EIR Daily Alert Service, MONDAY, JANUARY 8, 2018


Volume 5, Number 5

EIR Daily Alert Service

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


Without Joining in Asia’s ‘New Silk Road,’ Trump Is Facing a Financial Crash

Jan. 7 (EIRNS)—President Donald Trump’s administration cannot miss any more opportunities if it is going to carry out the intention for which, above all else, Americans elected him: To get the United States out of endless foreign wars, and rebuild and reindustrialize the nation.

If the big corporate tax cut is all there is to the Trump Administration’s economic policy, then the President and the nation are facing an oncoming financial crash, and another so-called “Great Recession” much worse than the last. The huge corporate debt and stock bubble already created with central bank free money for a decade, now surrounded by what analysts are calling the “everything bubble” of other exploding debt categories, cannot stand the smallest coming interest rate increases. Corporate tax cuts will not save it, but only blow it up faster until it explodes. The Wall Street and London megabanks are scrambling out of this debt by securitizing it—packaging and selling it on—knowing it is not payable. U.S. banks’ securitization of debt—corporate junk, auto and credit card debt, student debt, etc.—has grown by $1.1 trillion or 25% just during 2017.

Plainly the White House and Congress have to defy Wall Street’s old wives’ tales about the Glass-Steagall Act, and reinstate that act immediately, to isolate commercial banking from this casino speculation before it explodes. And put productive Federal credit into new infrastructure and scientific drivers for the economy, rebuilding productivity and productive, well-paid employment.

But there is the rub. This weekend’s Camp David Presidential meeting with Republican leadership, supposed to be centered on a $1 trillion infrastructure plan, appears to show little discussion and no progress. Desperate follies are being surfaced—diverting perhaps $2 billion in cancelled U.S. aid to Pakistan into building roads and bridges!—suggesting the White House has absolutely no idea as to how an infrastructure capital budget could be created, or funded. Even the disaster reconstruction aid for the hurricane-ravaged states and territories—which involves some critical power and storm-control infrastructure—has been held up with no action for nearly three months.

Yet West Virginia’s governor, when he gives his State of the State on Wednesday, will build on a long-term commitment of $80 billion in industrial investment he has, from one Chinese company backed by a state-owned bank in China. Maryland’s governor, carrying out feasibility for a maglev line from Baltimore to Washington, has a $5 billion commitment from Japan. Is there a mystery secret?

No, rather there is China’s truly win-win invitation to the United States to join the Belt and Road Initiative of great infrastructure projects; and an increasing “competition” by Japan to use its great infrastructure engineering capacities in and for other countries, in some cases with China. For building advanced nuclear reactors, Russia and South Korea are doing the same thing.

And there are Treasury Secretary Alexander Hamilton’s methods of generating credit for new infrastructure and manufacturing technologies, laid out in 21st-Century form by Lyndon LaRouche. Both China and Japan employ these national credit methods. The offer to join in the Belt and Road Initiative is there, extended by President Trump’s good friend President Xi of China. This is fully laid out in America’s Future on the New Silk Road, the pamphlet on LaRouche’s economic “Four Laws” being distributed to the entire Congress.

The President’s own State of the Union Jan. 30 will be the last chance for this win-win strategy to come from the Administration; and Congress must, in any case, take it up and legislate it. Without that and Glass-Steagall, watch the giant Wall Street bubble of debt and “financial engineering” through weeks or months more of explosive expansion, until it crashes down on the U.S. economy.


There Are Just 30 Million Chinese Who Remain To Be Lifted Out of Poverty

Jan. 6 (EIRNS)—The total number of Chinese still living in poverty was 30 million at the end of 2017, according to official statements made on Jan. 5 by the Director of the State Council Leading Group Office of Poverty Alleviation and Development, Liu Yongfu. Xinhua reported that Liu explained that this means there was a two-thirds reduction of the number of poor over the last five years; in 2012 there were 98.99 million poor. For 2016, the official number of poor repeatedly used by Chinese officials was 43 million, this means that some 13 million were lifted out of poverty in 2017 alone.

Liu continued that “to lift the remaining 30% of poor people out of poverty will be the toughest”—a point that President Xi Jinping has repeatedly made. Liu stated that the work will now shift to targeted and precise measures: “We will work to foster local industries, create new jobs, relocate residents in poor areas and strengthen aid to the aged, the disabled and people seriously ill.”

Receiving special attention will be some 30,000 villages where more than 20% of the population are poor. “We will step up support, partly by sending more central and provincial cadres to those villages who will work there for normally two years,” said Xia Gengsheng, another official of the State Council Leading Group Office of Poverty Alleviation and Development.

Vice Premier Wang Yang said at another meeting last week that 2018 will be a key year for the battle against poverty.

The eyes of the entire world are on China in this historic battle against poverty, not just over the stunning specific results already achieved, but as a proof of principle of an underlying optimism: Yes, it can be done. If in China, why not everywhere?

Dhaka Tribune Assesses Bangladesh’s Future Development on Belt and Road

Jan. 7 (EIRNS)—The Dhaka Tribune published an extensive analysis Jan. 7 by an associate of the country’s central bank, of the importance of China’s Belt and Road Initiative (BRI) to Bangladesh’s hopes to reach the status of a moderately prosperous economy. The author, Ifty Islam, bases his report—headlined “Opportunities abound in the Chinese Belt Road Initiative”—on his participation in a seminar involving the Bank of Bangladesh and leading university think-tanks from both countries.

The joint projects undertaken by China and Bangladesh in October 2016 are extensive: a multi-lane tunnel project in Chittagong, two 1,300 MW power plants in Chittagong and Payra, a new fertilizer production company in Fenchuganj, a Tier 4 national data center, and the Confucius Institute at Dhaka University. In total, Chinese President Xi Jinping “committed to $40 billion in investment and aid.” The main benefit for regional connectivity for Bangladesh is the Bangladesh-China-India-Myanmar (BCIM) corridor, which the author says began as the Kunming Initiative proposed by Prof. Rehman Sobhan of Bangladesh in 1999.

The author recognizes India’s current opposition to the Belt and Road, and the destabilization of Bangladesh-Myanmar relations by the Rohingya crisis. He writes, “Hopefully, over time, India will find that the economic benefits of better relations with China … outweigh other considerations.”

Author Islam concludes that credit and financial cooperation between China and Bangladesh may be at least as important as development of physical infrastructure. He proposes “development of a Twin Trade and Financial Corridor” between the countries. He writes that their trade, in which Bangladesh currently runs a deficit, is beneficial because “imports from China are dominated by industrial machinery and raw materials” needed for Bangladesh’s exports and industrialization. And since Bangladesh also needs a “financial corridor” for capital, China has the third-largest bond and second-largest equity market in the world, and aggressive venture capitalists.

The author’s largest aim, perhaps also reflecting Bank of Bangladesh, is that China-Bangladesh infrastructure joint-venture companies be formed, which could “issue RMB-denominated Panda Bonds to access the huge pool of Chinese liquidity to finance Bangladeshi investment projects.”

UN Report Finds that One-Third of Global GDP Growth Last Year Occurred in China

Jan. 6 (EIRNS)—The Chinese economy alone contributed about one-third of global growth in 2017, as measured in GDP monetary terms, according to the “World Economic Situation and Prospects 2018” released last month by the United Nations. China’s actual contribution is of course significantly greater, when considered from the standpoint of Lyndon LaRouche’s scientifically sound method of physical economy, as opposed to flawed GDP metrics. This can be seen, for example, in China’s stunning achievements in poverty reduction and breakthrough scientific work.

The UN report points to the transformation which the Chinese economy has undergone, from the former global leader in cheap mass-produced exports, to an increasing producer and exporter of high-value goods:

The first half of 2017 witnessed a surge of 93.4% in exports of drones, for example. There was a rise of 32.5% in automobile exports, and a considerable increase in the export of other high value-added products such as mechanical and electronic equipment for manufacturing. By providing medium and high-end products of high quality at reasonable prices, China is delivering larger dividends to the world. In recent years, many foreign media have paid attention to China’s advances in science and technology. World-leading technologies, including the mobile internet, artificial intelligence and Big Data, are serving not only as new drivers of China’s growth, but also contributing to global scientific and technological progress. Meanwhile, China’s telecommunications, computer and information services are being exported, creating new miracles of economic development in other developing economies including those of Africa.

On the other hand, China’s vast market and economic vitality have created huge demand for the goods of other countries—which is important, the UN report states, because world economic growth remains “sluggish” and de-globalization keeps growing. The Belt and Road Initiative and other public goods offered by China to the world have greatly promoted international trade and investment, and at the same time, have provided new guidance for economic globalization, the UN report documents. In 2017, China announced an additional 100 billion yuan investment in the Silk Road Fund, and, in the first 11 months of the year, China invested more than $12 billion in countries along the Belt and Road, making an important contribution to world economic development.


Morgan Stanley Out of Junk Debt, Which It Expects To Crash

Jan. 5 (EIRNS)—A day after releasing a research note warning of a crash in high-yield debt, Morgan Stanley announced Jan. 3 that its $2 trillion assets wealth management division has gotten completely out of junk debt markets. “We recently took our remaining high-yield positions to zero,” said chief investment officer Michael Wilson. Wilson said the bank expected it to be “much tougher to make money” on credit markets, “as the risk of a recession comes closer.”


Trump Ready To Talk to North Korea if Jan. 9 Meeting Goes Well

Jan. 7 (EIRNS)—President Trump, speaking to reporters after the Camp David meeting with Congressional leaders this weekend, told the press that he is “absolutely ready to talk to him [Kim Jong-un] if this meeting goes well,” referring to the planned Jan. 9 inter-Korean discussion.  The Hill reports the President’s remarks: “ ‘I always believe in talking. Absolutely, I have no problem with that at all. At the appropriate time, we’ll get involved,’ Trump said. Trump also said ‘I’d like to see them [North Korea] getting involved in the Olympics, and maybe things go from there. So I’m behind that 100 percent.’ ” Calling the Jan. 9 meeting “a big start,” he said that if “something can come out of those talks, that would be a great thing for all of humanity.”

President Trump talked Jan. 6 with French President Emmanuel Macron about Korea, “to provide an update on developments on the Korean Peninsula, and to underscore American, South Korean, and international resolve to achieve the complete denuclearization of North Korea,” The Hill reported today, from a readout of their phone call.

North Korea has named its delegation for the Jan. 9 discussions with South Korea. Both sides’ delegations are a combination of those responsible for unification matters and sports ministers.

Kim Jong-un’s New Year’s speech was a call for creating the conditions that will lead to the normalization of inter-Korean relations, according to D.P.R.K. news agency KCNA. “The head of the nation clearly stated that our country needs to stick to the policy, which will lead to the breakthrough of all for sufficient unification. It is not worth stirring up the past and recalling the specifics of relations with Seoul. Instead of this, relations between the North and South must be improved…. It is not only about the normalization of the inter-Korean relations, but about the reconciliation of the nations and its free-will unification,” TASS covered KCNA as reporting.

China announced on Jan. 4 that it was further cutting its crude oil exports to the D.P.R.K. to 3 million barrels/year. Xinhua reported that North Korean workers in China have been sent home.


No Progress on Infrastructure Plan at Camp David Meeting

Jan. 7 (EIRNS)—Just three weeks from President Trump’s State of the Union Address, it is clear that this past weekend’s Republican leadership meeting with the President at Camp David did not focus on getting Congressional support for a plan to build new U.S. economic infrastructure.

The only thing confirmed by White House officials is that the President, once again, told the Congressional leaders he does not believe that public-private partnerships (PPPs) work for important new infrastructure projects. But at the same time, the Washington Postreported that his economic advisor, National Economic Council Director Gary Cohn gave an all-PPP presentation to the Congressional leaders on Jan 6.

Rep. Rodney Frelinghuysen (R-NJ), Chairman of the House Appropriations Committee, on Jan. 4 came strongly to the defense of Amtrak’s Northeast Corridor Gateway Project, saying “it will be the Committee’s responsibility to see that such national priorities are met.” The Department of Transportation recently disowned a “50-50” agreement for the Gateway Project’s $29 billion estimated cost, calling it “a project of 90% local significance” only.

How might Franklin Roosevelt’s Reconstruction Finance Corporation have handled this? It might have extended a 20-year, 2% loan of $30 billion to the Metropolitan Transportation Authority, effectively doubling the MTA’s capital budget so that it could build the new Hudson Tunnels and bridges and repair Hurricane Sandy’s seawater damage which is ruining the old ones, among other improvements. The MTA, which is assigned $5.5 billion/year in special tax revenue, has already allocated $2.7 billion over five years to pay interest on a Gateway Project loan. It would have to increase that only slightly to pay the Federal loan interest, while increased economic activity from improvement of the Amtrak Northeast Corridor through the nation’s largest metropolitan area, would enable the states of New York, New Jersey and Connecticut to repay the loan principal over 20 years rather than $15 billion now.

Just as a Reconstruction Finance Corporation—borrowing with Treasury guarantee for a targeted capital budget—could do this, so could an infrastructure bank capitalized from the Treasury holdings of U.S. commercial banks, savers, and foreign holders particularly China and Japan. Tax backing for large-scale credits is necessary, and thus advisor Gary Cohn’s sometimes repeated proposal to raise the Federal gasoline tax to fund infrastructure, is important. But there is no indication whether Cohn repeated this at Camp David.

Grassley, Graham Refer Christopher Steele to Justice Department for Criminal Investigation

Jan. 5 (EIRNS)—Senators Chuck Grassley and Lindsey Graham referred the British author of the Trump dossier, Christopher Steele, to the Justice Department “for investigation of potential violations of 18 U.S.C. § 1001 for false statements investigators have reason to believe Steele made about the distribution of claims contained in the dossier,” Senator Grassley, chairman of the Judiciary Committee, said in a statement on his website. Graham, who co-signed the referral, also called for a special prosecutor in the case.

“I don’t take lightly making a referral for criminal investigation,” Grassley said. “But, as I would with any credible evidence of a crime unearthed in the course of our investigations, I feel obliged to pass that information along to the Justice Department for appropriate review. Everyone needs to follow the law and be truthful in their interactions with the FBI. If the same actions have different outcomes, and those differences seem to correspond to partisan political interests, then the public will naturally suspect that law enforcement decisions are not on the up-and-up.”

The statement by Graham, also on the Judiciary Committee reads: “After reviewing how Mr. Steele conducted himself in distributing information contained in the dossier and how many stop-signs the DOJ ignored in its use of the dossier, I believe that a special counsel needs to review this matter. The rule of Law depends on the government and all who work on its behalf playing by the rules themselves. I hope the Department of Justice will carefully review our letter and take appropriate action.”

Thursday evening, Jan. 5, Grassley and Graham delivered to Senate Security a letter and classified memorandum for delivery to Deputy Attorney General Rod Rosenstein and FBI Director Christopher Wray containing information that forms the basis of the referral. Their referral is also addressed to the chairs of the Intelligence and Judiciary Committees of the House and Senate.

Grassley’s statement says: “Under 18 U.S.C. § 1001, individuals are prohibited from making false statements to the federal authorities of the United States. Grassley and Graham are referring Steele for making potentially false statements about the distribution of claims from the dossier.”

The Wall Street Journal Welcomes Bannon’s Demise

Jan. 5 (EIRNS)—The Editorial Board of the Wall Street Journalwelcomed President Donald Trump’s open break with Steve Bannon, saying that it will “help the Trump presidency and the Republicans.” They observe that the fanciful book by Michael Wolff, even if it did contain anything truthful, reveals nothing new except the Bannon story. They write that “the book is told mainly from Mr. Bannon’s point of view.”

After Gen. John Kelly came in and straightened things out in the White House and Bannon was fired, they say, “the White House has become a saner place.” They believe Trump’s “worst mistakes” came from Bannon’s advice.


Astronomist Urges Plan Now To Put Radio Telescopes on the Far Side of the Moon

Jan. 6 (EIRNS)—Such is the strong recommendation of Joseph Silk in Nature, on Jan. 3. Silk is a highly regarded scientist, and Professor of Physics and Astronomy at Johns Hopkins University.

Silk reviews the current initiatives for manned lunar missions, including President Trump’s policy directive, the European proposal for “a permanent, human-inhabited village at the lunar southern pole,” China’s pursuit of a “human outpost,” and the projects of “private entrepreneurs who are enthusiastic about lunar mining.” “But these initiatives are more technical and economic than scientific,” he says. “Unless we start planning now, they will lack an exceptional asset—a lunar radio telescope. This would be uniquely poised to answer one of humanity’s most profound questions: what are our cosmic origins?”

“Rocket fuel from Moon ice and dollars from space tourists are grand. But if we really want to challenge the limits of human exploration, we should seek the beginnings of the universe,” he says.

Silk describes in detail the scientific questions that could be answered by observations from the electromagnetically quiet lunar far side, which he says would probably entail “millions of simple radio antennas deployed over an area of 100 km across on the Moon’s far side…. [The array would be] operated by humans and robots.” The radio signals that it would be possible to detect would have their origin in the near-beginning of the formation of the universe, he proposes.

China Completing the Nuclear Fuel Cycle

Jan. 7 (EIRNS)—China has begun pouring concrete for one of the world’s first Generation IV nuclear breeder reactors, the CFR-600, on the coast of Fujian province, about 400km south of Shanghai. The 600 MW demonstration unit, which is due to be complete in 2023, follows a 20 MW experimental reactor completed in 2011. It is intended to be the prototype of a 1 GW commercial reactor scheduled for around 2030.

The significance of the sodium-cooled reactor is that it points the way to the fast breeder fourth generation designs that are expected to be adopted by the global nuclear power industry over the next century. It is not the only design that the Chinese industry is pursuing. Another Generation IV fast breeder is being built in nearby Jiangxi province. This uses pebble-bed fuel and a helium cooling system.

These reactors, which use fast neutrons to split uranium atoms, are about 60 times more fuel efficient than slow reactors, generate less radioactive waste, and can be used in a closed cycle system, in which waste is reprocessed into new fuel. This last is particularly important for China, which is planning a massive expansion of its nuclear fleet, but is concerned about future shortages of uranium. The China Institute of Atomic Energy, which designed the CFR-600, is envisaging an increase in output from 40 GW in 2015 to 400 GW in 2050, at which time it is forecast that nuclear will account for 16% of the country’s 2,500 GW installed capacity.

Canada Buy-Out of Westinghouse Will Preserve Nuclear Capabilities

Jan. 5 (EIRNS)—The March bankruptcy of Westinghouse, which is owned by Japan’s Toshiba, could have led to the dismemberment of the world’s largest nuclear builder. Westinghouse technology is the basis for nearly 50% of the operating nuclear plants in the world. In addition to building nuclear plants, Westinghouse Electric provides some form of service, such as maintenance, to about 80% of the world’s 450 operating nuclear reactors, and is one of the world’s leading suppliers of nuclear fuel.

It was announced yesterday that Toronto-based Brookfield Asset Management is purchasing Westinghouse Electric for $4.6 billion, and is optimistic it will bring the nuclear company back from its weakened position due to the bankruptcy. Brookfield typically makes investment in long-term assets, such as infrastructure and real estate. The company says it will help build Westinghouse’s “position as a global infrastructure provider to the power generation industry.” The focus will be on overseas sales, as the purchase includes Westinghouse units in Asia, the Middle East, and Africa.


EU Propagandists Worried over ‘Populist’ Rise in Italy

Jan. 6 (EIRNS)—Bill Emmott, former editor in chief of the Economistand top EU propagandist (Wake Up Foundation), has warned against a “populist” victory in Italy’s March 4 general elections and pushed Silvio Berlusconi as the minor evil, in an article for Project Syndicate and in an interview with Corriere della Sera.

“The worst result would be a victory of the center-right with [Lega Nord head Mario] Salvini coming first,” Emmott warns. A second worst result would be an M5S victory, because the M5S will be “experimental and chaotic.” But the M5S, although coming in as first party, has no chance to form a coalition in order to get 40% of the votes, the threshold for a majority bonus in Parliament. The center-right does. But “Europe must hope that [Berlusconi’s Forza Italia] comes out stronger than the Lega.”

Salvini includes a Glass-Steagall bank separation and a National Credit Bank in his Lega Nord program.

Currently, Forza Italia is running at 16%. Lega Nord is trailing slightly behind. Together, they beat both the M5S and Renzi’s Democratic Party. A myriad of new, small and even one-man parties are being formed in order to steal some electoral seats here and there (the system is a combination of proportional and winner-take-all precincts). For instance, former EU Commissioner Emma Bonino has formed her own party called “More Europe.” Since she had no chance to collect enough signatures, financier Carlo De Benedetti deployed one senator out of his pocket who joined the slate thus allowing the slate to run without collecting signatures.

The M5S has increasingly focused on “anti-corruption” and remains ambiguous on the euro, although keeping Glass-Steagall in the program. Contrary to the last elections, it has opened its slate to “popular” independents. Party owner Davide Casaleggio paid a highly visible visit to the British Embassy Dec. 19.



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