TUESDAY, JUNE 11, 2019

Volume 6, Number 114

EIR Daily Alert Service

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

• It Will Take a New Credit and Money System
• U.S. Senators Step Up Effort To Stop Trump Administration Arms Sales to Saudis
• Acting U.S. Budget Chief Asks Long Delay of Ban on Huawei
• Huawei Rolling in 5G Contracts From Dozens of Commercial Firms in 30 Countries
• U.S.-Mexico: The Real ‘Deal’ Must Include Great Projects
• Three Firms From U.S., China, Italy To Bid on Batoka Gorge Dam Between Zambia and Zimbabwe
• Financial Media Concede China Is a Good Creditor To Have
• Expose of ‘Operation Car Wash’ Begins in Brazil, But the Outcome Is Unknown

EDITORIAL

It Will Take a New Credit and Money System

June 10 (EIRNS)—The big central banks continue to beat their way back to the quantitative easing schemes they all used to drag the City of London and Wall Street banks through the last crash—signalling the approach of another. The Federal Reserve, which after 10 years finally raised its discount rates in 2018, has resumed lowering them; its chair Jerome Powell said don’t regard the bailout measures used in the last crash as “unconventional”—they’re going to be used again. After the European Central Bank supposedly left its discount rate unchanged for a year on June 6, its president Mario Draghi spent the days since putting out rumors and leaks that in reality, its board was discussing interest rate cuts and increased buying up of corporate and sovereign bonds from private banks. The Bank of Canada central bank “reluctantly” returned to cutting rates. And so on for the rest.

Are we to believe the central banks that they are just “supporting continuation of the expansion”? Stagnant and low-wage as that “expansion” has been since the crash of 2007-08, it has ended in Europe and is slowing in the United States. The central bankers know, and admit, that trillions in the debt of overindebted corporations and super-indebted “zombie companies” will now default in these conditions, triggering a crash starting in some section of the financial markets—“the usual carnage” as Bank of America CEO Brian Moynihan dryly put it in a warning to the Economic Club of New York June 5. He should know: BoA is the biggest leveraged lender since the crash of all the megabanks, and has been selling off its “junk debt” to non-banks like private equity and hedge funds, which now “worry” Moynihan.

Another financial crash will take down real economies in Europe and the United States which have not really recovered yet, leaving them completely devastated. The “Four Laws” which Lyndon LaRouche called urgent necessity on June 8, 2014, must be enacted quickly now—especially quickly, the Glass-Steagall separation of commercial banks from the speculative casino, and the creation of masses of national credit for new, high energy-density and high-technology basic economic infrastructure.

Russian President Vladimir Putin’s sober comments to the St. Petersburg International Economic Forum were important: The brief global growth (through several serious crises) after the end of the Cold War ended decisively with the “global crisis of 2008-09,” and since then supposed “GDP growth” has decoupled from growth in physical goods trade, which has hardly grown. “Quantitative easing and other measures failed to resolve the problems and only pushed them into the future.” By turning back to that policy now, the central banks are confirming that Putin is right.

Lyndon LaRouche, in a videotaped speech to a conference in Russia at the depth of the 2009 economic collapse following the financial crash, said that only a new credit system—not a monetary, but a credit system—could launch a real economic recovery. The text of those remarks, “Agreement Among Four Powers Can Avert Total Collapse,” is republished in the June 14, 2019 issue of Executive Intelligence Review. Identifying the initiating powers as the China, Russia, the United States and India, LaRouche specified: “The future of mankind, even though it’s some generations distant, now, depends upon the development of the colonization of the Moon, as a manufacturing center for building pieces of equipment which will convey man to the colonization of Mars. This will be a fundamental change in the character of the apparent human destiny, over this period of time.” This “science driver” for creativity and productivity shaped another of LaRouche’s economic “Four Laws” in 2014.

The great projects on Earth, and in the Solar System, are there for a new credit system to carry out; China, with its Belt and Road Initiative, has launched the process. For the United States, the great projects for credit lie immediately before us in the developing nations of Mexico and Central America, and have been proposed in one form already to the Trump Administration. To carry them out—and to prevent the devastation of the approaching financial crash—requires a new credit system from those four powers, as LaRouche proposed it.

U.S. POLITICAL AND ECONOMIC

U.S. Senators Step Up Effort To Stop Trump Administration Arms Sales to Saudis

June 10 (EIRNS)—U.S. Senators are gearing up to get the votes to block President Donald Trump’s emergency sale of arms to the Saudis and their Gulf allies, The Hill’s Rebecca Kheel reported June 9. Besides opposition to the sale of arms to the Saudi regime, there is also opposition in both parties to President Trump’s declaration of an “emergency” for Saudi arms sales, and overuse of “emergency” measures to get legislation passed. The Senators showed some spine by introducing 22 resolutions—one for each arms sale proposed in the bill—that would block the deals, amounting to an unprecedented Congressional move to stop the White House’s approval of emergency arms sales.

In addition, Sen. Lindsey Graham (R-SC), a staunch Trump ally, is supporting the resolution to block the sales. Said Sen. Chris Murphy (D-CT), one of the co-sponsors, “I’ve offered two prior disapproval motions on Saudi arms sales, and Lindsey led the opposition to my prior attempts to stop the arms sales.” Graham told The Hill, “I think there’ll be a lot of support for the resolutions.”

In late May, the Trump Administration notified Congress that it was invoking a rarely used legal provision, deeming the situation an emergency, to push through long-stalled deals with the Saudis and United Arab Emirates worth $8.1 billion—and the emergency cited was alleged threats from Iran!

The Saudis are scheduled to get F-15 fighter jet support, Paveway precision-guided munitions, aircraft maintenance support, engines for F-15s, and logistics support for Saudi spy planes.

Further, the New York Times reported today that the Raytheon-made Paveway smart bombs will be co-manufactured in Saudi Arabia, which could give the Saudis enough access to produce a version of that bomb. The U.A.E. was also approved for laser-guided rockets, Paveway smart bombs, and also given the “go ahead” to provide some of the Paveway bombs to Jordan.

The Senators seeking to block the sales believe they have enough support to pass all 22 resolutions. Sen. Rand Paul (R-KY) said, “The first time we had a vote, we got about 22 people to oppose the sale. Last time, I think we got nearly 50. I think there’s a growing number of people and growing resistance to allowing the government to operate by emergency.”

In March, a resolution to end U.S. military support for the Saudi-led coalition in Yemen passed the Senate 54-46.

Senator Murphy argued that opposition to the arms sales is growing because Mohammed bin Salman’s “going off the rails is now hard for the Saudis to disguise,” referring to the Kingdom’s ruling Crown Prince. Senate Foreign Relations Chair Sen. Jim Risch (R-ID) said, “There’s things that have happened over the last year and recent years that cause all of us to need to recalibrate.”

Acting U.S. Budget Chief Asks Long Delay of Ban on Huawei

June 10 (EIRNS)—Acting director of U.S. Office of Budget and Management Russell Vought has asked to delay imposing some provisions of a U.S. law that restricts the government’s business with Chinese tech giant, Huawei Technologies, for two years, the Wall Street Journal’s Dan Strumpf reported today. Vought made the request in a letter to Vice President Mike Pence and nine members of Congress.

At issue are several provisions of the National Defense Authorization Act, which President Donald Trump signed into law in 2018. The NDAA targets Huawei and other Chinese tech companies with one provision which bans U.S. agencies, and recipients of federal grants and loans, from doing business with Huawei or contractors which make extensive use its products. On June 4, Vought asked for a delay in implementation of those portions of the NDAA.

If the two-year delay is enacted, it would be a reprieve for Huawei, which has been the target of a series of U.S. actions. Last month the Commerce Department also ordered Huawei to be placed on a blacklist preventing it from buying American technology.

Vought says the new NDAA would lead to a “dramatic reduction” in the number of companies that could supply the U.S. government, and would be a particular hardship for U.S. companies which are located in rural areas, where Huawei equipment is in use, and which rely on federal grants. An OMB spokesman said that the exception is “about ensuring that companies who do business with the U.S. government, or are involved with federal grants and loans, have time to extricate themselves from doing business with Huawei and other Chinese companies listed in the NDAA.”

The addressees of the letter have not responded yet, the Journalreports. A Huawei spokesman said it is “carefully watching the situation.”

Huawei Rolling in 5G Contracts from Dozens of Commercial Firms in 30 Countries

June 10 (EIRNS)—To all appearances, China will have the last laugh at the United States’ attempt to limit Huawei’s customer base. The Press Trust of India (PTI) reports that Huawei has obtained 46 commercial 5G contracts, so far, in 30 countries, and has shipped more than 100,000 5G contracts globally, according to a statement the company issued on June 6.

China has emerged as a top player in the race for setting up the super-fast telecommunications system, despite the U.S. ban on its 5G services, alleging that Huawei systems could be manipulated by the Chinese government to spy on other countries and disrupt critical communications.

The Financial Times of June 9 carries a very frank report that the major Ibero-American nations are going ahead with 5G wireless technology, despite U.S. Secretary of Commerce Wilbur Ross’s having essentially tried to order Mexico not to do so. “Brazil is leading the resistance,” writes the FT, and quotes Vice President Hamilton Mourão, saying, “Huawei is established in Brazil and will make more investments.” Chile’s President Sebastián Piñera told Huawei chairman Liang Hua met in Shenzhen, where the company is headquartered, “Huawei is welcome to participate in public tenders in Chile,” for 5G and fiber optic cable projects.

According to Mexican President Andrés Manuel López Obrador’s chief of staff Alfonso Romo, Ross instructed them: “We don’t want very active participation of Chinese investment in Mexico, especially not in strategic projects.” But the FT then quotes Ricardo Salinas, “a media mogul close to” López Obrador, as saying: “I have nothing but good things to say about Huawei. I think it’s a disgrace what these Americans are doing to put them down.” Telecom networks in Mexico are “deeply dependent” on Huawei equipment and technology, reports FT, citing Ernesto Piedras, CEO of Competitive Intelligence Unit consultancy that even “AT&T in Mexico has Chinese DNA,” which six years ago got into the Mexican market by purchasing local networks, which were “totally Huawei.”

FT cites analysts who, in the words of the City of London daily, consider “there is no U.S. supplier able to compete with them [Huawei] in Latin America.”

In short, opines FT, “The Trump Administration’s efforts appear to have come to nothing—at least for now.”

THE NEW GLOBAL ECONOMIC ORDER

U.S.-Mexico: The Real ‘Deal’ Must Include Great Projects

June 10 (EIRNS)—The question of whether the U.S.-Mexico agreement, reached this past weekend, includes any U.S. investment commitment to the Mexico/Central America development plan, remains open. The agreement itself has elements not yet publicly discussed. Mexican Foreign Minister Marcelo Ebrard clearly asked the United States to “speed up” $5.8 billion in project investment which was in some way committed last year, and the response of Secretary of State Mike Pompeo and Homeland Security officials is unknown. Mexico wants an additional $10 billion in investments guaranteed, presumably by the USAID development bank under Pompeo’s purview; however, Ebrard answered media questions to the effect that this was not brought up at all during last week’s meetings.

EIR attended a meeting at Rice University bearing on this question, in regard to the North American Development Bank (NADB), which was created by an addendum to the original NAFTA trade agreement, and which has had a maximum authorized capitalization of only $3 billion. Officials of the NADB spoke hopefully of possible action from Congress and the White House to get cross-border infrastructure project investment going.

Aside from that discussion, bills to expand the NADB exist in the 116th Congress in both the House (H.R.132) and Senate (S.267), both named the North American Development Bank Improvement Act of 2019. The Senate bill, with just two sponsors last session, now has six; the House companion bill has eight bipartisan sponsors from the Texas delegation. The NADB would make an obvious vehicle for joint U.S.-Mexico credit for investment in the development plan Mexico is proposing. A source in Congress said the aim of these sponsors, though still under discussion, is to “improve” the NADB to at least $10 billion in total capital authorization, including capital “on call” from both Washington and Mexico City.

Three Firms from U.S., China, Italy To Bid on Batoka Gorge Dam between Zambia and Zimbabwe

June 10 (EIRNS)—In a decision made May 31, the Zambezi River Authority (ZRA), which is run by the governments of Zambia and Zimbabwe, has “shortlisted” three companies—from three continents—as lead contractors for its dam on the Zambezi River at the Batoka Gorge, 50 km downriver from Victoria Falls. In variously planning and discussion since the early 1990s, its development has been stopped several times by local green activists. Now the project has been given greater importance since the current unexpected drought has reduced river flow and power output downstream on the Kariba Dam.

The three companies being considered are the Chinese Three Gorges Dam Corp., which built of the world’s largest hydro-electric project; Italy’s Salini Impreglio, which has been building dams in the region since the 1950s; and the American GE Hydro China, which has partnered with PowerChina. ZRA’s CEO Munyaradzi Munodawafa told media, reported Zimbabwe’s daily Herald, “If all goes well, by September we should have a developer for the Batoka. So, for Batoka, we are talking of a 2,400 MW plant; 1,200 MW on both sides of the river. We are just waiting for the developer; when we appoint, we will then go to the next stage of construction.”

The joint venture between the two countries is estimated to cost $4.5 billion. According to Construction Review Online, the dam should take six years to build, but electricity will begin being produced in three years. It is being constructed on a Build-Operate-Transfer financing model and “would not put any fiscal strain on the two governments. As a result, no sovereign guarantees would be needed,” the online journal wrote.

Financial Media Concede China Is a Good Creditor To Have

June 10 (EIRNS)—An article in the financial news website Quartz Africa, although intended to have just the opposite effect, reveals that China is actually a good creditor to have. Entitled, “Ethiopia and Kenya Are Struggling To Manage Their Chinese-Built Railways,” the article opens with the following: “In the wake of the Belt and Road Initiative (BRI) Forum in Beijing six weeks ago, Ethiopia gained another Chinese debt-concession … [and] also received a cancellation on all interest-free loans up to the end of 2018. This was on top of previous renegotiated extensions of major commercial railway loans agreed earlier in 2018,” wrote author Yunnan Chen.

China has further written off a billion dollars of losses on Ethiopia’s Addis Ababa-Djibouti standard gauge railway (SGR) line, mostly caused by lower than anticipated usage stemming from a lack of inland infrastructure to connect the rail line to other urban or industrial centers. In late 2018, the Chinese restructured the terms of a loan, extending the repayment period from 15 to 30 years.

The Wall Street Journal, too, ran a June 9 column, “Who’s Afraid of the Belt and Road?” by Gerard Gayou, to argue that “Beijing has a strong preference for debt renegotiation when partner countries get in the red.” (Though Gayou does not make comparisons, Beijing is also not likely to turn debtor nations over to vulture funds and asset-seizing courts as the U.S. Treasury did—while the Federal Reserve piously wrung its hands over it—to Argentina during the Obama Administration.)

Gayou cites a Rhodium Group report in April which “found 40 Chinese debt renegotiations with 24 countries, most … since 2007. Together they represented around $50 billion of renegotiated debt, including write-offs, deferments and refinancing. Debt forgiveness is rare for more expensive projects, but so are asset seizures.”

COLLAPSING WESTERN FINANCIAL SYSTEM

Mini-BOT Debate Raises Issue of Government Credit in Italy

June 10 (EIRNS)—In the debate on the mini-BOT Treasury bonds in Italy, Finance Minister Giovanni Tria and Prime Minister Giuseppe Conte have opposed them, but the two Deputy Prime Ministers, Lega’s Matteo Salvini and M5S’s Luigi Di Maio, are not giving up. Today the Council of Ministers was to discuss it.

European chancellorships fear that the mini-BOTs are a stealth means to introduce a parallel currency and leave the euro. The immediate real issue, however, is that the Italians plan to pay the government’s past-due debt to vendors for up to €53 billion, thus erasing in one stroke the government deficit!

Whereas ECB President Mario Draghi et al. struggle with Aristotelian categories to decide whether the mini-BOTs are money or debt, as EIR has explained before, the mini-BOTs (for Buoni Ordinari del Tesoro) are a “voluntary” means of payment, i.e., not legal tender which Italians are bound to accept as payment, and therefore they are not a currency. They are also not debt, because the government does not offer them in exchange for money.

The mini-BOT will be offered to the government’s Italian business creditors, i.e., vendors, to pay government past-due debt. These creditors can use the mini-BOTs to pay their taxes. If there are mini-BOTs left over, they can either keep them to pay taxes next year, or use them to purchase goods from other taxpayers who are willing to accept them to use in paying their own taxes.

Will it be successful? Probably, yes; but it is not the solution for the Italian economy. It is a limited tool for a limited purpose. It has a high political meaning, because it is an assertion of sovereign will against the EU.

However, the solution to the Italian crisis, as for other nations, is to re-establish a credit capability fully under sovereign government control, in order to mobilize large productive capacities.

SCIENCE AND INFRASTRUCTURE

Remember Space-Led Industrial Policy Is a Science Driver, as China Does

June 10 (EIRNS)—It shouldn’t be forgotten that China’s space exploration pioneer Ouyang Ziyuan told NetEase Technology in December 2018 about a truly productive industrial policy, “science-driven” by space exploration:

“There is a resource on the Moon, which is the ultimate energy for our future, called helium-3, the raw material for nuclear fusion power generation. There is almost no helium-3 on the Earth, and the soil of the Moon is rich in helium-3 resources.

“In 2006, I asked Academician Garimov, the chief scientist of the Russian lunar exploration project. I said, ‘Garimov, what is the ultimate goal of your Russian lunar exploration?’ He crossed his hands and told me proudly, ‘To solve the energy problem of the future of all mankind.’ ‘Oh,’ I said, ‘Garimov, next year when Chang’e-1 goes to Heaven, I’m going to get the distribution and total amount of helium-3 resources in the lunar soil.’ He was surprised. ‘How can you do that in China?’ I said that ‘after 3-4 years of preparation, we will be able to complete it.’

“According to our exploration, the resources [of helium-3] on the Moon are about 1.2 million tons. When nuclear fusion power generation is realized, the world’s annual energy demand is about 100 tons of helium-3. The lunar helium-3 resources can meet the energy demand of mankind for at least 10,000 years in the future. This is the wealth of mankind, so we want to publish it for the whole world.”

OTHER

Exposé of ‘Operation Car Wash’ Begins in Brazil, but the Outcome Is Unknown

June 10 (EIRNS)—Through The Intercept counterintelligence publication, a potentially powerful exposé and scandalization has started of the “Operation Car Wash” (“Lava Jato”) which wiped out the Workers Party (PT) government in Brazil and Peronist Kirchner government in Argentina. Beginning with Portuguese-language reporting and a statement in several languages by Intercept editors, the exposé appears based on a large amount of internal communications supplied by a “Car Wash” insider. Americans will be reminded of the communications between FBI officials Peter Strzok and Lisa Page, whose revelation first showed the extreme bias and strong desire to bring down candidate and President Donald Trump, hidden behind a facade of “impartial” official investigations.

The Intercept summary statement, in English, reminds that Brazil’s current President Jair Bolsonaro created the intended ultrapowerful post of “super justice minister” for Judge Sergio Moro, the same figure who had caused Bolsonaro’s election, by convicting and jailing Workers Party leader, former President Lula da Silva, who would otherwise have easily won the Presidency for a second time.

The statement then says, “Today’s articles show, among other things, that the Car Wash prosecutors spoke openly of their desire to prevent the PT from winning the election and took steps to carry out that agenda, and that Moro secretly and unethically collaborated with the Car Wash prosecutors to help design the case against Lula, despite serious internal doubts about the evidence supporting the accusations, only for [Moro] to then pretend to be its neutral adjudicator.”

Moro’s first response to the material coming out, was reminiscent of U.S. Under Secretary of State Victoria Nuland’s acknowledging making “our man Yats” (Arseniy Yatsenyuk) prime minister by coup in Ukraine; or DNC chair Donna Brazile admitting the DNC fixed the 2016 Democratic presidential primary against Bernie Sanders: Neither tried to deny the exposé, but both attacked the evil Russians for performing it. Moro, too, made no denial, but stated: “I lament the lack of indication of the source of the person responsible for the criminal invasion of the prosecutors’ cell phones. As well as the position of the site that did not contact me before the publication, contrary to basic rule of journalism.”

As in Ukraine, the “Car Wash” fix—which, openly coordinated with the FBI, spread across Latin America against progressive and left-wing leaders—is now being exposed only after having been executed. What the impact of the exposé will be, will depend on further developments.

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