Volume 5, Number 13

EIR Daily Alert Service

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


America’s Payoff for Joining the New Silk Road: Optimism

Jan. 17 (EIRNS)—Compulsive media followers in the United States are relatively sure about what’s going to happen in their near-term future: The government is going to shut down; millions of promising young people will be deported; an epidemic of more and more potent opiates will kill increasing tens of thousands of Americans; electronic surveillance of everyone, all the time, will continue indefinitely; President Trump’s planned $1 trillion initiative to build new infrastructure won’t happen; wars will continue in Afghanistan, the Middle East and Africa, and we’ll likely go to war with Russia in Europe or over North Korea in Asia.

Businesses have their own version: They can’t find skilled workers to fill their job openings; but they don’t raise wages anyway, because of uncertainty about what will happen when the stock-and-bond bubble crashes.

These, along with mass shootings and periodic terrorist attacks, have become the “informed expectations” of Americans, and Europeans. Things have gone very badly since the turn of the century—especially since the 2007-08 financial crash—and so pessimism is the order of the day.

Schiller Institute Founder Helga Zepp-LaRouche, who has great experience with China and as an intellectual author of its “New Silk Road” policy, points out that in China expectations are completely different. They are of economic growth, of ending poverty not only there but in very poor countries, of seeing wonders of technology and new infrastructure, of cultural cooperation with other countries and the possibilities of peace; and even—remember when millions of Americans dreamed of this?—of exploring the Moon and the Solar System.

She points out that the growing influence of China’s Belt and Road Initiative—most recently in drawing in French President Emmanuel Macron—is an influence for optimism and a sense of mission, not just “practical” agreements to build high-speed railroads, although those too can spread a cultural optimism about the future.

That mission is essential to optimism. A financial crash of the “everything bubble” is in fact coming, of a certainty. But by reinstating the Glass-Steagall bank separation act we can easily bring the banking system and the economy through it and increase credit to expand real economic productivity. There are ways tested in American history to get credit directed into the great infrastructure projects and the breakthrough technologies we need, even a crash fusion energy program.

The important thing is to acknowledge that the mission of China’s Belt and Road Initiative for great powers toward the world is a successful one, and to join it. The kernel of cooperation of Presidents Donald Trump, Xi Jinping, and Vladimir Putin to end 20 years of permanent war, is still there.

LaRouchePAC and the Schiller Institute have had a clear mission plan. First stop the planned coup against Trump by British and U.S. imperial factions and intelligence agencies. Having set back that coup by mass circulation of our “Mueller Dossier,” circulate Lyndon LaRouche’s “Four Laws” economic policies to restore U.S. productivity and get America ready to join a new Marshall Plan in the Belt and Road Initiative.

Those are actually informed expectations for the near-term future of the country.


Steinhoff Who? Wall Street Loses $1 Billion on Corporate Debt

Jan. 17 (EIRNS)—The corporate debt bubble’s early-collapse signs are starting to hit Wall Street and other big banks. According to a summary in Bloomberg derived from the Wall Street megabanks’ fourth-quarter reports, four major banks lost over $1 billion total on the collapse—still ongoing—of the Steinhoff Group. The bonds of the South Africa-based conglomerate, which owns retail companies across Europe, caused losses of $372 million for Citigroup, $292 million for Bank of America, $273 million for JPMorgan Chase, and $120 million for Goldman Sachs. But the banks’ overall exposure to Steinhoff was reportedly more than $20 billion, and the group is still dropping into the pit of what are euphemistically called “Fallen Angels,” former “zombie companies” that needed to borrow to pay interest on their debt.

The real problems for Wall Street occurred when Steinhoff was downgraded to junk and its bonds therefore thrown off the books of the European Central Bank (ECB), which has been taking care of all the Fallen Angels’ debt.

A long Zero Hedge posting on U.S. corporate debt says that corporate stock buybacks are actually stock speculation on margin debt, just as individual investors do, until they get hit with “margin calls” when their stock values fall below a certain percentage of their debt. The ratio of margin debt to the total value of all market stocks in the United States has reached 2.4%; the highest level ever reached was 2.5% in 2007.

Since the end of 2012, U.S. corporations have bought back $2.7 trillion of their stock, while increasing their net debt by $4.5 trillion to roughly $14 trillion. This combination of much more debt and much less equity (when they buy their own stock off the market they reduce their equity) leaves them extremely leveraged by the debt. The same pace continued in the third quarter of 2017, when there were $130 billion in buybacks.

And some of the companies nearing “Fallen Angel” status are a lot better known than Steinhoff Group: GE, for example.

Beijing Regulator Warns of Financial Crisis; Belt and Road Initiative Investment Favored

Jan. 17 (EIRNS)—China’s chief banking regulator warned of the threat of a banking panic event, using the term “black swan event” which could threaten China’s financial stability, in an interview Jan. 16 with People’s Daily. Guo Shuqing told the paper the financial system risks are “complex and serious.”

Guo has been cracking down on shadow bank activity, as well as loan fraud. He warned of the danger of rising bad debt in China’s financial system, and said, “We need to focus on reducing the debt ratio of companies, restrict household leverage, strictly control cross-financial sector products [i.e., sold by shadow banks to banks and investors], continue to dismantle shadow banking.”

China’s housing markets have been dramatically reined in. The Wall Street Journal reported Jan. 17 that over the entire country over the past year, the annual housing price appreciation has dropped from 10% to 5%; but in Beijing and Shanghai and neighbor cities, it has dropped from 40% to nothing. In some districts prices are falling. So there are bad debt problems among housing developers and mortgage lenders, although the commercial banks are partly shielded from this. The Journal notes, “China doesn’t have the sort of risky financial products that crashed the American housing market and infected the global economy a decade ago.”

China’s overseas investment was shifted in 2017 by similar active regulation. Actual investments on the Belt and Road Initiative project have been relatively constant: $18.5 billion in 2015; $14.4 billion in 2016; and $14.7 billion in 2017. But China’s overall overseas investment dropped 30% in 2017, to $120 billion, due to strong measures to discourage highly speculative investments. So the BRI share of overseas investment approached 15%.


Sunbase-Led Chinese Consortium Offers New Harbor for Swedish Atlantic Coast

STOCKHOLM, Jan. 17 (EIRNS)—The Hongkong-based company Sunbase, as a leader of a Chinese consortium, has offered to build a new harbor in a fjord north of Gothenburg on the Swedish Atlantic coast. It would have the capacity to receive the biggest container ships in the world, whose drafts are currently too great for harbors in Sweden. The proposed new harbor would also be an early stop in Western Europe for the Silk Road on Ice, the Northern Route, which China wants to develop. A plan to dredge the Gothenburg harbor at a cost of @EU400 million has so far been blocked by the Swedish government. Without such a harbor, Sweden risks seeing harbors like Rotterdam receive those ships for offloading onto smaller ships able to enter Swedish harbors.

Two Chinese industrialists have already bought the two Swedish car factories in this region, Volvo Cars based in Gothenburg and the former Saab car factory in Trollhattan, where electric cars for China will be produced under the brand name NEVS. On Dec. 27th, Volvo Cars owner Geely Holdings announced they had bought a big minority share of 8.2% of the Swedish truck and construction machine producer Volvo. These Chinese investments in these automotive industries has brought Sweden into one of the world’s biggest technology-sharing projects with China.

The new harbor at the city of Lysekil would have a berth 1,800 meters long and 1,000 meters wide. The plan includes a new bridge, new roads and railways, a terminal for cruise ships and also city development. It would be a huge investment in a nation starved for decades of infrastructure development and jobs. It has been welcomed by the city administration, so the Chinese have been asked to present a more detailed plan.

When on Nov. 23, the plan was referred to by Swedish Radio as a “secret Chinese multi-billion investment,” both national and local media and activists set off a campaign to stop the project. Security issues were raised about China’s alleged possible military interest in connection with harbor development projects internationally, portraying the New Silk Road project as a policy to project military and political domination. The participation, in July 2017, of Chinese naval units in military exercises with the Russian fleet in the Baltic Sea was played up in this debate.

In addition to the Social Democratic city leadership, support for the project has come from the business daily Dagens Industri. Editor Frida Wallnor, in an editorial Jan. 4, pointed to the project’s importance for Swedish shipping, as Gothenburg is not making investments to allow it to receive the largest container ships. She also pointed to “the positive experience with the Chinese ownership of the car producers.” She continued, “Actually the government has initiated an inquiry on how to convince investors to come to Sweden, especially from China, India, and the United States, as Sweden is lagging in attracting foreign direct investments in comparison with neighboring nations such as Finland, Denmark, and the Netherlands.”

Asking “all those who raise conspiracies about a future Chinese annexation to take a step back into reality,” Wallnor writes, “If we say no to the Chinese in Lysekil, we also should dismiss the Hongkong company MTR from running the Stockholm subway system. Or the Saudi owner of the [Swedish oil] company Preem that is running the refinery and oil harbor right in Lysekil itself. It would be more constructive instead to figure out how we could make use of the Chinese interest in Sweden.”

The Schiller Institute in Sweden welcomes the Chinese harbor project in Lysekil as a first step to help start rapid modernization of Swedish infrastructure. The government austerity policy and EU budget restrictions have held back economic development. The Chinese should also be invited to take part in the necessary development of the railway system. A new high-speed rail system connecting Gothenburg with Stockholm has been discussed for years, but has not been getting off square one.

China-Built Railway To Serve Industry in Sri Lanka’s South

Jan. 17 (EIRNS)—Track-laying has begun for the first phase of the Matara-Kataragama railway extension project in Sri Lanka. The first phase of the project includes constructing a railway service from Matara to Beliatta, in the south of the island country. Sri Lankan State Minister for State Enterprise Development Lakshman Yapa Abeywardena said Jan. 12 that the Sri Lankan government was hoping to finish the first phase of the railway project in the coming months.

“On behalf of the President and the Sri Lankan government, I would like to thank the Chinese government for this historic event. The extension is a historic development which will hugely benefit the public transport sector as well as the country’s tourism sector,” Abeywardena said. “Successive governments in the past have tried to implement this project. Due to the assistance of the Chinese government and the Chinese company, this project will soon be a reality,” the minister stated.

The Matara-Kataragama project is the first new railway line constructed in Sri Lanka since the island country gained independence in 1948. It is funded by the Exim Bank of China on a concessional loan, and constructed by China National Machinery Import and Export Corp. (CMC) in consultation with the Sri Lankan Ministry of Transport and Civil Aviation and the Central Engineering Consultancy Bureau. Vice President of CMC Zhao Jun said the railway extension project, which was under the China-proposed Belt and Road Initiative, is a key project closely related to the development of Sri Lanka, since the railway will connect many industrial areas in the south of the country.


Tillerson: It’s Up to North Korea To Avoid the Military Option

Jan. 17 (EIRNS)—U.S. Secretary of State Rex Tillerson made clear at the Foreign Ministers’ Meeting on Security and Stability on the Korean Peninsula in Vancouver, yesterday, that for the U.S. “diplomacy” means keeping the pressure on North Korea until it gives in on the question of denuclearization. “We must increase the costs of the regime’s behavior to the point that North Korea comes to the table for credible negotiations,” Tillerson told fellow foreign ministers. “We reject a ‘freeze-for-freeze’ approach in which legitimate defensive military exercises are placed on the same level of equivalency as the D.P.R.K.’s unlawful actions,” he went on. “The pressure campaign will continue until North Korea takes decisive steps to denuclearize.”

If Pyongyang fails to respond to maximum pressure, then the military option is available, but Tillerson put the onus for that on North Korea. Addressing media later at an availability with Canadian co-host Chrystia Freeland, he said: “We all need to be very sober and clear-eyed about the current situation…. We have to recognize that the threat is growing and if North Korea does not choose the pathway of engagement, discussion, negotiation, then they themselves will trigger an option.” Tillerson continued, “Our approach is, in terms of having North Korea choose the correct step, is to present them with what is the best option, that talks are the best option; that when they look at the military situation, that’s not a good outcome for them.”

The Vancouver conference on Korea—something of an imperial absurdity where Greece and Cyprus were invited and China and Russia were not—has a likely British Commonwealth origin. It evidently originated in a mid-December meeting in Ottawa between Tillerson and Canada’s intensely anti-Russia Foreign Minister Chrystia Freeland. In June 2017 in Ottawa, Freeland had given a speech sounding a lot like Tony Blair, David Cameron, or Barack Obama. She argued Canada had to “take on more responsibility for upholding a global order based on rules, that greatly benefitted Canadians. This order had at its heart the core notions of territorial integrity, human rights, democracy, respect for the rule of law and an aspiration to free and friendly trade.” The next day, Minister of Defense Harjit Sajjan announced plans to increase Canada’s military budget by 73% over 10 years—leading to this week’s Vancouver discussions of Canada’s Navy intercepting ships trading with North Korea.

U.S. Policy To Arm Kurds May Split NATO, Turkish Lawmaker Warns

Jan. 17 (EIRNS)—Ahmet Berat Çonkar, a Turkish MP from the ruling Justice and Development Party (AKP), and leader of the Turkish Group in the NATO Parliamentary Assembly, told Sputnik International in an interview yesterday that the U.S. plan for Syria threatens to split NATO. “Earlier, U.S. officials responded to Turkish criticism of their interaction with Kurdish elements with the assurance that this interaction was temporary, and connected with the need to fight Daesh [ISIS],” Çonkar said. “But the current U.S. action shows us that the Americans intend to create and maintain long-term contracts with the terrorist elements of the YPG, whose activities pose a direct threat to Turkey’s security,” he continued. “Such behavior by the U.S. is absolutely unacceptable for us, and contradicts the allied principles on which our relations with the U.S. should be built.” If the U.S. moves forward with forming the Syrian Kurdish border force, it will contradict all of NATO’s principles, and all bilateral agreements, he said.

At the same time, Çonkar endorsed Russia’s position on the U.S. plan. Russian Foreign Minister Sergey Lavrov warned that U.S. actions “demonstrate that the United States does not want to keep [a] territorially integrated Syria.” Çonkar said, “The words of the Russian Foreign Minister demonstrate Russia’s realistic and constructive approach.”


National Space Council Executive Exhorts Manned Return to the Moon

Jan. 17 (EIRNS)— Scott Pace, Executive Secretary of President Trump’s revived National Space Council, has an interview in the Winter 2018 issue of the George Washington University’s GW Magazine. Pace is on leave as director of GW’s Space Policy Institute, and previously served as NASA’s associate administrator for program analysis and evaluation.

Pace said that the Space Council’s priorities include “doing human space exploration, with a human return to the Moon as part of it, with international and commercial partners.” As far as a timeline is concerned, he said that “it’s possible that you could see a return to the Moon by the early 2020s,” but that that would require “unconventional ideas” by the private sector. “On the other hand,” he cautioned,” if the commercial ideas don’t pay off, then it’s going to be later.”

In answer to the question, “What do we want to get out of going back to the Moon?” he made three points: “rebuilding a capability for deep-space exploration, that has gone away and lapsed”; second, to carry out scientific research; and, third, to get “other developing space programs,” both international and private, “to align themselves more closely with us.”

On the goal of going to Mars, Pace said, “the fastest way to get to Mars is to be able to get to the Moon.” He stressed the need for international cooperation in the context of what real leadership is. “Go to Mars when you can bring lots of other people with you…. The nature of leadership today is very different than it was in the 1960s. Today, leadership is measured in how many people you can get to want to come with you and want to go with you. I thought that the previous administration’s focus on Mars was, in many ways, not really helpful, because it didn’t allow enough opportunity for others to participate in it,” he said.

Scott Pace has been a partisan for a manned return to the Moon. His emphasis on the need for the commercial sector to play a seminal role is a function of the expectation that the NASA budget request by the Administration next month will not include a ramp-up in funding that is necessary to implement President Trump’s lunar initiative. The President has already repeatedly said that public-private partnerships will not work to build infrastructure. This is true in spades for a national space exploration program.

The full article is on page 14 of the magazine, under the headline “A Return to the Moon,” and available online.

Lawmakers Make Case for Prosecuting Former DNI Clapper for Lying to Congress

Jan. 17 (EIRNS)—The Washington Examiner carries an article today by Steven Nielson quoting a number of congressmen who are arguing for the prosecution of former Director of National Intelligence James Clapper for lying to Congress, in his statement that the National Security Agency was not wittingly collecting any type of data at all on millions of Americans. Clapper has since admitted that the statement was false, falling back on national security considerations. Clapper plays a major role in his continual attacks against President Donald Trump, questioning the President’s fitness to govern.

“Clapper should be prosecuted,” said Rep. Thomas Massie (R-KY). “He admitted to lying to Congress and was unremorseful and flippant about it. The integrity of our federal government is at stake because his behavior sets the standard for the entire intelligence community.” Likewise, Rep. Ted Poe (R-TX) stated, “The time is long overdue for the Department of Justice and the FBI to bring the accusations against James Clapper in front of a grand jury. He and others who have held administrative power must be held accountable to the same laws that govern the people of the United States.”


Europe and China Test Technology for a Joint Weather Satellite

Jan. 17 (EIRNS)—Recently, the European Space Agency and China’s National Space Science Center realized that they were each working on similar space science instruments that would complement each other, and that working together would qualitatively improve forecasting severe weather events. “We had both been pursuing approaches with many similarities, so collaboration on this ground-based demonstrator seemed like a logical next step,” Peter de Maagt, from ESA’s Antennas and Sub-Millimeter Wave section, was quoted in an ESA release today. “If this testing goes well, the next step would be a space mission.” A major focus of the mission would be the forecasting of typhoons, with these two instruments that can see through rain and clouds.

The instruments are both designed to look through the Earth’s atmosphere in the millimeter-wavelength range, but in two different frequencies. The problem until now has been that if a satellite is in a high geostationary orbit, it can see a large, full-disc view of the Earth, but at such an altitude, 36,000 km, the resolution is poor. If the satellite is in a low orbit, the resolution is better, but it can only see narrow swaths of Earth at any one time.

When a satellite is looking at Earth in two different frequencies, and the signals are correlated together, they can produce an image with a sharpness that is not otherwise possible.


Korean Media Give Optimistic Report on North-South Talks

Jan. 17 (EIRNS)—It is universally reported today that officials of North and South Korea met yesterday and agreed on forming a unified women’s ice hockey team and marching jointly under a “Korean Unification” flag into the Winter Olympics opening ceremony in PyeongChang. However, the Korea Herald and Yonhap News Agency identify something which may be more important. North Korean officials proposed that the D.P.R.K. delegation—including athletes, officials, and cheerleaders—travel to PyeongChang not by air, but along a western road joining the North and South, which will be opened during the Olympics.

The road was once used by South Korean companies operating in a joint industrial complex in the North’s border city of Kaesong, as an outgrowth of the “Sunshine Policy” initiated by President Kim Dae-jung. Yonhap reported, “If the South agrees, the road would be reopened for the first time since February 2016, when Seoul [under President Park Geun-Hye] shut down the factory park in response to the North’s nuclear and missile tests.”

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