E.I.R.STRATEGIC ALERT

E.I.R.STRATEGIC ALERT

WEEKLY NEWSLETTER

Volume 28, No. 46 - November 13, 2014

After Obama’s Waterloo, the U.S. Urgently

Needs a Completely New, Bipartian Agenda

A “massive sea-change” is what the Nov. 4 elections for Congress

in the United States have been termed, and it will have

immediate international repercussions. The major gains for Republican

candidates were by no means an endorsement of their

program (cf. below), but rather an overwhelming rejection of

Barack Obama’s policy, both domestic and foreign.

Therefore, Lyndon LaRouche commented, President Obama

should be thrown out of office immediately. But in addition,

the United States needs a new combination of forces and above

all, a new positive policy, to address the urgent crises which

the world is facing. Indeed, he said, “endgame is coming on

fast. The international financial system is imploding and disintegrating

around us, and we have the job of putting this back

together in a way that’s going to work, quickly.”

LaRouche believes that there are “enough intelligent Democrats

and Republicans” who are aware of the dangers, and

can come together to make the change happen, once Barack

Obama is sidelined.

On the domestic front, such a bipartisan group should immediately

move to implement LaRouche’s four point program

to get out of the Depression and back on the track of actual

economic growth. This involves Glass-Steagall bank separation,

the establishment of a National Bank, the creation of a credit

system to foster real development, and the use of thermonuclear

fusion power, as the driver of an economy with increasing

levels of energy flux-density.

On the international front, LaRouche pointed out, the policy

must be reversed which is leading toward a thermonuclear confrontation

with Russia, and by extension, with China. It is urgent

to remove the fascists in Ukraine from a situation of power,

as those forces have been built up by the West for the sole

purpose of confronting Russia, and in particular Vladimir Putin.

Extremely alarming is the fact that Kiev unilaterally broke the

Minsk agreements and launched a new military offensive in the

south-east, shelling its own population.

Similarly, in South-West Asia, the priority is to shut down the

ISIS, a barbaric terrorist operation which is run and financed

by British and Saudi networks, among others. These jidahist

forces too, are leading towards general warfare, since their

stated policy is to seize entire provinces of China, and to overthrow

the government of Russia.

LaRouche warned that “the kettle of general warfare is already

set to boil over.” The only way to turn down the heat is

to advance a real policy of global recovery -- in line with what

China and the other BRICS countries have already initiated.

While such an agenda will not instantly solve all of the problems,

he said, “decisions can be made that will clearly take us

into a new era.”

The Post-Obama Era Has Been Ushered In

While it has often been the case that the party of the President

losses seats in Congress in mid-term elections during the

President’s second term, the defeat inflicted on Barack Obama

on Nov. 4 is of historic proportions. Republicans have thus far

picked up seven more seats in the Senate, with two more Democratic

seats likely to be lost in run-offs, giving them a solid

majority. In the House of Representatives, the Republicans increased

their majority to the highest level since 1928, while on

the state level, 31 out of 50 governors are now Republicans.

Most analysts share Lyndon LaRouche’s assessment, that this

vote was a “political impeachment,” demonstrating the unpopularity

of Obama. Many of the Democratic Senate candidates

lost in spite of their efforts to politically distance themselves

from the President, with one candidate going so far as to refuse

to acknowledge whether she voted for him in the 2012

Presidential race! (She lost by 11% to the unpopular incumbent

Sen. McConnell, who will likely become the new Senate

Majority leader.)

Democratic Party insiders were expecting losses, and some

had been trying -- unsuccessfully -- to warn the White House of

the need to change course. Most significant was a pre-election

memo allegedly from Defense Secretary Hagel, leaked to the

New York Times, demanding a clarification of the administration’s

policy in the Mideast (cf. SAS 45/14), as there is little to

no confidence that Obama’s plan against ISIS could succeed.

According to numerous sources, at least three different Democratic

Party groupings are assembling lists of White House officials

and National Security Council members they want purged

and replaced. Among the agreed-upon top targets to be evicted

are: Valerie Jarrett, Denis McDonough, Susan Rice, Ben Rhodes

and Tony Blinken. They have been collectively referred to

as the “gang of five” who have surrounded Obama and shut off

all outside sources of advice.

While the targets are agreed upon by all three groups, we

are told, the list of candidates to replace them differs, based on

different priorities.

On Nov. 6, LaRouche suggested a “Thanksgiving massacre”

should be orchestrated, similar to the “Halloween Massacre”

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2 WEEKLY NEWSLETTER n°46 / 2014

with which President Gerald Ford cleaned out his White House

in 1976. The national holiday of Thanksgiving this year is on

Nov. 27, so the purge should come quickly.

It’s the Economy, Stupid!

While the American electorate is very upset over the danger of

war and terrorism, as well as the Ebola epidemic, the decisive

factor leading to the rout of the Democrats was broad anger

about the economy. The Obama Administration was putting

out daily reports on how strong the economic recovery has

been, touting job numbers and the rise in the stock markets, to

argue that Obama’s policies have restored the economy to its

pre-September 2008 state. This line was duly touted in most

European media.

But, according to President Bill Clinton’s former chief political

strategist, James Carville, most Americans did not believe

this. Carville presented polls showing that, by a strong majority,

Americans believe that the economy is “headed in the

wrong direction,” and that more than 70% believe that their

children will have worst economic prospects than they, which is

a significant reversal of the traditional tendency in the U.S.

One figure speaks volumes: according to a new UNICEF report,

nearly one third of U.S. children live in poverty. Out of

the 41 countries considered wealthy in the survey, the United

States is in 36th place, i.e., only five other countries have greater

child poverty.

Carville and others pointed to the growing gap between the

1% super-wealthy and the lower 80% of income brackets,

who have seen a drastic decline in their net wealth, and who

struggle to pay for rent, food and other basic needs. Of the

jobs created since 2009, most are low wage, temporary or

part-time, and the unemployed who accept them earn on average

23% less wages than in the jobs they lost.

Obama’s claims that they are better off convinced many potential

Democratic voters that the President is lying, and is out

of touch with their circumstances, leading many of them to

stay at home, rather than vote.

Thus, this was less a Republican triumph than a thorough

repudiation of the Obama presidency. Voters were also appalled

at the $4 billion in all that had been spent on the campaigns,

while neither party is prepared to fix the economy. The voting

returns show that the American people are ready for the “post-

Obama era”, but, as LaRouche noted, a new constellation of

forces has to take shape to put forth the program needed.

China Announces ”New Silk Road Fund”

at APEC Gathering

At a meeting with a number of Asian countries leaders Nov. 8

in Beijing, on the eve of the APEC (Asia Pacific Economic Cooperation)

summit, Chinese President Xi Jinping announced that

his government would set up a Silk Road Fund of $40 billion.

It is to be used for investments in infrastructure, resources and

industrial and financial cooperation in Asia, but also be open to

non-Asian countries.

The fund is in addition to the $50 billion that China will put

into the new Asian Infrastructure Investment Bank, created in

October with 20 other nations. It occurs in the context of the

BRICS policy for global development.

Addressing a meeting of CEOs from APEC countries, Xi

called on them to help make the “China Dream” an “Asia-Pacific

Dream,” laying out his strategic vision for the region and the

world. He also indirectly referenced the obstacles being placed

in the way of this development by the policies of the United

States, in particular, noting the “different directions and priorities

in accelerating the regional integration process and various

free trade arrangements being proposed, making it difficult for

some to make a choice.”

Xi also called on the other APEC countries to work together

with China on developing the Silk Road Economic Belt and the

21st Century Maritime Silk Road. “The development prospect

of our region hinges on the decisions and actions we take today,”

Xi said. “We are duty-bound to create and fulfill an Asia-

Pacific dream for our people. That dream,” Xi said, “is about

staying ahead of global development and making a greater contribution

to the well-being of mankind.”

On the sidelines of the APEC meeting, Xi and Russian President

Putin signed new economic agreements, including deliveries

of gas from Russia. Putin also met, among others, Japanese

Prime Minister Abe, a meeting which may lead to a reversal of

the chill in the relations between the two countries.

“The future of the planet’s economy depends upon this BRICS

process,” commented Lyndon LaRouche. These nations are defining

a trend to create the kind of system the world needs, a

new system of cooperation among governments, based on the

higher interests of mankind.”

China, Japan Reach Crucial Agreement

to Resume Diplomatic and Security Dialogue

After intense back-channel talks and just ahead of the APEC

summit in Beijing on Nov. 10-11, China and Japan signed an

historic, measured agreement to renew diplomatic meetings

and strategic cooperation, setting the stage for a meeting between

the two leaders at the APEC Summit.

While Prime Minister Abe has been appealing for a meeting

with President Xi Jinping, the Chinese have insisted on preconditions,

the most important being that Japan acknowledge

that there is a viable question of sovereignty over the long disputed

Diaoyu/Senkaku Islands, and that Abe and other highlevel

Japanese officials stop visits to the Yasukuni Shrine, which

honors Japanese war dead, including several condemned World

War II war criminals.

Nonetheless, on Nov. 7, Shotaro Yachi, head of Japan’s National

Security Council, met with State Councilor Yang Jiechi in

Beijing, and hammered out a four-point agreement, which diplomatically

subsumes both those issues, and stresses the need

to “gradually resume political, diplomatic and security dialogue

dialogue.”

When Deng Xiaoping established relations with Japan in

1972, he made the decision that the issue of sovereignty over

the disputed islands should be put off to the future for the sake

of moving forward in the relationship. The present agreement

seems to return to that position.

The news was not welcomed at the White House, as Obama,

after his Waterloo in the recent elections, headed for his Asian

tour with the core ally in his war plan against China, i.e. Japan,

having signed a deal to end the confrontation.

In addition, after the agreement was announced, both the

foreign and commerce ministers of the two countries met separately

Nov. 7 on the sidelines of the APEC. Tokyo has been

heavily courted by the Obama Administration to join the Trans-

Pacific (free trade) Partnership, which is decidedly anti-China,

but that would require eliminating their agricultural subsidies,

which is hotly contested. Rather than that option, the Japanese

may be seriously considering moving in the direction laid out by

China in developing a “roadmap” for a future Free Trade Area

of the Asia-Pacific.

Chinese scholars indicate that PM Abe is under a lot of pressure

at home to establish a good working relationship with

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n° 46/ 2014 WEEKLY NEWSLETTER 3

China, which, in spite of all the unresolved issues between, remains

one of Japan’s most important trading partners.

Is Saudi Arabia out to Provoke War with Iran?

The Saudi ruling family is clearly enraged by the recent positive

developments involving Iran in South-West Asia, including diplomatic

progress with the United States, advances against ISIS

in Iraq with obvious assistance from the Iranian Revolutionary

Guard, and the collapse of the policy of Barack Obama and his

Saudi-Qatari allies in Syria to overthrow Bashar Al-Assad by

using jihadist terrorist groups.

At the same time, Riyad is helplessly watching Yemen slip

from its fingers. Its plan to deflect the 2011 revolution by creating

a government of rival tribes and agents of former dictator

Ali Abdullah Salih has failed. Shia Zaydi rebels under Abdulmalik

Al-Houthi, sworn enemies of the Saudi rulers and Wahhabi

clergy and Al-Qaeda, descended from their mountain strongholds

on the capital, Sana’a, and helped create a new coalition

government, while stretching southward to retake the southern

regions from Al-Qaeda, whose top leaders are Saudis.

Two weeks before the decisive final round of negotiations

between Iran and the P5+1, with a deadline set for Nov. 24,

U.S. Secretary of State John Kerry met with Iran’s Foreign

Minister Mohammad Javad Zarif in Oman Nov. 9-10, to iron

out differences and clarify red lines. That the meeting is being

held in Oman, which has emerged as Saudi Arabia’s unthankful

neighbor in the Gulf Cooperation Council, is another upset for

Riyad. Oman’s ruler Sultan Qabus has established a very cordial

relationship with Iran’s Supreme Leader Ayatollah Khamenei,

who has the final word on the negotiations with the Western

powers.

The last time Iran-U.S. relations improved in Sept. 2013,

leading to direct talks and easing of some of the sanctions, Saudi

Arabia withdrew its membership in the UN Security Council,

condemned the international community for not bombing

Syria, and threatened to go its own way in Syria. “Its own way”

turned out to be the ISIS plague in both Syria and Iraq.

If these negotiations are successful, despite the many dark

clouds hanging over the process, a longer-term U.S.-Iran

agreement could be reached. To sabotage that potential, the

Saudis are also provoking the Shia population in Saudi Arabia

and Bahrain, obviously hoping to provoke at least some extremist

hardliners in Iran’s clergy to intervene.

On Nov. 3, masked gunmen killed five people in a mostly

Shia area of eastern Saudi Arabia, in acts which carry the fingerprints

of jihadists of the Al-Qaeda and ISIS type. Moreover,

a leading Shia minority rights advocate in Saudi Arabia, Sheikh

Nimr Baqir al-Nimr, has been sentenced to death for sedition.

Nazi Paramilitary Leader

Appointed Police Chief of Kiev

Even pro-coup political groupings in Ukraine are sending out

the alarm about the recent appointment of paramilitary leader

Vadim Troyan, deputy commander of the Azov Battalion and

reputed active member of the neo-nazi paramilitary organization

Patriot of Ukraine, to become Chief of Police in Kiev. In

their view, the appointment may make it impossible to sell the

lie that accusations of the Nazi character of the current Kiev

regime are simply “Russian propaganda.”

The Azov Battalion has gained international notoriety, even

within pro-coup publications in the West like the Washington

Post and the New York Times, for its brutal tactics, especially

in the Southeast. The battalion has the official blessing of Kiev,

and was heavily relied on in the fighting against federalists.

In the words of Eurasianet.org: “Many of the Azov Battalion

members describe themselves as ultra-right Ukrainian nationalists.

They proudly wear symbols and use slogans associated with

neo-Nazis, such as black t-shirts with the Celtic cross. Football

ultras have also joined the ranks of the battalion, which was

founded by the National Social Assembly, a confederation of

ultra-nationalist organizations, as well as Ukrainian groups that

oppose alignment with the European Union and NATO.”

Europeans and Americans Squabble

over How to Save the Banks

As a new crash looms in Europe, European and American regulators

are not discussing how to avoid it, but are arguing over

how it should paid for.

That was evident at a Nov. 5 conference of bank regulators,

analysts, and economists at George Washington University in

Washington, titled “Have We Ended Too-Big-To Fail?”. British

and EU banking authorities insist on the “bail-in” for insolvent

megabanks, i.e., which U.S. officials at the Federal Reserve and

FDIC know will not work. The latter, in turn, are preparing to

put an insolvent megabank through Title I bankruptcy, based

on liquidation plans or “living wills”, prepared by each giant

bank in advance. European banking authorities know that this

will not work.

Both are right. But the one solution which will work – a

Glass-Steagall breakup of the so-called “too big to fail banks”

-- has been pushed off the table by those same officials.

Nonetheless, the case for the bail-in policy of London, Brussels,

and the Bank for International Settlements was made by

former Bank of England deputy governor Paul Tucker. He was

provoked by panel moderator Simon Johnson, who has quietly

supported Glass-Steagall, and by interventions from EIR and

others in the audience, into a brutal admission of how it will

work.

The rules are supposed to be “finalized” this month at the

Brisbane G-20 meeting, and will force megabanks to build up

their “risk-weighted capital” ratio to 20-25%, more than double

what it is now.

How? by selling contingent capital bonds, also known as

“bail-in bonds”, which are made to absorb enormous losses

when megabanks become insolvent and default, to... pension

funds and insurance funds, which will take the losses. “Ultimately

there are only households,” Tucker said.

If the G-20 Meeting is pushing the 20-25% capital requirement

demanded by Tucker, traditional banks will be again punished

hard, whereas investment banking will be favoured.

As we explained (SAS 44/14), a bank’s “risk-weighted assets”

are in fact its loans, which are straightforward, contrary

to pure financial trading. Thus, a bank like Deutsche Bank with

“level 3” derivatives (i.e., junk which has no price, because no

one would buy it) amounting to 99% of its capital, passed the

stress test easily, whereas Italian banks with a large share of

loans failed.

ECB Quote of the Week: For Lack of Time

At a European Parliamentary hearing on Nov. 3, Danièle Nouy,

chairwoman of the Supervisory Board of the ECB, was asked

why her agency, for the stress tests, allowed banks to use their

own models of risk-assessment values.

Her reply: because of ... a lack of time! In answer to Italian

MEP Marco Zanni, Nouy defended the “risk-weighted assets

methodology, adding that “it was not possible to address the

issue this time because of the short period of time in which we

had to do the comprehensive assessment.”

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Oil Price Warfare Aimed at the BRICS

The decision by Saudi Arabia, with the backing of London and

Washington, to flood the world market with cheap oil is all

about geopolitics. With the Middle East in a state of increasing

turmoil and uncertainty, it is otherwise inexplicable why the

price of oil would have dropped by a quarter over the past

months. Brent crude, which was at $115 a barrel last June,

was down to just above $80 a barrel last week.

In fact, it all fits right into the scheme to hit Russia financially,

in addition to the sanctions, by causing its expert revenues to

collapse. Russian President Putin has understood the message,

as he indicated, in his usual understatement, in comments Nov.

6 : “at some moments of crisis it starts to feel like it is the politics

that prevails in the pricing of energy resources”.

Other major victims of the scheme is Brazil, which is heavily

dependent on oil exports, and Iran.

A senior analyst of Asia Times, Pepe Escobar, gave some figures

on this on RT Nov. 4. Over 50% of Russia’s budget comes

from revenue from oil and gas, he wrote, and “every $10 drop

in the price of a barrel of oil means Russia losing up to $14.6

billion a year.... With each $1 drop in crude oil prices, Brazil’s

number one company, Petrobras, loses more than $900 million.

At current oil price levels, Petrobras will be losing around

$14 billion a year. So the price drop does undermine Petrobras’

long-term expansion to fund new infrastructure and exploration

projects linked to its valuable ‘pre-salt’ oil deposits.

“Iran is not part of the BRICS but shares the group’s push

towards a multipolar world. Iran needs oil at $136 a barrel to

balance its budget.” In Tehran, Escobar wrote, “there are no

illusions about how the manipulation of oil prices has been engineered

to further destabilize Iran’s economy and undermine

its position in the nuclear negotiations.”

Egypt’s President Al-Sisi

Undertakes to Develop the Desert

Egyptian President Abdel Fattah Al-Sisi is thoroughly convinced

pf the importance of major major national infrastructure projects

to develop the country’s economy. In addition to launching

the construction of the second Suez Canal in early August, the

government has now adopted the plan for the “desert development

corridor,” proposed by geologist Farouk Al-Baz.

The project involves construction along 1,200 kilometers of

a new eight-lane superhighway, a railway, a water pipeline, and

a power line, to open new land for urban development, commerce,

agriculture, tourism, and related jobs.

The architect of the project, Dr. El-Baz is a longtime collaborator

of the Schiller Institute and current member of the

Egyptian President’s scientific advisory committee.

In a recent interview with the Kuwait News Agency (KUNA),

President Al-Sisi explained that the project has begun in phases,

including the reclamation of approximately 4 million acres of

agricultural land. Egyptian authorities, he said, would seek to

secure funding from national resources and citizens’ contributions,

noting that the Egyptian citizens had bought up bonds

for the Suez Canal project amounting to the equivalent of 7

billion euros in just eight days.

Elsewhere in the interview, Al-Sisi said that despite Egypt’s

security problems and great economic challenges, the government

will proceed with its comprehensive development plans.

“That is why we have shifted towards huge economic ventures,

designed to make qualitative strides in the Egyptian economy.”

As for the new Suez Canal Project, the Egyptian President

said, “We aim to accomplish the new canal venture in one year,

instead of the experts’ prediction, which was between three

to five years.... It is indeed Egypt’s gift to the world. We are

racing against time, and simultaneously orders have been given

to begin construction of an international logistics and storage

center....

“We are depending on the support and will of the Egyptian

people, and we expect further support from our brothers,

whether in the form of financial contributions, direct investments

or easy loans.”

25 Years after the Fall of Berlin Wall:

A Second Chance for Germany and Europe

The Nov. 8-9 weekend was filled with celebrations in Berlin and

other German cities of the 25th anniversary of the opening of

the Berlin Wall on Nov. 9, 1989. But while the German elites

were mainly feting themselves, and their failed economic and

political conduct of the past 25 years, Helga Zepp-LaRouche

recalled in a statement how that historic Nov. 9 was one of

the rare “momentous hours of mankind”, a “very precious moment”,

which could and should have ushered in a “new, more

positive era of mankind”.

“People climbed onto the wall, danced on the wall, embracing

one another with tears of joy in their eyes. In the following

weeks, Germany was gripped by an incredible tension – the

latent uncertainty over whether it would remain peaceful, but

also the spell of a sublime moment. Beethoven’s Ninth Symphony

was broadcast twice on German TV for Christmas and

seemed to be the only composition that could adequately express

the promise of that historical moment.“

At the time, Zepp-LaRouche and Lyndon LaRouche, campaigned

for a great East-West project of cooperation, first in

the form of the “Productive Triangle Paris-Berlin-Vienna”, then

in the form of the “Eurasian Landbridge”. The rapid realization

of this concept would have spared mankind the profound

economic and financial crises, wars and pandemics which have

dominated the world agenda in the past 25 years, culminating

in the present strategic confrontation pitting NATO against Russia

and China. But the western elites, personified by President

George Bush and Prime Minister Margaret Thatcher exploited

the chance to expand their Anglo-American Empire across the

entire globe.

Nonetheless, 25 years later, wrote Zepp-LaRouche, a second

– and perhaps the last -- chance is offered to mankind, in the

form of the New Silk Road, and what the BRICS group and

the numerous new financial, economic and political institutions

emerging around that group and its allies, are developing. They

are inviting a reluctant, if not hostile, West to join hands and

cooperate for the good of mankind.

Fortunately, the BRICS group has outstanding leaders in Dilma

Rousseff, Vladimir Putin, Narendra Modi, Xi Jinping and Jacob

Zuma, whose initiatives insert a healthy dose of optimism

in the population, which should also inspire our populations

here in the West.

E.I.R. STRATEGIC ALERT www.eir.de

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Verantwortl. f. d. Inhalt: Dean Andromidas, Claudio Celani

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