EIR Daily Alert Service, Thursday, November 15, 2018


Volume 5, Number 228

EIR Daily Alert Service

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





Chaos in Europe and U.S., but Trump’s Aim for Agreements with Russia and China Signals Potential New Paradigm

Nov. 14 (EIRNS)—As of this writing, the governments in the United Kingdom and in Israel are teetering on the brink of collapse, with Theresa May’s botched Brexit effort facing rejection by her own party and/or the Parliament, and Bibi Netanyahu facing a collapse of his coalition after the resignation of Avigdor Liberman as Defense Minister, and the removal of his party from the government, over the ceasefire with Hamas. Meanwhile, the would-be New Napoleon in France, Emmanuel Macron, having called for a European Army to combat the “authoritarian nationalists” of Russia, China and the United States, is the laughingstock of the world, while his cohort Angela Merkel has resigned as CDU leader (after 18 years) and may also be forced to step down as Chancellor before her term officially ends in 2021.

In the United States, two hysterical reports were released today, one by the bipartisan Congressional U.S.-China Economic and Security Review Commission and one by a Congressionally-mandated Commission, ranting against China—the first, claiming that China’s Belt and Road is a military and economic conspiracy to take over much of the world, which must be stopped, and the second, that the U.S. is threatened with military defeat by China and/or Russia if we do not massively increase defense spending and prepare for war.

And yet, President Donald Trump is proudly preparing for full-scale summits with both Vladimir Putin and Xi Jinping on the sidelines of the G20 Summit in Argentina on Nov. 30-Dec. 1, once again insisting that “it is a good thing to be friends with Russia and China.” He has also instructed two of his economic officers, Wilbur Ross and Larry Kudlow, to promote the restoration of talks with China, at all levels. Both Ross and Kudlow are expressing optimism that the close relationship between Trump and Xi Jinping at the beginning of Trump’s Presidency can be restored.

What is going on?

In fact, the world is awash in contradictions. While on the one hand we are potentially “sleepwalking into war,” as we did in World War I, and peering into the economic abyss, with a quadrillion-dollar-plus derivatives bubble ready to explode.

But there are no solutions to the individual crisis points around the world. There is only one issue: Whether or not the human race has the moral fitness to survive. The old paradigm of geopolitical scheming, in a zero-sum, Hobbesian world of British Imperial thinking, has driven the world to the brink of a disaster worse than the nightmares of the 20th-century depressions and wars. And yet, the Chinese miracle of the past 30 years, and the astonishing development process unleashed by the New Silk Road, freeing the formerly colonialized world from hopeless poverty and backwardness, is offering the human race a collaborative solution and a new paradigm for all nations and peoples. With President Trump’s election victory, keeping the U.S. Senate under a Republican majority, he now has the freedom to both crush the British/Obama conspiracy to bring him down, and to join with China and Russia, and others who will want to join, in a win-win policy of sovereign nation-states, collaborating in development projects for mankind as a whole.

Trump recognizes that Europe is collapsing—witness his tweet ridiculing Macron’s mad call for war, and concluding ironically: “Make France Great Again!” He recognizes the urgency of peace with Russia and China. On the other hand, while he is committed to rebuilding the industrial infrastructure in the United States, the speculative bubble that burst in 2008 has returned with a vengeance—half again bigger as before that 2008 crash. Neither the New Silk Road process nor Trump’s “Make America Great Again” vision can be sustained without the restoration of the American System, the Hamiltonian credit policies which LaRouche has posed as his Four Laws.

Again, the solutions are not many, but one. This weekend, the Schiller Institute will demonstrate this “one” in a celebration in New York City of the birth of Friedrich Schiller. Helga Zepp-LaRouche will address a forum on Saturday (which can be viewed the following day at larouchepac.com), discussing the urgency of Russia, China and the United States convening a new Bretton Woods Conference. This event will be followed on Sunday by the Schiller Institute NYC Chorus and Orchestra concert, addressing the Aesthetic Education of Man through the music of Beethoven, Brahms, and American Spirituals.


The Old Paradigmers Just Can’t Let It Go: Hysteria and Lunacy on China

Nov. 14 (EIRNS)—In yet another display of hysteria over China’s extraordinary global development perspective—which is leaving the old paradigm in the dust—the U.S.-China Economic and Security Review Commission (USCC), a bipartisan Congressional entity responsible for monitoring security implications of U.S.-China trade, presented its 2018 annual report today to Sen. Orrin Hatch (R-UT), chairman of the Senate Finance Committee and to House Speaker Paul Ryan (R-WI).

The 525-page “scholarly” report, which includes pages and pages of detailed footnotes, reflects the desperation of Western geopoliticians whose lies and distortions about “authoritarian” China, and President Xi Jinping, have failed miserably to dissuade countries from associating with it and with the Belt and Road Initiative (BRI).

Revealingly, the report was compiled on the basis of classified and unclassified hearings, with witnesses from government, academia, and the private sector, as well as research trips to Taiwan and Japan—but Commission members were not granted visas to visit China to conduct in-country research, the South China Morning Post reported today.

Instructive is the report’s 45-page chapter on the Belt and Road Initiative, which warns that it “could pose a significant challenge for U.S. interests and values because it may enable China to export its model of authoritarian governance and encourages and validates authoritarian actors abroad.” It rails against “Chinese state-owned enterprises” and warns that the BRI’s offers to develop infrastructure are suspect, because China might plunge nations into debt, “while providing Beijing with economic leverage to promote Chinese interests, in some cases threatening the sovereignty of host countries.” [emphasis added]

The report intones that the BRI facilitates and justifies the People’s Liberation Army’s overseas expansion, particularly in the Indo-Pacific region by accessing port facilities, and other bases to refuel and resupply its Navy.

As to how Congress might counter the BRI, the report makes several recommendations, among which is a proposal to create a fund to provide additional bilateral assistance for countries targetted or “vulnerable to Chinese economic or diplomatic pressure,” especially in the Indo-Pacific region. Such a fund could be used to promote “sustainable development, combat corruption, promote transparency, improve the rule of law,” etc.

In addition, Congress should require the State Department to prepare a report to Congress on actions taken to provide “an alternative, fact-based narrative to counter Chinese messaging on the Belt and Road Initiative.” [emphasis added]

Secretary Ross, Larry Kudlow Positive on Talks with China

Nov. 14 (EIRNS)—Speaking yesterday at the Yahoo Finance Conference, Commerce Secretary Wilbur Ross said he was optimistic about future U.S.-China trade relations. Pointing to the Nov. 1 “constructive” phone conversation between Presidents Donald Trump and Xi Jinping, he said he expects Chinese negotiators to be “coming here shortly to start some informal talks.”

The issue with China, Ross continued, isn’t just about tariffs. If it were, it could be resolved fairly quickly. “We don’t mind them becoming much more technically advanced, getting into the newer technologies, but they have to do so in a legitimate fashion, not through these other practices.”

Larry Kudlow, Director of the National Economic Council, agrees with Ross. He told CNBC’s “Squawk on the Street” program yesterday, that the administration is “again talking with China and I think that’s very, very positive. … We now know that we will in fact be discussing trade at the G20 meeting in Argentina. We didn’t know that before, as a certainty, but there will be many things, security matters and so forth on that list, but trade is going to be one of them.”

Kudlow emphasized that communications with the Chinese are occurring “at all levels of the U.S. and Chinese government…. So, without even thinking about a prediction on the outcome, we are talking to them again. … I think it’s better to talk than not talk, so that’s a plus.”


Netanyahu Teetering on the Edge after Liberman Resigns, and Takes His Party with Him

Nov. 14 (EIRNS)—There’s blood in the water and the sharks are circling in Israel. A week ago, Benjamin Netanyahu seemed untouchable as prime minister of Israel, but today, in the aftermath of the resignation of Avigdor Liberman as defense minister over yesterday’s Gaza ceasefire, Netanyahu’s government appears very close to collapse.

Liberman announced his resignation in a press conference earlier today, in which he expressed his strong disagreement with the cabinet decision to accept the ceasefire with Hamas, which he characterized as a “capitulation to terror” that will harm Israeli security in the long run.

Liberman not only resigned from the cabinet, he took his Yisrael Beytenu party out of the governing coalition, leaving Netanyahu with a razor thin 61-seat majority in the 120-member Knesset. Even that is now being threatened by Naftali Bennett, the education minister, who is demanding that he be made defense minister or his Bayit Yehudi party will leave the coalition, too. If Bayit Yehudi carries out its threat, the government could fall, which would force early elections. Netanyahu, for the moment, is holding the defense portfolio for himself, though there are other contenders besides Bennett for it.

According to a commentary in Ha’aretz, Liberman’s resignation couldn’t have come at a worse time for Netanyahu. Elections are mandated for no later than November 2019, but could be moved up. One of Netanyahu’s objectives was to prevent Gaza from being an issue in the election. Liberman’s resignation increases the risk of early elections, for which he hopes to strengthen his own position with the Israeli right wing, which will now be fought over the Gaza debacle and Netanyahu’s “weakness.” Netanyahu’s rivals, and even some of his allies, “sense the Netanyahu era is slowly grinding to a close.”

In Gaza, Liberman’s resignation is being seen as a victory for the Palestinian resistance. Hamas spokesman Sami Abu Zuhri called Liberman’s resignation an “admission of defeat and a sign of failure to face the Palestinian resistance,” reported the Jerusalem Post. Liberman’s resignation, he went on, is a “political victory for Gaza, which succeeded in triggering a political earthquake” in Israel.

Commission Report Demands That U.S. Military Be Able To Fight Both Russia and China

Nov. 14 (EIRNS)—America does not have the military superiority that guarantees that it can fight and win wars against either Russia or China or even both, according to a report issued today by the National Defense Strategy Commission, a panel created by the U.S. Congress in July 2017, co-chaired by neo-con and former G.W. Bush Administration Pentagon official Eric Edelman and former Chief of Naval Operations retired Adm. Gary Roughhead, and populated mostly by neo-cons and liberal interventionists. The mandate of the commission was to review the strategy documents produced by the Trump Administration (not by Trump), including the National Security Strategy and the National Defense Strategy, both of which claim that we have now entered an “era of great power competition” against Russia and China. In short, the report fully endorses the strategic confrontation that these documents have pointed the U.S. towards, but complains that the strategy behind the confrontation is poorly developed and under-resourced.

According to press coverage, the warning of the report, titled “Providing for the Common Defense,” is stark. America’s military superiority has “eroded to a dangerous degree,” leaving the U.S. in a “crisis of national security,” especially if faced with more than one conflict at once, the report concluded, according to Defense News. “The U.S. military could suffer unacceptably high casualties and loss of major capital assets in its next conflict,” reads the report. “It might struggle to win, or perhaps lose, a war against China or Russia. The United States is particularly at risk of being overwhelmed should its military be forced to fight on two or more fronts simultaneously.”

Aiming at justifying even more resources pumped into military hardware, according to the New York Times, the Introduction to the 98-page report claims: “America’s longstanding military advantages have diminished.  The country’s strategic margin for error has become distressingly small. Doubts about America’s ability to deter and, if necessary, defeat opponents and honor its global commitments have proliferated.” The report claims that China and Russia were seeking regional hegemony and pursuing aggressive military buildups aimed at neutralizing American strengths. Additionally, it said, threats posed by Iran and North Korea have worsened in recent years as both have developed more advanced weapons. The report recommends new capabilities that should be developed against Russia and China and calls for a 3-5% growth in the defense budget.

Retired Gen. John Abizaid Named as New U.S. Ambassador to Saudi Arabia

Nov. 14 (EIRNS)—President Donald Trump has named Gen. John Abizaid (ret.) as the next U.S. ambassador to Saudi Arabia, filling a post that has been vacant so far. Abizaid is a fluent Arabic speaker of Lebanese Christian descent, who headed the U.S. Central Command during the Iraq war following the U.S. invasion in 2003. His appointment requires Senate confirmation.

General Abizaid’s appointment comes at a crucial time when Washington has begun pressing Riyadh to implement a ceasefire to end its four-year long brutal war against Yemen. The war has devastated that nation, claiming more than 13,000 lives, with a million suffering from cholera. Roughly 20 million Yemenis need humanitarian assistance to meet basic needs, including food and water, out of a prewar population of 28 million, according to media reports.

On Oct. 30, both U.S. Defense Secretary James Mattis and Secretary of State Mike Pompeo called for the warring parties to reach a ceasefire by the end of the month. Last week, the U.S. said it will no longer refuel Saudi warplanes, whose bombing raids have been responsible for the majority of civilian war dead.


Italian Development Undersecretary Geraci Insists We Don’t Want To Suffer Like Greece

Nov. 14 (EIRNS)— Italian Undersecretary for Economic Development Michele Geraci is in London, where he was interviewed by the BBC yesterday and by CNBC this morning. To CNBC he stressed that Italy is planning a budget deficit which is far below the 3% ceiling dictated as a limit for the euro area by the Maastricht Treaty. That treaty, which was incorporated in the EU Treaty, makes that ceiling independent from the debt level: Be the debt lower or higher, the deficit limit is always 3%.

With that, Geraci implicitly meant that Italy is disregarding the “Stability and Growth Pact,” which was signed later and which is not part of EU Law, but it is an “intergovernmental agreement.” The SGP mandates a tendentially zero deficit for “indebted” countries.

Italy has a primary surplus, i.e., a budget surplus if debt service is not considered. “This is a rare case. There are not many countries which have a primary surplus,” Geraci remarked. The Italian government is confident that, once investors realize that the government is not implementing any weird measures, but aims at growth with conventional measures, the yield on Italian bonds will go down.

In the interview with BBC yesterday, Geraci said that the Italian response to the EU request to change its budget plan will be “No.”

Yesterday was the deadline for the answer. BBC asked Geraci what is going to happen. “Not much,” Geraci answered. “We’ll send back our plan, which won’t be revised in any substantial manner. We do believe that under the current economic situation in Italy we need to spend, and it has been proven, I believe, in the last few years, that, indeed, austerity does not help and we need to go into a deficit.”

What about the taxpayers in Greece, Spain, Ireland? All of them had to suffer under harsh austerity. Why should Italy be different?

Geraci replied: “Because they suffered! And we do not want to repeat those mistakes made in 2010-2011 with Greece and some other countries. We have a problem that in the last 20 years our productivity has not grown and our GDP is back to the levels of 1999; so, in the last 20 years the standard of living of the average population has not improved and we need to make drastic changes. For the first time we are taking the risk of taking daring measures that try to bring benefits for the long term.”

Infrastructure Is Key to Future U.S. Economic Growth—What About Funding?

Nov. 14 (EIRNS)—In media interviews yesterday, Commerce Secretary Wilbur Ross and National Economic Council Director Larry Kudlow both discussed the importance of infrastructure, with Kudlow telling CNBC that the Trump Administration is looking at a “multifaceted” infrastructure plan. Thus far in the Trump Administration, the vaunted infrastructure program has not materialized.

“We’re looking at it … in many different ways,” Kudlow said, particularly mentioning energy infrastructure, such as liquefied natural gas pipelines, terminals, and shipping. He insisted that Europe and Asia would love to buy U.S. natural gas, for which, he said, the U.S. shipping industry must be revived to facilitate exports. Absent here is any mention of what is actually required to build U.S. infrastructure as a completely new economic platform.

Speaking to CNBC at the Yahoo Finance All Markets Summit in Washington, Ross responded to a question about whether the prospect of “diminished corporate earnings” in the near future will be a drag on the economy, by emphasizing that the economy’s continued success will depend largely on infrastructure.

“As you know,” he continued, the “President is very keen to have an infrastructure program, and the only real issue is how do you pay for it. How much does the federal government do, how much is done by private sector.” This begs the question of creating a new credit institution, as laid out in economist Lyndon LaRouche’s Four Laws.

Ross did say that the U.S. needs much higher workforce participation to ensure that “robust” economic growth continues. There are good jobs available, he said, “but people don’t have the skills needed.” Quite true. “We are going to try to fix that,” he emphasized, but offered no details as to how.

In his remarks, Kudlow raved about the U.S.’s excellent economic growth, and the strength of the dollar—ignoring fundamentals such as the metastatic corporate debt and the reverse carry trade. The dollar is “king,” Kudlow boasted. “We’re attracting money [from] all over the world. We’re the hottest economy. We’re crushing it right now. China is in a slump. Europe is slumping. So, they’re coming to where the returns are best and the most hospitable environment.”

Goldman Sachs Cheated Malaysia Over 1MDB Dealings, Affirms Prime Minister Mahathir

Nov. 14 (EIRNS)—Malaysian Prime Minister Dr. Mahathir Mohamad, in an interview with CNBC aired on Nov. 13, said the bankers at Goldman Sachs “cheated” Malaysia during dealings with the state fund 1Malaysia Development Berhad (1MDB). “There is evidence that Goldman Sachs has done things that are wrong…. Obviously we have been cheated through the compliance by Goldman Sachs people,” he said, Reuters reported without further specification.

Goldman Sachs has been under scrutiny for its role in helping raise funds through bond offerings for 1MDB, which is the subject of corruption and money-laundering investigations in at least six countries. The U.S. Department of Justice has said about $4.5 billion was misappropriated from 1MDB, including some money that Goldman Sachs helped raise, by high-level officials of the fund and their associates over 2009-2014. U.S. prosecutors filed criminal charges against two former Goldman Sachs bankers earlier this month. One of them, Tim Leissner, pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act.

Goldman earned about $600 million in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised $6.5 billion.


Theresa May Squeezes Cabinet To Support Her Brexit, but Her Government Faces Severe Crisis

Nov. 14 (EIRNS)—Late this evening, Theresa May finally emerged from 10 Downing Street to announce that her Cabinet had approved, despite many highly displeased members, her version of Brexit, which she had negotiated yesterday with the EU. A plan which is described by many—both Labour and Tories—as no Brexit at all, will apparently retain a customs union (at least temporarily), meaning Brussels will still have powers over the British economy, and also appears to establish some sort of trade division across the Channel between England and Northern Ireland (so as to allow an open border between Northern Ireland and the Republic of Ireland).

May acknowledged that the fight was far from over: “There will be difficult days ahead, this deal will come under intense scrutiny…. This is a decision that was not taken lightly, but I believe it is firmly in the national interest,” May said, and describing how the cabinet had had a “long, detailed and impassioned debate.”

It must now pass the Parliament. In a Questions session in the House of Commons today, May was grilled by members of her own Conservative Party. Not only will some Tories vote against it, but some cabinet members may also resign in the coming days. The Democratic Unionists in Northern Ireland, who came to May’s support when she lost the majority in the last election, are threatening to pull out of the coalition, which could bring down the government.

Boris Johnson, who quit as Foreign Secretary earlier over the May proposal, has joined with Tony Blair in what Blair called an “unholy alliance” against May’s deal, calling it the “worst of both worlds.” Blair is demanding a new referendum, but May today told the Parliament there would be no re-vote. Blair said today: “Remainers like me, leavers like Boris Johnson, are now in unholy alliance. We agree this is a pointless Brexit, in name only, which is not the best of a bad job, but the worst of both worlds.”

Labour Party leader Jeremy Corbyn said today: “After two years of bungled negotiations, from what we know of the government’s deal, it’s a failure in its own terms,” describing the negotiations as “shambolic,” and calling the deal a choice between a “botched deal and no deal.”

The EU is also not united behind the deal. A meeting of the EU to confirm the deal is expected on Nov. 25 in Brussels.

Four Atlanticist Centuries Coming to a Close, with Opening of Global Century

Nov. 14 (EIRNS)—In his keynote speech in London yesterday at the Financial Times-Citi forum series “On the Future of Europe,” Britain’s International Trade Secretary Liam Fox said that when his country leaves the EU in the spring of 2019, it will certainly have an impact on Britain and on the EU itself, but he stated that “neither will determine the future of Europe, which is not synonymous with the EU in any case, for the future of Europe will be shaped not only by its internal relationships but by forces far beyond either its control or its geographical borders.”

Fox stated that “world trade is at a pivotal moment. We are at the intersection of a series of major global trends—trends so large that they have transformed or will transform economies and societies, in Britain, in Europe and around the world, across decades or even generations.” The world, Fox said, is faced with “the start of a Global Century, after four Atlanticist ones. By 2030 China will have more than 220 cities with over 1 million people—the whole of Europe will have only 35.”

“Major new opportunities will also arise in the rapidly developing commercial and consumer markets of Africa,” Fox went on, pointing to a forecast by PwC that there will be 1.1 billion middle-class Africans by 2060. He also said that “the rise of developing economies throughout the world is occurring at a staggering pace. The IMF predicts 90% of global growth will happen outside the EU—not in the distant future, but in the next five years.”

Japanese Premier Abe To Visit Russia and Work with Putin To Sign a Peace Treaty

Nov. 14 (EIRNS)—Japan’s Premier Shinzo Abe, following his meeting with Russian President Vladimir Putin in Singapore today said he will be visiting Russia early next year and will work towards signing a peace treaty between the two countries that has been hampered by a long-standing territorial dispute. “I agreed with President Putin to accelerate negotiations on a peace treaty based on the 1956 joint declaration between Japan and the Soviet Union,” Abe told reporters, Kyodo news reported.

Abe also expressed a desire to put “an end” to the unresolved diplomatic issue that has prevented Japan and Russia from concluding a peace treaty: In the 1956 joint document, Moscow agreed to return two of the four disputed islands off Hokkaido to Tokyo once a peace treaty was signed. The declaration was intended to restore diplomatic ties by ending wartime hostilities, said Kyodo.

The Japanese leader told reporters he hopes Japan and Russia will solve their territorial dispute based on trust built between the two leaders. “We will solve the territorial issue and sign a peace treaty based on trust built with [President Vladimir Putin],” Abe said, TASS reported.




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