E.I.R.STRATEGIC ALERT

E.I.R.STRATEGIC ALERT



WEEKLY NEWSLETTER

Volume 29, No. 23 - June 4, 2015

Financial Collapse Escalates Danger of World War

Lyndon LaRouche warned on May 30 that the coming two weeks could see dramatic events likely to change the course of history. Indeed, while a Greek default threatens to bring down the trans-Atlantic financial system, there is growing recognition that the desperate London and Wall Street apparatus which tightly controls U.S. President Obama, may go for strategic confrontation to avert a total collapse of their financial system... and thus of their power.

The failure to understand the link between those two dynamics is one of the gravest problems today. It could have a crippling effect on those genuine war-avoidance forces, who have become increasingly vocal over the past weeks, as the crisis deepened.

An American defense analyst, John Schindler, was cited in the Australian media last week, for his report of a brief communique he received from a European high-ranking NATO official, who simply wrote that he expected “we will be at war by the summer. If we are lucky, it will not be a nuclear war.”

It is in this context that the recent escalation of NATO provocations against both Russia and China must be seen. The United States continues to provide military training and other support for the rabidly anti-Russian Kiev government, as NATO manuevers have been carried out near the Russian borders, in the Baltic states, in the Black Sea and off the coast of Scandinavia.

Moreover, the Obama Administration has dramatically escalated the threats against China over the disputed islands in the South China Sea. On May 20, a P-8 US surveillance plane entered the disputed air space over the Spratly Islands reef where China has been doing construction, carrying a CNN camera crew, after which CNN began a campaign against China’s alleged violation of commercial sea lanes.

At the annual Shangri La Asia-Pacific defense conference, US Secretary of Defense Ashton Carter delivered direct threats against China, including announcing an escalation of US military deployments in the region, and increased military cooperation with Southeast Asian countries.

Russian Deputy Defense Minister Anatoly Antonov, addressing the Shangri La conference, gave details on U.S. military deployments, specifically citing Washington’s doctrine of Prompt Global Strike, which is a first-strike policy.

Antonov also picked up on the policy of promoting “color revolutions” in central Europe (Macedonia as latest example), on the borders of Russia, in the Middle East, and, now, in the Asia-Pacific region.

The top Chinese military participant at the conference, Adm. Sun Jianguo, delivered a detailed speech on President Xi Jinping’s “win win” program of cooperation on development, while intervening personally to challenge Ashton Carter, when he tried to single out China as the sole violator of international law in the South China Sea disputes.

Will Greece Become the Trigger for a Global Financial Blowout?

In addition to the acute war danger, fueled by the confrontation course with Russia and with China, there is the very real risk of a globalized blowout of the trans-Atlantic financial system.

The trigger could well be the crisis around the Greek debt. If the IMF, the European Central Bank and the European Commission maintain a hardline position, Greece will in all likelihood have to announce a default on its payments to the IMF, the first of which is due June 5. That, Lyndon LaRouche said, is more than likely to set off a chain reaction, and if Greece is forced out of the euro, the collapse will spread rapidly throughout the entire European banking system, and simultaneously hit the big six Wall Street banks.

Last Feb., LaRouche had already declared that the Greek debt “is illegal, it is unpayable, and it is the fruit of a London-led criminal enterprise that must be shut down altogether,” to avoid war (cf. SAS 9/15).

While the EU Finance Ministers, led by a Wolfgang Schäuble whose incompetence rivals with his arrogance, continue to downplay the danger, the U. S. Treasury Secretary Jack Lew acknowledged it quite openly. At an event May 27 at the London School of Economics, en route to the G7 Finance Ministers meeting in Germany, Lew said he tries to be optimistic about an agreement on Greece, but warned added that the situation must be resolved quickly.

The message of panic came through clearly, despite the bankers language: “Brinksmanship is a dangerous thing when it only takes one accident. Everyone has to double down, and treat the next deadline as the last deadline and get this resolved. The risk of going from deadline to deadline only increases the risks of an accident.”

But that in no way means that he or the Obama Administration has an actual solution to propose. Lew also went on to demand that the Greek government come up with “credible economic reforms”.

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The collapse of the euro system thus looms large. There are about $26 trillion in currency derivative bets that are directly tied to the value of the euro, according to the Bank for International Settlements, which, in the event of a euro collapse, would generate huge losses in the system, producing a systemic crisis like in 2008. Altogether, the bubble of derivatives worldwide amounts to $700 trillion.

In addition, there are $4 trillion in other, non-currency derivatives linked to Greece, as reported in detail on Investmentwatchblog.com.

The Greek government, at the same time, refuses to impose more austerity on the population, and is increasingly looking to join in the BRICS dynamic.

The only competent approach, as Helga Zepp-LaRouche has again stressed, is write off the illegitimate part of Greek debt, in the framework of a European debt conference, similar to what was held for Germany in 1953.

With O’Malley, Glass-Steagall Enters the U.S. Presidential Race in a Big Way

On May 30, Democrat Martin O’Malley announced his candidacy for the 2016 Presidential race, promising a break with “politics as usual”. O’Malley, who previously was elected twice Mayor of Baltimore, and twice Governor of Maryland, has made the re-enactment of Glass-Steagall the leading edge of a campaign to end Wall Street’s corruption of U.S. politics and economy.

In his announcement, O’Malley charged that the American dream, of a better future for all citizens, has been left “hanging by a thread,” under an assault by those he characterized as the “bullies of Wall Street,” identifying Goldman Sachs by name. We are afflicted, he said, by “conditions of extreme and growing poverty.... Powerful, wealthy special interests... have used our government to create... an economy that is leaving the majority of our people behind.”

He added that these powerful interests, have acted through government to concentrate “wealth in the hands of the very few,” and have “taken opportunity from the homes of the many.”

He concluded his opening comments by saying, “It does not have to be this way. This generation of Americans still has time to become great. We must save our country now.”

In laying out the agenda for his Presidency, he insisted, “We have to prosecute cheats [referring to Wall Street scandals in which no arrests have been made], and we need to reinstate Glass Steagall.”

O’Malley’s aggressive entrance into the campaign is part of an increasing assault against the status quo in U.S. politics, which is typified by the idea of the “inevitability” of a Nov. 2016 race between Hillary Clinton and Jeb Bush. In addition to O’Malley’s anti-Wall Street campaign theme -- which is clearly seen as an attack on President Obama, as well as Hillary Clinton, the President has been placed on the defensive by Democrats who oppose his all-out drive for passage of the Trans-Pacific Partnership (TPP) free trade deal, and his call for renewing the Patriot Act. O’Malley attacked the TPP as a “race to the bottom,” which would further depress U.S. wages.

On the Republican side, Kentucky Sen. Rand Paul has shaken things up, by his efforts to derail the renewal of the Patriot Act, and his alliance with several Democrats to demand the release of the classified 28 pages on the Saudi role in the 9/11 terrorist attacks on the U.S. (cf. below).

Both O’Malley and Paul say they represent a “new generation of leadership” for the country. But the initial enthusiasm for their campaigns is evident not just among younger voters, but among many older Americans, who are looking for a revival of the America of Franklin Roosevelt and John F. Kennedy. O’Malley’s fight does open the door for that revival.

Lyndon LaRouche stated that, of the Presidential candidates so far in the race, Martin O’Malley is undoubtedly the best qualified. However, the priority for his movement now is to shape the transitional period between now and the early removal of Barack Obama to rebuild the institution of the U.S. presidency, as originally intended.

EU’s Fake Bank Separation Bill Defeated in Strasbourg

The ring-fencing bill drafted by the European Commission was rejected May 26 in the Economic and Monetary Committee of the European Parliament in a 30-29 vote. The decisive was cast by the EFDD (Europe of Freedom and Direct Democracy) group, whose representatives Marco Zanni and Marco Valli have been fighting for a strict separation of investment and commercial banks, along the lines of the original Glass-Steagall Act. The Commission’s version would merely isolate the risky activities within the same institution, and that not even mandatory for all, but only in cases where the risk level is higher than the level established by “harmonized metrics” - i.e. the same models used to fake the stress tests.

“We succeeded in blocking the crap drafted by the banking lobbies and introduced by the EPP (European People’s Party)”, Zanni told EIR. (He used the very strong Italian term “porcata” to define the defeated bill.) That is “already a big success,” he added.

The legislative process for a EU-wide bill now goes back to square one. Either the Commission drafts a new text or nothing. In the latter case, each member state is free to implement its own regulations.

The pro-Glass Steagall coalition in the Committee had introduced its own draft, but did not have enough votes to put it through. Therefore, it concentrated on preventing a compromise between the conservatives and the socialists on the EU Commission version, and was successful at that. The socialists rejected the provision that separation of certain banking activities would be enforced by supervisors only if banks failed to fulfill some parameters, insisting on an ante hoc ring-fencing, or separation of the activities under the same roof.

“The unimpeded march of the banking lobby has been stopped for now,” said Jakob von Weizsäcker, a German SPD member of the committee.

A Battered European Union Continues to Deny Reality

The death bell for the euro began sounding at the beginning of last week and has not stopped since. The people in Spain and Poland massively rejected EU austerity in two elections, and the message sent out has strengthened the Greek government, which has so far refused to implement austerity. If Greece is forced into a default by the EU Commission and by the German government, it could bring down the entire, already badly shaken, European construct (cf. above).

Various time bombs have been ignited:

* As expected, Podemos, the anti-austerity movement which was only founded 18 months ago to protest against the Troika policy, made an excellent showing in local elections in Spain on May 25, gaining the municipalities of Barcelona and, in a coalition, of Madrid. If general elections next Nov. confirm those

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results, there will be an anti-austerity government in Spain, run by a Podemos-PSOE coalition.

* In Poland, Andrzej Duda made a surprise surge to win the Presidential elections against outgoing Branislaw Komorkowsky. Duda, a protégée of former Premier Jaroslaw Kaczinsky, had campaigned against Poland entering the Eurozone.

* As for Great Britain, David Cameron’s Tories won the May 7 elections, mainly for promising to hold a referendum on leaving the European Union. Now, Cameron is making the rounds in Europe in an attempt to obtain special reforms/concessions, to help avoid a “Brexit”. Although the demands remain vague, they include the right for the British parliament to veto EU laws, the right for the UK to be involved in the formulation of the monetary policy of the Eurozone (although not a member), more liberalization to benefit the City of London, and restricting social benefits to residents from other EU countries.

* In France, the tenth anniversary of the referendum in which a clear majority of Frenchmen rejected the European Constitution, was met with a slew of coverage in the media, most of them acknowledging that the EU is even more hated today than at the time. On May 29, 2005, 55% of the Frenchmen said “no”, as against 45% “yeas”. According to a poll carried out out by Ifop and published May 28, if such a referendum were held today, 62% of those who answered said they would vote “no”, and only 38% “yes”.

And yet, European leaders and oligarchs are stubbornly clinging to their glaringly failed model, while expanding the military alliance, just as stupidly as they did in the run-up to World War One.

Russia and Iran Escalate Efforts to Contain the Powder Keg in Southwest Asia

The entire region of the Middle East is set to explode on a much greater scale than ever before, for a combination of factors: the Saudi war on Yemen, the Saudi-American-Turkish plans to use “Islamist” terrorists for a massive invasion of Syria, from both Turkey and Jordan, were they are being trained by U.S. and British special forces, and the ISIS’ recent military advances in Palmyra (Syria) and Ramadi (Iraq).

The Iranians, who have thus far been restraining themselves and their allies, are losing patience, as they see themselves as the next target. While the Saudis make no secret that Iran is their ultimate target, they are not weighing the consequences clearly, and their flight forward is beginning to alarm political and military authorities, even in the United States, Great Britain and the EU, not to mention Russia.

It seems that the Iranians are moving forcefully and openly onto the battle ground in at least Iraq and Syria, and potentially Lebanon. The Iranian Supreme Leader’s foreign policy adviser Ali Akbar Velayati was recently in Syria, where he met President Assad and pledged Iran’s continued support in its fight against takfiri forces, including economic aid and, implicitly, military aid. Reports from Syrian sources say the national army, although not on the verge of collapse, is exhausted both in terms of manpower and weaponry after four years of intensive fighting. Young people are avoiding conscription and the psychological warfare of advances of ISIS and Al-Nusra terrorists are lowering the morale of the population in the government-controlled areas.

In Lebanon, where Velayati met Hizbollah’s leader and the Prime Minister, he even stated that Iran is ready to help the Iraqi government take Ramadi back from ISIS. The Iranian Defense Minister Ali Dahghan was in Baghdad the same day and met with Iraqi Prime Minister Haidar Al-Abbadi, who traveled to Moscow the next day. According to some reports, Iran suggested that Russia provide Iraq with new arms shipments and support, rather than the Americans.

It is recognized that the policy of the U.S. and its allies of relying on airstrikes without coordination with ground troops, is an exercise in futility when fighting terrorism. Even more alarming is that the Obama Administration and other political and military circles in Washington are proposing to arm the Sunni tribes on the ground in Western Iraq rather than the Iraqi national army. That in turn threatens to split the country even more into sectarian and ethnic groups.

Meanwhile, the elephant in the room is that the situation in Iraq is not separate from Syria. Therefore, to propose to fight Islamic terrorists in Iraq while de facto backing them in Syria by undermining the Syrian national army, is worse than absurd. In addition, Washington’s and NATO’s own allies -- Saudi Arabia, Qatar and Turkey -- are the source of financing, arming, and logistical and ideological support for the terrorists in the region and the world (cf. below).

What is required in the region is to create a new policy and a combination of forces that include the Iraqi and Syrian national armies, with military, logistical and intelligence backing from Iran, the U.S. and Russia. Simultaneously, a military offensive has to be launched from both Syria and Iraqi to put ISIS and the other terrorist groups that share the border areas in both countries in a pincer. Otherwise, Iran may be pushed to take action single-handedly.

Breakthrough Resolution Introducedin U.S. Senate on Saudi Role in Terrorism

Republican Senator Rand Paul from Kentucky has announced his intention to introduce a resolution in the Senate calling on President Obama to declassify and publicly disclose the 28 pages from the December 2002 Joint Inquiry into Intelligence Community Activities Before and After the Terrorist Attacks of September 2001. Sen. Paul’s office said that Democratic Senator Ron Wyden from Oregon will co-sponsor the resolution, titled the “Transparency for the Families of 9/11 Victims Act”. It is a companion to the existing House Resolution 14, which asks that the President declassify the 28 pages.

The resolution will be made public at an outdoor Capitol Hill press conference on June 2, just after our newsletter has gone to press. Joining Rand Paul will be Republican Representatives Walter Jones and Thomas Massie and their Democratic colleague Stephen Lynch, the three original sponsors of HR 14. Also speaking will be former Democratic Senator Bob Graham of Florida, who was co-chair of the joint investigation which issued the original reports, and who has aided them in securing support in the Senate.

Sen. Graham has said repeatedly that those 28 pages point to the role of Saudi Arabia in funding the hijackers, but he is prohibited from revealing the contents, just as is everyone who has read it. President George W. Bush, whose family is very close to the Saudi monarchy, originally classified the 28 pages, and President Obama has continued to refuse to declassify them.

This issue is truly explosive. It is not just about past history of previous terrorist attacks, it is a matter of immediate concern because those same networks continue to be funded and armed and to wreak havoc in the Middle East and North Africa.

Note that just one day after the press conference, a former adviser to then Secretary of State Hillary Clinton, Sidney Blu

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menthal, is scheduled to give a private interview to the Congressional Committee investigating the attacks in Benghazi on Sept. 11, 2012. One of the memos he sent to her, dated Feb. 16, 2013, reveals both the Benghazi attack and the In Amenas, Algeria hostage-taking were carried out by al-Qaeda, and that according to French foreign intelligence, DGSE, both attacks were funded by “wealthy Sunni Islamists from Saudi Arabia.”

Note that Rand Paul was also instrumental in preventing the Senate from extending the provision in the hated Patriot Act, allowing bulk collection of telephone records of American citizens.

Lyndon LaRouche stated May 28, in an answer to a question that, on many issues, he could not agree with Sen. Paul, but that he has taken a courageous stance on issues of paramount importance: the 28 pages and the NSA spy program.

Eurasia Economic Union and New Silk Road Work toward Common Aims

China and Russia continue to consolidate their relations in all areas, including defense, scientific research and economic development. That has become manifest in the past weeks’ push to coordinate the projects of the Eurasian Economic Union (EEU) with the Chinese policy of the New Silk Road linking Asia to Europe.

On May 8, Russian President Putin, meeting with the heads of state of the other EEU member countries (Belarus, Kazakhstan, Armenia, and Kyrgyzstan), during the commemoration of the end of WWII in Moscow, told them that he had discussed such coordination in a meeting the same day with President Xi Jinping. Putin stated clearly that the “development of economic cooperation between the Eurasian Union and the People’s Republic of China is also promising.”

He was echoed on May 23 by the President of Russian Railways Vladimir Yakunin, who was speaking at the opening of the 10th Shanghai Forum. He stressed the importance of “implementation of a full-scale mechanism for dialogue to unify the Eurasian economic integration process and develop the Silk Road Economic Belt.” In that context, he raised the “unique opportunity to integrate the Russian megaproject of the Trans-Eurasian Belt RAZVITIE and the One Belt-One Way initiative of our Chinese partners,” according to his website.

The same vision was clearly laid out by the Chinese ambassador to Russia, Li Hui, at an international conference on May 29 on the theme “Russia and China: New Partnership in a Changing World.” Li told the participants: “I see the main task of our cooperation in combining development of the Silk Road economic belt and the Eurasian Economic Union.”

It was in mid-May that the EEU signed a Memorandum of Understanding with China on economic cooperation. According to a report in Russia Beyond the Headlines, the MoU calls for joint investment in the development of infrastructure within the framework of the Chinese Silk Road Economic Belt project. Eurasian Economic Commission Trade Minister Andrey Slepnev from Russia said the agreement will help the EEU with its investments in the industrial and transportation sectors, as well as in services and infrastructure. He also said the agreement will put stress on cooperative investment projects.

Conference in Peru, with EIR Participation, Builds on Premier Li’s Visit to South America

Chinese Prime Minister Li Keqiang completed a four-country tour of South America (Brazil, Colombia, Peru and Chile) on May 26, which centered on cooperation on building not just one, but various trans-continental railroads, where not one exists today.

Li promoted this cross-region infrastructure as laying the basis for “a new type of industrialization and urbanization of the South American continent.”

In Peru and Brazil, he signed agreements to complete a feasibility study by May 2016 for a railroad connecting the Atlantic and Pacific. Li then proposed to Chile’s President Michelle Bachelet, that Chinese construction companies, with their experience in seismic areas, help construct another transcontinental rail line, tunneling under the Andes. Bachelet enthusiastically briefed Li on various such routes which Chile, Argentina, Paraguay, and Brazil have discussed.

The great optimism which collaboration with the BRICS, and China, has awakened in a South America until recently trapped in the Trans-Atlantic system, was demonstrated at an international conference on “The BRICS Alternative and the Development of Peru and South America,” organized by Peru’s Association of Graduates of the Center for Higher Military Studies (ADECAEM) in Lima two days after Li’s trip ended.

ADECAEM President, Gen. (r) Juan Autero Villagarcía opened the conference with a ringing statement that the future lies with the BRICS, and Peru has a role to play in that future: “The BRICS are taking up the historic challenge for tomorrow’s future. A group of countries which … are building, a new destiny, a new world order of progress… demonstrating new real capabilities of countries that have united to forcefully constitute a new axis [with] new poles of development on three continents: Asia, the Americas, especially South America, and Africa.”

Over the next five hours, in succession, Dr. Liu Youfa, former vice president of the China Institute of International Studies, associated with the Chinese Foreign Ministry, speaking from Beijing, Schiller Institute founder Helga Zepp-LaRouche and EIR’s Dennis Small, speaking from the United States, and EIR’s Lima head, Luis Vásquez, addressed and then answered questions from the retired military, businessmen and others attending.

Dr. Liu emphasized a unified concept: that Ibero-America and China, alike, have risen up the ladder of industrial development, and their relations must change accordingly, the construction of the long-dreamed of transcontinental railroad being crucial to create the pre-conditions for national and regional development, and to open to South America the “enormous opportunity” of exporting to Asia, Europe and Africa.

Zepp-LaRouche’s global strategic briefing and discussion of Confucius provoked a high-level dialogue, as people battled to understand the idea that the world could be ordered around mutual interest and harmony, rather than one against all.

By then well-provoked, the audience burst out in applause, when Small proposed that Peru continue to be a “mining country,” as the colonial powers have always insisted, but do so on the Moon, joining China in the mining of helium 3.

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