EIR Daily Alert Service, WEDNESDAY, SEPTEMBER 5, 2018

WEDNESDAY, SEPTEMBER 5, 2018

Volume 5, Number 177

EIR Daily Alert Service

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

America Can’t ‘Compete’ With China’s Belt & Road, But Work With It For a New Economic Order

In Collaboration With China, 'Africa Will Be a Powerhouse of the Future'
China Will Integrate Belt and Road With African Development Plans
China's Running Brazil's Paranagua Port Advances Belt and Road
U.S. May More Than Double Credit Guarantees 'To Counter China'
So-Called 'Emerging Market Currency Crisis' Is Getting Serious
Russian, Syrian Air Strikes Resume Against Jihadis in Idlib
Bridenstine Docks Foot in Mouth:  NASA's Lunar Landing Will Have No 'Apollo-Style' Budget
Mexico's Future Interior Minister Launches Drug Legalization Drive

EDITORIAL

America Can’t ‘Compete’ with China’s Belt and Road, But Work with It for a New Economic Order

Sept. 4 (EIRNS)—What Wall Street would like to call the “emerging markets currency crisis” intensified today and is headed for contagion into the huge global corporate debt bubble; serious trouble is directly ahead. And the nation in the worst crisis, Argentina, is the nation whose government, over the past two years, has carried out the free trade policies of the City of London and Wall Street religiously, sending its economy into hyperinflationary collapse. A global debt crash is looming.

At the same time, with agreements of the Sept. 3-4 China-Africa conference in Beijing, China’s Belt and Road Initiative (BRI) has become clearly unstoppable. Even as countries in Ibero-America continued in recent days to join the development paradigm of the Belt and Road as a “world land-bridge” of infrastructure, China and Africa merged the BRI with the continent’s most ambitious long-range industrial development and poverty reduction goals, those of the African Union’s “Agenda 2063.”

Optimism for Africa’s future “China-like” development was radiating from the 53 heads of state and government—all but a few on the entire continent—who participated.

And as Schiller Institute President Helga Zepp-LaRouche said today, “history will see this conference as the official end of 500 years of colonialism,” and 50 years of IMF anti-progress conditionalities. “Africa will be a world economic powerhouse by 2063.” Already poverty, Africa’s changeless burden through the colonial centuries, has been reduced by 10% since China became the continent’s main trading partner and development investor.

If one still believes the well-known fable that “China’s Belt and Road is hitting roadblocks,” one probably also believes that London and Wall Street have the so-called “currency crisis” under control. They don’t, as many economists and even one JP Morgan analyst were warning through the media today.

The choice between the two economic paradigms, between “free trade” on one hand, and credit for infrastructure, industrial progress and technological breakthroughs on the other, is clear.

Trump Administration officials want to compete with China in fostering industrial development in Africa, Asia, and Ibero-America, by a new USAID Development Bank capitalized with $60 billion, under a new “BUILD Act” the White House has been pushing through Congress.

This will not “compete” effectively with the Belt and Road, now the world land-bridge, in either infrastructure development, new scientific and technological breakthroughs, or reduction of poverty.

How much better would it be, to use such initiatives to cooperate with China on the entire new paradigm! Cooperation could begin with spectacular effect in Central America and Mexico as well as in Africa, as Texas Congressional candidate Kesha Rogers has proposed. Rogers, running against Rep. Al “the impeacher” Green, is also confronting an African-American constituency with the great optimism of African leaders who are working with China.

The United States can’t “compete” with the Belt and Road; but it can cooperate with it, and help take it to a higher level.

That is why the Schiller Institute is mobilizing an international petition, for four crucial powers—the United States, China, Russia and India—to form a new international credit system on the model of the 1945-65 Bretton Woods system of President Franklin Roosevelt.

Restore its features—Glass-Steagall bank separation, stable currency exchange rates, capital controls, and above all replacing unrestricted global speculation with credit for infrastructure development and capital goods investment—and the looming financial crisis can be stopped. Rapid economic development like that of the 1945-65 period could take off instead.

THE NEW GLOBAL ECONOMIC ORDER

In Collaboration with China, ‘Africa Will Be a Powerhouse of the Future’

Sept. 4 (EIRNS)—The Schiller Institute announced today that its president and founder, Helga Zepp-LaRouche will give her weekly strategic webcast on Thursday, Sept. 6, at 3 p.m. Eastern Time (9 p.m. Central European Time), on the Schiller Institute website. The announcement read:

A glimpse into the future of humanity is being offered to those with courage and imagination, with the opening of the Forum for China-Africa Cooperation (FOCAC) this week in Beijing. In the presence of 53 African heads of state and government, China’s President Xi Jinping laid out a strategy for their nations to leapfrog into the future, to realize a “shared community of interest for all humanity,” through participation in the scientific and technological breakthroughs associated with the Belt and Road Initiative. Toward that end, he pledged $60 billion in funding for development projects over the next three years, while stating that participation in these projects is open to all nations which wish to participate.

Contrast this with the pitiful state of the economy for those nations trapped by the debt imposed on them by the presently bankrupt trans-Atlantic financial system. A new debt crisis for emerging nations has already arrived, but also for so-called developed nations, as the so-called financial innovations of the last decades prove to be nothing but producers of worthless, speculative paper, coming due at unpayable levels.

China’s bold initiatives beckon to those in the U.S. and Europe who wish to be a part of this positive future, but they must break away from the British imperial system, to join. It is the British Empire which created this debt, and which is using its old tools, such as divide-and-conquer politics, false-flag provocations, wars and regime change—including in the U.S.—to prevent Western governments from pursuing their national interests by joining with China and its growing number of collaborators.

China Will Integrate Belt and Road with African Development Plans

Sept. 4 (EIRNS)—The second day of the Forum for China Africa Cooperation (FOCAC) summit in Beijing consisted of a round-table chaired jointly by President Xi Jinping and President Cyril Ramaphosa, and side forums dealing with individual issues. Speaking at the concluding press conference, President Xi summarized the intent of the summit: “We will synergize China’s Belt and Road Initiative with African Union’s Agenda 2063 and the United Nations 2030 Agenda for Sustainable Development, and the national development strategies of African countries.”

Xi said, “Together we will better uphold the common interests of China and Africa, boost the strength of developing countries, and make the world a more balanced and better place for everyone to live in.” Xi also spoke to Africa’s other “international partners,” saying: “We hope that Africa’s international cooperation partners could learn from each other, leverage their respective strength, build synergy, and jointly contribute to peace and development in Africa.”

He thanked President Ramaphosa for his close cooperation over the last few months in preparing for the summit and welcomed President Macky Sall of Senegal as the new African co-chair of FOCAC.

President Ramaphosa reiterated his strong support for the Belt and Road: “As the China-proposed Belt and Road Initiative provides the African continent with great opportunities. African countries all collectively accept and praise the initiative, hailing it a best way to address Africa’s challenges.” Ramaphosa pointed out that China and African countries agreed to work more closely together and share technologies and achievements. He outlined a list of projects in the offing, including the China-Africa cooperation center for ocean science and blue economy, the China-Africa research center for the development of green agriculture, the China-Africa energy technological cooperation center, and the China-Africa geo-science cooperation center.

President Sall, in turn, expressed that he is “happy” over being able to co-chair FOCAC, and said he saw “great prospects” in coming years with more engagements with the private sector. “We will push our relationship to a higher level,” he said, calling the present period of China-Africa relations, a “golden age.”

China’s Running Brazil’s Paranagua Port Advances Belt and Road

Sept. 4 (EIRNS)—In September 2017, China Merchants Port (CMP) purchased for $935 million 90% of the TCP Participações (Paranagua Container Terminals), the Brazilian company that manages the port of Paranagua, Brazil’s second largest and only container terminal, located in the southern state of Parana.

According to CMP’s Vice President Lu Yongxin, as Xinhua reported on Sept. 1, with the purchase of the port, CMP intends to take a leadership role in Ibero-America’s port activity, as part of the Belt and Road Initiative (BRI). “We’ll aim for the TCP to become one of the major business platforms between Brazil and China, with the goal of becoming leaders in Ibero-America,” Lu said in conversation with Chinese media in Brazil. TCP is the first container port controlled by the state-owned China Merchants Group outside China.

Lu explained, too, that in 2016, CMP made a strategic decision to “advance toward the American continent.” Brazil’s most important ports are located in the three states of Parana, São Paulo and Santa Catarina, where 45% of the population lives, and represents enormous investment potential.

TCP’s capacity is the second-largest in Brazil, and the port is currently being expanded to increase annual container traffic from 1.5 million to 2.4 million, which TCP CEO Luiz Alves says will lead to “the development of the entire region.” Logistics, railroads, highways will all generate wealth for the local population, he said. Currently the port employs 1,000 people directly, and another 3,000 indirectly; one of every four containers is directly linked to China-Brazil trade.

The BRI excites Brazilians involved in this venture. Luiz Alberto Bressan, TCP’s financial manager, spent four weeks in several Chinese cities in June and July for training, and told Xinhua how important it is that Chinese culture and language be included in Brazil’s school curriculum, so that from a very young age, children can learn about Chinese culture. Many Brazilians “don’t even know that China is our major [trading] partner,” he said.

He underscored also that China has continued to invest in Brazil “despite the Brazilian economy’s difficult moments. With the TCP, we expect greater trade, more exports and more imports from China.” It is so important that China has included Brazil in the Belt and Road, he emphasized.

U.S. POLITICAL AND ECONOMIC

U.S. May More than Double Credit Guarantees ‘To Counter China’

Sept. 4 (EIRNS)—On Aug. 31 the Wall Street Journal reported that the so-called BUILD Act is nearing passage in the Senate, under the headline, “To Counter China, U.S. Looks To Invest Billions More Overseas.” The BUILD (Better Utilization of Investments Leading to Development) Act, S.2463, already through the House and backed by a Trump Commerce Department push, would dramatically increase the federal loan guarantees and insurance available for industrial and infrastructure investment projects of U.S. companies (occasionally including direct government investment).

“Congress is working to resolve the last barriers to passing a bill that would … combine several little-known government agencies into a new body,” the Journal reported, “with authority to do $60 billion in development financing—more than double the cap of the current agency performs that function.” That agency is the 45-year-old Overseas Private Investment Corporation (OPIC), which BUILD would merge into the USAID Development Credit Authority and expand both.

The Journal dubiously claims that “The new agency would have broad authority to go toe-to-toe with China in offering countries financing options for major infrastructure and development projects. The bill’s momentum reflects growing bipartisan concern in Washington about the scale of China’s ambitions…. Senators have become especially concerned with China’s global investment plan known as the One Belt, One Road Initiative.”

The bill represents a complete turnaround for the Trump White House from proposing to eliminate OPIC in 2017 because it “interfered with free trade,” to pushing to more than double it. OPIC’s total portfolio after 45 years was $25 billion.

The BUILD Act’s purpose statement says: “The mission of the IDFC [International Development Finance Corporation] is to facilitate sustainable, broad-based economic growth, poverty reduction, and development … to achieve clearly defined economic and social development outcomes and to build public accountability and transparency and follow high standards of transparency and environmental and social safeguards.” Its summary: “This bill establishes the United States International Development Finance Corporation to facilitate the participation of private sector capital and skills in the economic development of countries with low- or lower-middle-income economies and countries transitioning from non-market to market economies, in order to complement U.S. assistance and foreign policy objectives.

“The corporation may: (1) make loans or loan guarantees, (2) as a minority investor acquire equity or financial interests in entities, (3) provide insurance or reinsurance to private sector entities and qualifying sovereign entities, (4) provide technical assistance, (5) administer special projects, (6) establish enterprise funds, (7) issue obligations, and (8) charge service fees.”

COLLAPSING WESTERN FINANCIAL SYSTEM

So-Called ‘Emerging Market Currency Crisis’ Is Getting Serious

Sept. 4 (EIRNS)—The currencies of many countries resumed and/or accelerated their fall Monday, as public warnings became louder of blowouts in the global corporate/household debt bubble. Figures from former European Central Bank President Jean-Claude Trichet interviewed by AFP (“could be more devastating that the financial crisis of 2008”), to JPMorgan Chase’s star “quant” (quantitative analyst) Marko Kolanovic on CNBC (“great liquidity crisis” later in 2019) were warning of crisis, or even “social chaos.”

A typical financial press warning was “Global Debt Soars, Along with Fears of Crisis Ahead” in the Sydney Morning Herald Sept. 4: “Ten years after the worst financial panic since the 1930s, growing debt burdens in key developing economies are fueling fears of a new crisis that could spread far beyond the disruption sweeping Turkey. [This] is only a preview of debt problems that could engulf countries such as Brazil, South Africa, Russia and Indonesia, some economists say.”

A London Telegraph warning piece, on Sept. 2, “The Ticking Time Bomb That Could Blow Into a Financial Crisis,” was reposted in New Zealand and Australia financial sites. It focused on the market in corporate “leveraged loans,” most often used in leveraged buyouts (LBOs) of companies, and now totaling well over $1 trillion in the United States alone, more than doubled since 2012. The article uses repeated comparisons to the crash scenes in the well-known film “The Big Short,” as the LBO market today.

An op-ed in the South China Morning Post, “Emerging Markets Currency Crisis Is the Product of the Global Liquidity Deluge,” long-time financial columnist Anthony Rowley wrote, “What is scary about this impending new currency crisis is that it could also precipitate a debt crisis … particularly in the corporate sector…. What is happening now in corporate debt markets, mainly in emerging economies, should be worrying people much more than it is. Why? For one, corporate debt in emerging and developing economies now significantly exceeds levels before the 2008 global financial crisis.”

Rowley says that capital controls “are on the cards” for many economies—pointing to a return toward Bretton Woods regulations. Also on the cards are currency defense measures: Kyodo News reported in late August that the Japanese and Chinese governments are discussing possible bilateral currency swaps between their central banks in case of a financial crisis. The swap being negotiated is far larger than the Japan and China have set up before ($27 billion compared to $3 billion).

Argentina’s plunging currency led the way, falling another 5.5% from Sept. 1-4; the Australian dollar fell to a 20-month low; the Indian rupee to a 5-year low; Indonesia’s rupiah to a 6-year low. Brazil’s real fell 2% on Monday, to a 2.5-year low. The South African rand fell 2% more, forcing the rise of its 10-year interest rate to 9.45%. ABN Amro Bank forecast Turkey’s lira would fall to an unheard-of 8.2 to the dollar by the end of the year, in “a severe crisis, a perfect storm.”

Waves of corporate debt defaults are coming, against European, British, and also U.S. banks.

STRATEGIC WAR DANGER

Russian, Syrian Air Strikes Resume against Jihadis in Idlib

Sept. 4 (EIRNS)—Russian and Syrian war planes resumed air strikes against jihadi positions in Idlib province in Syria early today, according to two reports by Al Masdar News. Until today there had been a break in air strikes since the Eid Al-Adha holiday.

Al Masdar reported first that Syrian jets flying out of Homs and Latakia began hitting Hayat Tahrir al-Sham (al Nusra) and Turkestan Islamic Party positions in western Idlib. A couple of hours later, it reported that Russian jets had joined the campaign. A military source said that at least 10 Russian Sukhoi jets launched dozens of airstrikes over the southern and western parts of the Idlib Governorate. “With the large Russian bombardment, the Syrian Arab Army’s long-awaited offensive is bound to start in the next few days,” writes Al Masdar’s Leith Aboufadel.

Al Jazeera reported later that at least 23 air strikes, by both Syrian and Russian warplanes, hit the area this morning.

At the same time, the Russian naval exercise off the coast of Syria has been underway since Sept. 1. Al Masdar reported a couple of days ago that a pair of Russian Tu-142 maritime patrol aircraft (the naval version of the Tu-95 Bear bomber), escorted by Su-30SM fighter jets, had arrived at the Russian base in Latakia to participate in the exercise.

This exercise will now include 26 surface ships, 2 submarines and 34 aircraft. TASS reported today on a Defense Ministry statement yesterday describing the air refueling practice carried out by Russian planes after the eastern Mediterranean Sea.

SCIENCE AND INFRASTRUCTURE

Bridenstine Docks Foot in Mouth: NASA’s Lunar Landing Will Have No ‘Apollo-Style’ Budget

Sept. 4 (EIRNS)—NASA Administrator Jim Bridenstine, speaking to reporters Aug. 30 during a tour of NASA’s Ames Research Center, in California, made the stupid statement that NASA’s planned return to the Moon won’t require an Apollo-style budget, or break the bank, Mike Wall reports for Space.com. The key, Bridenstine said, is partners—both international and commercial—that will pick up the parts of the mission that NASA can’t pay for.

“We now have more space agencies on the surface of the planet than we’ve ever had before,” Bridenstine said. “And even countries that don’t have a space agency—they have space activities, and they want to partner with us on our return to the Moon.”

In addition to “partners” that don’t even have space agencies, Bridenstine believes there will be enough money for the mission, because industry (read: new space start-ups) will jump onboard, and because this year, Congress “bumped up” NASA’s budget, and will continue to do so. He omitted that the Congressional “bump” was necessary because the administration’s FY19 request, and five-year projection, is for a flat budget, without even an increase for inflation. Without the “bump up,” a half-dozen NASA space science missions and the Office of Education would have been cancelled.

It is time for the Administrator to learn history and economics. In fact, the Apollo program cost nothing, through its contribution to the increase in productivity in new technology transferred from the space program to the general economy.

If then-NASA Administrator Jim Webb had run the Apollo program in his time depending upon industry and international “partners,” now 50 years later, we would still be waiting for Neil Armstrong’s grandson to take that “giant leap for mankind” onto the surface of the Moon.

OTHER

Mexico’s Future Interior Minister Launches Drug Legalization Drive

Sept. 4 (EIRNS)—Olga Sánchez Cordero, appointed Government (Interior) Minister in the López Obrador government, is barging ahead with a campaign to legalize drugs—not just marijuana but also poppies—as part of her plan to “pacify” Mexico.

As the Trump Administration has indicated that drug legalization in Mexico won’t be tolerated, Sánchez’s offensive, if it becomes policy, will become a major point of tension.

In an interview on the “Democracy Dialogues” show at the National Autonomous University (UNAM), Sánchez elaborated on what is essentially drug kingpin George Soros’s program for a less “punitive” policy, whose basic premise is that it’s impossible to combat the drug trade. During the first three months of López Obrador’s government, she said, she intends to push this program in Congress, to both decriminalize marijuana and poppy production. She went on at length about how 25 U.S. states have decriminalized, and how unfair it is that young people are persecuted and prosecuted for drug possession. The amnesty she is proposing will allow for currently incarcerated young people and poor peasants to be released from jail.

Bragging that 120 communities just in the state of Guerrero produce poppies, under “excellent climatic conditions.” Poppy “should be industrialized, converting it to an input for pharmaceuticals such as morphine,” she said, claiming there are six nations authorized by UN to legally grow poppy, and Mexico should be one of them.

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