EIR Daily Alert Service, Wednesday, October 9, 2019

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WEDNESDAY, OCTOBER 9,
2019Volume 6, Number 200
EIR Daily Alert Service
P.O. Box 17390, Washington, DC 20041-0390

EDITORIAL

It Only Works with U.S. Cooperation with China, Russia and India

Oct. 8 (EIRNS)—There are a number of key lessons to be drawn from the Schiller Institute’s New York City Oct. 5 conference on “Mankind as a Galactic Species: The Necessary Alternative to War.” A leading one: underscoring Lyndon LaRouche’s pioneering role in designing a fusion-based space exploration and colonization mission, as mankind’s required next scientific and technological platform.

Also stressed throughoutthe international webcast, including in the keynote speech by Helga Zepp-LaRouche, was that such a mission can only succeed as the embodiment of the common aims of mankind, based on the cooperation of major and emerging space powers. It was not lost on any of the participants that Russia’s Ambassador to the United States Anatoly Antonov sent a message of greetings and encouragement to the conference; and that Xing Jijun, Counselor and Head of Science and Technology Section of the Consulate General of the People’s Republic of China in New York, delivered remarks at the event also urging cooperation with the United States. (See coverage in the Oct. 11 issue of EIR, which will include Antonov’s greeting and Dr. Xing’s remarks.)

Now turn your eyes from the stars to the turbulent planet Earth. The entire trans-Atlantic financial system is careening towards a short-term blowout, because it has been taken over by a voracious financial cancer, which the U.S. Federal Reserve and the other central banks are desperately feeding with hyperinflationary bailouts. As one financial columnist wrote on Oct. 7, “the only reasonable conclusion that can be drawn from the Fed’s announcement on Friday that it is extending its money pumping program to Wall Street until at least Nov. 4 … [is] that there is some kind of ‘emergency’ taking place.”

China, on the other hand, is cracking down on its shadow banking sector, bringing it to a three-year low in the first half of 2019, and is instead channeling credit to infrastructure and other productive activities. Such a two-tiered credit system would make Alexander Hamilton proud. What China is doing could well be described as the American System with Chinese characteristics.

Shouldn’t the U.S. and China be cooperating on such sane economic policies and to put Wall Street out of business?

Now look at Syria, where President Donald Trump has forcefully stated—again—that he intends to pull American troops out of Syria, as part of his campaign commitment to end the perpetual wars bequeathed by the Bush and Obama Administrations. And the gaggle of neocons and liberal Democrats, the same ones who are intent on impeaching him, howled—yet again—in protest that Trump was “endangering security” by trying to end the wars.

To succeed in this policy, the U.S. will have to work with Russia to keep the complex situation in Southwest Asia from blowing up, stopping terrorism, and to maintain every country’s sovereignty and territorial integrity.

Shouldn’t the U.S. and Russia be cooperating to put British geopolitics out of business for good?

Such U.S. cooperation with China and Russia, and with India and other nations as well, is the only foundation on which a New Paradigm can be built, an alliance strong enough to sweep away the British Empire’s Old Paradigm, as Lyndon LaRouche specified. The U.S. will only find the moral strength to take that step by exonerating Lyndon LaRouche, who—against all odds—designed the policies and scientific breakthroughs on which such a New Paradigm will be based.

COLLAPSING WESTERN FINANCIAL SYSTEM

Fed Money Pumping Indicates ‘Some Kind of Emergency Is Taking Place’

Oct. 8 (EIRNS)—One or more of the major U.S. or foreign banks that are “primary dealers” to the New York Fed are in deep trouble, according to Pam Martens and Russ Martens writing in their Oct. 7 article in “Wall Street on Parade.” “That is the only reasonable conclusion that can be drawn from the Fed’s announcement on Friday that it is extending its money pumping program to Wall Street until at least Nov. 4…. So it would certainly appear that there is some kind of ‘emergency’ taking place.”

The Martens’ article is the latest in a series of articles they have published on the looming blowout of the financial system, as it faces a situation similar to that of 2008, or worse. “The Fed’s money sluicing operation that began abruptly on Sept. 17” is all very much like what the Fed secretively did “during the early days of the 2008 crash—a time when it also refused to name the banks that were receiving the money.”

Like everything else in the trans-Atlantic financial sector, in the decade since the last crash there has been growing concentration in fewer banks, while overall insolvency has worsened. The primary dealers conduct open market operations with the New York Fed, and are contractually bound to make purchases in every auction of U.S. Treasuries. “There were 46 primary dealers in 1988. By 1999, that number had shrunk to 30. Today, it stands at 24. A large number of these primary dealers are the securities units of foreign banks.”

China Continues To Crack Down on Its Shadow Banking Sector

Oct. 8 (EIRNS)—China’s shadow banking sector shrank to a three-year low in the first half of 2019, according to a Moody’s report covered by Xinhua. As part of “government efforts to contain financial risks,” Xinhua reported, the authorities “have been stepping up efforts to rein in risky shadow banking activities in recent years amid a broader crackdown on financial irregularities,” while increasing “efforts to encourage bank lending to small private businesses.”  Broadly defined shadow banking assets declined by nearly 1.7 trillion yuan (about $240 billion) in the first half of 2019 to 59.6 trillion yuan, the lowest level since the end of 2016, according Moody’s.

If you read, and believe, the Financial Times, however, you would have been told the exact opposite. In their Sept. 24 edition, the FT cited an outfit called China Beige Book International, to run an article under the headline “China’s Shadow Banking Industry Roars Back.” The argument they peddle is that the U.S. trade war against China has been so successful, that “following the onset of the trade dispute with the U.S. and slowing economic growth, shadow lending has made an unprecedented return in the second and third quarters of 2019, according to China Beige Book International, a provider of independent data on the Chinese economy.”

And who, pray tell, is China Beige Book International? Well, it would appear to be a purveyor of military-grade disinformation. Its co-founder Leland Miller, according to their website, “was a capital markets attorney based out of New York and Hong Kong and worked on the deal team at a major investment bank,” and is “an elected life member of the Council on Foreign Relations, and a non-resident Senior Fellow at the Brent Scowcroft Center on International Security at the Atlantic Council.” And chief economist Dr. Derek Scissors hails from neocon outfits including the Heritage Foundation and AEI (where he is concurrently a resident scholar), as well as having been “a consultant for London-based Intelligence Research Ltd., and an advisor to the U.S. Department of Defense.”

Powell Announces ‘Not-QE,’ Works the Same Way as QE

Oct. 8 (EIRNS)—Speaking at the annual conference of the National Association for Business Economics (Oct. 5-8) in Denver today, Federal Reserve Chairman Jerome Powell let the other shoe of the “standing repo loan facility” drop, and promised the Fed would “soon” resume quantitative easing, known by its initials QE. “This is not QE,” Powell said. “In no sense is this QE”; while his listeners no doubt rolled their eyes and dashed off “QE back on” texts to their stock traders. It had the same effect as QE, for sure, as the stock markets, which had been sinking a good deal, reversed their losses.

Moreover, Powell said in detail that the Fed would soon start enlarging its balance sheet again, by expanding the securities, and particularly the Treasury securities it holds. So it also will look like and act as “QE4.” We can await more details from Powell on the “not-QE” features; but he seemed to be maintaining that this couldn’t be QE because there is no financial crisis.

In fact the sudden emergency demand for short-term liquidity from major banks, which has forced the Fed into hundreds of billions in overnight and two-week lending to banks for almost a month—for the first time since before and during the 2008 global financial crisis—shows the problems forcing it back into money-printing. In about ten days it will try to lower short-term interest rates again, to the range of 1.5-1.75%. When it last lowered by a quarter point in mid-September, short-term rates got out of its control and shot up.

Brexit Blowout Looms

Oct. 8 (EIRNS)—Sterling dropped against the dollar today, with British media reporting that Brexit talks were close to dead. Oct. 31 is the deadline for Britain’s withdrawal from the EU.

Sky News reported that German Chancellor Angela Merkel made it clear to U.K. Prime Minister Boris Johnson in a phone conversation that a deal for Brexit is now “overwhelmingly unlikely,” citing a Downing Street source. Meanwhile, the BBC said a government official said the EU had not shown a desire to “budge one centimeter” since Johnson submitted new proposals to Brussels last week, and that a Brexit deal is “essentially impossible” after the call between BoJo and Angela Merkel. President of the European Council Donald Tusk sent a public tweet to Johnson, writing: “What’s at stake is not winning some stupid blame game. At stake is the future of Europe and the UK as well as the security and interests of our people.”

STRATEGIC WAR DANGER

Rand Paul Backs Trump’s Syria Pullout, Says Regime Change Doesn’t Work

Oct. 8 (EIRNS)—Does Sen. Rand Paul (R-KY) have the monopoly on sanity—at least with respect to the permanent war policy—in the U.S. Senate? In an interview, yesterday, with Fox News’ Neil Cavuto, Paul said that the Republican Party critics of President Donald Trump’s decision to pull U.S. troops back from the Syrian border—“Lindsey Graham, Marco Rubio, Mitt Romney, Nikki Haley, and on and on and on,” as Cavuto put it—are “the neocon war caucus of the Senate” and that they “always want to stay at war. They always think it’s the best answer.”

“The bottom line is, this chaos was fed by outside intervention,” Paul continued. “The Turks got involved.  We got involved, the Qataris, the Saudis.  All these people got involved in this Syrian civil war.  And to what end?” Paul said. “I mean, hundreds of thousands of people have died.  Millions of people are displaced.  So, once again, the idea of regime change in the Middle East—and this is what President Trump is so right about—regime change hasn’t worked.  It’s led to more chaos. And the rise of ISIS came in the chaos of [Saddam] Hussein being toppled, but also the chaos of Assad’s regime being made marginal and made fragile.”

While Paul may have only had Republicans in mind when he identified the war party, the insane mob-like response to the White House announcement of Sunday night (Oct. 6) clearly indicates that the neo-con war caucus is bipartisan. Both House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Mitch McConnell (R-KY) issued statements condemning the U.S. withdrawal, as did a long list of neo-con members of the war party in both the House and Senate. At least three Democratic presidential candidates also condemned Trump’s decision. Bernie Sanders called Trump’s decision “extremely irresponsible” while Elizabeth Warren said that Trump’s decision was “reckless and unplanned.”

Kremlin Spokesman Peskov Says Russia Was Uninformed of U.S. Decision To Pull Out of Syria

Oct. 8 (EIRNS)—In comments to reporters this morning, Kremlin spokesman Dmitry Peskov said that Moscow had received no advance warning on the U.S. plan to withdraw troops from northeastern Syria, Sputnik reported. In fact, he added, Russia isn’t sure the withdrawal is happening.

“No one has informed us,” he stated, “We don’t yet know what troops are being withdrawn from there, to what extent and [whether they] are being withdrawn at all. … There have been different statements about troops pullout from different parts of the world that have not been confirmed. This is why we are following developments of the situation very attentively.” Peskov also confirmed that Putin had had no conversations either with President Donald Trump or Turkish President Recep Tayyip Erdogan about this.

In reply to another question, Peskov also commented that President Trump’s statements about wanting to get along with Russia have not been reflected in reality, pointing to the attacks Trump has suffered for supposedly being too friendly with Russia, TASS reported. “We know there have been some constructive statements by President Trump regarding cooperation with Russia, which assume rebuilding and fixing our bilateral relations. However, his statements on getting along with Russia still have not been reflected in reality. It is unclear what he meant, because unfortunately, the current state of our bilateral relations deeply contradicts these initial statements by President Trump.”

Norway Rejects NATO’s Missile Defense Shield

Oct. 8 (EIRNS)—The Norwegian government has decided against joining NATO’s missile shield. The debate about Norway’s possible participation has long spurred fears of tensions between Norway and Russia, Sputnik reported. Oslo’s Ministry of Defense stated the decision in its part of the budget, news agency NTB reports. “Through a broader security policy assessment, the government has decided that Norway does not consider acquiring upper-tier sensors or intercept missiles that can become part of NATO’s ballistic missile defense,” the state budget said.

“I think this prevents further tensions,” Russian expert from the Norwegian Institute of Foreign Affairs Julie Wilhelmsen said as quoted by Norway’s TV2. A secret Norwegian defense document from 2017 cited the alleged “threat” from Russia as the reason why Norway should join the “missile shield.” NATO’s defense program is a missile defense system being constructed in several NATO member states.

Norway initially opposed the idea of NATO becoming part of the U.S. missile defense plans, but changed its mind and has been rather supportive of the idea since 2010.

U.S. POLITICAL AND ECONOMIC

Ross, Pompeo Put New Restrictions on China, Alleging Human Rights Violations in Xinjiang

Oct. 8 (EIRNS)—On Oct. 7, the U.S. Commerce Department announced it was adding 28 Chinese high-tech, artificial intelligence firms to its “Entities List”—a virtual blacklist—alleging human rights abuses, illegal detention and repression of Muslim minorities in Xinjiang province. The statement was issued under the name of Commerce Secretary Wilbur Ross.

Then this afternoon, the State Department announced the imposition of visa restrictions on Chinese government and Communist Party officials “believed to be responsible for, or complicit in, the detention or abuse of Uighurs, Kazakhs, or other members of Muslim minority groups in Xinjiang, China.”

The State Department explained that its measures complement the announced Commerce Department measures. State demands that China “immediately end its campaign of repression in Xinjiang and release all those arbitrarily detained,” threatening it will “continue to review its authorities to respond to these abuses.”

The timing is not accidental, coming only days before U.S.-China trade talks are set to resume in Washington.

The Commerce Department action bars the named Chinese firms from buying components from U.S. companies without U.S. government approval. This is the same tactic used by Washington in attempting to limit the influence of China’s Huawei Technologies Co. Ltd. for alleged national security reasons. The decision targets twenty Chinese public security bureaus and eight companies, including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group, Ltd. and Megvii Technology Ltd.

This morning, prior to the State Department announcement, Chinese Foreign Ministry spokesman Geng Shuang responded to the Commerce Department’s actions, charging that the blacklisting of 28 Chinese agencies and companies “seriously violates the basic norms governing international relations, interferes in China’s internal affairs and undermines China’s interests.” He also stated that, “the U.S. criticism is nothing more than fact-distorting gibberish, which only further reveals the country’s malicious intention to impede the counter-terrorism efforts in Xinjiang and stability and development of China.”

U.S. Says It Is Not Backing Turkish Operation in Northern Syria

Oct. 8 (EIRNS)— The Trump Administration has taken step to demonstrate that it is not backing Turkey’s bid to create what Ankara calls a “safe zone” in northern Syria.

On Oct. 7, U.S. Defense Department spokeswoman Carla Gleason told reporters the Combined Air Operations Center has removed Turkey from the anti-ISIS coalition’s air tasking order, which is the means by which it coordinates the flights of partner nations operating in the theater, and also halted Turkey’s access to surveillance information. It does not technically cut off Turkey from the airspace, but, she said, “if you’re not on the air tasking order, it’s really hard to coordinate flights in that area.”

Meanwhile an unnamed U.S. official was quoted by the official Turkish Anadolu Agency that the “U.S. does not endorse Turkish action. The Secretary of Defense will be in touch with affected allies, partners and [Capitol] Hill today.”

President Donald Trump himself issued a strong statement yesterday on Twitter warning Turkish President Recep Tayyip Erdogan saying: “As I have stated strongly before, and just to reiterate, if Turkey does anything that I, in my great and unmatched wisdom, consider to be off limits, I will totally destroy and obliterate the Economy of Turkey (I’ve done before!). They must, with Europe and others, watch over the captured ISIS fighters and families. The U.S. has done far more than anyone could have ever expected, including the capture of 100% of the ISIS Caliphate. It is time now for others in the region, some of great wealth, to protect their own territory. THE USA IS GREAT!”

On Oct. 8, Trump announced he will host Turkish President Erdogan in Washington on Nov. 13, which he mentioned in a tweet: “So many people conveniently forget that Turkey is a big trading partner of the United States, in fact they make the structural steel frame for our F-35 Fighter Jet. They have also been good to deal with, helping me to save many lives at Idlib Province, and returning, in very good health, at my request, Pastor Brunson, who had many years of a long prison term remaining. Also remember, and importantly, that Turkey is an important member in good standing of NATO. He is coming to the U.S. as my guest on November 13th. #ENDENDLESSWARS.”

How much of an actual pullout of American troops is underway or planned, is an open question. One unnamed senior U.S. administration official was quoted by TASS as telling reporters, “Removal of the 50 to 100 U.S. soldiers from the safety zone where the Turks may incur is not the beginning of a formal pullout of Syria… The President has said this on numerous occasions, and the American people want American troops as soon as possible. And that remains our ultimate goal, is to get American troops from the Middle East and to let the parties in the region determine their own future.” The official continued, “But this is not the time for any such move right now. We’re moving 50 troops within Syria.”

Former U.S. Ambassador Huntsman Insists U.S. Needs ‘More, Not Less, Dialogue with Russia’

Oct. 8 (EIRNS)—In an op-ed appearing in the Wall Street Journal on Oct. 7, former U.S. Ambassador to Russia Jon Huntsman said the United States needs to cultivate constructive relationships with Russia’s future leaders.

According to Huntsman, whose term as ambassador ended Oct. 3, Russian President Vladimir Putin “runs the country with unrivaled strength but, his time will pass. We need to do less obsessing about Mr. Putin and more thinking about the institutions and generations that will outlast him. Rather than cutting ourselves off from Russia, which is the inescapable effect of all these sanctions, we need to cultivate constructive relationships with those who will shape Russia’s post-Putin period,” he emphasized.

“We need more, not less, dialogue with Russia. But first, we need to allow space for discussion about Russia among ourselves,” Huntsman went on to say. “As security experts know, fear often has a paralyzing effect. If we allow fear to dictate our approach, we may never find or even consider policies that more effectively advance our national interests, improve the bilateral relationship and make the world safer.”

He said that many of the sanctions leveled against Russia “may be having the desired effect and should be maintained, but not all. Blithely implementing sanctions without making sure they fit into a larger strategy of engagement costs us the ability to shape outcomes,” he wrote. “Our goal should be a Russia that is both a better partner and a more responsible global citizen.”

THE NEW GLOBAL ECONOMIC ORDER

Schiller Institute’s Richard Black Talks to Xinhua about ‘A New Paradigm in International Relations’

Oct. 8 (EIRNS)—Xinhua published an excellent interview with the Schiller Institute’s Richard Black on Oct. 6, who discusses how China and the U.S. need to build trust by increasing exchanges between them, identifying the basis for U.S.-China trade tensions in the “fears and geopolitical habits from the old way of thinking, the colonial way of thinking” of the 19th century, “which are still holding us back in the West.”

Now, he said, is the time to discard these old ideas about geopolitical conflict or fighting over resources. He explained that the root causes of existing bilateral trade tensions “lie in a fear of China’s economic excellence by some leading circles in the United States, as a result of misconception and geopolitical thinking.” There were “those in leading political circles in America having a British imperial outlook. We can only hope that the falseness of that view” has been left behind in the past.

The United States and China have a great deal in common, Black underscored, and suggested that people-to-people exchanges may be one way of changing the geopolitical mindset and rebuild trust between the two nations. “If we can get people to think about that, then we will come up with ways to coordinate our joint development.” Black stressed it would be important for U.S. Senators and Congressmen to travel to Beijing and meet their counterparts “and the same thing with Chinese political leaders coming to the U.S.”

Exchanges of this kind, Black continued, would help uproot fears and prejudices among people, and contribute to inter-civilizational dialogue of the kind that has promoted advances in history. “That’s the rule, not the exception,” he said. “We need a new paradigm of international relations, and we feel that China is making a very important contribution in helping to define a new paradigm of international relations. China’s contribution today to multilateralism is using economic development as a way to boost global development,” he concluded.

Reach us at eirdailyalert@larouchepub.com or call 1-571-293-0935

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