Belt and Road initiative today is enhancing the China-Europe comprehensive strategic partnership. Liu made a four-point proposal to further China-Europe civilization dialogue in terms of strategic trust, cultural exchanges, non-governmental exchanges and pragmatic cooperation, and concluded with a call for the integration of China’s Belt and Road initiative with Europe’s development strategies.

Liu also presented a Chinese bronze vase of the first millennium B.C. decorated with dragons, as an exhibit for the museum for three months as part of the celebrations marking the museum’s 150th anniversary.

SCIENCE AND INFRASTRUCTURE

China Announces Science Cooperation with Belt and Road Countries for Critical Breakthroughs

Oct. 4 (EIRNS)— A special plan issued by the Chinese Ministry of Science and Technology, the National Reform and Development Commission, the Ministry of Commerce, and the Ministry of Foreign Affairs would enhance the science cooperation among the countries along the routes of the One Belt, One Road initiative. According to the plan, China will over the next three to five years bring over 150,000 science and technology personnel from the Belt and Road countries for exchanges or training in China, as well as some 5,000 young people representing scientific talent in the Belt and Road countries.

“Outstanding scientific personnel will be supported for the key tasks of Belt and Road development, and the exchange of the qualified talent will deepen the innovative collaboration, stimulating the enthusiasm and creativity, and deepening the cooperation by laying a solid basis of scientific talent. Focusing on strategic points, the policy will in an orderly fashion promote, establish, and implement a policy of creative collaboration, concentrating on making breakthroughs toward the shaping of concrete results,” the statement said.

China intends to sign basic memoranda of cooperation with Belt and Road countries for setting up laboratories (cooperative research centers), technology transfer centers, centers for the popularization of science, and an international platform for innovative cooperation, as well as encouraging the set-up of R&D centers, focusing on producing practical results for implementing Belt and Road goals.

Japan and Russia Set To Cooperate in Russia’s Far East Space Facilities in Vostochny

Oct. 4 (EIRNS)—Vostochny, Russia’s Far East launch complex that is still under development, may be supported by Japan, as talks are underway on collaboration on space projects. Such collaboration on strategic civilian space projects would be an important aspect to growing Japan-Russia cooperation. Vostochny, which is many years late and billions of dollars over budget, would be used by Japan to launch its satellites. Such commercial contracts would greatly support the new launch facility, and help Russia recover some of the construction costs.

Japan’s Minister for Economic Cooperation Hiroshige Seko is scheduled to visit Russia next month, and it is expected that a working group would be formed to make specific proposals for the cooperation. Yomiuri Shimbun reported Oct. 1 that the two countries are seeking to expand their cooperation in preparation for President Putin’s visit to Japan scheduled for December.

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