EIR Daily Alert Service, TUESDAY, MAY 15, 2018

TUESDAY, MAY 15, 2018

Volume 5, Number 96

EIR Daily Alert Service

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

·             Schiller Institute Ibero-America Resolution Calls on Nations To Join Belt and Road, End Poverty

·             Russian General Describes Geopolitics as Problem in Astana Talks for Syrian Peace

·             UN World Food Program Director Urges China Model To Tackle North Korea Poverty

·             Gulf Cooperation Council Nations Solicit the Belt and Road

·             German Political Prominents Debate Russia Sanctions

·             Trump and Xi Move To Resolve Shutdown of ZTE Corp.

·             Pitchfork Candidates Target Soft-on-Drugs Congress Members

·             No Let-Up in Argentine Currency Run, as Fears Grow of Looming Debt Crisis

·             Four Months In, U.S. Corporate Tax Cuts Not Affecting Stagnation

·             North Korea Could Develop a Major Land-Bridge/Arctic Route Link

EDITORIAL

Schiller Institute Ibero-America Resolution Calls on Nations To Join Belt and Road, End Poverty

May 14 (EIRNS)—The Schiller Institute has begun to circulate a resolution across Ibero-America intended to promote a widespread debate about why the area’s nations must join the Spirit of the Silk Road, and work with China’s Belt and Road Initiative. The resolution is headlined: “An Appeal to the Governments, Nations and Peoples of Ibero-America: The Science To End Poverty; If China Can Do It, Why Not We?

The resolution notes that 200 million of the 600 million inhabitants of Ibero-America and the Caribbean are officially classified as poor. “Poverty is not a natural condition of mankind,” the statement asserts; it can be wiped out in a generation, as China has done. “China has reduced the number of poor people from 875 million in 1981 to 30 million in 2018—a 97% reduction!—according to World Bank statistics. And the government of Xi Jinping is committed to eliminating poverty in China altogether by 2020. If China can do it, why not we?” the resolution demands.

The resolution then discusses how China has achieved this. “As China has shown, poverty can be eliminated with an economic plan based on wiping out speculation and promoting scientific innovation and the introduction of the most advanced technologies,” such as the construction of a large network of high-speed rail lines across the country. “China’s approach coincides with the systematic development of the science of physical economy that the economist Lyndon LaRouche has developed and spread over five decades.”

China is now extending its economic success across the planet through the Belt and Road Initiative, the resolution states, which the nations of Ibero-America must join. The petition concludes with a three-point appeal:

“We call on our governments to fully join the Belt and Road Initiative…. That way, instead of poverty and drugs, our youth will have a future of great infrastructure projects.

“We call on our political parties, business associations trade unions and other institutions to promote a broad national discussion to learn about the BRI and the science of physical economy which underlies it, and to urge our governments to join. We will no longer tolerate empty speeches about democracy and corruption. The time has come to put an end to poverty—and to those governments which tolerate it.

“We call on those economists, journalists and other opinion-mongers who prefer to resort to ideological slogans and geopolitical arguments in order to dismiss the proven success of China, without bothering to even discuss it, to at least have the intellectual honesty to publicly debate these ideas—which, after all, involved the survival of the human species—with representatives of the Schiller Institute, either in person or by international videoconference hookup.”

The resolution has begun to circulate widely in a number of Ibero-American countries, both through social media and direct distribution at political meetings and rallies. For example, at a recent march by one presidential campaign in Colombia, about 450 copies of the resolution were leafleted to participants.

STRATEGIC WAR DANGER

Russian General Describes Geopolitics as Problem in Astana Talks for Syrian Peace

May 14 (EIRNS)—In the 9th round of Syrian peace talks taking place May 14-15 in Astana, Kazakhstan, the American decision not to attend as observers has pointed to a deeper problem. Russian participants have warned that the Astana process is being undermined by moves contemplating the effective partition of Syria, even though all participants in both the Astana and Geneva talks have committed themselves to Syrian territorial integrity and sovereignty.

Russian Lt. Gen. Yuri Netkachev told Nezavisimaya Gazeta May 13 that the key motives of the main players which have attended the talks are not focussed on terrorists now, but on their geopolitical and military-economic goals in the settlement of the Syrian war.

“The Astana process is stuck right now,” General Netkachev told the newspaper, “because Damascus and Moscow, with the participation of Turkey and Iran, control only about 60% of Syria’s territory,” reported TASS. “The economically important land, with many oil and gas fields, is now controlled by the United States and its allies,” he said. Russia, Iran and Turkey are the three guarantors for the Astana peace process for Syria.

Syria and Russia are ready to work on a new constitution with the opposition, and negotiate in both Astana and Geneva. However, Nezavisimaya Gazetasays the U.S. coalition may have its own plans, because, in violation of international norms, the U.S. coalition has created 14 military bases in Syria—many located on the territory of oil and gas fields.

“It becomes obvious that the Assad regime and its allies are unlikely to succeed politically in controlling Syria’s hydrocarbon infrastructure areas of the Euphrates,” Gazeta writes, according to TASS. “The power play for these areas might threaten to morph into a real war.”

It also reports that Israeli actions under the guise of fighting Shi’ite formations in Syria, suggest that the threat of large-scale war exists.

THE NEW GLOBAL ECONOMIC ORDER

UN World Food Program Director Urges China Model To Tackle North Korea Poverty

May 14 (EIRNS)—Executive Director of the World Food Program David Beasley has just made a May 8-11 visit to North Korea to assess emergency food needs there. Interviewed on China’s TV network CGTN May 12, Beasley said that he had found no threat of starvation in the D.P.R.K., but extensive threats and existence of undernutrition and malnourishment.

Correspondent Hou Na asked Beasley about his perception of the “future prospects of cooperation,” after talking with representatives of China’s Ministry of Agriculture, and whether China’s “experience in poverty reduction” could help other countries in the world.

“China is an amazing success story in addressing world hunger.  Our goal is to end world hunger by 2030,” he replied. “We can’t do that without China. And China has been a model for the rest of the world to follow in … ending hunger.  Because the severity of the poverty rate has just dropped—it’s unprecedented—over 800 million people!  And as I meet with the leaders of China, I say: ‘You, just like the United States did decades ago, [with] this success, you need to help the rest of the world. And we need to partner together so that we can end hunger in every country in the world and your success is a model to be replicated.’ ”

Gulf Cooperation Council Nations Solicit the Belt and Road

May 13 (EIRNS)—The Belt and Road Initiative was warmly endorsed by Bahrain’s Minister for Transportation and Telecommunications Kamal bin Ahmed Mohammed, on behalf of Bahrain and the six countries of the Gulf Cooperation Council (GCC)—Bahrain, Saudi Arabia, Kuwait, United Arab Emirates, Oman, and Qatar—at a conference held in Bahrain May 10-11.

“The Belt and Road Initiative is ambitious and broad in its nature…. We think China always will look for a new market for their services; they are manufacturing goods, every day they’re increasing their production and we can be the market for these goods,” Ahmed Mohammed said. “We also have a lot projects [going on] and … there will be a need for Chinese goods and products.”

The Bahraini Minister also said that there is a “great opportunity for the GCC countries; the infrastructure already exists, already we have the routes and the [trade] corridor available … and there are a lot of areas in which both regions, China and the GCC, can benefit each other. It’s a win-win for both sides.”

In offering Bahrain and the Gulf countries as another “hub” for the BRI, Ahmed Mohammed proffered the Gulf’s oil and commodities in exchange for the BRI’s infrastructure and know-how.

German Political Prominents Debate Russia Sanctions

May 14 (EIRNS)—Christian Lindner, leader of the German Free Democratic Party (FDP), called for a policy of “double strategy” toward Russia that would include both the preservation of dialogue and clearly-defined policy.

“Russia will have its place in the ‘Europa’ house, if it abides to a set order,” Lindner said at a federal rally in Berlin on May 12. Lindner suggested that Russia either be invited back into the G8 or be otherwise included in the association by creating a G7+1 format, and asked for the restoration of regular EU-Russia summits. Nonetheless, he said, anti-Russia sanctions should not be removed without conditions.

This was also the result of debates at the national party convention of the German Free Democrats on May 13, at which Vice Chairman Wolfgang Kubicki proposed a Western initiative to launch a trial balloon towards Russia, a constructive proposal for some cooperative project, which, if Russia accepted, could open the door to easing the sanctions and return to a process of cooperation again.

This idea was opposed by the FDP’s official foreign policy spokesman, Alexander Graf Lambsdorff, arguing that sanctions never are an economic issue alone but are always connected to political and human rights. Sanctions against Russia must therefore remain, he said. However, dialogue with Moscow should be kept, and one might, for instance, reassociate Russia with the G7, he agreed at the same time. The delegates at the convention then voted against Kubicki’s idea.

Opposition to Russia sanctions also exists in Chancellor Angela Merkel’s own Christian Democrats party: Saxony-Anhalt Minister President Reiner Haseloff (CDU) called for revision of the country’s policy towards Russia following President Donald Trump’s withdrawal from the nuclear deal with Iran.

“The recent developments regarding Iran should trigger a revision of the German policy towards Russia,” he said in an interview published in the May 13 Welt am Sonntag Sunday newspaper. In light of the U.S. sanctions against Iran, “it is important as never before to maintain dialogue with our eastern neighbor Russia,” and stress that both countries will benefit from returning to normal trade relations.

U.S. POLITICAL AND ECONOMIC

Trump and Xi Move To Resolve Shutdown of ZTE Corp.

May 14 (EIRNS)—With China’s second-largest telecommunication company ZTE literally shut down because of punitive sanctions by the U.S. Treasury, President Donald Trump called for a solution of the situation on May 13 after talking to China’s President Xi Jinping.

“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!” Trump tweeted.

A White House statement May 14 elaborated: “The President’s Tweet underscores the importance of a free, fair, balanced, and mutually beneficial economic, trade and investment relationship between the United States and China. The administration is in contact with China on this issue, among others in the bilateral relationship. President Trump expects [Commerce Secretary Wilbur] Ross to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE quickly based on its facts.”

Shortly thereafter, the Chinese government reportedly restarted its review of the application of Qualcomm—a U.S. telecom company—to acquire the Chinese company NXP. The actions may be linked, and may bear on agricultural trade as well, although Commerce Secretary Wilbur Ross on May 14 insisted that the sanctions against ZTE had “nothing to do with trade.” It is perhaps notable that, although the sanctions were imposed by Steve Mnuchin’s Treasury, Trump instructed Ross’s Commerce Department to resolve them.

Pitchfork Candidates Target Soft-on-Drugs Congress Members

May 14 (EIRNS)—Fresh Democratic and Republican candidates who have never run for office before are challenging entrenched Congressional incumbents who support loosening restrictions and access to addictive painkillers.

This movement exploded when President Trump’s candidate to head the White House Office of National Drug Control Policy (ONDCP) Rep. Tom Marino (R-PA), was booed out of a White House ceremony for his “easy access” efforts. President Trump dropped his support, and now Marino is a target for removal—with a host of others in Congress, in all parties.

Although the role of the law Marino sponsored and Obama signed in 2016 has been exaggerated by party hacks, the ravages of the opioid epidemic have finally galvanized some Americans into running for office themselves, or actively working to elect others, to stop drug addiction. One influential author on the epidemic, Sam Quinones, has proposed attacking the deeper cultural problem by reviving the national mission of the American space program.

In a lengthy article in May 13 Washington Post, authors Scott Higham, R. Thebault, and S. Ricks detail how some of the incumbents they describe are targeted by candidates who say they are running because the incumbents have large stock holdings in drug manufacturing companies, or even national drugstore chains like CVS. The authors cite one drug and alcohol counselor in Williamsport, Pennsylvania, a mother of two, who lost eight of her clients to opioid overdoses in one month in 2016. She is now running against the politician, Marino, she holds responsible for passing 2016 legislation that “hampered” drug enforcement.

“It’s a big reason why I chose to run,” she said.

Sen. Orrin G. Hatch (R-UT), who announced this year that he will retire, sponsored the final version of the Marino’s bill in the Senate. Lawmakers said the Drug Enforcement Agency (DEA) signed off on the legislation and Congress passed it with a parliamentary procedure known as unanimous consent. There was no debate and no recorded vote, and Obama signed it into law without fanfare in April 2016.

Marino was forced to withdraw his nomination to lead the White House’s Office of National Drug Control Policy for President Trump in Fall 2017.

In Vermont, Dan Freilich, MD, is running a long-shot primary battle against Rep. Peter Welch (D), a co-sponsor of one of the versions of the legislation. “To find a so-called progressive Democrat co-sponsoring a bill to strip the DEA of regulatory capabilities of opioid distribution is incredible,” Freilich said. Welch accepted $79,000 in campaign contributions from companies that backed the measure. During the years that the legislation was pending, Welch bought and sold between $215,000 and $550,000 in Rite Aid stock, disclosure reports show.

Rep. F. James Sensenbrenner Jr. (R-WI), a co-sponsor of the legislation, also held at least $500,000 worth of stock in AbbVie, the maker of Vicodin brand of hydrocodone bitartrate and acetaminophen, which includes a widely abused narcotic painkiller. His general election challenger is using the law and the stock holdings against Sensenbrenner. “From a big picture standpoint, this is not the direction we want to go,” said Tom Palzewicz, a Navy veteran and first-time political candidate who runs a small business consulting firm.

Twenty-six congressmen sponsored or co-sponsored versions of the “Ensuring Patient Access and Effective Drug Enforcement Act” in the House, 23 of them Republicans, three Democrats. Many regret it now.

COLLAPSING WESTERN FINANCIAL SYSTEM

No Let-Up in Argentine Currency Run, as Fears Grow of Looming Debt Crisis

May 14 (EIRNS)—The opening of the markets this morning saw another run on the Argentine peso, as it reached a record low of 25.75 to the dollar, an 8% drop—it has plunged 34.3% this year—forcing the Central Bank to intervene with $5 billion to prop it up. This morning, President Mauricio Macri spoke by phone with President Donald Trump, who, according to the White House readout, “expressed strong support for President Macri’s efforts to transform Argentina’s economy.”

May 15 is being seen as “D-Day” for the markets. This is when 680 billion pesos, or $30 billion, in the short-term peso-denominated Lebac bonds come due. The fear is that, in the current climate of uncertainty, there won’t be sufficient rollover, and that the Central Bank will have to cough up $10 billion or more if holders start dumping Lebacs. In anticipation of tomorrow, today in the secondary market the interest rate on Lebacs reached 100%.

There is nervousness that Argentina’s crisis won’t be limited to just a currency crisis, either, as editor Wolf Richter warned in his Wolf Street blog May 10, pointing out that when the “ ‘hot money’ gets antsy, a currency crisis morphs into a debt crisis.” Argentina has issued a large amount in foreign currency bonds, highlighted by last June’s issuance of a $2.5 billion 100-year bond. “But these foreign currency bonds get increasingly difficult to service for these countries when the local currency crashes, and that’s on the horizon now,” Richter predicts.

Writing in Página 12 today, economist Alfredo Zaiat reports that Wall Street banks are telling Macri that he’ll need a lot more than a $30 billion bailout, and will have to look to various other multilateral lending agencies, as well as special credit lines from advanced-sector central banks. Last week, the government obtained a $2 billion credit from the Bank for International Settlements.

The need to increase foreign assistance, Zaiat says, stems from fears, both domestically and internationally, as to whether the bailout being negotiated with the IMF will succeed in calming the markets, or “whether it will be insufficient to avoid a solvency crisis, which would imply a new renegotiation or debt default.”

Four Months In, U.S. Corporate Tax Cuts Not Affecting Stagnation

May 13 (EIRNS)—When passed last December, the law which cut U.S. taxes by an estimated $1 trillion a year—primarily for corporations—was promised to raise business capital investment, raise productivity throughout the economy, and raise workers’ wages.

Business capital investment growth, however, has not changed at all in 2018; it is running at a 4.5% annual rate of growth, just as in previous years. Compare this to China’s 10-11% annual rate of business capital investment growth over the past three years, for example.

The crude labor productivity measure for the American workforce rose in the first quarter at an extremely low annual rate of just 0.7%, continuing the trend of the Obama presidency.

As for wages, “U.S. workers’ wages have finally begun to rise,” is as commonly read in the media now as that “Russia interfered in the U.S. election,” and equally false. The Bureau of Labor Statistics wage data, generally ignored, show the following. For all employees, there was an April 2017-April 2018 average real weekly wage increase of 0.4%. For production and non-supervisory employees, however the April 2017-April 2018 average real weekly wage increase was just 0.1% in a year.

Nor is any sign of current acceleration shown in the latest monthly report. There was no March-April 2018 change in non-supervisory workers’ real weekly wages, and their real hourly wages dropped -0.2%. All workers’ real weekly wages dropped -0.1% from March to April 2018.

Raising stock market valuations by corporate stock buybacks was usually not mentioned by the law’s promoters, but it has succeeded there, on a grand scale; large corporations led by Apple and a number of banks are on pace to buy $1 trillion of their own stock in 2018, a new record by more than 25%.

SCIENCE AND INFRASTRUCTURE

North Korea Could Develop a Major Land-Bridge/Arctic Route Link

May 14 (EIRNS)—If President Donald Trump’s summitry with North Korean leader Kim Jong-un succeeds, South Korea and China are both prepared to take on infrastructure development linking Korea to the Belt and Road Initiative, as well as action to reduce poverty in the D.P.R.K.; U.S. Secretary of State Mike Pompeo promises that U.S. energy and agricultural corporations will take part. One development that can be of great benefit to the progress of the Eurasian Land-Bridge and Maritime Silk Road, will be the redevelopment of the port of Rason (actually twin ports Rajin and Sonbong) in North Korea’s extreme northeast corner, on the Sea of Japan.

Rason was developed as a deep-water container port—deep enough not to freeze over—with Chinese investments, but has no land-side infrastructure and almost no traffic now. It is on the Korean east-coast side of the “H”-shaped combination of rail/development corridors proposed to Kim Jong-un by South Korea’s Moon Jae-in. When provided with road and rail links, it will become an important port for Russian and Chinese trade as well as Korean. Moreover, it will be among most northerly ports in the Sea of Japan that communicates directly, and quickly, to the Northern Route or “Arctic Silk Road” for shipping.

Writing in Forbes on May 2, Australian academic Salvatore Babones compares Rason’s potential future to that of the Chinese “science city” Shenzhen in 1979 when it was built as the first special economic zone in China. He says its potential as an engine of productivity for North Korea’s economy is much greater than that of Kaesong near the 38th Parallel, where South Korean companies have invested in ventures in the past. Babones also writes that the Dongbei region in China, across the Tumen River border from Rason’s region, is economically depressed, by Chinese standards; Rason’s twin-port city could link it immediately to Japan, to Europe (by the Northern Route), and to the United States. The port will center both transport infrastructure in the northern and eastern D.P.R.K., and export processing industries.

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