EIR Daily Alert Service, MONDAY, JULY 1, 2019
|MONDAY, JULY 1, 2019|
Volume 6, Number 128
EIR Daily Alert Service
P.O. Box 17390, Washington, DC 20041-0390
- ‘New Bretton Woods’ Opportunity Was Missed at G20 and a Global Economic Crash Got Closer
- Trump and Kim Meet at DMZ: Trump Expects Talks to Resume In ‘Next Two or Three Weeks’
- Pat Buchanan Wrties ‘Memo to Trump: Trade Bolton for Tulsi’
- Presidents Putin and Trump Have Long Strategic Dialogue in Osaka
- Bank for International Settlements Warns To Beware of Bank Crash From Heavy Corporate Debt
- People’s Bank of China Going After Leveraged Lending in Baoshang Bank Takeover
- Trump-Putin Meeting Opens Up Potential for U.S.-Russian Strategic Stability Discussions
- Arms Control Association Aims at Bolton as Saboteur of Arms Control Agreements
- Fresh Call by Chinese and Japanese Officials for Healthy Development of Ties
- Italian Scientists Tell Government, ‘CO2 Is Not a Pollutant, Global Warming Is Conjecture’
- Brazilian ‘Car Wash’ Hatchet Man Dashes to Washington To Confer With FBI and DOJ
June 30 (EIRNS)—The meeting between Presidents Donald Trump and Vladimir Putin at Osaka, held despite every attempt to prevent it by the Anglo-American war party, made one welcome step back from the confrontation of nuclear superpowers which was threatening. With the outrageous June 15 New York Times story that John Bolton’s National Security Council was placing cyberbombs in Russia’s national electricity grid without President Trump’s knowledge, to the planned bombing of Iran blocked by Trump on June 20, the world spent two weeks in the shadow of nuclear war. But even the howling British and U.S. national media could not prevent Trump and Putin from at least reopening strategic talks between the nuclear superpowers.
What was not addressed at the G20 meeting got just one sentence in the final communiqué: “The leaders assess that [global] growth remains low and risks remain tilted to the downside.” This drastic understatement was the only reference to Western Europe falling (again) below zero economic growth; the Bank for International Settlements’ new (June 29) world financial report warning of the banks being taken down by a corporate debt crash; the United States’ short manufacturing recovery under Trump’s Presidency having ended; global capital expenditure growth having fallen near zero in the second quarter; the stagnation of world trade with near zero growth in exports internationally in the last nine months; falling life expectancy in both the United States and the U.K.; and the dire picture shown in EIR’s new report, “The Bitter Truth About the U.S. ‘Economic Recovery.’ ”
All that could be concluded from the G20 communiqué, is that the consensus of leaders there called on the major central banks to return to and/or continue the zero-interest-rate money-printing, big bank bailout policy called “quantitative easing,” ten years of which have suppressed economic growth and almost guaranteed another financial crash!
Most important, it appears the looming collapse was not addressed in the crucial meeting at Osaka between President Trump and China’s President Xi Jinping. In the now-renewed economic talks between the two economic superpowers, the new paradigm of economic and scientific cooperation exhibited in China’s Belt and Road Initiative must be taken up. Only between China and Japan was the potential of direct and extensive collaboration shown on this new system of great infrastructure projects in the developing countries.
What is needed—and nothing else will solve the crisis—is Lyndon LaRouche’s bold proposal from the 1990s until his death this year. That is, that at least the four economic and scientific powers China, Russia, India and the United States launch a New Bretton Woods credit and development system for the world. The Belt and Road Initiative has given the seed crystal for this new paradigm in which the United States must become involved.
LaRouche’s proposed New Bretton Woods would involve—as did FDR’s original—Glass-Steagall-type bank separation to protect credit from financial speculation and crash; and joint credit from the powers for new infrastructure credits in third countries, as proposed in China Daily just before the G20. LaRouche’s New Bretton Woods would also mean scientific crash programs in manned space exploration and fusion energy technologies.
We should take from this missed opportunity, again, the necessity that Lyndon LaRouche be exonerated of the false charges on which he was prosecuted in the 1980s and constantly vilified in the major trans-Atlantic media. That exoneration can put his policies right on the table of great-power summits where they must be launched, to prevent global “recession” and another general financial crash.
U.S. POLITICAL AND ECONOMIC
June 30 (EIRNS)—Following a 50-minute meeting with the North Korea’s Chairman Kim Jong Un in the demilitarized zone (DMZ) that divides the North and South Korea in Panmunjom, President Donald Trump said today that teams from the United States and North Korea would start meetings “over the next two or three weeks” for talks on Pyongyang’s nuclear program. Trump said he was in no rush for a deal. Negotiators will “start a process and we’ll see what happens,”South China Morning Post quoted him.
The two held a short press conference, no questions, with Trump expressing his gratitude: “Well, I want to thank you, Chairman. You hear the power of that voice. Nobody has heard that voice before. He doesn’t do news conferences, in case you haven’t heard. And this was a special moment.”
U.S. Special Representative for North Korea Stephen Biegun held secret discussions at the DMZ to set up the meeting between President Donald Trump and North Korean Chairman Kim Jong Un, reported media.
“We’re not looking for speed, we’re looking to get it right,” Trump told reporters. “Speed is not the object… We want to see if we can do a really comprehensive, good deal. [But] a lot has already come up.”
“I would like to move away from the past and maintain good relations in the future,” Kim told Trump. Trump said he appreciated Kim’s presence, noting that many positive changes have happened. “The relationship we have developed has been so much,” Trump said. “This could be very a historic moment. I really enjoy being with you,”SCMP reported, which also pointed out that Trump is the first incumbent U.S. President to have visited the North Korean side of the border.
At a joint press conference in Seoul earlier, South Korean President Moon Jae-in said the meeting at the border was crucial for the future of the denuclearization talks.
June 29 (EIRNS)—An item Pat Buchanan published on his blog on June 27, “Memo to Trump: Trade Bolton for Tulsi,” was full of praise for Rep. Tulsi Gabbard’s (D-HI) and her sharp focus on the war issue in the 7 minutes she got to speak out during this week’s two-hour debate among Democratic presidential candidates. In that debate, Gabbard said: “For too long our leaders have failed us, taking us into one regime-change war after the next, leading us into a new cold war and arms race, costing us trillions of our hard-earned taxpayer dollars and countless lives. This insanity must end.” Gabbard also attacked both the “president and his chickenhawk cabinet (who) have led us to the brink of war with Iran.”
Buchanan argued that “her performance may shake up the Democratic race. If she can rise a few points above her 1-2% in the polls, Gabbard could be assured a spot in the second round of debates…. If she makes it into the second round, Gabbard could become the catalyst for the kind of globalist vs. nationalist debate that broke out between Trump and Bush Republicans in 2016.”
Buchanan continued: “The problem Gabbard presents for Democrats is that … she takes positions that split her party, while her rivals prefer to talk about what unites the party, like the terribleness of Trump, free college tuition and soaking the rich. Given more airtime, she will present problems for the GOP as well. For the foreign policy Tulsi Gabbard is calling for is not far off from the foreign policy Donald Trump promised in 2016 but has since failed to deliver. We still have 2,000 troops in Syria, 5,000 in Iraq, 14,000 in Afghanistan. We just moved an aircraft carrier task force, B-52s and 1,000 troops to the Persian Gulf to confront Iran. We are about to impose sanctions on the Iranian foreign minister with whom we would need to negotiate to avoid a war.”
June 28 (EIRNS)—The Presidents of Russia and the United States, Vladimir Putin and Donald Trump, met for 80 minutes in the sidelines of the G20 Summit in Osaka, Japan. It was revealed that Putin invited Trump to Moscow for the May 9 Victory Day in 2020, the celebration of the 75th anniversary of victory in World War II. There was also a brief discussion between the two Presidents on their way to the G20 group picture taking.
In his opening remarks Trump said: “Thank you very much, everybody. It’s a great honor to be with President Putin, his representatives, my representatives. We have many things to discuss, including trade, and including some disarmament, a little protectionism, perhaps, in a very positive way. We’re going to discuss a lot of different things. We’ve had great meetings, we’ve had a very, very good relationship, and we look forward to spending some very good time together. A lot of very positive things are going to come out of the relationship. So Vladimir, thank you very much.”
President Putin stated: “I agree with Mr. President—we do have much to discuss, and have already outlined all the topics. We have not met for a long time, since the Helsinki meeting [July 16, 2018]. But our colleagues have been working, giving us a good opportunity to follow up on what we agreed in Helsinki, so thanks to both parties.”
When a journalist demanded, “Mr. President, will you tell Russia not to meddle in the 2020 election?” President Trump replied: “Yes, of course, I will.” He then turned to Putin, wagging his finger: “Don’t meddle in the election, President. Don’t meddle in the election.” Putin laughed, but the media are furious that Trump made fun of the fake “meddling” charge.
COLLAPSING WESTERN FINANCIAL SYSTEM
June 30 (EIRNS)—The so-called “central bank of central banks,” the Basel, Switzerland-based Bank for International Settlements (BIS), has warned again of a bank crash from corporate overindebtedness in the advanced economies, in its Annual Economic Report released June 30. The Guardian’s headline on the report, “Corporate Debt Could Be the Next Sub-Prime Crisis, Warns Banking Body,” was typical; it added a kicker: “Group for central banks says borrowing by firms with low credit scores is growing alarmingly, especially in U.S. and U.K.”
The report says that the $3.5 trillion market in what are called “leveraged loans”—loans to already overindebted corporations, now dominating whole economic sectors such as oil/gas and retail in the United States—is greatly “overheated,” and could lead to a bank panic as did the sub-prime mortgage bubble in the 2007-08 global financial crash. Agustín Carstens, who was formerly governor of Mexico’s central bank and is now BIS managing director, is quoted about the report, “While firms in the U.S.—and, to a lesser extent, the U.K.—have accounted for the bulk of the issuance [of this junk debt], holdings are spread out more widely. There is most concern about corporate debt, more than the household or sovereign sectors.”
The BIS report adds that even though major banks insist they own only the safest tranches of the collateralized loan obligations (CLOs) made up of these over-leveraged corporate debts, those major banks are in danger of being hit by large numbers of defaults in these sectors.
This is coming closer with the global recession underway. The big London and Wall Street banks also thought they were playing it safe with the collateralized debt obligations (CDOs) made up of sub-prime mortgage securities in the 2004-07 period, keeping only the AAA or AA-rated tranches of those CDOs. When the mortgage securities bubble imploded, Morgan Stanley infamously led the way by suddenly losing $14 billion that way.
The major Wall Street bank holding companies and their investment banking and speculative units have continued to defraud and steal, as ever when poorly regulated. On June 25 the U.S. Justice Department announced that “Merrill Lynch Commodities (MLCI), a global commodities trading business, agreed to pay $25 million to resolve the government’s investigation into a seven-year scheme by MLCI precious metals traders to mislead the market for precious metals futures contracts on the COMEX (Commodity Exchange Inc.).” MLCI admitted that “beginning by at least 2008 and continuing through 2014, precious metals traders employed by MLCI schemed to deceive other market participants by injecting materially false and misleading information into the precious metals futures market,” according to the DOJ press release. They placed tens of thousands of fraudulent orders, which they would then cancel at the last moment before execution. Naturally, Justice Department settled for a deferred prosecution agreement and minor fine.
CDS and CDOs based on mortgage-backed securities, and now rent-backed securities, have again been introduced, by JPMorgan Chase and Bank of America, and $30 billion of them have been sold this year.
It also appears that a “zombie company” in the oil sector of leveraged loan debt—which is the largest such sector—is causing a significant rise in gas prices in the United States this summer. The company is Sunoco Logistics which ran the largest oil refinery on the East Coast, called Philadelphia Energy Solutions (PES). It was processing 335,000 barrels/day; U.S. oil products consumption is about 9 million bpd, so roughly 3.6% of U.S. oil products. Carlyle Group, as a big lender to it, had already had to become a part owner. PES went bankrupt 18 months ago, acquiring thus Credit Suisse as majority owner. It was laying off workers and cutting maintenance costs, until major sections of the refinery were destroyed in a huge fire last week. PES now says it will close permanently.
June 30 (EIRNS)—A sign of Chinese banking authorities intervening strongly against the “leveraged loan” problem, was the People’s Bank of China (PBOC) takeover of Baoshang Bank in Mongolia (with $60 billion in assets) on May 28. The takeover was prominently announced and commented on in financial media by Chinese bank supervisors, and occurred although Baoshang Bank appeared not to be in any danger of failing, but rather engaging in very excessive leveraged lending.
In the month since the takeover of Baoshang, there have been signs of stress in China’s interbank lending market; the PBOC central bank has stepped in with liquidity, setting its own interbank lending rate extremely low, as low as in early 2009 during the global crash.
The PBOC and government regulators often poke hard into bubbles they want to deflate for safety’s sake. Here, it is challenging the accuracy of balance sheets of non-state-supported banks. Nomura Securities reported the government did not agree to insure all of Baoshang’s creditors and depositors.
Baoshang, part of a large business conglomerate, was reported by Business Insider (citing China investments firm J Capital Research) to be involved in large numbers of lawsuits over delinquent corporate loans, some with interest rates as high as 18-25%, collateralized by side agreements. Because of the collateral, Baoshang was not reporting these loans as defaulted and appeared to have a low non-performing loan rate. But in fact, its NPLs were reportedly massive in scope, relative to its capital.
STRATEGIC WAR DANGER
June 29 (EIRNS)—Comments from the Russian side following the summit meeting between U.S. President Donald Trump and Russian President Vladimir Putin suggest that the potential for further dialogue between the U.S. and Russia on matters of arms reduction and strategic stability has been opened up, which the Russians are welcoming with cautious optimism. “In general, the two countries demonstrated the mood to establish a dialogue on all issues, including the controversial,” Kremlin spokesman Dmitry Peskov said after the meeting yesterday. With respect to disarmament and strategic stability, Peskov said that “the presidents agreed this discussion should be continued in a more specific vein between Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State Mike Pompeo, as well as between Russian Finance Minister Anton Siluanov and U.S. Treasury Secretary Steven Mnuchin,” according to Xinhua.
For his part, Lavrov reported in Tokyo that the two Presidents stressed the necessity to avoid steps that could provoke an arms race. “Both agreed that these issues were essential for the international community in the sphere of security and that Russia and the United States as the two largest nuclear powers are called upon to play the leading role in lowering the risks, which, unfortunately, are piling up in this sphere as well,” Lavrov said.
Lavrov also stressed Moscow’s readiness to cooperate with the U.S. on strategic stability to the degree that the U.S. is ready for such cooperation. “The two Presidents are committed to developing dialogue and refraining from making the biggest global security issues, which are of interest to the entire world, hostage to some problems within the U.S. elites. I believe this is a very positive fact,” he said.
Chairman of the State Duma’s Committee for International Affairs Leonid Slutsky called Trump and Putin’s agreement significant. “One of the key issues is definitely about the present-day model of arms control,” Slutsky said. “In my opinion, the leaders’ agreement to continue discussions on this issue is a very significant result of their meeting.” He said that following the dismantling of the INF Treaty, and the possible failure to extend New START, that “it was important to continue the dialogue in order to avert the collapse of the arms control sphere and the violation of the nuclear parity.” On the whole, Slutsky continued, “the second meeting between the Presidents of Russia and the United States once again evokes cautious optimism on the restoration of the constructive atmosphere in the Russia-U.S. relations.”
June 29 (EIRNS)—Daryl Kimball, the executive director of the Arms Control Association, posted an article on the ACA’s website in the hours after the Putin-Trump summit meeting in which he reported that while Trump expressed his desire to work with the Russians on the “arms race,” it was National Security Adviser John Bolton who blocked a proposal supported by both the Pentagon and the State Department to engage in strategic stability talks with Moscow and who talked Trump into ditching the INF Treaty. Kimball also reports that the idea of attempting to bring China into an arms control arrangement to replace New START, as well as trying to include Russia’s non-strategic nuclear weapons stockpile were also Bolton’s ideas, not with the intention of expanding New START but of sabotaging its renewal, since no agreement could be reached on either proposal before the treaty expires in 2021.
EIR does not have independent confirmation of Kimball’s specific charges against Bolton, but they are consistent with Bolton’s well-known animus against arms control in general.
THE NEW GLOBAL ECONOMIC ORDER
June 30 (EIRNS)—A number of Chinese and Japanese diplomats and scholars have urged their countries to build stronger bilateral relations as an important and positive element for maintaining world peace and promoting common development, Xinhua reported.
Although informally Japanese companies are participating in China’s Belt and Road Initiative under Prime Minister Shinzo Abe’s support, Makoto Taniguchi, former Japanese ambassador to the United Nations, suggested to Xinhua that the Japanese government should actively consider joining the Asian Infrastructure Investment Bank (AIIB) and strengthen communication and cooperation in the field of Belt and Road construction, which will provide more development opportunities to Japanese enterprises and benefit regional development.
Among others, Yuji Miyamoto, former Japanese Ambassador to China, told Xinhua that Japan-China relations are now back on the right track and that he expects the two countries to create a new type of relationship that is beneficial to the two peoples, the Asian people and the world.
Chinese Ambassador to Japan Kong Xuanyou told Xinhua that bilateral relations are at a new historic starting point and facing an important opportunity to move to a new level. “High-level exchanges play an irreplaceable leading role in the continuous improvement and development of China-Japan relations,” Kong said. “The two sides took advantage of this important opportunity to send a clear signal that the two countries are committed to enhancing political mutual trust, deepening mutually beneficial cooperation, consolidating people-to-people friendship and properly managing differences, thus leading the steady and long-term development of bilateral relations,” the ambassador said.
SCIENCE AND INFRASTRUCTURE
June 28 (EIRNS)—A June 17 petition signed by dozens of Italian scientists against the dogma of man-made climate change is addressed to the President and Prime Minister of Italy, and the presidents of the Chamber of Deputies and Senate, as a “Petition on Global Anthropogenic Warming,” from “Italian scientists and technologists to defend scientific truth.” The petition was initiated by Uberto Crescenti, Professor Emeritus of Applied Geology, G. D’Annunzio University in Chieti-Pescara, former President of the Italian Geologic Society. The petition was published on the website of ASTRI, the Italian Association of Research Scientists and Technologists.
Signers include Antonino Zichichi, Professor Emeritus in Physics, University of Bologna, founder and chairman of the Ettore Majorana Center of Scientific Culture in Erice; and Renato Angelo Ricci, Professor Emeritus in Physics, University of Padua, former chairman of the Italian Physics Society and of the European Physics Society.
The following excerpt is translated from the original:
“The undersigned, citizens and scientists, send a warm invitation to political leaders to adopt environmental protection policies consistent with scientific knowledge. In particular, it is urgent to combat pollution where it occurs, according to the indications of the best science….
“But we must be aware that carbon dioxide itself is not a pollutant. On the contrary, it is indispensable for life on our planet.
“However, the anthropogenic origin of global warming is an unproven hypothesis, deduced only from some climate models, that is complex computer programs, called General Circulation Models…. The anthropogenic responsibility for climate change observed in the last century is therefore unjustifiably exaggerated and catastrophic predictions are not realistic….
“Climate simulation models do not reproduce the observed natural variability of the climate and, in particular, do not reconstruct the warm periods of the last 10,000 years.
“The media spread the message that, with regard to the anthropogenic cause of the current climate change, there is an almost unanimous agreement among scientists and that therefore the scientific debate is closed. However, first of all we must be aware that the scientific method dictates that the facts, and not the number of adherents, make a conjecture a consolidated scientific theory.
“In any case, the same alleged consensus does not exist. In fact, there is a remarkable variability of opinions among specialists—climatologists, meteorologists, geologists, geophysicists, astrophysicists—many of whom recognize an important natural contribution to global warming observed from the pre-industrial period and even from the post-war period to today….
“In conclusion, given the crucial importance that fossil fuels have for the energy supply of humanity, we suggest that they do not adhere to policies of uncritical reduction of the emission of carbon dioxide into the atmosphere with the illusory pretense of managing the climate.”
June 28 (EIRNS)—Brazilian Justice Minister Sergio Moro scrambled up to Washington, D.C. last weekend, in the midst of a firestorm over how he ran the so-called “Car Wash” (“Lava Jato”) anti-corruption operation which sent former President Lula da Silva to jail and destroyed key areas of Brazil’s productive economy. The firestorm was ignited on June 9 when The Intercept began publishing leaked private texts and conversations which exposed how Judge Moro had violated Brazil’s Constitution and law by instructing prosecutors and police on how to run their Car Wash cases.
His Washington visit added to the scandal. EIRNS sent shockwaves through Brazil in 2017, when it published excerpts of the speech given that July by then-head of the Justice Department Criminal Division Kenneth Blanco, in which he hailed Lula’s imprisonment as the great success story of the DOJ’s extraordinarily close collaboration with Moro’s Car Wash team.
Ten days ago, the head of Lula’s Workers Party (PT) in the Chamber of Deputies Paulo Pimenta presented a dossier to the European Parliament which documents the illegal U.S. Justice Department’s collusion with Car Wash, pivoted on Blanco’s speech.
Moro’s short U.S. trip was packed: It began in El Paso, visiting the U.S. Border Patrol and Drug Enforcement Agency (DEA) Special Operations Center, followed by a long day in Washington, where he met with high-level State Department and Treasury officials, members of the DOJ’s Organized Crime Intelligence and Operations Center, unidentified officials at FBI headquarters plus the FBI’s Cyber Investigative Joint Task Force, and with the National Cyber-Forensics and Training Alliance. The latter alliance of business, government, and academia describes its role as “identifying, mitigating and ultimately neutralizing cyber crime threats globally.”
Moro describes the leaks as a cyber crime, and is calling The Intercept a “site allied to criminal hackers.” Brazil’s President Jair Bolsonaro called Moro “a national hero.” BBC Brasil published a threatening interview with U.S. Judge Peter Messitte in Maryland, who has advised and trained the Brazilian judiciary on reforms for decades (June 22), in which Messite warned that “revoking Moro’s Car Wash decisions [on the basis of the leaks] would be a very serious error.” (Messitte argues that he talks to prosecutors all the time when he is sitting on cases “and this never compromised my cases.”)
The scandal around the Car Wash operation is building, however.The Intercept announced on June 23 that it has signed a partnership with establishment daily Folha de São Paulo, which has already begun publishing its own confirmations of the authenticity of the leaked material.
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