EIR Daily Alert Service, MONDAY, MAY 14, 2018
‘Deals’ or Wars? Trump Joining Economics with Xi, Meeting Putin, Will Decide
May 13 (EIRNS)—A Japanese newspaper has raised the prospect that President Donald Trump’s crucial June 12 summit with D.P.R.K. leader Kim Jong-un may be joined by China’s President Xi Jinping. This report, sourced to an unnamed American official, is not at all confirmed. But the potential of the leaders of the three Armistice countries of the Korean War meeting, with the included goal of ending it with a treaty, is a very significant one for that summit furthering peace and economic progress in the world.
More important, however, is that President Trump decide between his own campaigning for Alexander Hamilton’s “American System” to “make America great again,” and the British system of high profits from trade and cheap labor, which his party and advisors push on him.
Why? Because the decision for the American System means joining in cooperation with China’s extraordinary Belt and Road Initiative of great infrastructure projects, which itself culminated decades and decades of China’s learning and adopting Hamilton’s economics with Chinese characteristics. And that will make President Trump’s Korea “deal” succeed.
President Moon Jae-in of South Korea has already submitted a peace plan to the North Korean leader, to build new infrastructure to integrate the Korean Peninsula into the Belt and Road Initiative; so even if the mooted third leader at the June 12 Singapore summit were to turn out to be President Moon, the decisive issue will remain the same.
Secretary of State Pompeo’s discussion of preparing that summit, on “Fox News Sunday” today, showed the great problem of the influence of British imperial economics. “U.S. private companies—not American taxpayers’ money—will go in and help North Korea develop a 21st-century economy” if it gives up its nuclear and ballistic missile programs, Pompeo said.
Those corporations’ profit visions will clash with the project integral to denuclearization and peace: To bring the Korean Peninsula into the whole Eurasian Land-Bridge development, the whole sweep of new connectivity from Japan to Paris and Madrid.
Schiller Institute President Helga Zepp-LaRouche told China’s Weixing Satellite Communications that if Trump goes with the British model, it will lead to profound economic crisis for the United States and the world. “Under those conditions, the entire trans-Atlantic system will descend into chaos. If he goes … with the Belt and Road Initiative, this new economic community in Eurasia will have the exact opposite effect.”
President Trump continued to have that impulse, even in the conflicted question of trade with China. He tweeted May 13, “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”
The Belt and Road uniquely can make Trump’s Korea “deal” work.
The President clearly also wants a new and comprehensive Mideast “deal” with Iran, and believes that intensive economic pressure—better called financial warfare—will get one. But here he walks straight toward the trap of British geopolitics. British intelligence assets in Israel and Saudi Arabia do not want a new Iran “deal,” but an Iran war, another step on the descent from Iraq, to Libya, to Syria, to Yemen wars which lead to the hell of war with nuclear-weapons power Russia.
Trump can achieve nothing in Southwest Asia without the summit with Putin which he clearly wants, and which British and U.S. intelligence are furious to prevent him from having.
Again, from Weixing Satellite Communications April 13, “In an interview with this news service, Helga Zepp-LaRouche, the president of the Schiller Institute said that the sooner President Trump and the Russian President can meet, the quicker they can put an end to the danger of a conflict. ‘Precisely at the point that President Trump was expressing that wish, many operations within the United States were set into motion to prevent that from happening.”
Helga Zepp-LaRouche’s forecast here also involves Trump’s United States itself returning to that Hamiltonian “American System of Economy,” as specified in the “four new laws” proposed by her husband Lyndon LaRouche since June 2014. The measures start with the restoration of the Glass-Steagall Act, breaking up the biggest Wall Street and London-centered banks, without which the financial crash she warned about, can sweep all “deals” away.
STRATEGIC WAR DANGER
Defense Correspondent Ben-Yishai Calls for Russia To Broker Israel-Iran Ceasefire
May 12 (EIRNS)—Writing in today’s Ynetnews, senior Israeli security commentator Ron Ben-Yishai calls for Russia, as the “responsible adult” to broker a ceasefire between Israel and Iran in Syria. After reviewing the recent flare-up between Iranians operating in Syria, and Israelis, which led to a larger-scale Israeli attack on alleged Iranian targets, Ben-Yishai wrote: “On the other hand, it was clear to Israeli policymakers that if Israel showed restraint in the face of Iranian Quds Force’s aggressions, it would erode Israeli deterrence power vis-à-vis Iran. Therefore, the best solution for all parties would be for Russia to assume the position of responsible adult and broker a ceasefire between the two sides. Such a ceasefire would have to guarantee Israel that Iran will cease its attempts to establish itself in Syria, at least for a few months, as well as cease its attacks against Israel.”
Writing that the situation could calm down, he warned that since the Israeli strikes, “Israel will decide how much further it wishes to challenge the Iranians until they decide that they cannot allow themselves to be on the receiving end anymore of Israel’s punishing strikes, and end the bellicosity on their own. Alternatively, they will carry on into a full-scale war that might include Hezbollah and its massive arsenal of rockets in Lebanon.
“Such a scenario is undesirable to both sides, but it is entirely in the realm of possibility considering the current explosive atmosphere.
“Meanwhile the [Israeli Defense Forces] IDF and the Quds Force continue the dangerous game of walking on the edge while avoiding a full-blown war. The question remains, for how much longer can this continue?”
Israeli Authors Warn What Netanyahu’s War Policy Leads To
May 13 (EIRNS)—President Donald Trump’s stated intention to force Iran into a “new deal, a better deal—better for Iran,” runs straight into the Netanyahu government’s intention to have an Israeli war with Iran, and involve U.S. forces in it. Close coordination between Trump and Russian President Vladimir Putin is the sine qua non for restoring peace in Southwest Asia.
Two articles written by Israelis, appearing in Ha’aretz and the New Yorker respectively, make clear that while some Israeli leaders and media are euphoric about the May 9 strikes against Iranian forces in Syria, the larger issue facing the Israelis, is that this could lead to a protracted war against Hezbollah, and may result in a far different outcome than the self-assured Israelis anticipate.
Left unsaid, is that it could be the spark for a global nuclear war.
Writing in Ha’aretz May 12, Amos Harel acknowledges what, so far, the Israeli government has not: That the Israelis carried out the April 9 bombing of the T4 airbase in Syria, which resulted in the deaths of seven Iranians, followed by the May 9 bombing. He also states that so far, “Russia has not gone out of its way to assist Iran,” which, with President Trump’s pullout from the Iran nuclear agreement, may have emboldened the Israelis.
Harel stresses, “It would be worth waiting before holding the medal ceremonies and victory celebrations,” and “it would be better not to get caught up in the now self-assured, arrogant spiral evident in the reactions in some television studios, at the Knesset and on social media. Under extreme pressure or down the line, Tehran could nevertheless roll out its heavier weapon, Hezbollah, in which case the conflict could take on an entirely different scope.”
On May 10, for New Yorker, Israeli author Bernard Avishai also writes that this may end in a drawn-out Israeli-Hezbollah confrontation that may end poorly for Israel. Moreover, U.S. military intimidation of Iran—a policy Avishai identifies with U.S. National Security Advisor John Bolton—“is precisely what Netanyahu is counting on, given the potential for escalation in Syria and Lebanon, which he does not wish Israel to face alone.”
Avishai emphasizes what Amos Yadlin, the head of the Institute of National Security Studies told him: “The situation urgently needs Russian and American leaders who will contain the menace of a larger war.”
THE NEW GLOBAL ECONOMIC ORDER
Economic Development Between India and China Is Soaring
May 13 (EIRNS)—During their historic April 26-27 “informal summit” in Wuhan, China, Indian Prime Minister Narendra Modi and Chinese President Xi Jinping, while walking and taking a boat ride, launched a new era of peace and cooperation.
They discussed as high priorities, “strengthening India-China relations,” as Prime Minister Modi put it, and economic development. Bubbling just beneath the surface, is the explosion in Indian-Chinese trade, joint infrastructure projects, and cross-border investment. During 2017, Indian-Chinese two way trade leapt 18.6% to $84.4 billion from its 2016 level of $71.2 billion. This, despite the effect of increased tensions over the Doklam border dispute high in the Himalayan Mountains. Given that these are the world’s two most populous countries, there is room for much greater growth.
A May 1 Forbes article, entitled “How China Is Positioning Itself Among India’s Top 10 Investors Despite Bilateral Differences,” reported that in 2017, “China’s Sany Heavy Industry planned an investment of $9.8 billion in India.” Sany is China’s leading engineering machinery manufacturer, specializing in equipment for road construction, port machinery, concrete pumps, mobile cranes, etc. This is part of a larger operation. The Oct. 16, 2017 Economic Times of India, in its article “Led by Chinese, Nearly 600 Companies Line Up $85 Billion Investments in India,” reported that the Chinese companies “Pacific Construction, China Fortune Land Development, and Dalian Wanda … are each planning investments of more than $5 billion during this period.” This planned investment of Sany and these three other Chinese companies is above $25 billion alone.
This is coordinated with “Invest India” which is seeking foreign investment.
Further, China is helping build Kolkata’s metro rail system, as the Beijing-based China Railway Stock won the bid to provide 112 advanced train-coaches to the city. The advanced coaches that will provide real-time footage of coaches to the driver, who would be able to act swiftly in the event of any disturbance. The same company has a contract to supply similar coaches to Nagpur metro, and a separate joint venture unit in India’s northern state of Haryana to manufacture and repair locomotive engines.
But further accelerating the economic and equally political relations, is that the Chinese-created multilateral development Asian Infrastructure Investment Bank has approved funding for $1 billion worth of projects in India, and according to a Feb. 28 Bloomberg story, is considering about $1 billion more. India is by far, the largest recipient of AIIB investment. This includes a $200 million investment in New Delhi’s National Infrastructure Investment Fund.
Tumen River Area Development Program in the Spotlight
May 11 (EIRNS)—Sputnik International points out that the complete denuclearization of the Korean Peninsula will now put a spotlight on reviving the Tumen River Area Development Program (TRADP) as a point of “leverage to bring momentum to North Korea’s opening-up and economic development.”
Initiated in the early 1990s, the TRADP was a project in which multilateral cooperation was to develop the downstream area of the Tumen River among China, North Korea, and Russia, through which the river flows. In addition South Korea could also make a contribution. Sputnik writes, “Such cooperation can be viewed as the first step in restarting the TRADP to promote regional economic integration.”
Already Russia set up a working group last March to draw up plans for a new bridge across the Tumen River at its border with North Korea. TRADP also provides investors to leverage the economic power of South Korea, Japan, and Mongolia to offer aid to North Korea to revive it economy.
TRADP could also provide a way to avoid uncertainties of the fragile geopolitical landscape of Northeast Asia by providing a multilateral cooperation platform.
Multilateral economic cooperation is also likely to ensure the smooth process of North Korea’s reform and opening-up after the UN Security Council loosens economic sanctions, and it will eventually promote bilateral economic cooperation.
China and Japan Open New Era of Cooperation in New Silk Road Spirit
May 11 (EIRNS)—China’s Prime Minister Li Keqiang has stayed in Japan following the China-Japan-South Korean Summit, holding extremely productive meetings aimed at firmly establishing a new era of cooperation in global development.
Li attended a ceremony commemorating the 40th anniversary of the signing of the China-Japan Peace and Friendship Treaty, and also a meeting of former politicians who were involved in putting that treaty together. Speaking there, Li emphasized that the two countries must take “new steps” to move forward in their ties, not only to bolster the confidence of their own people, but that of the international community as well.
Host Prime Minister Shinzo Abe welcomed Li’s remarks, emphasizing that both nations can now take on more responsibility in resolving regional issues, such as jointly promoting infrastructure development in Asia, and by setting up a cross-departmental committee. China and Japan, he said, have now entered into an “era of coordination,” rather than competition.
In commenting on the visit, Global Timesrecommends steps that can be taken to further enhance relations, but specifically urges China and Japan “to abandon a traditional geopolitical way of thinking and jointly explore paths to mutual benefit.” Xinhua also referred to the cross-department mechanism for promoting third-party market cooperation under the framework of the China-Japan high-level economic dialogue, and to organize a forum on the third-party market cooperation.
The head of Japan Business Federation, Sadayuki Sakakibara, long known as “Mr. Yen,” attended the reception, saying he looked forward to further high-level bilateral meetings, pointing out that both nations’ business sectors can collaborate, especially within the framework of the Belt and Road.
This morning, when visiting a factory of Japanese carmaker Toyota in Hokkaido, Li called for deepening bilateral cooperation on joint R&D and innovation so as to produce competitive high-tech goods that meet the demands of Chinese and Japanese markets and also third-party markets. China also agreed to grant Japan RMB Qualified Foreign Institutional Investors (RQFII) a quota of 200 billion yuan (about $31.36 billion), allowing Japanese to invest in Chinese stock and bond markets.
Spain Promotes Mediterranean Corridor as Belt and Road Stop
May 12 (EIRNS)—Spain is bidding to bring a lion’s share of Eurasian cargo along the Belt and Road through its ports, and China appears all for it. Chinese State Councillor and Foreign Minister Wang Yi discuss “deepening practical cooperation under the Belt and Road framework,” when he visits Spain on his way to the May 20 G20 meeting in Argentina, a Chinese Foreign Ministry spokesman reported on May 11. Wang will meet with Spain’s King, Prime Minister and Foreign Minister.
Puertos del Estado, the government agency representing Spain’s ports, announced yesterday that Spain will host a conference on “Spanish Mediterranean Corridor, Essential Part of the New Silk Road,” during the “Transport Logistic China” fair in Shanghai May 16-18. Spain’s Secretary of State for Infrastructure, Transport and Housing will inaugurate the conference, joined by speakers such as Puertos del Estado President José Llorca and two representatives from Spain’s national rail company, Renfe, among others. Spain will also have a stand at the fair, where the ports of Algeciras, Barcelona, Bilbao, Cartagena, Huelva and Valencia will have representatives.
Llorca himself was just in Egypt, participating in conferences organized by the Union for the Mediterranean, where he emphasized the great opportunities opened by the New Silk Road and the expansion of the Suez Canal. In Egypt, Llorca told Spain’s news agency EFE on May 8, that Spain’s ports seek to become a leading point of entry of trade between Europe and Asia, arguing cargo can move through Spanish ports onto rail into Europe in a shorter time than entering through Europe’s northern ports.
He reported that Spain is already the second country in Europe, after Germany, in maritime transit, moving more than 550 million tons and 16 million containers a year, more than 50% of which are in transit to other countries. With a growth rate of 7%, the Spanish port system is the fast-growing in Europe, in his view.
U.S. POLITICAL AND ECONOMIC
Japan Daily Moots Xi’s Participation in Trump-Kim Summit June 12
May 13 (EIRNS)—Japan’s Mainichi Shimbun reported May 12 that China’s Foreign Ministry had no comment on a report that President Xi Jinping may participate in the June 12 meeting in Singapore between U.S. President Donald Trump and North Korean leader Kim Jong-un. Mainichi said “some media” have reported this, and that “the leaders of the countries that signed the armistice to halt the 1950-53 Korean War could gather there to agree the armistice be replaced with a formal peace treaty.”
Mainichi had also been the first to suggest the possibility, on May 11. Singapore’s Straits Times wrote that “The Mainichi Shimbun’s Washington-based correspondent cited American diplomatic sources as saying there was a chance that Mr. Xi may meet Mr. Trump and Mr. Kim in Singapore. In a report published on Friday, the Mainichi quoted a senior international negotiator with the National Security Council as telling reporters that ‘there is a possibility’ the leader of a third country may take part.”
White House Press Secretary Sarah Sanders said May 11 that she “had no indication that President Moon [of South Korea] would take part” in the June 12 summit, that go into a second day. Moon and Kim had agreed at their own April 27 summit, to pursue three-way talks with the United States and four-way talks including China as well.
China’s Vice Premier Liu He’s Washington Visit for Trade Talks Is Still Pending
May 12 (EIRNS)—The visit expected this week to Washington by top Chinese economist, Vice Premier Liu He, may be delayed, according to casual remarks yesterday by Commerce Secretary Wilbur Ross, who made reference to the fact that preparations were not yet completed, from discussions between a Chinese advance delegation and Washington officials on China-U.S. trade matters, which went on this past week. May 22 is set by the U.S. as the deadline for when U.S. tariffs could be approved for activation on trade categories worth $50 billion, if no interim terms of agreement were otherwise reached.
This coming week there are public hearings on this in Washington, extended to three days, from the original one, because of the turmoil and demand for comment; representatives from 130 groups will testify. The U.S. Chamber of Commerce issued a statement this week, reiterating its view that a U.S. tariff policy will backfire and be harmful. On May 10, twelve Iowa state and farm leaders, representing top commodities and organizations, and including Gov. Kim Reynolds, wrote a letter to U.S. Trade Representative Lighthizer, asking for a quick, positive resolution to any disputes with China, in order to preserve the “important trade relationship that we have spent decades building.” Iowa, the second ranking soybean-producing state, has been sending one-third of its soybean crop to China until now. Iowa produces 30% of U.S. pork, and exports $1 billion to China, etc.
Pompeo Offers Pyongyang Economic Aid for Forfeiting Nuclear Weapons
May 12 (EIRNS)—During his press conference with South Korean Foreign Minister Kang Kyung-wha U.S. Secretary of State Mike Pompeo said the United States is prepared to help North Korea achieve prosperity on par with South Korea with if agrees to full and verifiable denuclearization.
In concluding his opening remarks Pompeo said: “If Chairman Kim chooses the right path, there is a future brimming with peace and prosperity for the North Korean people. America’s track record of support for the Korean people is second to none. If North Korea takes bold action to quickly denuclearize, the United States is prepared to work with North Korea to achieve prosperity on the par with our South Korean friends.”
In response to a question on his conversations with Kim and whether he saw Kim as “rational,” Pompeo called the question “undignified”: “You asked about my conversations with Chairman Kim—this question—sort of undignified—it’s irrational. Yes, we had good conversations; substantive conversations; conversations that involved deep, complex problems, challenges, the strategic decision that Chairman Kim has before him about how it is he wishes to proceed and if he is prepared, in exchange for the assurances that we’re ready to provide to him—if he is prepared to fully denuclearize….”
Meanwhile the White House Press Secretary Sarah Sanders briefed reporters yesterday about President Donald Trump’s June 12 meeting with North Korean leader Kim Jong-un. “We plan for a full day of meetings on the [June] 12th with some time reserved to carry over if necessary,” Sanders said. “Certainly the best outcome would be an agreement for complete and total denuclearization.”
COLLAPSING WESTERN FINANCIAL SYSTEM
Crash Flags on Corporate Debt, Derivatives; Congress Not Worried
May 13 (EIRNS)—Several new warnings have pointed to the potential for a blowout of overleveraged corporate debt, particularly in the United States.
An Economist Buttonwood column warning on May 3 was headlined, “Where Will the Next Crisis Occur? Corporate Debt Could Be the Culprit.” It said that the three features which combine in the worst crises are excessive leverage, concentrated bets, and term- or currency-mismatch of assets and liabilities; and all are present in the U.S. corporate sector and globally. Add to this, “Interest rates are heading higher and that is likely to put financial markets under strain.”
“[U.S.] companies have sought to make their balance-sheets more ‘efficient’ by raising debt and taking advantage of the tax deductibility of interest payments,” the piece continued. “Businesses with spare cash have tended to use it to buy back shares, either under pressure from activist investors or because doing so will boost the share price…. At the same time, a prolonged period of low rates has made it very tempting to take on more debt. S&P Global, a credit-rating agency, said that as of 2017, 37% of global companies were highly indebted. [Their debt exceeds 6 times their net earnings—ed.] That [37%] is 5 percentage points higher than the share in 2007, just before the financial crisis hit. By the same token, more private-equity deals are loading up on lots of debt than at any time since the crisis.”
The Economist analysis concludes that now, the rate of return on corporate lending has dropped in 2018, by a large 3.5%. Consequently, purchases of U.S. corporate debt by foreign sources has dried up. A crisis is waiting to happen.
Bloomberg May 9 published a crash warning by Satyajit Das, entitled “WMD Old and New Primed for Next Financial Crisis.” “In the next crisis, familiar instruments—chiefly risky debt and derivatives, either rebranded or modified—will be prominent. There are record levels of high-yield and emerging-market (some of it now labeled ‘frontier market’) debt outstanding,” Das wrote. “Banks may be less exposed directly than in the past, but they have significant indirect exposure to these instruments through loans to nonbank financial institutions.”
Ignoring the flags, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, pushed by heavy Wall Street lobbying, announced May 8 the House will vote up the Senate’s bank deregulation bill by the end of May. The Senate bill exempts $50-250 billion-asset banks from stress tests and makes other changes allowing greater leveraging by the bigger banks.
SCIENCE AND INFRASTRUCTURE
China Marks Tenth Anniversary of Huge Earthquake, Tests Three-Week Warning System
May 13 (EIRNS)—This date in Asia was the 10th anniversary of the huge 8.0 earthquake that struck the city of Wenchuan, China May 13, 2008, killing 70,000 people, and also called the Great Sichuan Earthquake. It was observed with major ceremonies in Wenchuan and a national moment of silence.
China’s CGTN TV network reported May 13 on the event, that the relief effort rapidly involved 120,000 national responders and international teams. This recalls the amazing response by FDR’s Works Progress Administration to the Category 3, “Great New England Hurricane of 1938,” in which catastrophic flooding of the Connecticut River was prevented by the sheer speed and size of the emergency work and reconstruction force.
Reconstructing the destroyed city of Wenchuan took three years and 1.7 trillion yuan investment (about $260 billion!). The city is completely renewed and has actually expanded beyond 2008 limits, and is now seeking designation as a United Nations “green city.”
In this context, Global Times reported May 10, “Chinese seismologists plan to build the country’s first ‘cloud image’ system to enable the country to release timely and reliable warnings on earthquakes with magnitudes above 5.0, according to the project’s chief scientist on Tuesday,” May 8. By timely, the scientists involved mean up to three weeks’ notice.
“The ‘cloud image’ system is based on sensory technology, with self-developed detectors buried under the Earth’s surface to detect stress and energy dynamics in an area between 8 to 20 km, said Wang Tun, the project’s leading scientist and head of the Chengdu-based Institute of Care-life,” wrote Global Times. “Mou Chaozhi, the director of the Wenchuan earthquake prevention and disaster relief bureau, said the decision ahead of the 10th anniversary of the Wenchuan earthquake is of great significance.”