EIR Daily Alert Service, Tuesday, October 17, 2017



With Financial Crash Coming, the Power Is with Those Who Know What To Do

Oct. 16 (EIRNS)—The warnings from the IMF, from Trump economic advisor Gary Cohn, from bond market analysts, are understated, in circumspect terms, but nonetheless point to the onrushing fact: some of the multiple, hyperextended debt bubbles created by the central banks since 2008 will soon crash. These “leaks” join a steady drumbeat of warnings even from such normally stone-faced customers as German Finance Minister Wolfgang Schäuble, that a crash is coming.

In the 35 member countries of the Organization for Economic Cooperation Development (OECD), cautions the IMF, the debt leverage ratios both for non-financial companies, and for households, are at record levels and unable to survive rising interest rates; the central banks are slowing down their “quantitative easing” programs which are driving the debt leverage even higher. Any misstep which pushes interest rates up quickly will trigger default by 20% of all U.S. companies, said the IMF. “Bond markets are in a state never seen before,” Brian Raven of Tavistock Investments told CNBC Oct. 9. Mistakes by the central banks in raising rates “can cause unpredictable snap-backs and crashes in markets that are not very liquid.”

And now the growing threat of the London-centered clearinghouses for financial derivatives and foreign exchange trades—especially in a disorderly outcome of “Brexit”—is indicated both by Cohn, in a speech to Group of 30 bankers Oct. 13, and by the United States Treasury. These undercapitalized clearinghouses are now, says the City of London Financial Times, “a nasty headache for the derivatives markets”—which with $600 trillion in unregulated speculative bets, are far, far too big to fail—or to bail out.

These immense bubbles of debt created since, or recreated after the 2008 crash by central bank money-printing, have been used overwhelmingly for speculation, especially in “perpetually rising” stock markets. Ironically the debt issued by China, which is constantly decried, is the exception—backed by $10 trillion-plus in new public assets, $3 trillion in foreign exchange reserves, $1 trillion in Treasury holdings, and now by public construction outside China all along the expanding Belt and Road.

An uncontrolled crash will be the greatest man-made disaster. Another “Hurricane Lehman” will dwarf Maria or Harvey in economic devastation, and carry with it the danger of escalated war. The steps to rapidly bring this danger under control, are being put forward by EIRand LaRouchePAC, simultaneously with the means—if quickly taken up and used—to stop the witchhunt led by Robert Mueller against President Trump, and thus free Trump to take these steps.

The first—reinstating the Glass-Steagall Act—is being put forward all over Europe as well as in the United States Congress. In fact it was the clear and obvious solution to the very threat Trump’s advisor Gary Cohn was emphasizing in his Oct. 13 speech, of the constantly greater size and complexity of the biggest banks dominating the financial sector.

If, when Trump travels for summit meetings in Asia in two weeks, he has under discussion the additional step of creating a U.S. national credit institution for infrastructure building, America’s joining in the Belt and Road Initiative will be virtually assured, and the great danger of Wall Street financial blowout will be coming under control.


Trump Advisor Warns of Derivatives/Brexit Threat, Begs Glass-Steagall Question

Oct. 16 (EIRNS)—Speaking to the Group of 30 consultative group on banking after the IMF/World Bank annual meetings in Washington, D.C., President Donald Trump’s chief economic advisor Gary Cohn gave some warnings about the derivatives markets and too-big financial institutions, according to the Financial Times. Cohn said, as had the U.S. Treasury in a recent report, that the clearinghouses which are supposed to reduce counterparty risk in the hundreds of trillions in unregulated derivatives bets, were themselves becoming, instead, concentrations of systemic risk.

One of Cohn’s emphases, according to the Financial Times, was that “The post-crisis regulatory system is fostering increasing complexity and growth of massive financial firms, ignoring the lessons of the meltdown.” He stressed that the regulations enacted after the 2008 crash, including the Dodd-Frank Act in the United States, which were supposed to remove the “too-big-to-fail” threat, were in fact “leading to the consolidation of more activity in a handful of vast companies.” He called these “perverse effects,” including the inability of any new banks to enter the system.

While this statement of the problem clearly begged the known solution—reinstating the Glass-Steagall Act to break the megabanks of Wall Street up—Cohn did not propose that this time, but claimed that the Treasury’s elimination of some regulations on Wall Street, would enable newer, smaller banks to establish themselves.

Cohn warned in particular about the increasing derivatives activity run through clearinghouses: “something that is starting to resonate as an important systemic risk.” Clearinghouses were set up as partnerships of the big banks, after the 2008 crash, to guarantee derivatives speculators against loss from bankruptcy of their counterparties on the other side of the bets, or against dramatic singularities in the exchange rates, interest rates, etc. being bet on. Operating largely in London, where 40-50% of all derivatives contracts originate, the clearinghouses are not adequately capitalized because they make assumptions about “netting out” of derivatives bets in a crisis, reducing what has to be guaranteed, when that is very likely not to be possible at just that conjuncture.

Since the $600 trillion-plus derivatives markets are obviously systemic, the dozen or so major clearinghouses are just as systemic, but undercapitalized, and instead of taking away risk, they are concentrating it. Cohn noted that a U.S. Treasury report said the U.K.’s “Brexit” raises the urgency of this.

Another City of London mouthpiece, The Economist, on Oct. 12, in “Brexit Will Give the Derivatives Markets a Nasty Headache,” says clearinghouses are a major profit center for City of London banks. “LCH, a clearing-house in London, clears over 50% of interest-rate swaps [by far the most common derivatives] across all currencies; London houses clear 75% of swaps in euros and 97% of those in dollars.” Even Bank of England Governor Mark Carney has acknowledged these clearings may become “legally invalid” in a disorderly Brexit. That this would cause financial chaos, would rank among the great understatements.

The Financial Times quoted Gary Cohn, writing: “ ‘We don’t understand the magnitude of continuously putting things in clearing houses without the proper guardrails in the clearinghouse,’ Mr. Cohn argued. ‘As we get less transparency and as we get less liquid assets in the clearing house, it does start to resonate to me to be a new systemic problem.’ ”

One-Third of Greeks Live in Poverty or Social Exclusion

Oct. 16 (EIRNS)—While China has lifted 700 million people out of poverty over some 30 years and is now working to relieve the remaining 40 million Chinese who still live in poverty, the European Union is driving more and more people deeper into misery, according to a report today by the Greek Observer.

According to the EU statistics authority, Eurostat, an average of 23.4% (or 117.5 million people) were living in conditions of social exclusion in 2016. But in Greece, one in three Greeks lives in conditions of poverty and social exclusion, or 35.5% of the Greek population (3.8 million people), up from 28.1% in 2008. The situation is worse in Bulgaria and Romania where 40.4% and 38.8% of people are regarded as living in  conditions of poverty or social exclusion.

Not surprising the EU countries with the lowest poverty rate are the Czech Republic, Finland and Denmark with 13.3%, 16.6% and 16.7% respectively. Maybe it is because none of these countries is a member of the Eurozone.

Eurostat defines a person living in poverty or social exclusion when they earn less than 60% of the average national income.


Trump: ‘Russia-gate Should End Because There’s Nothing There’

Oct. 16 (EIRNS)—As Special Counsel Robert Mueller continues his nearly five-month-long investigation into Russian meddling in last year’s presidential election, Trump shared his frustration with the inquiry, and continued to assert Russia did nothing to interfere in the 2016 election at his White House press conference today with Senate Majority Leader Mitch McConnell (R-KY).

As Special Counsel Robert Mueller continues his nearly five-month investigation into alleged Russian meddling in the 2016 election, which followed FBI head James Comey’s investigation, Trump shared his impatience with the Russia-gate witchhunt:

“I’d like to see it end,” Trump said of the investigation. “The whole Russian thing was an excuse for the Democrats losing the election.”

“There has been absolutely no collusion,” Trump said. “It’s been stated that they have no collusion. They ought to get to the end of it, because I think the American public is sick of it.”

Today, the three co-founders of Fusion GPS, the opposition research firm responsible for overseeing the creation of the infamous “Trump dossier,” refused to comply with a subpoena issued by House Intelligence Committee Chairman Devin Nunes (R-CA), compelling the three Fusion GPS co-founders to appear before his Intelligence Committee.

USA Today reported today that Fusion GPS’s lawyers from Cunningham, Levy & Muse said in a letter that if called to testify, the three would invoke their First Amendment rights to exempt them from answering questions. The  website Zero Hedge reports that “the move—which has all the hallmarks of a stalling tactic—is the latest attempt by the firm’s co-founders, who reportedly were aware that not all of the allegations contained in the dossier were credible before turning it over to the FBI, to forestall delivering public testimony.”

Washington Post/’60 Minutes’ Opioid Exposé Draws Quick Responses

Oct. 16 (EIRNS)—A major intervention was made against the opioid epidemic over the Oct. 14-15 weekend, with the coordinated release of an “exposé” in Sunday’s Washington Post combined with a segment on the well-watched Sunday evening “60 Minutes” news show.  The emphasis of the combined efforts was to show the extent to which Wall Street—front-men for the British international drug cartel, Dope, Inc.—will go to in order to protect their program. The opioid epidemic has now been credited for taking over 200,000 victims in the United States, more than three times as many troops who died in the Vietnam War.

This is not the first time the Post has taken on this topic; it ran an extended series in October 2016. That series quite effectively exposed the direct complicity of the Obama administration (Eric “Pot” Holder’s Department of Justice, of which the Drug Enforcement Agency is a part) in hamstringing DEA enforcement by intervening in defense of the Big Pharma drug distribution companies, just as the DEA was preparing to take the companies to court, in 2015. The case involved a Walgreens drug store in Florida, whose annual shipments/sales of opioids was nearing a million doses, when the nationwide average was 74,000 doses.

The specific focus of the new series is two additional strategies of the distributors to corrupt the agency itself, first by buying off qualified dedicated civil servants through what is generically called the “revolving door.” Beginning in 2011, first with leading agency attorney Linden Barber, the white collar (Wall Street) drug pushers pulled dozens of committed enforcement agents out of service for the nation, and into high-paying “industry” legal services. “There was a fear,” former DEA lawyer Jonathan P. Novak told the paper, “[which] comes from seeing that some of the best and brightest former DEA attorneys are now on the other side and know all of the weak points.”

Secondly, beginning in 2014, another avenue of corruption was pursued, this one aimed at Congress, with the introduction of the “Ensuring Patient Access and Effective Drug Enforcement Act,” a bill no doubt written with heavy input from “industry” sources. After a harrowing two years, and lubricated by excessive amounts of cash, leaving a lengthening list of corrupted legislative officials in its wake, the bill was signed into law by President Barack Obama, in April 2016.

The last thread which the Post wound through this narrative, is that the drug producers have now successfully maneuvered to get Rep. Tom Marino, the original sponsor of the Pharma bill in the House, nominated to head the White House Office of National Drug Control Policy for the Trump administration. At his press conference today, reporters shouted to Trump to “Look into the Washington Post’s report.”

As a direct result of this series, two things have happened. First, Trump responded at his press conference by acknowledging the reporters’ intervention, and confirming that he would “look into it” and might conceivably withdraw Marino’s nomination. Secondly, Sen. Claire McCaskill (D-MO) has announced that she intends to introduce a bill which would reverse the Obama-era, Marino-sponsored law.


People’s Daily Features Helga Zepp-LaRouche on China’s Future on Threshold of National Party Congress

Oct. 16 (EIRNS)—People’s Daily Online features Schiller Institute Founder Helga Zepp-LaRouche in its fast-moving four-minute video segment on China, on the eve of the 19th National Congress of the Communist Party of China which convenes on Oct. 18 in Beijing.

The video pointedly features the answers of 60 young Americans “on American streets” what they think of China and its future prospects, and all are impressed and optimistic.

People’s Daily writes it wanted its readers to know “How Americans felt about what China has done in the last five years, and any thoughts they may have about what China will be like in the years to come?” and that “To do this we interviewed Helga Zepp-LaRouche, founder of an international think tank, as well as over 60 Americans we approached on the streets of the United States. We hope you will find the following video as interesting as we did, and that it provides you with a better understanding of China and its future.” The video is full of people in motion, and everyone interviewed is clearly impressed and intrigued, with Zepp-LaRouche’s analysis of China’s development over the last five years, and where the development will take the nation in the future, anchoring the video.

The video presents Helga LaRouche as the authority among those interviewed, most of whom are young adults. She says that President Xi Jinping has a “new concept of governance for the whole world,” and that “not only China, but the whole world is lucky to have a leader like Xi Jinping. He has developed a dream not only for China, but I think the New Silk Road is a dream for all humanity.”

Mrs. Zepp-LaRouche identifies “the Belt and Road” of President Xi as China’s  most important initiative, which he announced in Kazakhstan in September 2013 as “the beginning of a new era of because it establishes the interests of all of humanity first, and after that, the national interest…. I think this is the most important strategic initiative on the planet.”

Zepp-LaRouche reports that she has been in China several times in the recent period and seen its progress; the building of more than 20,000 km of high-speed trains, making China the leader in that field, and China’s transformation of the living standard of its people.  The announced intention to connect all its cities through fast train systems will, Helga Zepp-LaRouche says, “will revolutionize the lives of the people living in China.”

The German stateswoman says she was impressed when she heard President Xi Jinping announce that he will use e-commerce to enable farmers in poor areas to sell their produce elsewhere, as a very “creative, and very good” initiative. She concludes, “I am very certain and optimistic that the lives of all people in China will be very much improved in the next five years. I think this would put the world on a very steady basis for peace.” http://en.people.cn/n3/2017/1016/c90000-9280307.html


Food and Agriculture Organization Leader Asserts Syrian Agriculture Needs To Be Transformed

Oct. 16 (EIRNS)—Graziano da Silva, Director of the United Nations Food and Agriculture Organization (FAO), told Sputnik today that Syrian agriculture has been so severely damaged during the course of the six-year war that it should be fully transformed, rather than just restored.

Da Silva stated, “As for the long-term vision, I should make it clear that because of the huge impact of the crisis on agriculture, we can no longer use a ‘building back approach’ to bring the sector to its pre-crisis level. Rather, we need to transform it.” He said that the FAO has prioritized providing assistance to the Syrian citizens who have returned to their homes, and to create favorable conditions for farmers in the next few months.

The FAO report, “Counting the Cost: Agriculture in Syria after Six Years of Crisis,” details that the nation’s agricultural sector accounts for 26% of Syria’s GDP, while possibly as many as 75% of Syrian households still grow food for personal consumption. An estimated $16 billion in damages has occurred to Syrian agriculture during the six years of war. The Syrian provinces of Al Hassakeh, Ar-Raqqa, rural Damascus, Deir Ezzor, Dara’a, and Idlib suffered the most significant damage.


U.S.-South Korean Naval Exercise Underway with Heightened Tension

Oct. 16 (EIRNS)—The U.S.-South Korean joint naval exercise is underway somewhere in Korean waters, having begun earlier today. Besides the aircraft carrier USS Ronald Reagan and two destroyers, two U.S. submarines—the cruise missile submarine USS Michigan and the attack submarine USS Tucson—are both thought to be participating, since they both made high-profile visits to South Korean ports last week. The Michigan has the capacity for up to 154 Tomahawk cruise missiles and it’s also rumored to have aboard a team of special operators tasked with carrying out “decapitation” operations. And the exercise is characterized as a “Maritime Counter Special Operations Force.”

In addition to these forces and others already in the region, the carrier USS Theodore Roosevelt departed San Diego on Oct. 6 for the Western Pacific and the Middle East. It’s to be joined by two destroyers out of Pearl Harbor.

The U.S. military also announced that it would practice evacuating noncombatant Americans out of South Korea in the event of war and other emergencies. The exercise, dubbed Courageous Channel, is scheduled to run from Oct. 23-27. There seems to be concern about being too alarmist about it, since according to the New York Times, the military is trying to assure Americans who won’t be participating in the exercise that they’ll hardly notice it and that it would be little different in scale from previous such exercises.

The South Korean Joint Chiefs of Staff, meanwhile, reported to a parliamentary committee, this morning, that it is drawing up an offensive-defense strategy aimed at concluding a military conflict with North Korea within the shortest time possible, reports the Korea Herald. “A war plan designed to enable early neutralization of critical targets, and to win within the shortest possible time within minimum casualties, will be established,” the JCS revealed at the audit. The JCS said that as part of the plans, the military will reinforce its intelligence, surveillance and reconnaissance assets in order to detect signs of provocation in advance. “Mid- and long-range and high-power precision strike capabilities will be secured in order to neutralize the enemy’s asymmetric warfare capabilities.”


Iran May Seek To Keep Nuclear Deal Alive without United States

Oct. 16 (EIRNS)—Now that U.S. President Donald Trump has refused to certify Iran’s compliance with the 2015 Joint Comprehensive Plan of Action (JCPOA), Iranian strategy appears to be to try to keep the deal alive with the European signers of the agreement—Britain, France and Germany—as well as Russia and China. “Iran needs to sell its oil on the international market as allowed by the atomic accord. And politically, Trump’s speech helps the same hard-liners America’s President says he wants to target, offering them a convenient punching bag as many Iranians took his words as a personal insult,” wrote the Associated Press’s Jon Gambrell in an analysis published yesterday. Gambrell’s analysis is coherent with that of Trita Parsi, president of the National Iranian American Council, who told the Middle East Eye that Tehran’s Foreign Minister Mohamad Javad Zarif’s March 28, 2017 letter to EU foreign policy chief Federica Mogherini was harsher than Iran’s public statements on Trump’s rejection of the JCPOA have been. “I suspect that they have decided to play the reasonable party by not making too much noise about Trump’s actual violations in public, but instead let Trump shoot himself in the foot,” Parsi said.

This would be coherent with Iranian approaches to Europe. In an appearance with the new Czech ambassador in Tehran, Iranian President Hassan Rouhani highlighted the importance of the JCPOA and said following the deal, better conditions were created for closer cooperation between the Islamic Republic and European countries, reported Iran’s Tasnim News Agency. He also said all parties to the multilateral agreement should implement their obligations under the deal, and that as long as other parties remain committed to the deal, Iran will be also.

And Zarif indicated that the JCPOA may still have a future if the Europeans stick with it. “The resistance of the Europeans will show whether the nuclear agreement can be carried forward or not,” he said. British Prime Minister Theresa May and German Chancellor Angela Merkel, speaking by phone, yesterday, “agreed that U.K. and Germany both remained firmly committed to the deal.”




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