EIR Daily Alert Service, Tuesday, November 13, 2018


Volume 5, Number 226

EIR Daily Alert Service

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



Mobilize for a Four-Power 'Bretton Woods' System
China to Build Maglev Factory in Philippines
EIR/Schiller Representative Presents Eurasia Canal,
             Belt & Road to Shipowners in Athens
British Empire Faction Gives New U.S. Congress Orders
             and Instructions
Russia Steps Up Syria Diplomacy as Idlib Situation
Putin Wants to Discuss INF Treaty With Trump
Inviting the Crash:  Federal Regulator Makes Dangerous
'De-Dollarization' Plans Won't Work
Russian View of Macron's Empty 'Grand Triomphe' in Paris



Mobilize for a Four-Power ‘Bretton Woods’ System

Nov. 12 (EIRNS)—U.S. Democrats, including newly elected Democratic representatives, now have the choice before them, of either crusading to drive President Donald Trump out of office by any possible means—alienating voters and splitting their party in the process—or developing an economic development agenda and working with him on it.

Republicans, whom the President pulled through a difficult midterm election with success which was no fault of their own, must end their Churchill-imitation war fantasies. They have to support him in trying to make the “deals” he wants with Russia and Korea for peace, China for economic growth, trade with Japan…

What kind of “deals” should be made? China has just given a stunning example. It has made an agreement to fund and help create a major development center for magnetic levitation trains, in the Philippines. In other words, China plans to transfer to a less developed country, a hub of combined R&D, training, and production of—not old textiles, not smart phone parts—the very front edge of ground transportation technology worldwide. Essentially they will be jointly developing this amazing new rail technology with the Philippines. If China provides credit for this it matters not at all whether the Philippines pays it back; the “return” will be the upgrading of China’s high-speed rail industries to make the leap to maglev on a large scale. That’s the kind of “deal” that can both revive industry in industrial countries—like America—and build productive industry in developing countries.

President Franklin Roosevelt understood exactly this kind of “deal.” He introduced Lend-Lease in 1940, using the famous metaphor of lending your garden hose to your neighbor whose house has caught fire. FDR said: Forget about money; it doesn’t matter if Britain or Russia pay America back for new ships and planes under Lend-Lease; we are building up the American economy, the arsenal of democracy. And FDR’s great infrastructure projects like TVA and the Hoover and Bonneville Dams had already built up so much new electric power that the United States could be the arsenal of democracy and provide a high standard of living at the same time.

Speaking of Roosevelt, he continued the same “deals” after the war and after his death, by launching in 1944 the Bretton Woods monetary system—to facilitate credit for infrastructure projects in, and capital goods exports to, developing countries. A New Bretton Woods is the really great deal the United States could make, through summit meetings with Presidents Xi Jinping of China, Vladimir Putin of Russia, Prime Minister Narendra Modi of India—perhaps Prime Minister Shinzo Abe of Japan. Those powers can set up a New Bretton Woods and development bank to create the many trillions in credit actually required to fund great projects of high-technology economic infrastructure, including in the United States.

Schiller Institute President Helga Zepp-LaRouche, who has appealed directly to the leaders of the first four powers to initiate such a credit and development system, has called for a public mobilization for it now. The United States must take the lead; and the American President will either be free to deal with those powers, or tied up by “impeachers” instigated by British intelligence and their “liberal imperialist” co-thinkers.

A New Bretton Woods is thus as crucial for peace as for productivity. As one observer remarked on Veterans Day, to honor the war dead, stop making so many of them. See to their grandchildren creating things they could only imagine.


China To Build Maglev Factory in the Philippines

Nov. 12 (EIRNS)—Two Chinese companies have signed a deal with the province of Cagayan in the Philippines to build medium- and high-speed magnetic levitation (maglev) trains. The Cagayan Economic Zone Authority (CEZA) announced Nov. 8 that Eminova Asset Management Ltd. and Hunan Goke Maglev Technology Development Ltd. signed a memorandum of understanding for the facility in Santa Ana, Cagayan, the province on the northern coast of the main island, Luzon. CEZA said the project includes the establishment of the Maglev Research and Development Center for Production and Training Hub.

According to the Philippine Daily Inquirer, CEZA Administrator and CEO Raul Lambino said the initial project cost of $1 billion would be used for research and development, as well as the production of the both light rail vehicles and medium- and high-speed maglev trains capable of running from 200-400 km per hour, for neighboring countries in Southeast Asia.

Eminova has investments in energy, environment, and infrastructure. Hunan Goke Maglev Technology is a magnetic levitation line builder based in Shanghai, CEZA said.

EIR/Schiller Representative Presents Eurasia Canal, Belt and Road to Shipowners in Athens

Nov. 12 (EIRNS)—The proposal to build a Eurasia Canal for ships to traverse between the Caspian and Black Seas was presented to the Board of Directors of the Hellenic Shortsea Shipowners Association in Piraeus, Greece, on Nov. 8. The idea was depicted by Dean Andromidas, representative of the Schiller Institute and the EIR Strategic Alert, who spoke for 20 minutes and then fielded questions from board members.

The Eurasia Canal was first proposed by Kazakh President Nursultan Nazarbayev and Russian President Vladimir Putin in 2007. The project calls for a 750-km cement-lined canal across the Manych Depression in the Russian Caucasus. It would have five locks and accommodate ships of the Handymax class of up to 35,000 DWT, thus for the first time introducing ships of this class to the Caspian Sea.

According to studies by the Chinese Sinohydro company, a potential of 120 million tons of cargo could pass through the canal, including hydrocarbons from the Caspian Sea region, which accounts for 6-10% of the world’s oil reserves. It would also carry other bulk cargo, including grain and mineral resources. The container traffic from China could amount to as much as 24-30 million tons. This compares with the 101 km Volga-Don Canal, which has a capacity of only 15 million tons, accommodating ships no larger than 5,000 DWT.

By opening up all of Central Asia to maritime shipping, the Eurasia Canal would create a new economic development corridor stretching from the port of Lianyungang in China on the Yellow Sea, through Urumqi in China’s westernmost Xinjiang province, to the port of Aktau on the Caspian in Kazakhstan, through to the Black Sea and into the Aegean Sea, right on Greece’s maritime doorstep. This is a region comprising more than 11 countries and more than 1 billion people. The canal would be an important contribution to the ongoing Belt and Road Initiative composed of the Economic Silk Road Belt and Maritime New Silk Road integrating Eurasia and Africa.

Questions posed by the participants demonstrated a lively interest in the project. Many of them, who were already active in the shipping sector on the Caspian and also the Danube, quickly grasped the potential for such a channel. While one might have expected concerns about the costs of such a project, none were raised. One participant said, the real issue is the will among the concerned nations to build the project. As for financing, the participant pointed to China and how it is able to mobilize financing for major projects after it had made the decision to go ahead.


British Empire Faction Gives New U.S. Congress Orders and Instructions

Nov. 12 (EIRNS)—The anti-American U.S. national media are laying out their instructions to the new Congress. The Washington Post, the co-leader with the New York Times of the British coup attempt against Trump, leads today with an article reporting what the 116th Congress’s agenda will be. Its lead editorial orders what that agenda should be.

The two are the same: “probes” of Trump.

A front-page article claims that Democrats “are fresh off a resounding mid-term elections victory,” while, in fact, the House takeover was expected and the shift much smaller than occurred with the last three Presidents. It quotes only Rep. Gerald Nadler’s and Rep. Adam Schiff’s views of the agenda: Defending “Mr. FBI” Mueller; defending the world’s richest man, Jeffrey Bezos, from any anti-trust actions; defending AT&T, Time-Warner, and CNN from any anti-trust actions; a House investigation of Trump’s sex life, tax returns, etc. They write, “House Democrats, while wary of the risks of alienating voters who backed the President, are fully embracing their midterm victory last week as a mandate to dig deep into the actions of the executive branch.” The Post then cites its own poll, to say that Democratic voters “believe Congress should begin impeachment proceedings against the President.”

The Wall Street Journal followed suit, though not front page: “Mueller Probe Tops Democrats’ Priorities.” Again based on Nadler’s statements on ABC News’ “This Week” on Sunday, as well as incoming Senate Majority Leader Chuck Schumer’s claim that Matthew Whitaker’s becoming Acting Attorney General represents a Constitutional crisis.

The CFR’s Foreign Affairs was first, publishing already on Nov. 7, “How Congress Can Take Back Foreign Policy: A Playbook for Capitol Hill,” with the Democrats controlling the House. While going through a long list of ways to reverse or block Trump’s foreign policy—particularly on North Korea, Iran, and the Paris Climate Agreement—it said: “At the top of the legislative calendar, the incoming Speaker of the House must schedule an early vote on legislation to protect the Mueller investigation. Trump has hinted that he may shut the investigation down prematurely. Congress must not allow that to happen. Building on the Russian sanctions it passed in 2017, Congress should also promptly consider the Defending American Security From Kremlin Aggression Act of 2018, bipartisan legislation introduced in the Senate in August 2018 that provides additional sanctions on the Russian energy sector and new tools to protect the U.S. electoral system from foreign interference.”

The British orders may be thrown back in their face by a mobilized American population.


Russia Steps Up Syria Diplomacy as Idlib Situation Deteriorates

Nov. 12 (EIRNS)—Russia has been engaged in intense diplomacy around Syria. This was summarized in a report by Al-Monitor which described meetings that Russian diplomats had in Damascus, Tehran, and Moscow as part of a broader effort to tie the Astana format of guarantors Russia, Iran and Turkey, to that of last month’s Istanbul meeting of representatives of Russia, Turkey, Germany, and France.

“Russia is making sure its own initiatives are well sealed and recognized by other major regional players before UN Syria envoy Staffan de Mistura steps down at the end of November. Russia is thus pressing Assad to speed up the formation of the Constitutional Committee,” Al-Monitor reported.

At the same time, the ceasefire in Idlib province appears to be getting increasingly fragile, which is not surprising, given Turkey’s limited influence with some of the more radical jihadi groups that refused to abide by the Russian-Turkish agreement of early October. According to a series of reports in Al Masdar News, both the jihadis and Syrian army units are on alert along the frontlines of the de-escalation zone in Idlib province. Al Masdar reported this morning that the Turkish-backed National Liberation Front is seeking alliances with jihadi groups, including Ahrar al-Sham and Hayat Tahrir al-Sham to repel what they expect will be a major government offensive. This followed a report yesterday that the Syrian Army’s Tiger Forces, led by Maj. Gen. Suhail Hassan, were ordered on high alert by the army command. According to the Tiger Forces, their troops are preparing to launch a big ground offensive that will target the remaining towns under the control of Hayat Tahrir al-Sham near the Abu Dhuhour Airbase, which is about 53 km south of Aleppo city.

Another 65 km southwest of Abu Dhuhour is the town of Mughayr, one of several that jihadis from the Turkestan Islamic Party attacked overnight, Nov. 10-11, in an effort to gain some ground near the Al Ghaab plain. However, Al Masdar reports, the jihadist rebels were unable to penetrate the Syrian Army’s defenses, resulting in their eventual withdrawal before dawn on Sunday morning, Nov. 11.

In eastern Syria, meanwhile, the U.S.-backed Syrian Democratic Forces are reported to have resumed their offensive against the last remaining ISIS enclave in the Euphrates valley. The offensive was “suspended” about two weeks ago in the aftermath of Turkish attacks on the Syrian Kurdish YPG positions on the Syrian border. However, Al Masdar reports this morning that Turkish forces are gathering across the border from the Syrian city of Ras Al-‘Ayn, about 100 km east of the Euphrates River, in preparation for an assault on YPG positions there, following two weeks of artillery strikes.

Putin Wants To Discuss INF Treaty with Trump

Nov. 12 (EIRNS)—In an interview with RT on the sidelines of the centennial Armistice celebrations in Paris, Russian President Vladimir Putin said he hopes for the resumption of a comprehensive negotiating process on the Intermediate-Range Nuclear Forces (INF) Treaty with the United States.

“It is more important to maintain dialogue, not even at a top or high level, but at a level of experts. I hope a comprehensive negotiating process will be resumed,” he told RT on Nov. 11. “It is not we who are withdrawing from the Intermediate-Range Nuclear Forces Treaty. It is the U.S. that plans to do that,” he said. “Both they and we want to resume dialogue.”

Putin also told RT that he hopes to hold substantial talks with President Donald Trump during their meeting on the sidelines of the G20 summit in Buenos Aires, Argentina, over Nov. 30-Dec. 1.

When asked if the subject was brought up with Trump during the events in Paris, Putin replied, “Not yet. We have just said hello. The ceremony was organized in such a way that we could not speak with each other. We only watched the ceremony.”

Putin made clear that no meeting was held between them, at the request of the French. “Anyway, we agreed that we will not violate the receiving party’s schedule here. At their request, we will not organize any meetings here,” Putin said. “Such a meeting may be held on the sidelines of the G20 meeting or later.”

Putin’s Press Secretary Dmitry Peskov said no final agreement on the Putin-Trump meeting in Argentina has been reached yet. “The agenda has a lot of questions. The Presidents will discuss what they think necessary,” he said in an interview with the Rossiya-1 television channel. “Circumstances keep on changing. They may change with our American colleagues and with us, that is why there are no firm agreements. According to Peskov, some Argentine sources say that Trump is planning to shorten his stay in Bueno Aires to one day. “So, we cannot say how it fits into such plans,” Peskov said.

On Nov. 12, Peskov told the media that at the Nov. 11 events in Paris, Putin had a quick word with Trump. “They agreed they had a great deal to discuss, including the INF Treaty. They decided to do this at the G20 summit in Argentina.”


Inviting the Crash: Fed Regulator Makes Dangerous Mistake

Nov. 12 (EIRNS)—The Federal Reserve Vice Chairman for Supervision Randal Quarles spoke at a Brookings Institution event Nov. 9 and introduced rules changes for the biggest banks which repeat the Fed’s pre-2008 crash mistake and threaten to hasten another and bigger crash.

Quarles’s presentation covered a host of rules changes which, as he said, had been requested by the big banks themselves. The common denominator was to allow them to operate with less capital relative to their assets, and therefore with more debt leverage. A bank’s lending—producing its assets, of whatever quality—is funded either out of its capital, or out of its borrowing on bond markets; and the ratio of the latter to the former for the big Wall Street banks is currently about 22:1 on average. By contrast the average leverage ratio for community banks around the country is 12-15:1.

The biggest banks’ ratio was much higher a decade ago; tougher regulation, especially driven by the hard-driving FDIC regulator Thomas Hoenig, had forced it down and fought off European Union attempts to pull U.S. banks debt leverage back up. Hoenig wanted the new position of Fed bank regulator, which Quarles got; Wall Street knew the difference.

While Quarles’s account of what the new rules under consideration are, and when they may go into effect—anywhere out to 2021 or 2022—was detailed and could be confusing, it had a clear bottom line: The earliest rule changes will allow the biggest Wall Street banks to increase their debt leverage starting “in the very near future,” as Quarles put it. By adopting “risk adjustment” rules the EU has been using, the big banks’ assets will appear to be smaller than they actually are.

As both Hoenig and former FDIC chair Sheila Bair have stressed, the 2004 Fed policy change to allow the big Wall Street investment banks to increase their debt leverage above 30%, was the death star for the banking system. That system imploded four years later with Morgan Stanley and Lehman Brothers leverage ratios between 35:1 and 40:1.

With the corporate debt-centered “everything bubble” already ready to melt down now, this is a very dangerous mistake.

‘De-Dollarization’ Plans Won’t Work

Nov. 12 (EIRNS)—The Wall Street Journal reports that “Moscow is expected to publish its de-dollarization plan by the end of the year.” This is the “Kostin plan” (Andrey Kostin is president and chairman of VTB Bank), “including tax credits and other incentives for using the ruble.” Various reports have claimed its backing by Putin, and that it is intended to involve the Eurasian Economic Union (EAEU) countries as well.

The Journal quotes some people at the Eurasia Group consultancy saying that this plan may be largely intended as a public way of attacking sanctions, and that businesses will be reluctant, because using the ruble will cost more than using the dollar in most trading.

This is true, and is one reason why such plans are not a substitute for, nor a step towards, a new Bretton Woods system which tamps down currency speculation with stable exchange rates among currencies.

With the dollar the informal but effective international reserve currency, plans like the “Kostin Plan” to trade in other national currencies, require that those trading, invest in foreign exchange futures—derivatives. These derivatives—like the interest-rate swaps which cost so many cities and states so much suffering in “protecting” their bonds’ rates in the 1990s and 2000s—are aimed to keep the national currencies stable to the dollar and to each other. They cost the trading parties money, effectively giving a fluctuating “haircut” to the national currencies they are trading in.

Such derivatives were used in introducing the euro’s value against European national currencies in the late 1990s. Ironically, a key consultant in that process was the famous and “supersmart” Long Term Capital Management hedge fund, later infamous for nearly crashing the banking system in 1998.


Russian View of Macron’s Empty ‘Grande Triomphe’ in Paris

Nov. 12 (EIRNS)—The Editor-in-Chief of Russia in Global Affairs and Research Director at the Foundation for Development and Support of the Valdai Discussion Club, Fyodor Lukyanov, panned French President Emmanuel Macron’s Paris celebration of the World War I Armistice centennial.

TASS reported Nov. 12: “The large-scale Paris celebrations marking the 100th anniversary of the World War I Armistice were nothing but a protocol event that did not provide a platform for dialogue between world leaders Fyodor Lukyanov told TASS on Monday.” He referred to the critical planned meeting there between Presidents Donald Trump and Vladimir Putin, which, Putin indicated, was cancelled at Macron’s insistence, so as not to “distract” from his grand event.

TASS quotes Lukyanov as saying, “As it was a society event, no achievements could be expected. In my view, no one placed any hope on this meeting, except for over-enthusiastic analysts at some media outlets.” More pointedly, he continued, “It was a completely protocol celebration aimed first and foremost at providing French President Emmanuel Macron with an opportunity to deliver a speech. He had made thorough preparations for it, even arranging the Paris Peace Forum in conjunction with the celebrations.”

According to Lukyanov, “Macron has been carefully building an image of a world leader who is an alternative to U.S. President Donald Trump as far as his world outlook goes—naturally, in accordance with his own views. Whether he has been successful at it is another question, but this is what he aims at.”

Schiller Institute founder and President Helga Zepp-LaRouche, who had just visited Russia over Oct. 24-28 with speeches on the urgent importance of Trump-Putin collaboration against British geopolitical war policy, called President Macron’s posturing “despicable.” She warned it had contributed to uncertainties around the even more critical Trump-Putin full bilateral meeting which has been aimed at in the Buenos Aires G20 meeting at the end of November.





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