EIR Daily Alert Service
MONDAY, DECEMBER 24, 2018
Volume 5, Number 255
EIR Daily Alert Service
P.O. Box 17390, Washington, DC 20041-0390
EIR Daily Alert
Dec. 23 (EIRNS)—U.S. establishment figures and media are hysterical over the resignation of Gen. James Mattis as Defense Secretary. But it is President Donald Trump’s policy actions that matter, not the degree to which his Cabinet and other appointees, or his “fellow” Republicans in Congress, agree with him.
Withdrawal of American troops from Syria and Afghanistan is one of those things the American people who elected Trump President hoped, against hope, that he would do.
Those troops have been fighting “the perpetual war” on behalf of British geopolitical designs and regime-change desires since 1991, at the cost of great destruction of life and treasure in Southwest Asian countries, and death and demoralization of American service personnel and their families. The many trillions in war expenditures have strengthened a “military-industrial complex” which has neglected productive investment in the U.S. economy. The threat of escalation into nuclear confrontation with Russia, has grown constantly.
President Trump is clearly considering another step that will drive “failing Wall Street” and its City of London seniors into fury and chaos: downgrading the authority of the Federal Reserve Bank and its current chair.
Federal Reserve policy has been a bubble and collapse-inducing disaster at least since the appointment of Alan Greenspan chairman in 1987 and Greenspan’s personal crusade to destroy the Glass-Steagall Act on behalf of Wall Street. The Fed’s supposed independence and authority to “run the U.S. economy,” in the view of cowering Members of Congress, has grown in proportion to its repeated failures and financial crashes.
Across the trans-Atlantic world are now seeing eruptions of the “Yellow Vests,” spreading popular protests against the austerity policies of the decades in which the Fed and other major central banks have ridden herd over governments.
President Trump’s extremely bold action under fire, to end British-instigated “perpetual war”—before it becomes world war—means that now it is the American people who have to act. His potential, even bolder fight with the Federal Reserve increases the stakes, for Americans, of an extraordinary moment.
They must shake off the befuddlement of a popular culture of violence, drugs and victimization. They are called on to lead, and tomake a new policy.
If the President’s actions end the hated perpetual war, and challenge the discredited Federal Reserve, what will the new policies be? President Trump does not clearly know, and he is putting himself in the direct line of fire of an enraged Anglo-American “imperial” establishment which will kill to get him out, or use the legal assassin, Special Counsel Mueller.
Moreover, another financial crash is threatening now. That demands the immediate reinstatement of Glass-Steagall in America and Europe to stop another bailout disaster and economic collapse.
The organizing of the Schiller Institute and LaRouche Political Action Committee point the way. Lyndon LaRouche has proposed four actions as a package, including Glass-Steagall and a new national credit institution, used for high-technology infrastructure investments and “Apollo Projects” in space fusion energy development.
Become familiar with these potential policies and how they can be implemented. Study the agreements for new productive investments the United States could now make with the countries President Trump whose leaders has wanted to work with, particularly China, Russia and India.
Along with perpetual war, we can end the perpetual loss of industry and productivity, and replace it with a new policy of economic development and peace.
Editor’s Note: As usual, we will skip the issues for Tuesday, Dec. 25, 2018 and Tuesday, Jan. 1, 2019.
COLLAPSING WESTERN FINANCIAL SYSTEM
Dec. 22 (EIRNS)—Writing for Project Syndicate (“The Biggest Emerging Debt Problem Is in America,” Dec. 20) Harvard Professor and former investment banker Carmen Reinhart identifies the major Wall Street banks’ dangerous dumping of increasingly toxic debt on all kinds of investors as a crash nears.
It is this massive “handing over of losses” by the big banks which is the most immediate urgency of a restoration of Glass-Steagall by Congress, and by other nations through a new monetary agreement. Glass-Steagall bank separation will stop those majors from creation of hundreds of billions “worth” of securities by which they dump the debt off their books and rob the population of its wealth in a meltdown.
The securities Reinhart is writing about are derivatives, collateralized loan obligations or CLOs, also singled out by former Fed Chair Janet Yellen in her warning of Dec. 10.
Reinhart reports, “According to the Securities Industry and Financial Markets Association, new issues of conventional high-yield corporate bonds peaked in 2017 and are off significantly this year (about 35% through November). New issuance activity has shifted to the CLO market, where the amounts outstanding have soared, hitting new peaks almost daily. The S&P/LSTA US Leveraged Loan 100 Index shows an increase of about 70% in early December from its 2012 lows, with issuance hitting record highs in 2018. In the language of emerging markets, the USEM [‘U.S. emerging market’, her shorthand for junk U.S. corporate debt] is attracting large capital inflows.”
Thus the junk debt markets have cracked in the second half of 2018, as EIR has reported; big banks and shadow banks are taking losses and withdrawing, leaving those markets illiquid. But the market for certain derivatives of junk debt has soared at the same time. Reinhart make clear the purpose of those derivatives, with reference to the 2008 crash: “These CLOs share many similarities with the mortgage-backed securities that set the stage for the subprime crisis a decade ago. During that boom, banks bundled together loans and shed risk from their balance sheets. Over time, this fueled a surge in low-quality lending, as banks did not have to live with the consequences.”
She notes in conclusion that as in 2008, “CLOs have also gained in popularity in Europe. Higher investor appetite for European CLOs has predictably led to a surge in issuance (up almost 40% in 2018). Japanese banks, desperately seeking higher yields, have swelled the ranks of buyers. The networks for financial contagion, should things turn ugly, are already in place.”
Dec. 23 (EIRNS)—On Saturday night Dec. 22 Treasury Secretary Steve Mnuchin tweeted a comment from President Donald Trump: “I have spoken with the President and he said ‘I totally disagree with Fed policy. I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time, especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.’ ”
By then, however, the eruption of anxiety from Wall Street directions, that Trump might cut down the authority of Fed Chair Jay Powell or of the Federal Reserve as a whole, had perhaps exceeded even that of neo-conservatives over the President’s order to withdraw troops from Syria.
Typical of the wild assertions was Senator (and Wall Street veteran) Mark Warner (D-VA), however: “Any action taken to dismantle the independence of the Fed would … threaten the institutions that protect our rule of law.”
But the Federal Reserve’s record since at least 1987, when Alan Greenspan took over from Paul Volcker, has been a continuous game of debt bubble pumping, financial crash, pumping up larger bubble, another crash, and so forth.
Lyndon LaRouche, in an April 26, 2006 article in EIR entitled “Characteristics of the Current Crisis: How the World Has Changed,” wrote that six days earlier, “I issued my warning that, unless a drastic policy-change intervened, the world as a whole was now on the course toward a systemic monetary-financial collapse”—the so-called Great Financial Crash which was in full view a year after LaRouche wrote. Moreover, reviewing “four stages of decline” since the policies of President Franklin Roosevelt, LaRouche attributed the fourth stage to Alan Greenspan and the Federal Reserve.
“This Fourth Phase came into being during 1987, in the 1929-style, October collapse of the New York stock bubble. That stock-market crash occurred on the watch of Federal Reserve Chairman Paul Volcker. Volcker’s nominated successor, Alan Greenspan, took charge. It was Greenspan who crafted the Fourth and fatal phase, leading into the presently threatened, imminent general collapse of the world’s present monetary-financial system.
“The Greenspan ‘bubble,’ otherwise known as the ‘financial derivatives’ scam, which has been cast in the tradition of the John Law bubbles of early Eighteenth-Century Europe, has become a highly complicated structure; but, the essence of the problem it represents can be fairly summarized as follows.
“The included effect of the process leading into the 1929-style, October 1987 stock-market crash, was the depleting of the cash available to the private banking system. Greenspan’s engineering used the Federal Reserve pumping of a mortgage-based securities bubble in Fannie Mae and Freddie Mac operations, as a way of pumping cash back into the banks. This, and the associated boom in inflationary real-estate speculation, has represented the principal axis of an accelerating inflation in the U.S. and Europe, among other locations. This, combined with the role of Japan’s virtually zero overnight lending rate, has emerged as the base for the build-up of a highly inflationary, implicitly cancerous mechanism known as ‘the carry trade.’ This operated within a global environment shaped by Greenspan’s role as architect of a system of gamblers’ side-bets, known as financial derivatives, including so-called credit derivatives.”
Dec. 23 (EIRNS)—The impetus for those who wear Yellow Vests is showing up, spontaneously and internationally, in places as diverse as Ireland, Israel, Canada, and among the celebrated “Beefeaters” who guard the Tower of London. In the midst of this mass strike, some donning the vests may be ignorant of the details of the fight in France, but they have seized upon the vest as a symbol of the fighters against fascist austerity, which austerity is caused by a frantic, purblind attempt to suck out wealth to prop up the bankrupt world financial bubble.
In her Dec. 12 international broadcast, Helga Zepp-LaRouche stated: “[I]t shows how the whole situation is absolutely unstable, and that the neo-liberal paradigm, which we have been discussing now for quite a while, created the conditions for the Brexit, the defeat of Hillary Clinton, the election of the new Italian government, and the Yellow Vest movement. All of these are symbols of the same thing: That you cannot violate the common good of the ordinary people endlessly in favor of the very rich.”
In London, in a rich ironic twist, AFP reported Dec. 21, “Beefeater guards at the Tower of London switched their traditional red uniforms for yellow vests on Friday as they went on strike with staff at other historic sites over pensions.” The Beefeaters are technically known as the Yeomen Warders of Her Majesty’s Royal Palace and Fortress. They guard the Tower of London, the Queen’s jewels, and Kensington Palace, which is a huge, luxurious complex that houses, among others, Prince Harry and his wife Meghan Markle (the Duchess of Sussex), the Duke and Duchess of Kent, et al. The Beefeaters and the Historic Royal Employees were just offered a pension plan in which they have to pay much more towards their pension. Their union, by a vote of 91%, decided to strike. They formed picket lines wearing resplendent high safety yellow vests.
In Israel, on Dec. 22 Ha’aretz reports, “Some 400 protesters demonstrating against the high cost of living blocked a major traffic artery in Tel Aviv on Saturday as part of French-inspired yellow-vest protests, which commenced all across Israel last week. The demonstration cut off access to the Shalom intersection near the Defense Ministry headquarters.” David Mizrahi, one of the protest leaders, said “We’ve been going through hell for too long now. We thought it would end but it’s getting harder to make ends meet, the gaps are becoming monstrous.”
In Dublin, the Dec. 22 Irish Sun reports, “In solidarity with the French yellow vest demonstrations, a group called Yellow Vests Ireland took to the streets on Saturday afternoon. Protesters wore high-visibility jackets and chanted anti-government slogans including: ‘Banks got bailed out, we got sold out.’ ”
Sheila O’Byrne, one of the protesters, exclaimed, “The housing situation is a disgrace. People are left out on the streets when we have buildings lying empty.”
In the oil patch of Alberta, Canada, on Dec. 19 a convoy of 1,000 trucks demanding an oil pipeline to move Canada’s petroleum product to export markets, backed up the national QEII Highway for 22 km in Nisku. Oilmen had mass support from the population sporting yellow vests, many of them caught in the backup while trying to attend a pro-pipeline event. Typical was one tweet: “As I try to make my way to @AndrewScheer townhall in Nisku I am caught in middle of large convoy of oilfield workers. Albertans have had enough of PMJT’s [Trudeau’s] devastating anti-energy development policies & are taking to the streets literally show their disgust.”
Protests spread and continued in Edmonton, Medicine Hat, and Grand Prairie over the weekend.
U.S. POLITICAL AND ECONOMIC
Dec. 23 (EIRNS)—Sen. Rand Paul (R-KY), interviewed by an argumentative Jake Tapper on CNN’s “State of the Union” program today, gave very strong support to President Donald Trump’s decision to withdraw American troops from Syria. Senator Paul made a broader statement: “The seven different wars we’ve been engaged in were not authorized by Congress. They are unconstitutional.”
Paul said, “All these people who believe in forever war” reacted to the defeat of ISIS by adding new objectives: Keep Iran out of Syria; stop Russia in Syria. “Do you want another war now with Iran?” he asked. “Do you want to fight Russia?”
The Senator countered Tapper’s outrage about the President’s having overruled Defense Secretary Jim Mattis and provoking the latter’s resignation, simply by noting that Mattis himself had repeatedly said “There is no military solution for Syria, or Afghanistan.”
He implied that Mattis was among those “who believe in forever war” without a resolution for the unfortunate countries involved. “Our troops there [in Syria] are a tripwire for a much wider war,” he said. Paul stressed Russia’s decades-long interest in Syria, and stated, “We need to have conversations with Russia. We’ve virtually criminalized talking to Russia.”
The Senator twice called for concentration of funds and effort on building new economic infrastructure in the United States—“We’ve spent several trillions on these wars.”
“It should not be the job of America to be replacing regimes all over the world. The people want the troops home,” he concluded.
Dec. 21 (EIRNS)—President Trump is considering withdrawing up to 7,000 troops of the 14,000 now deployed in Afghanistan, according to a report in the Dec. 20 the Wall Street Journal citing unnamed Defense Department officials. The report came just one day after the President announced his intention to begin withdrawal of U.S. troops from Syria, which total 2,000.
As in the case of Syria, the news of Trump’s moving on force-withdrawal from Afghanistan has provoked hysteria from the usual geopolitical quarters, with warnings that a U.S. withdrawal will spell disaster for the country, hand it over to ISIS, proclaiming that it is a gift to Russian President Vladimir Putin, as is also being said of U.S. troop withdrawal from Syria.
Reuters reports that plans for the drawdown are being drafted to present to the President. Associated Press cited unnamed U.S. officials, speaking on condition of anonymity, saying that troops could be out by summer, but that no final decision on the timetable has been made.
Since entering Afghanistan in 2001, the U.S. has lost 2,400 soldiers and spent $900 billion.
Dec. 21 (EIRNS)—In a Dec. 20 article published in the American Spectator, analyst Mark Perry gets behind the hysteria that accompanied President Donald Trump’s allegedly “sudden” decision to withdraw troops from Syria, writing that a “select group of administration officials, as well as a handful of senior military officers,” have known about the decision for a week. The matter was thoroughly discussed during a Dec. 14 phone call that the President had with Turkish President Recep Tayyip Erdogan, as well, according to Perry’s report.
In several recent phone calls with Trump, Erdogan, who has opposed the U.S. alliance with the Syrian Kurdish PYD/YPG, insisted that there’s no reason for the U.S. to stay in Syria to deal with Iran, as Turkey is the best hedge against that nation’s influence in the region. In this context, Perry offered details on the disagreement between European Command Commander Gen. Curtis Scaparrotti, who favors a troop withdrawal, and Centcom commander Gen. Joseph Votel, who doesn’t, in which Scaparrotti argues that the U.S. alliance with Turkey is far more strategically important than that with the Kurds and should not be disrupted.
Iran expert John Allen Gay, from the John Quincy Adams Society, told Perry that Trump’s decision to pull out of Syria confirms what many analysts have been saying quietly for the past year—that keeping U.S. forces in Syria looks very much like mission-creep, a way for the “administration interventionists” to argue the case for taking on Iran.
“Yet dangling a few thousand guys in between Turkish forces on one side and the Iranians, Russians and Syrians on the other, was never going to be decisive on Iran’s regional role, and it came with real risks and no endgame,” he said. “I just don’t think there’s any appetite in the American public for a big fight with Iran anywhere, let alone in Eastern Syria.” Perry states that “a number of U.S. military officers” with whom he’s consulted, concur.
Dec. 21 (EIRNS)—In an interview with Sputnik International, former U.S. diplomat Jim Jatras said the U.S. establishment is terrified, saying, “Terror has again gripped the establishment that the Trump who was elected President in 2016 might actually start implementing what he promised.” He further told Sputnik that President Donald Trump is overhauling his defense and national security advisors and chiefs.
“This will be a critical time for the Trump presidency, if he can get the machinery of the Executive Branch to implement his decision to withdraw from Syria, and if he can pick a replacement to General Mattis who actually agrees with [his own] views,” Jatras said. “It is imperative that he pick someone for the Pentagon—and frankly, clear out the rest of his national security team—and appoint people he can trust and whose views comport with his own.”
STRATEGIC WAR DANGER
Dec. 22 (EIRNS)—TASS reported yesterday that the Russian military has been testing a new hypersonic anti-ship weapon called the Tsirkon. “Overall, more than ten test launches have been performed against targets at sea at a distance of several hundred kilometers,” a defense industry source said. The hypersonic missile “repeatedly destroyed designated naval targets at the hypersonic speed,” the source said, declining to give the date of the latest trials.
CNBC put out a report Dec. 20, based on sources within U.S. intelligence, claiming that there have been five successful tests of the Tsirkon, the most recent being on Dec. 10, when the missile reached Mach 8 and successfully hit its target. “What we are seeing with this particular weapon is that the Russians designed it to have a dual-purpose capability, meaning, it can be used against a target on land as well as a vessel at sea,” one source explained. “Last week’s successful test showed that the Russians were able to achieve sustained flight, a feat that is crucial in the development of hypersonic weapons.” According to CNBC’s sources, this is a weapon that the U.S. has no defense against, a fact that Putin had made in his March 1 nationally televised address to the Federal Assembly, when he first spoke of a number of new weapons.
Dec. 22 (EIRNS)—In his year-end annual press conference on Dec. 20, broadcast live nationally, Russian President Vladimir Putin was asked: “Mr. President, as Soviet-era children, all of us feared a nuclear war very much…. Forty years have passed, and major media outlets on both sides of the ocean are beginning to publish a scenario for a nuclear exchange between Russia and the United States. The word ‘war’ is sounding more and more often at household level, in kitchens.
“Mr. President, how can you calm down my little son who, just like me, also fears a nuclear war today? What words and actions can calm us all down?”
Here is President Putin’s answer in full:
“You know, I think you are right. I just thought that all this, including the danger of such developments in the world, is now being hushed up and played down to some extent. It seems impossible or something that is not so important. At the same time, if, God forbid, something like this happens, it might destroy the whole of civilization or perhaps the entire planet.
“These issues are therefore serious, and it is a great pity that there is such a tendency to underestimate the problem, and that this tendency is probably becoming more pronounced. What are the current distinguishing features and dangers?
“First, all of us are now witnessing the disintegration of the international system for arms control and for deterring the arms race. This process is taking place after the United States withdrew from the Anti-Ballistic Missile (ABM) Treaty that, as I have already noted a thousand times, was the cornerstone in the sphere of non-proliferation of nuclear weapons and deterring the arms race.
“After that, we were forced to respond by developing new weapons systems that could breach these ABM systems. Now, we hear that Russia has gained an advantage. Yes, this is true. So far, the world has no such weapons systems. Leading powers will develop them, but, as yet they do not exist. In this sense, there are certain advantages. But, speaking of the entire strategic balance, this is just an element of deterrence and for equalizing parities. This is just the preservation of parity, and nothing more.
“They are now about to take another step and withdraw from the INF Treaty. What will happen? It is very difficult to imagine how the situation will unfold. What if these missiles show up in Europe? What are we supposed to do then? Of course, we will need to take some steps to ensure our safety. And they should not whine later that we are allegedly trying to gain certain advantages. We are not. We are simply trying to maintain the balance and ensure our security.
“The same goes for the START III Treaty, which expires in 2021. There are no talks on this issue. Is it because no one is interested, or believes it is necessary? Fine, we can live with that.
“Finally, there is another circumstance I cannot ignore. There is a trend to lower the threshold for the use of nuclear weapons. There are plans to create low-impact nuclear charges, which translates to tactical rather than global use. Such ideas are coming from Western analysts who say it is okay to use such weapons. However, lowering the threshold can lead to a global nuclear disaster. This is one danger we are facing today.
“The second is the use of non-nuclear ballistic missiles. True, our U.S. partners seem to have dropped this idea, but it still exists. What does it mean? Suppose, a ballistic missile is launched, nuclear or non-nuclear. The missile attack warning system identifies the launch and the launch site, and, seconds later, determines the flight path and the possible warhead landing area. This is all on the verge of a possible error. It is terrible, and we cannot take it that far. Nevertheless, such an idea of using non-nuclear ballistic missiles exists. Suppose, a submarine fired a ballistic missile from the World Ocean, but who the hell knows if it is nuclear or not, go figure. This is very dangerous. All of that is being widely discussed, which is dangerous.
“However, I believe humanity has enough common sense and enough of a sense of self-preservation not to take these things to the extreme.”
THE NEW GLOBAL ECONOMIC ORDER
Dec. 21 (EIRNS)—Japan’s Nippon Express Co., one of the largest international freight companies in the world, launched a test run on Dec. 20 of moving Japanese freight on the Chinese Belt and Road Initiative train that runs from Xi’an to Duisburg, Germany. A China Railway Express freight train is being used for the journey.
Asahi Shimbun reported today that Hirobumi Iida, commercial minister at the Japanese Embassy in China, speaking at a ceremony for the trial run in Xi’an, said, the Nippon Express plan “will benefit Japan and China, and it is the representative project of cooperation between those two nations toward third countries,” which has recently been called for with respect to the Belt and Road.
According to Asahi, Nippon Express intends to run regular trips on the China Railway Express starting next year.