EDITORIAL

LaRouche’s Call for New Bretton Woods: On the 47th Anniversary of Nixon’s Taking the Dollar Off Gold

Aug. 15 (EIRNS)—August 15th is a historic date, Schiller Institute founder Helga Zepp-LaRouche told a gathering of associates today. Exactly 47 years ago today Richard Nixon ended the fixed-exchange rate system and decoupled the dollar from the gold standard. Lyndon LaRouche was probably the only economist, who with absolute clarity recognized what that would mean. He said that if the West stayed with the monetarist policies represented by that move of Nixon’s, the world would inevitably go into a New Dark Age, a new danger of fascism and depression—unless there was a new just economic system, a New Bretton Woods system. And that is exactly where we stand today.

The next 90 days, before the midterm elections in the U.S., will be decisive, to either reach a New Paradigm, or go into financial chaos and the danger of war. There is a clear reversal of the carry trade from the emerging markets back into the dollar underway, which was in part triggered by the Fed’s raising interest rates, but it also has more systemic reasons. There are many so-called experts, bankers, all kinds of people from the financial milieu, who are warning of a perfect financial storm coming out of this emerging markets crisis, and that it could hit the United States and the rest of the world even before the midterm elections.

There is an immediate crisis around Turkey. This was not caused by Trump’s sanctions against Turkey, but rather by the systemic character of the crisis. This also has to do with the fact that Turkey’s President Erdogan has been strategically reorienting in the last period, stating that he wanted to be part of the BRICS, which are engaged in building a new financial architecture, and he is being politically attacked with financial warfare for that reason.

Already back at the G20 summit in Hangzhou in 2016, China had demanded a new financial architecture, saying that the causes of the financial crisis of 2008 had not been addressed. China in the meantime has made major moves against speculation, banning speculation in the country and forbidding Chinese investors from involving themselves in speculative projects abroad.

Now, in the context of the punitive sanctions gone wild against various countries, these countries are preparing to leave the dollar. For example, the bill that Sen. Lindsey Graham and others introduced into the U.S. Senate has new sanctions against Russia which would involve banning all Russian banking abroad, trading in Russian state bonds, preventing Aeroflot from landing in the United States, downgrading diplomatic relations between the U.S. and Russia—in addition to sanctions because of the Skripal affair, for which absolutely no proof has been presented. Obviously, this is really a serious matter and Russian Prime Minister Medvedev a couple of days ago said that they regard this as a declaration of economic war, and that if such sanctions are implemented Russia will take the appropriate countermeasures.

This attack on Russia is the same thing as the British attempted coup against President Trump:  The whole purpose was to ruin the possibility of having improved relations between the United States and Russia. And if you have this kind of trade war—we already saw this with the CAATSA bill last August, which was voted up 98-2 in the Senate, making a veto by Trump impossible—you are on a complete course to disaster.

Trump’s measures against Turkey will not work to force Erdogan to capitulate, but will produce the contrary result. There is an effort by the British to cause that capitulation. For example, there is an article by Jim O’Neill, who is the former head of Goldman Sachs who is now the head of Chatham House/RIIA—he has a complete warning that Erdogan must capitulate, must allow the rape of Turkey, and that neither Russia nor China will help.

However, Russian Foreign Minister Sergey Lavrov is now in Ankara, and he gave an interview to TASS, where he said that Russia is already transforming its trade with Turkey into their national currencies, that they’re doing the same thing with Iran, and that they’re also talking about this with China. A return to trading in national currencies will not solve the global problem, but it can be an important intermediate step in the direction of a full return to a New Bretton Woods system, as LaRouche has specified.

This would mean that the global speculative bubble would be frozen and put through bankruptcy reorganization; a system of fixed exchange rates would be established; each country must have a National Bank, for sovereign control over credit; an international clearinghouse would be established to balance trade over the long term; and international investments at low interest rates based on clear scientific principles of physical economy would be encouraged. There are already steps in this direction in the form of the AIIB, the BRICS New Development Bank, the New Silk Road Fund.

For the West to fully join it would mean to go for Glass-Steagall, get rid of the casino economy, then have National Banks, credit generation for productive investments, and then go to this kind of international cooperation.

Lyndon LaRouche emphatically made the point many years ago, that the only way to do this, is you must break the power of the British Empire, and that requires having a Four Power agreement—Russia, India, China and the United States—and then, other countries who want to survive can associate with that new system.

What happens in the United States will be a decisive factor in bringing this about, especially stopping the attempted coup against President Trump.

Helga Zepp-LaRouche concluded her strategic review with the following reflection:

In terms of world history, we have reached a point, what Nikolaus of Cusa very prophetically recognized already in the 15th century, that you cannot have solutions on a partial level. When you have a systemic crisis, you cannot settle this one region, and have peace, and have other regions going haywire; but you need to have that which remedies the systemic problem of the entire system.

That is what Lyndon LaRouche’s life’s work has been all about. He not only has been the best and probably the only economist worthy of the name, but he has devoted his entire life to finding solutions on a higher level, on the level of the “coincidence of opposites,” as Cusa put it.

This is one of those unique moments in history. There are many periods where you can’t do much, like the ’60s, the ’70s; these were calm periods, where things were set and you could not do much, because it was all locked up in clear patterns and systems.  But now: Anybody who is not a complete mental moron can see that the old system is collapsing!  The EU is in terrible shape; you have all the strategic realignments emerging; there are hopeful spots. So it’s not yet clear: it’s a very undefined situation, where the solution is clear, and the fact that the status quo cannot remain is clear.

You have to look at it from the long arc of history:  We are at a transition period from one era of human universal civilization into a new one.  And the new era will either be with the neo-cons and the British, which will probably lead to the extinction of civilization in a thermonuclear war, because that’s what the confrontation with Russia would mean. Or, we can move into a new era of civilization, a New Paradigm, a new set of international relations, based on respect, on sovereignty, on focussing on the most advanced traditions of each culture, where the relationship among people will eventually become human! People will relate to each other like Einstein and Planck, Humboldt and Schiller. All you have to do is study their correspondence, and you see on what a high level people were able to relate to each other.

We are not beasts; we don’t have to walk with our nose on the ground, and just looking in the dirt like pigs. Rather we can raise our eyes to the stars, and really move human civilization into a completely new era of creativity, of cooperation, of having defeated poverty, of every child having the chance to develop their fullest potential, Zepp-LaRouche concluded.

• Helga Zepp-LaRouche’s weekly strategic webcast will take place on Friday, Aug. 17, at 3 p.m. EDT, 9 p.m. CET, on the Schiller Institute website.

COLLAPSING WESTERN FINANCIAL SYSTEM

Financial Blowout Before the U.S. Midterm Elections in November?

Aug. 15 (EIRNS)—Today is the 47th anniversary of Richard Nixon’s Aug. 15, 1971 announcement that he was taking the dollar off the gold exchange standard, which de facto meant the destruction of the post-war Bretton Woods system.

First of all, it opened the floodgates to the creation of a London-based “dollar” currency for global speculation, which was the cancer that ended up taking over the U.S.-based dollar itself. It also was the end of the entire fixed-exchange rate system, which meant that, for developing sector nations, the wall between international speculation and their national currencies was demolished. This was in fact the first step towards wiping out the international Glass-Steagall regime of separation between productive and speculative banking. Then that was done officially in the U.S. itself in 1999, by the repeal of Glass-Steagall—with the known consequences.

As a result, a global speculative bubble was unleashed over this last half-century, but especially beginning in 1999—a bubble which today has grown to over $1.5 quadrillion in derivatives and other financial aggregates. One of the ruses used by the British Empire since the 2008 financial blowout to try to keep that bubble afloat, has been the so-called “carry trade” fueled by zero-cost liquidity pumped into the system by quantitative easing, which was then shipped to high-interest emerging markets such as Brazil, Turkey and other countries—where those economies were looted.

With the beginning of the Fed’s “tapering” of QE and rising interest rates in 2015, the whole financial system has been touch-and-go, as this triggered waves of “reverse carry trade” financial flows out of emerging markets back to supposedly safer havens, such as the dollar. This, in large measure, is what we are seeing in the various manifestations of the financial crisis in Turkey, Argentina, Russia, Brazil, etc. Bloomberg has reported a 6% loss across the carry trade in the first quarter of 2018 alone.

Now, the trans-Atlantic sector may well be staring down the barrel of a global financial blowout, perhaps in October, which has historically been a prime month for such explosions, as Lyndon LaRouche has frequently observed.

Chatham House To Erdogan, Allow Turkey To Be Raped, and Expect No Help from Russia or China

Aug. 15 (EIRNS)—There is an important component of deliberate financial warfare in the current Turkish crisis. This was made abundantly clear in an arrogant article published Aug. 14 by Lord Jim O’Neill, the former Goldman Sachs chairman who is now the head of Chatham House, the top London think-tank also known as the Royal Institute of International Affairs. O’Neill explained in a feature for Project Syndicate yesterday, how and why Turkey’s President Erdogan will have to surrender and allow the rape of his country:

“As the Turkish lira continues to depreciate against the dollar, fears of a classic emerging-market crisis have come to the fore. Turkish President Recep Tayyip Erdogan’s populist economic policies have finally caught up to him, and sooner or later, he will have to make nice with his country’s traditional Western allies.”

The Turkish crisis, O’Neill wrote “gives credence, at least for some people, to the notion that ‘a crisis is a terrible thing to waste.’ I suspect that many Western policymakers, in particular, are not entirely unhappy about Turkey’s plight…. [Erdogan is] a belligerent leader who does not realize—or refuses to acknowledge—that his populist economic policies are unsustainable….

“The country must drastically tighten its domestic monetary policy, curtail foreign borrowing, and prepare for the likelihood of a full-blown economic recession, during which time domestic saving will slowly have to be rebuilt….

“Given the unlikelihood of some external source of funding emerging, Erdogan will eventually have to back down on some of his unorthodox policies. My guess is that we’ll see a return to a more conventional monetary policy, and possibly a new fiscal-policy framework.”

O’Neill then proceeded to tell Erdogan not to expect any help from any other countries. “Russia is sometimes mentioned as a potential savior for Turkey. There is no doubt that Russian President Vladimir Putin would love to use Turkey’s crisis to pull it even further away from its NATO allies. But Erdogan and his advisors would be deeply mistaken to think that Russia can fill Turkey’s financial void. A Kremlin intervention would do little for Turkey, and would likely exacerbate Russia’s own financial and economic challenges….

“As for China, though it will not want to waste the opportunity to increase its influence vis-à-vis Turkey, it is not the country’s style to step into such a volatile situation, much less assume responsibility for solving the problem….

“That means that Turkey’s economic salvation lies with its conventional Western allies: the U.S. and the EU (particularly France and Germany).”

Jittery Banks Call for an End to Fed ‘Tapering,’ Return to Full Quantitative Easing

Aug. 15 (EIRNS)—A number of top international bankers are sounding the alarm, demanding that the Fed’s “taper” of QE and corresponding rise in interest rates must stop, before everything blows sky high. Bloomberg on Aug. 14 reported that Credit Suisse analyst Zoltan Pozsar, a former U.S. Treasury advisor, wrote in an Aug. 13 note that “A rethink of the Fed’s operating regime is necessary.” One reason, according to Bloomberg, is that “America’s growing debt pile may force the Federal Reserve to stop shrinking its balance sheet before the year is out.” Both Goldman Sachs and the Royal Bank of Canada are now “forecasting” that the “tapering” policy will be ending earlier than expected.

Similar warnings have been building since the end of July. Seeking Alpha ran an article July 29 headlined “Will the Fed’s Tightening Trigger Another Crisis?” which explained that “This question is timely and worryingly justified in the context of the ongoing Fed’s tightening cycle and the ECB’s shy steps toward normalization of its monetary policy.”

U.S. POLITICAL AND ECONOMIC

U.S. and Russian Security Advisors Bolton and Patrushev Plan Meeting in Geneva

Aug. 15 (EIRNS)—White House Press Secretary Sarah Sanders reported Aug. 14 that National Security Advisor John Bolton, after meetings in Israel and Ukraine, will meet with an unnamed Russian representative in Geneva to “discuss a range of national security issues.” Sanders described the meetings as a “follow-up” to last month’s Helsinki meeting between Presidents Donald Trump and Vladimir Putin. The Russian Foreign Ministry had previously reported that a meeting between Bolton and Russian Security Council Secretary Nikolai Patrushev could take place “by the end of the summer.” Patrushev is currently meeting in Sochi with top Chinese envoy Yang Jiechi.

In reporting on these developments of what should be normal diplomacy between two global powers, RT counterposes that to the current and threatened U.S. sanctions against Russia, including: a) Congress’s proposed “sanction bill from hell” which, if passed, will go beyond CAATSA and sanction Russian banking and financial transactions, as well as energy investments; the State Department’s announcement last week of additional sanctions because of Russia’s alleged involvement in the Skripal case in Britain (for which zero evidence to date has been provided); and the State Department announcement of a second round of Skripal sanctions in 90 days, if Russia does not agree to “onsite inspections” by the UN of their non-existent chemical weapons sites—which of course Russia will not agree to. RT says this second round of sanctions “would include a near-total trade blockade, downgrading diplomatic relations, and banning the Russian airline Aeroflot from flying to the U.S.”

NEW WORLD ECONOMIC ORDER

South Korea Proposes Northeast Asian Railroad Community, Including U.S.

Aug. 15 (EIRNS)—South Korean President Moon Jae-in proposed, today, setting up the seven-nation railway community of Northeast Asian countries, which would include the United States as a projected partner, the Korea JoongAng Daily reported. Moon was speaking during celebrations of Liberation Day, commemorating the end of the 35-year Japanese occupation of Korea, at the end of World War II in 1945.

Yonhap news agency reported that Moon proposed that the two Koreas, together with the United States, Russia, China, Japan, and Mongolia, form what he called a “Northeast Asian railroad community,” which would “lead to an energy bloc and economic bloc in Northeast Asia by expanding our economic area to the northern continent and becoming the foundation of co-existence and prosperity in Northeast Asia.”

Although he didn’t mention the four regional countries by name, the Presidential office Cheong Wa Dae later reported they were China, Japan, Russia, and Mongolia. Moon also expressed the hope that North and South Korean railways and motorways would be linked by the end of 2018. The agreement to modernize and connect North and South Korean railways was reached during the April 27 inter-Korean summit in Panmunjom. “The development of South-North Korean relations is not an additional outcome of development in North Korea-U.S. ties. Rather, the development of South-North Korean relations is the driving force that promotes denuclearization of the Korean Peninsula,” Moon said.

The announcement follows the June 22 Moscow meeting between Moon Jae-in and Russian President Vladimir Putin, where the two states signed a memorandum between Russian rail monopoly RZD (Russian Railways) and Korea’s Korail company. In the document, the sides express their readiness to consider creating a rail link uniting South Korea, Russia, and Europe, as well as a three-party project to link the trans-Korean rail and Russia’s Trans-Siberian Railway Network.

China’s Yang Jiechi in Russia: Sino-Russian Relations Are the ‘Best in History’

Aug. 15 (EIRNS)—Yang Jiechi, a member of the Politburo of the Chinese Communist Party (CPC) Central Committee, and China’s top foreign policy expert, is in Sochi today to co-host the 14th round of the China-Russia strategic security consultation with Nikolai Patrushev, the Secretary of Russia’s Security Council. Yang Jiechi also met today with President Vladimir Putin, who said he looks forward to meeting with President Xi Jinping in September at the Vladivostok Eastern Economic Forum.

The strategic security consultation began yesterday and will conclude on Aug. 17.

In remarks reported by CGTN and Xinhua, Yang emphasized that the Sino-Russian relationship is the “best in history,” stressing that Putin and Chinese President Xi Jinping have already met twice this year, reaching important consensus, and they continue to coordinate on important issues. “The two sides should first implement the consensus of the two leaders, and then continue to consolidate and enrich the content of the Sino-Russian comprehensive strategic partnership, promote deeper cooperation between the two sides in various fields, and make the development of Sino-Russian relations better benefit the two peoples,” he said.

According to Xinhua, discussion focused on the Korean Peninsula, Southwest Asia, and the Iran nuclear deal.

Lavrov in Turkey Stresses, Putin Considers Trade in National Currencies a Top Priority

Aug. 15 (EIRNS)—Russian Foreign Minister Sergey Lavrov told a press conference in Ankara, after talks with his host, Foreign Minister Mevlut Cavusoglu, that establishing trade in national currencies with various countries is a top priority for President Vladimir Putin. Lavrov stated: “I am confident that the grossest abuse of the dollar’s role as the global reserve currency will weaken it. It will be sinking, and more and more countries—even those which are not affected by the U.S. sanctions—will go away from the dollar, just to be on the safe side, and count on more reliable partners… As for how to overcome these illegal barriers and restrictions—indeed, the use of national currencies in mutual trade is one of the main tasks that the presidents of Russia and Turkey have put in place. A similar process took place in our relations with Iran. We are reaching an agreement with China, and already initiated payments in national currencies in our mutual trade.”

Chinese Economy ‘On Solid Footing Despite Complicated Domestic and External Environment’

Aug. 15 (EIRNS)—China’s National Bureau of Statistics (NBS) announced Aug. 14 that the Chinese economy continued to perform well, although there are some problem areas, including a cooling of infrastructure investment, which grew by only 5.5% in the first seven months of 2018. Industrial output, however, rose by 6% in July (year-on-year), with especially strong performances in high-tech manufacturing (11.6%), equipment manufacturing (9%), and strategic emerging industries (8.6%). These are the Made in China 2025 sectors that are particularly targeted by the existing and threatened U.S. tariffs.

STRATEGIC WAR DANGER

Korean Denuclearization Moving in the ‘Right Direction,’ U.S. State Department Reports

Aug. 15 (EIRNS)—In her Aug. 14 State Department briefing, spokeswoman Heather Nauert reported that talks between the U.S. and North Korea were making progress. South Korea’s Yonhap news agency reported the same day, citing an unnamed diplomatic source, that North Korea and the U.S. held the latest working-level meeting in Panmunjom last weekend, whose agenda was believed to have been on the issue of denuclearization, and that another working-level meeting may take place this week.

In her remarks, Nauert emphasized that behind-the-scenes discussions with Pyongyang have become a normal occurrence in the wake of President Trump’s meeting with Chairman Kim Jong-un in June in Singapore.

“We consider meetings, negotiations, conversations, as we move forward behind the scenes with those negotiations, to be moving in the right direction,” she said. “Conversations with the government of North Korea are becoming far more normal matters.”

Nauert offered no further details, but reiterated that “we continue to have those conversations, because Chairman Kim has committed to President Trump that they are willing to denuclearize, and so we will continue in a full good faith effort to have those conversations move forward.” She also said that the recent release of remains of American soldiers by Pyongyang is a “step in the right direction.”

SCIENCE & INFRASTRUCTURE

NASA’s Bridenstine Insists Space Agency Must Be Separate from Space Force

Aug. 15 (EIRNS)—Since President Trump announced his intention to create a Space Force, NASA Administrator and former Congressman Jim Bridenstine has been a supporter. While again recently expressing his support for a Space Force, Bridenstine was careful to separate it from the space agency. Speaking to reporters Aug. 13 during a trip to New Orleans to tour the Michoud Assembly Facility, Bridenstine said that as far as defense and national security are concerned, “We want to be an agency that maintains its independence from those capabilities.” NASA’s responsibilities, he said, are science, space exploration, and technology development.

And there is no place more impressive for what NASA has planned for manned space exploration than Michoud, one of the largest manufacturing plants in the world. The Space Launch System rocket and Orion crew vehicles that will go to the Moon are being built there, and the first stage of the Saturn V rocket, and the external fuel tank for the Space Shuttle, were built there before them.