TUESDAY, DECEMBER 17, 2019 Volume 6, Number 249 EIR Daily Alert Service P.O. Box 17390, Washington, DC 20041-0390

• Fed Doubled Bailouts Again on Dec. 13 in an Out-of-Control Crisis–Trump Being Set Up for Crash
• Nunes Letter Proves House Intelligence Chair Schiff Is Discredited, and in Need of ‘Rehabilitation’
• Mass Strike Ferment Expanding in France
• Former ECB Chief Economist Concerned Over Potential for Financial Crisis of New Dimension
• Argentina’s New President Intends To Join the Belt and Road Initiative
• Assad Points to China’s Belt and Road as Key to Syria’s Future
• UN Report Shows Real Economic Parameters Rising in Africa
• Normandy Four Agreements Moving Towards Implementation
• China To Build Space Station, Then Search for Habitable Planets

EDITORIAL

Fed Doubled Bailouts Again on Dec. 13 in an Out-of-Control Crisis—Trump Being Set Up for Crash

Dec. 16 (EIRNS)—This morning a series of bank economists, beginning at Bank of America, proclaimed that the Federal Reserve has finally, after three months, brought the interbank lending liquidity crisis under control, and there will be “no crisis” and “no stress” on banks or interest rates at year-end.

This is very much to be doubted, since simply to get these Pollyanna statements from the big banks, the New York Fed on Friday the 13th had to roughly double, again, the emergency liquidity loans it is making daily to its primary dealer banks. This money-printing liquidity-pumping has constantly expanded and extended since Sept. 17, with no let-up to the process in sight.

On Dec. 9 a Credit Suisse analyst with years of experience working at the Treasury and the New York Fed on the repo market, Zoltan Pozsar, warned that these three months of $50-100 billion daily liquidity bailouts (largely kept secret from the public) were not nearly enough to get the interbank market through the end of the year. The Fed, he said, would have to go to full quantitative easing in weeks, or establish a permanent repo lending facility for the banks, or both.

On Dec. 13, the New York Fed made new announcements, added to its continuing daily, two-week, and 42-day loans and securities purchases:

• Liquidity loans from Dec. 13-Dec. 30: “At least $125 billion”;

• One-day loans on Dec. 30: “at least $75 billion”;

• Dec. 31-Jan. 2 loans: “at least $150 billion”;

• Jan. 3-14, 2020 loans: “at least $120 billion”.

The Fed will now be substituting itself for at least 15% of the $1.1 trillion/day interbank lending market, meaning that 15% of that market is unable to function. The biggest banks can’t, or much more likely refuse to lend that much to some other financial firms and/or banks even for 24 hours, for fear of intraday insolvency of their counterparty.

One analysis, that of the “Wall Street on Parade” website, is that on Dec. 12, “the New York Fed announced that over the next month it would shower the trading houses (primary dealers) on Wall Street with a total of $2.93 trillion in short-term loans … for a Wall Street liquidity crisis that has yet to be explained in credible terms” (emphasis in original).  Whatever the Fed chooses to call it, this is really massive, effectively secret, quantitative easing (“QE4”).

It is easy to trace this to hedge funds which are liquidating, to unpayable corporate debts in the $15.5 trillion U.S. corporate debt bubble, and perhaps to one or more major banks ready to go. These all constitute the fuse: The bomb is these banks’ exposure to hundreds of trillions of dollars in derivatives bets, of which the worst exposure is to foreign exchange derivatives.

The American people cannot let President Donald Trump, fighting what is really a British Empire coup d’état, get set up to be hit with a “2008” financial crash or worse. It can be prevented.  The four key actions proposed by the late economist and statesman Lyndon LaRouche are the essential means. Break up Wall Street banks with Glass-Steagall and establish a national credit institution, high-technology new infrastructure, a crash Moon-Mars mission for NASA.

These actions mean the U.S. economy can recover instead. If Americans mobilize and force them on the Congress as a way to “rehabilitate” itself, the President is in a position to deal with China, Russia and India for a new international credit and monetary system that extends the new infrastructure and science projects into the developing countries.

Sitting still and waiting for the Federal Reserve to “plug” a vast liquidity hole in the Wall Street banking system, bigger than anything since the Lehman Brothers blowout and being kept almost entirely secret, is not a good alternative.

U.S. POLITICAL AND ECONOMIC

Nunes Letter Proves House Intelligence Chair Schiff Is Discredited, and in Need of ‘Rehabilitation’

Dec. 16 (EIRNS)—House Intelligence ranking member Rep. Devin Nunes (R-CA), whose exposure of that the FBI and Justice Department knowingly used the lying Steele dossier to obtain a Foreign Intelligence Surveillance Act warrant against a member of Trump’s campaign, turned Russiagate into a dead letter, stands completely vindicated by the report of Justice Department Inspector General Michael Horowitz. The abominable FBI conduct regarding the so-called “Steele dossier” smearing Trump, was what Nunes was unearthing when he was attacked by committee Democrats and the media as virtually a Russian agent.

Now Representative Nunes has released a devastating letter to the Democratic Intelligence Committee Chair Adam Schiff, who on Sunday television was completely on the defensive about the FBI misconduct and outright crimes found by Horowitz’s investigators. Nunes is basically cataloguing Schiff’s discredited position as Committee chair, and demanding action from him to “rehabilitate.”

The long letter begins: “Dear Chairman Schiff: As you are aware, on December 9, 2019, U.S. Department of Justice Inspector General (IG) Michael Horowitz published the results of his investigation of the FISA warrant and renewals obtained by the Federal Bureau of Investigations (FBI) and the Department of Justice (DOJ) to spy on Trump campaign associate Carter Page. The IG’s findings of pervasive, major abuses by the FBI dramatically contradict the assertions of your memo released on February 24, 2018, in which you claimed, ‘FBI and DOJ officials did not “abuse” the Foreign Intelligence Surveillance Act (FISA) process, omit material information, or subvert this vital tool to spy on the Trump Campaign.’

“After publishing false conclusions of such enormity on a topic directly within this committee’s oversight responsibilities, it is clear you are in need of rehabilitation.

“Outlining every false claim from your memo would require an extremely long letter, so I will limit my summary to a few highlights. In your memo you made the following assertions:

“• FBI and DOJ officials did not omit material information from the FISA warrant.

“• The DOJ ‘made only narrow use of information from [Christopher] Steele’s sources about Page’s specific activities in 2016.’

“• In subsequent FISA renewals, DOJ provided additional information that corroborated Steele’s reporting.

“• The Page FISA warrant allowed the FBI to collect ‘valuable intelligence.’

“• ‘Far from “omitting” material facts about Steele, as the Majority claims, DOJ repeatedly informed the Court about Steele’s background, credibility, and potential bias.’

“• The FBI conducted a ‘rigorous process’ to vet Steele’s allegations, and the Page FISA application explained the FBI’s reasonable basis for finding Steele credible.

“• Steele’s prior reporting was used in criminal proceedings….

“The IG report has exposed all these declarations as false.”

Nunes makes the unanswerable argument that the Intelligence Committee’s purpose is oversight of the activities of the intelligence agencies; that in contradiction, Schiff has been covering up their misdeeds; he is therefore discredited as chair of that committee. Nunes concludes: “As part of your rehabilitation, it’s crucial that you admit you have a problem—you are hijacking the Intelligence Committee for political purposes while excusing and covering up intelligence agency abuses. The next step will be to convene a hearing with IG Horowitz, as the Senate Judiciary Committee has done and the Senate Homeland Security Committee will do next week.”

COLLAPSING WESTERN FINANCIAL SYSTEM

Mass Strike Ferment Expanding in France

PARIS, Dec. 16 (EIRNS)—Today is the 12th day of mass strike ferment in France, whose main thrust is to fight against the government’s attempt to ram through pension reform. In this fight, the two sectors spearheading the movement are transportation (buses, metros, trains, flights) and education. Since Dec. 5, four of the main transportation unions—General Confederation of Labor (CGT), Workers’ Front (FO), Combined Union Federation (FSU), Solidaires—joined by four student unions, have succeeded in blocking practically all transportation in Paris, as well as at the regional, national, and European levels.

In public education, badly threatened by the pension reform, the strike has been also very successful. In the kindergarten and primary schools, the rate of participation is reported by police to be at 51%, and by unions at 65%; and participation in secondary schools is 42-75%. Police and firefighters are also striking against the pension reform.

Now other forms of anti-austerity strikes and protests are joining the mass ferment. Some sectors are striking against the increase of energy prices under the press of “climate protection” laws. They include truck, ambulance and tax drivers. The truckers came into action today, and will be blocking several access points in Paris.

On Dec. 17, there will be a new national strike day, bringing in all sectors in addition to those against pension reform. It will demonstrate how the mass strike process is working: All striking sectors will converge in large demonstrations in Paris and elsewhere. The hospital workers will begin their own march at 11 a.m. and then join the larger demonstration in the early afternoon. They have been strong for several years in fighting against the shutdown of many facilities, which has cut medical care so badly that patients have died in emergency department hallways for lack of care.

The “Gilets Jaunes” (Yellow Vests) will also be participating in tomorrow’s strike.

Prime Minister Edouard Philippe poured fuel on the fire Dec. 11, when he detailed the government reform point system. The pro-reform trade unions and the people at large would have liked the government to seize on the occasion to drop the reform. Philippe didn’t back off on anything. On the contrary, he confirmed that the government intends to extend retirement to age 64, while not calling it that. So the pro-reform unions, which had made the withdrawal of retirement extension the condition for their continued support for reform as a whole, en bloc turned their back on Philippe and his reform, and decided to immediately join the strike.

Former ECB Chief Economist Concerned over Potential for Financial Crisis of New Dimension

Dec. 16 (EIRNS)—In an interview with Frankfurter Allgemeine Sonntagszeitung, the Sunday edition of the daily FAZ, former European Central Bank (ECB) chief economist Otmar Issing warned that the ECB’s extreme low-interest rate policy is encouraging investors to get into things, whose risks they do not realize. The market value of many assets does not reflect the real risks. And since this approach is moving into the most remote corners of the financial market, “that can lead to a crisis of new dimensions,” Issing says, adding that the situation is as fragile as before the outbreak of the crisis in 2008.

Issing has a good reason to worry, naturally, because he does not have any solution.

THE NEW GLOBAL ECONOMIC ORDER

Argentina’s New President Intends To Join the Belt and Road Initiative

Dec. 16 (EIRNS)—In a meeting with Chinese President Xi Jinping’s envoy to his Dec. 10 inauguration, Argentina’s new President Alberto Fernández indicated his intention of joining China’s Belt and Road Initiative (BRI). According to the Dec. 15 daily Perfil, Fernández told Arken Imirbaki, vice-chairman of Standing Committee of the National People’s Congress, that he’s very interested. Note too, that Xi Jinping has extended an invitation to Fernández to visit China.

Sources from the office of Foreign Minister Felipe Sola, who attended the meeting, told Perfil “We’ll join the Belt and Road in the future. We’re very interested.” The Fernández government is reportedly prepared to sign a Memorandum of Understanding (MOU) to this effect soon. The Chinese Embassy in Buenos Aires told Perfil it is optimistic that the new Argentina government is open to improving bilateral relations, which former President Mauricio Macri had downgraded, and indicated it will work with Argentina “so it can participate in the Belt and Road.”

Among other subjects discussed at the meeting was the construction of a fourth Argentine nuclear reactor, which China is willing to finance for $9 billion on very favorable terms.

It is noteworthy that Argentina’s new ambassador to Beijing is Sinologist Sabino Vaca Narvaja, who is an enthusiast of the BRI, and recommends that Argentina quickly sign an MOU. In a Nov. 17 article for “El Cohete a la Luna” website, Vaca Narvaja observed that being part of the BRI “can broaden our possibilities of financing and investment in some vectors that are important for national development, especially in the small and medium-sized business sector.”

Vaca Narvaja proposes that Ibero-American nations strengthen regional integration and function as a continental bloc, so as to “take advantage of China’s new global strategy.” As an example, he points to the bioceanic railroad (traversing Bolivia) which, once completed, will represent a strategic area of productive integration and trade that will benefit several countries in the region by allowing them to export products via the Pacific to Asia much more efficiently and cheaply.

Assad Points to China’s Belt and Road as Key to Syria’s Future

Dec. 16 (EIRNS)—In an interview with China’s Phoenix Television, Syrian President Bashar al-Assad stressed the importance of China’s economic relationship to Syria, including China’s Belt and Road Initiative. The first question from the interviewer was on reconstruction in the areas of Syria that have been liberated from the terrorists. Assad said that reconstruction begins almost immediately and focuses first on the hard infrastructure, such as electricity and roads, and then moves on to the soft infrastructure such as schools and hospitals. “However, the most important stage in reconstruction, which comes later and constitutes the most serious challenge for us, is restoring daily activity especially economic livelihood,” he said. “This requires a great deal of effort and is affected by internal factors and the external environment—namely the embargo imposed by Western countries on Syria, which has a negative effect and slows the process down.”

Assad said, China “specifically provides assistance in reconstruction particularly in the humanitarian domain.” But discussions have begun with Chinese companiesexperienced in reconstruction, he said, which includes discussions on finding ways to evade the Western sanctions. “I would like to emphasize that this support is not limited to the economy; reconstruction ultimately means contributing to Syria’s stability for two reasons. First, in the past two years, millions of Syrians have returned from abroad without finding sufficient job opportunities, which in itself is a factor that can be used by terrorists and outside powers. Second, the reconciliation we have achieved in Syria was in part with those who worked with the militants or the terrorists at a certain period. They agreed to lay down their weapons and return to their normal lives—this return requires job opportunities.  So, the support from China and other friendly countries in Syria’s reconstruction, is as important as the military efforts to restoring stability in Syria, and striking and fighting terrorism.”

In the Belt and Road Initiative, Assad sees much more than just an opportunity to rebuild Syria. “From a strategic perspective, it constitutes a worldwide transformation, a transformation in the nature of international relations. If we look at the current situation in the world, we see that it is governed by Western attempts of domination, particularly on the part of the United States,” he said. But China has an entirely different perspective. China, Assad said, is “trying to strengthen its influence in the world. But what kind of influence? It is not the negative influence we have become accustomed to, but rather an influence in the sense of relying on friends and an influence based on mutual interests.” Later, discussing the relative size and power of the countries, Assad continued, “This new approach is derived from history but is suitable for the 21st century; it is an approach built on parity. When we are part of this [Belt and] Road, China treats us as equals and not as a superpower dealing with a small country. There are mutual interests: it is beneficial to China, Syria and all the countries on this Road.”

The full translation of interview transcript is available on the official Syrian Arabic News Agency (SANA): “President al-Assad: ‘The Belt and Road Initiative’ Constituted Worldwide Transformation in International Relations…. There Will Be No Prospect for U.S. Presence in Syria.”

UN Report Shows Real Economic Parameters Rising in Africa

Dec. 16 (EIRNS)—The UN Development Program has released its decennial “Human Development Report 2019,” which shows African countries making a healthy rise in physical economic parameters. Global in scope, the 300-page report purports to “go beyond” the simple income statistics, and including life expectancy and education years in the equation. It has been doing this since 1990.

To get a sense of the report’s perspective, for example, the top 50 ratings are primarily Western European countries, owing to high per-capita income and life expectancy. Looking at the BRICS countries: Brazil registers 79 on their scale; Russia 49; India 129 (due to a low “mean years of schooling”); China 85; and South Africa 113. The U.S. rates 15, right behind the U.K., with Japan and South Korea slightly down the list.

While African countries in general compose the majority of the Low Human Development segment of the rankings, the island nation of Seychelles has for the first time broken into the “Very High” segment, coming in at number 62. Four countries, Botswana, Gabon, Mauritius and South Africa are now rated “High,” and another 12 African countries—Angola, Cape Verde, Cameroon, Congo, Equatorial Guinea, Ghana, Kenya, Namibia, São Tomé and Príncipe, Zambia, and Zimbabwe—are in the “Medium” category.

A primary focus of the report is “inequalities” between rich and poor, which they describe as motivating “the wave of demonstrations” now sweeping the globe.

STRATEGIC WAR DANGER

Normandy Four Agreements Moving Towards Implementation

Dec. 16 (EIRNS)—The points agreed on at the Normandy Four summit of Russia, Ukraine, France and Germany in Paris on Dec. 9 seem to be moving towards implementation. Ukrainian Foreign Minister Vadym Prystaiko indicated as much in interviews reported over the last few days. For one, the new ceasefire that was discussed in Paris. “The announcement [of a ceasefire] will be on Dec. 20 or Dec. 21. And we will see whether further progress is possible,” he said in an interview with Unian news agency. “The Trilateral Contact Group is authorized by the [Normandy Four] leaders to provide this technical solution,” to include when it’s to be announced and when the Organization for Security and Cooperation in Europe (OSCE) will carry out verification.

Prystaiko also reported that Ukraine is ready to offer three new sites in the Joint Forces Operation zone for the disengagement of troops. “We are preparing several alternatives. These sites will be considered and agreed upon within one of the Trilateral Contact Group’s sub-groups. We believe there should be disengagement in areas of humanitarian significance at this stage. This is a priority in these three or four, or how many sites we’ll agree on,” the minister said.

According to TASS, Prystaiko stressed that three main events need to show progress: the ceasefire; an all-for-all prisoner swap; and the implementation of the “Steinmeier formula” for the special status of the Donetsk and Luhansk regions. Related to the ceasefire and the disengagement along the line of contact, “another important event” might take place this week. “On our request, the Red Cross will attempt to cross the line [of contact] and take part in the investigation into the whereabouts of, according to different estimations, nearly 500 people that are reported missing,” Prystaiko said.

As for special status, Prystaiko told TASS that Kiev is ready integrate the “Steinmeier formula” into the law on a special procedure for local self-governance in the Donetsk and Luhansk regions in eastern Ukraine. “We are ready to take this step [to implement the ‘Steinmeier formula’] by integrating it into Ukraine’s legislation. There is every likelihood that it will be integrated into the special status law,” he said.

The “Steinmeier formula” was named for Germany’s then-Foreign Minister Frank-Walter Steinmeier, when he was negotiating as part of the Normandy Four.  He is now President of the Federal Republic of Germany.

SCIENCE AND INFRASTRUCTURE

China To Build Space Station, Then Search for Habitable Planets

Dec. 16 (EIRNS)—Yuan Jie, the head of China’s space exploration program, announced Dec. 13 that China’s space exploration program for 2030 to 2045 would include missions both to examine exoplanets, and to evaluate their potential for human habitation. Yuan is executive director and president of the China Aerospace Science and Technology Corporation (CASC). He made the announcement in an address to 500 students at Beihang University, Sputnik International reported yesterday.

Yuan told the students of plans to launch space missions that would searchfor habitable planets that can be colonized by humans. CASC’s “Min Yin” project, which translates as “searching sound,” would examine exoplanets and assess their potential for human habitation. He called the project a huge priority for the country’s space agency in the next decade.

Yuan said that these projects would mark a breakthrough for Beijing in basic research. CASC will send spacecraft with state-of-the-art telescopes, infrared detectors, and other equipment that can function in extremely harsh environments and low temperatures, looking for planets that have the potential to support human life.

In the 2020-2030 decade, CASC’s plans so far include launching a Mars probe in 2020, with a landing on Mars expected a year later. CASC also plans to start building a long-term, near-Earth manned space station in 2020, as well as carrying out the third stage of its lunar exploration program.

Sputnik added, for comparison, that the U.S. National Aeronautics and Space Administration (NASA) will prepare to land astronauts on the Moon by 2024 with the Artemis missions. And that Russia’s Roscosmos has planned to establish a lunar observatory by 2025, according to Executive Director for Science and Long-Term Programs Alexander Bloshenko. “There are plans to install equipment on this [lunar] base to study deep space and special telescopes to track asteroids and comets that pose a danger of their collision with Earth,” Bloshenko told TASS on Nov. 25.

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