E.I.R.STRATEGIC ALERT

E.I.R.STRATEGIC ALERT

WEEKLY NEWSLETTER

Volume 30, No. 19 - May 12, 2016

Has World War III Already Begun?

The annual Moscow International Security Conference was

highlighted in late April by a clear signal from top Russian security

officials, including Defense Minister Shoigu, that Moscow is

looking to build on the limited US-Russian cooperation around

the Geneva talks on Syria to establish a framework for cooperation.

Unfortunately, every signal coming out of the Obama

Administration – now including from Secretary of State John

Kerry -- is pushing confrontation.

While Kerry has continued to work closely with his Russian

counterpart Sergei Lavrov on seeking a full ceasefire and diplomatic

solution to the five-year Syrian war, he suddenly issued

last week an ultimatum to President Assad that had all the earmarks

of an Obama freakout. Kerry told reporters in Geneva,

after meeting with UN Syrian envoy de Mistura and speaking

by phone with Lavrov, that Assad has a deadline of early August

to start the process of leaving power -- or else (cf. below).

This change of tone was in line with actions taken in Europe

last week. Deputy Secretary of Defense Robert Work visited

Europe, followed by Defense Secretary Ashton Carter and

Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford, to

preside over talks with NATO officials and attend the transfer

of command of the military alliance to General Curtis Scaparrotti

(cf. SAS 18/16).

During the Brussels meetings, US officials confirmed plans

to create a permanent rotating NATO force of 4,000 troops

in the three Baltic states and Poland, with forward based warfighting

hardware. Putting such forces directly on the border

with Russia is a provocation of the highest order, in effect recreating

the Cold War “trip wire” deployments.

Russian officials immediately responded, and President Vladimir

Putin announced plans to create new Army Divisions, to be

deployed all along the Western front.

In Asia, Washington remains committed to installing a

THAAD anti-missile system on South Korean territory, which

both China and Russia view as a threat to them. In response,

the armed forces of both countries have decided to hold, for

the first time, a joint computer-enabled, anti-missile defense

exercise in May. According to the Russian Defense Ministry, the

exercise is aimed at improving their capability to “deal with

accidental and provocative ballistic and cruise missile strikes on

the two countries’ territories.”

Thus, Washington’s and NATO’s actions have further escalated

the chances of super-power war.

Lyndon LaRouche delivered a blunt assessment on May 7,

declaring that World War III has, in effect, already begun, with

battle fronts stretching from Afghanistan, through Syria and

Iraq, into Northern Africa in Syria, and now along the Russian-

NATO borders. He drew a parallel with the First World War,

which actually began well before 1914.

AIIB President in Frankfurt: Connectivity, Not

Tariffs, Increase Mutually Beneficial Trade

The determining factor of the annual meeting of the Asian Development

Bank on May 2-6 in Frankfurt, was unquestionably

the presence of the President of the Asian Infrastructure and

Investment Bank (AIIB) Jin Liqun. Held for the first time in a

German city, this year’s conference saw the signing between

Jin Liqun and ADB President Takehiko Nakao of a Memorandum

of Understanding (MOU), allowing the two Asian-centered

banks to co-finance projects in many sectors, including energy,

transportation, telecommunications, rural and agricultural development.

That announcement, and the overall intervention of Jin, set

the tone for much of the conference, which was otherwise to

be dominated by no-growth themes, such as “sustainability”,

green economics, energy savings and transparency.

Speaking at a panel discussion on expanding trade and investment

between Asia and Europe, Jin said the best way to

accomplish that was not through more tariff agreements, but

through building infrastructure connectivity. The main problem

today in international trade, he pointed out, is the fact that

many countries, especially those in landlocked regions of Asia,

are not only very poor, but also unable to fully participate in

world trade, because of the lack of connecting infrastructure.

Hence, the need to deal more extensively with funding their

infrastructure, which is the AIIB’s main task.

While the representative of the EU commission kept wanting

to come back to questions of tariff and other reforms, others

on the panel, which included Mohammad Ishaq Dar, Pakistani

Finance Minister as well as its representative to the ADB, and

Stephan Groff, vice president of the ADB, who is an American,

expressed their full agreement with Jin.

This is, of course, a very different approach from the tradewar

agreements that President Obama is pushing, both for Asia

(TPP) and for Europe (TTIP).

According to the MOU with the Asian Development Bank,

the first project to be co-financed will be a 64 km stretch of

EIR STRATEGIC ALERT

2 WEEKLY NEWSLETTER n°19 / 2016

the M4 highway project in Pakistan, connecting Shorkot to

Khanewal in Punjab Province. Significantly, this project is part

of the China–Pakistan Economic Corridor, which in turn is part

of the 21st Century Silk Road Initiative. While not giving details,

Nakao said there were many other projects in discussion.

While most of the questions at Nakao’s first press conference

dealt with cooperation between the ADB and the AIIB, there

were also questions on the role of the BRICS New Development

Bank, to which Nakao replied that both were willing to pursue

co-financing of projects. As of now, the projects are restricted

to the five BRICS countries, but could expand as other countries

join the NDB.

Daily Warnings The Financial Collapse Is On

A number of financial institutions, market operators and financial

establishment figures are now admitting publicly what our

newsletter has long warned of: a crash of the financial system

and of the Eurozone is inevitable. Such warnings would not be

issued, were the potential damage of spreading panic not less

than the havoc the coming crashes will wreak. But while some

such warnings may be accurate, no solution is indicated.

* The Institute for International Finance (IIF), the London/

Wall Street big banks’ lobby, has found debt leverage of the

corporate sector far above the levels Lehman had, and called it

“deeply disturbing”. The increased debt has been used to fund

mergers and acquisitions, pay dividends and buy back shares,

rather than for capital spending.

* Stanley Druckenmiller, an early partner of George Soros,

forecast an early financial crash due to extreme debt leveraging

of US corporations for non-productive purposes. Druckenmiller’s

“apocalyptic” facts, as Zero Hedge calls them, are in

fact widely known: added debt over added GDP in the U.S. has

gone from 2.5:1 to 4:1 in less than a decade, and net profits in

the non-financial sector have sunk into negative territory while

net debt is growing by more than 20% per year. Furthermore,

“the debt today has been used for financial engineering, not

productive investments”.

* James Bianco, head of the Chicago-based Bianco Research,

warned in an interview with Finanz und Wirtschaft. that the

energy bubble could become the trigger for a systemic collapse,

drawing the parallel with the subprime crisis. Of the estimated

$3 trillion in energy lending spread worldwide, Bianco asks,

how much the financial institutions have. “The banks will tell

you that they’re not exposed and there’s no problem – just

like in 2007, when they claimed that they had no exposure to

subprime lending.”

He also points out that “Deutsche Bank is the largest holder

of Euro denominated derivatives. So what happens if it comes

to a Brexit or if it comes to a Grexit?”

* Moody’s warned that “even a small crisis” could set off the

final crisis for the European single currency. In a report issued

May 4, the rating agency wrote that even if the EU survives a

Brexit vote, “even a ‘small’ future crisis could threaten the sustainability

of current institutional frameworks, if it coincided

with negative public sentiment and populist political developments.

This can create the impression that the question is when

the system breaks, rather than if.”

As these warnings indicate, a systemic crash is inevitable. But

there is a means to keep the damage within the bounds of the

non-productive financial sector, through a timely separation of

banks according to the Glass-Steagall standard. If government

institutions fail to do it, financial interests will implement policies

to save themselves and dump the damage on the people.

95% of EU Bailout Funds for Greece

Went Straight to the Banks!

The European taxpayers’ money that went into what were

called the “bailouts of Greece” in 2010 and 2012 actually went

directly into the coffers of the major banks of the City of London,

Wall Street, and Europe, according to an academic study

reported on in Handelsblatt May 4. Those first two bank bailouts

for Greece totalled €216 billion.

The two-year study was carried out by the European School

of Management and Technology (ESMT) in Berlin. Its findings

confirm the statement of the Greek Parliamentary Debt Commission

during the 2015 crisis, which declared Greece’s huge

debt to be “illegal, illegitimate, and odious” (cf. SAS 26/15).

The new study, according to Handelsblatt, found that “Less

than 5% of the 215.9 billion Greece received as part of its first

two bailout programs actually went into state coffers.

“The rest was used to pay off old debts, make interest payments,

and to recapitalize Greek banks.... Only 9.7 billion [euros]

of the total sum went into the government budget, while

86.9 billion was used to service debt and 52.3 billion to make

interest payments.”

In addition, “A total of 37.3 billion in aid money was used to

rescue Greek banks.” Since 2013, those banks have “lost about

98% of their market value.”

ESMT President Jörg Rocholl told Handelsblatt: “The aid packages

were first and foremost used to rescue European banks.

The European taxpayers have bailed out the private investors.”

Worse yet, the Greek governments, in exchange for the

taxpayer funds which they never saw, were forced to impose

murderous cuts in the budget, which severely increased the

poverty rate, and gutted the economy further, while adding to

the debt burden.

The ESMT study came just as the hated Troika was again

forcing Athens, in exchange for new credit, to cut retirement

benefits and raise taxes, at the demand of the international

creditors.

The IMF itself has again insisted that the EU agreement with

Greece is unworkable, as it mandates a primary budget surplus

of 3,5%, which no European country has ever yet achieved,

not even star pupil Germany. The IMF, while demanding more

austerity, does defend a “haircut” on Greek debt.

But that, as such, is not the answer. The real solution is to

determine out which debts are usurious and illegitimate, and

therefore to be cancelled, and which need to be honored to

protect the social welfare and the real economy. That can be

done in the framework of implementing a two-tier banking

system, along the criteria of the original Glass-Steagall Act

adopted in 1933 in the United States under President Franklin

Roosevelt.

Suicide Rates in the United States Soar,

As Manufacturing Plummets

An alarming growth in the number of deaths in the United

States from suicide was splashed across the front pages of the

New York Times back on Nov. 2, 2015, in an article about a

report on mortality rates, written by Nobel Economics Prize

winner Angus Deaton, and his wife, Anne Case. Their report

focused on the rate of increase among white males, aged 45

to 54, with the most startling rise attributed to substance

abuse, including a huge spike in heroin overdoses (cf. SAS 46-

47/15).

Since then, numerous reports have expanded on the demographic

categories affected, showing an increase in suicide

EIR STRATEGIC ALERT

n°19 / 2016 WEEKLY NEWSLETTER 3

deaths in most age groups, including among white males 25

to 44 years old, and among women. A new report from the

Centers for Disease Control found that the suicide rate for men

aged 45 to 64 has risen by 43% from 1999 to 2014; for

women in that age group, it has jumped 63% over that same

period. And among girls aged 10 to 14, the rate tripled!

That is in contrast to steadily falling rates since the 1950s.

In analyzing this alarming trend, most coverage centered on

“mental health disorders”, and pointed to the collapse in spending

on treatment of depression.

It is true that funding for treatment of mental health in the

U.S. has been subjected to brutal budget cuts, with many public

facilities closing in recent years, and mentally ill people dumped

onto the streets. However, most of the coverage ignores what

economist Lyndon LaRouche has called the leading factor in this

surge of suicides, which is the sense of hopelessness caused by

a collapse of physical production in the economy, as increasing

numbers of once-productive workers, and of unemployed, are

cast into the category of “useless eaters.”

Take the collapse of manufacturing: from March 1998 to

Dec. 2013, the United States lost 5.7 million manufacturing

jobs. While manufacturing as a percent of GDP has been dropping

for 30 years, the trend has escalated since 2008, and

even more so since 2014. Manufacturing jobs, which were a

ticket to the middle class for millions from the 1950s until the

1980s, now make up only 8.8% of total employment. The

economic uncertainty caused by this sharp decline parallels the

jump in suicide rates.

Despite the claims of job creation by President Obama, there

are now 94 million working-age Americans out of the workforce,

and 45 million need food stamps to afford to eat. Government

figures show that more than 75% of the jobs created

in the last seven years have been low-wage, temporary or parttime,

which adds to the sense of despair.

Yet, the same New York Times, which first called attention

to the increase in suicides, quoted Barack Obama claiming that

“we probably managed this [the ‘economic recovery’] better

than any large economy on Earth in modern history.”

South-West Asia: Obama Deeper in League

with Erdogan and House of Saud

While many voices in the United States protest against the

war drive, there is no evidence that President Obama is paying

any attention. Evidently alarmed at Russia and China’s growing

influence in South-West Asia, the U.S. President has clearly decided

to align with Saudi Arabia and Turkey in pursuing a new

round of regime change actions against the Assad government

in Damascus.

Thus, the ultimatum which John Kerry was forced to issue to

Assad (cf. above). While Kerry did not elaborate on the threat,

White House officials have been running a steady stream of

media leaks that the Obama Administration is prepared to activate

“Plan B” for Syria -- arming jihadist fighters -- if the ceasefire

breaks down and the Geneva talks collapse. Saudi Arabia

has already been shipping US-supplied “manpads,” shoulderheld

anti-aircraft missiles, to Syrian rebel groups. Ultimately,

a majority of those weapons find their way into the hands of

the most hardcore groups, excluded from the ceasefire: the

Islamic State (ISIS) and the Nusra Front, the Iraq-Syria branch

of Al Qaeda.

And as of April 25, Obama had announced the deployment

of 250 more special forces to Syria to fight with U.S.-backed

rebels, without the permission, and against the will, of the government,

which is a blatant violation, by anyone’s measure, of

Syrian sovereignty. U.S. Senator Tom Kaine brought that up in

a recent Senate hearing, where he asked how one can “criticize

the Russian incursion into Ukrainian sovereignty,” when the

United States is escalating, military operations in Syria under

such conditions.

Another clear indication of Obama’s current profile is the role

that he has played in backing up Turkish President Recep Erdogan’s

coup against Prime Minister Ahmet Davutoglu. While

Davutoglu is a scoundrel in his own right as a leading international

figure in the Muslim Brotherhood, his ouster by Erdogan

was based on the latter’s drive for total dictatorship, unshared

with a PM (cf. below).

In late April, President Obama was in both Riyad and London,

forging a deeper alliance with the Anglo-Saudi axis. Then, on

May 6, the Pentagon for the first time publicly admitted that

there are U.S. troops, fighting side by side with the Saudis and

their mercenaries in Yemen. The UN and a myriad of human

rights organizations have all denounced the Saudis’ large-scale

killing of civilians in Yemen, targeting schools, clinics, hospitals

and other civilian installations in areas under the control of the

Houthi forces.

The Obama White House has also made clear that it will continue

to cover up the Saudi hand in 9/11, the worst terrorist

atrocity to ever take place on American soil.

Erdogan’s Coup Against His Own Government

The resignation of Turkish Prime Minister Ahmed Davutoglu is

a giant step toward the consolidation of “authoritarian” powers

for President Recep Tayyip Erdogan, the would be Ottoman

Sultan. Even more dangerously, it means the continuation of

operations to overthrow Bashar al-Assad in Syria and sabotage

efforts to end the war in the region. And it comes amid a ferocious

crackdown on all opposition to Erdogan’s policy, including

from journalists.

The announcement of Davutoglu’s stepping down occurred

within hours of the European Commission approving visa-free

travel for Turks, thus throwing into doubt the entire rotten

refugee deal struck between the EU and Ankara.

The leader of Turkey’s main opposition party, the Republican

People’s Party, Kemal Kılıçdaroğlu charged: “Davutoglu’s resignation

should not be perceived as an internal party issue; all

democracy supporters must resist this palace coup.”

It is indeed a coup since, according to the Turkish Constitution,

the President is the ceremonial head of state. That is

why Erdogan is pushing for Constitutional change to give him

executive power. In fact, he has already assumed it, declaring

on May 6, one day after Davutoglu stepped down: “At this

point, there is no turning back. Everybody should accept this

by now”.

Although Davutoglu was hand-picked by Erdogan to become

Prime Minister in 2014, after the latter had assumed the Presidency,

he has been accused of not carrying out the full wishes

of the President, especially the demand to force through the

parliament or by referendum the relevant change in the constitution.

In listing the conflicts between the two, Hurriyet pointed to

Davutoglu’s planned meeting in Washington with President Barack

Obama and Vice President Joe Biden, which was supposed

to take place the same week he was forced out. It was officially

canceled due to Obama’s “busy schedule”, but in fact it was

because Erdogan let his friend in the White House know that

he opposed the meeting.

EIR STRATEGIC ALERT

4 WEEKLY NEWSLETTER n°19 / 2016

The new Prime Minister will be named when the ruling Justice

and Development Party holds a special party congress on

May 22. There is a long list of possibilities, including Energy

Minister Berat Albayrak, who happens to be Erdogan’s sonin-

law! All have on thing in common – they owe their political

careers to Erdogan.

In the Ruins of Palmyra, Russian Orchestra

Celebrates Victory over Barbarism

Amidst the ruins of the ancient amphitheater in the historic

Syrian city of Palmyra on May 5, the Mariinsky Theater Orchestra

of Russia paid a solemn, and incredibly moving, tribute

to the triumph of civilization over barbarism in the form of a

classical concert.

Titled “With A Prayer for Palmyra -- Music Revives the Ancient

Walls,”, the concert was dedicated to the memory of all

those throughout the world who have lost their lives to terrorism.

But in particular, to Dr. Khaled al-Assad (1934-2015),

the Syrian archaeologist, who was custodian of the Palmyra

antiquities for 40 years, and was publicly beheaded last August

by ISIS jihadists, after refusing to give them access to yet

more statues to destroy. And also to the memory of the young

Russian special forces officer, Aleksandr Prokhorenko, killed in

mid-March, after calling in Russian airstrikes on his own position,

when he was surrounded by the jihadists during the battle

for Palmyra.

The orchestra’s conductor Valery Gergiev led the program,

with principal players Pavel Milyukov, violin, and Sergei Roldugin,

’cello, the latter the artistic director of St. Petersburg’s

House of Music.

The Classical program featured Johann Sebastian Bach’s Chaconne,

which famed violinst Yehudi Menuhin called the “greatest

for solo violon solo that exists.” It immediately uplifted the

audience, and the millions who watched it, to the realm of the

sublime. That was followed by the First Symphony by Sergei

Prokofiev, and by an excerpt of the opera Not Love Alone by

modern Russian composer, Rodion Shchedrin (widower of the

famed Russian ballerina Maya Plisetskaya). When Gergiev introduced

the pieces in the program, he pointed out that Prokofiev

wrote his symphony “in homage to the great masters of the

past -- Mozart, Haydn, Beethoven,” whose work expresses

“optimism and hope.”

The classical concert, organized in tremendously dangerous

logistical and security circumstances, was a successful flanking

operation by Russian President Vladimir Putin. In his video address

to open the event, Putin thanked all involved and called

the classical music a sign of “remembrance for all victims of terror

no matter the place and time of crimes against humanity,

and hope, not just for the revival of Palmyra as a cultural asset

of the whole of humanity, but for the deliverance of modern

civilization from this terrible ill, from international terrorism.”

Gregiev is a close associate of Putin. In introducing the concert,

he said, in both Russian and English: “We protest against

barbarians who destroyed wonderful monuments of world culture.

We protest against the execution of people here on this

great stage,” referring to the public mass killings by the Islamic

State last November in the amphitheater.

Africa Looks to Nuclear Power

Anton Khlopkov, director of the f in Moscow, participated in a

seminar May 5 at South Africa’s Institute for Security Studies

in Pretoria, during which he summarized the dramatic underinvestment

in energy in Sub-Saharan Africa. He reported that

only 24% of the population currently have access to electricity,

and very often where it is available, it is unreliable. Outages

for manufacturing enterprises average 56 days per year. Many

companies rely on diesel generators as a back-up, which makes

power up to three times as expensive.

In Africa, he said, Algeria, Egypt, Ghana, Kenya, Morocco, Namibia,

Nigeria, Senegal, Tanzania, Tunisia, and Uganda are considering

embarking on nuclear programs. And four African countries

produce uranium -- Malawai, Namibia, Niger, and South

Africa -- which also brings them into the nuclear industry.

Recently, U.S. Energy Secretary Ernest Moniz commented

that Russia and China will garner such contracts, since they offer

financing for the plants, which the U.S. does not.

Global Warming Debate in Ireland:

“God Controls the Weather”

A bit of “common sense” was introduced into the recent debate

on climate change in the Irish Parliament by Danny Healy-Rae.

The recently elected independent MP from Kerry argued against

the carbon tax, which is costing the community massive sums

of money, and the refusal to invest in infrastructure under the

pretext that “global warming” is responsible for all our ills.

Patterns of climate change, he said, go back over centuries,

“before there was ever a combustible engine working in this or

any other country.” For example, if “we go back to the 11th

and 12th centuries, this country was roasted out of it and in

the 15th and 16th centuries we were drowned out of it,” he

said. “In the 1740s, we had a famine in which we lost more

than 3 million people because of two years of bad weather.”

With a touch of humor, he added that “God above is in

charge of the weather.”

As for claims that climate change is responsible for flooding

in Ireland, Healy-Rae countered that the problem is rather due

to the lack of investments in cleaning rivers. The Flesk River

in Killarney and Glenflesk was cleaned out 35 years ago, and it

was fine for about 20 years, he said. “Now it is in a desperate

state again, but the view is that now climate change is the cause

of flooding and we cannot get funding to clean rivers.” Another

river, the Shannon, he said, had not been cleaned out “since the

English last cleaned it out. Perhaps if that river were cleaned

there would not be half the flooding or the need for funding to

be set aside to deal with flooding.”

Dredging the rivers, the Independent member of Dail suggested,

should be done before getting “carried away with the

notion of addressing climate change by hoping to change the

weather.”

On the carbon tax, he noted that it hurt ordinary workers

and farmers. Beyond that, as we have reported, it is part of

a broader scheme to create another bubble on the financial

markets.

The Vatican and Pope Francis would do well to heed the argument

on “God” controlling the climate, or to put it in lay

terms, the physical principles of the universe.

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

Published by: E.I.R.GmbH, Bahnstr. 9a, 65205 Wiesbaden

Tel.: 0611/73650, Fax: 0611/7365101, Email: eirna@eirna.com

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

Subscription: EUR 3000/ ISSN 0936-7527

© E.I.R. GmbH Alle Rechte vorbehalten, auch die des Nachdrucks

von Auszügen, derphotomechanischen Wiedergabe und der Übersetzung,

Printed in Germany