E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 31, No. 51-52 - December 21, 2017

E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER
Volume 31, No. 51-52 - December 21, 2017

2017: The Year of Win-Win Cooperation In our first issue of January, 2017, we forecast that the New Silk Road dynamic, originally launched by China in 2013, would increasingly become the defining force in the world, due to the superior approach of win-win cooperation over a unipolar world. We noted that two major summits would be decisive in shaping and consolidating that dynamic over the course of the year. 1) The first was the imposing Belt and Road forum which took place on May 14-15 in Beijing, bringing together representatives of 110 countries. Helga Zepp-LaRouche, who was a speaker at the think tank panels of the event, commented at the time that it represented “a phase change for humankind”. 2) The second was the BRICS (Brazil, Russia, India, China, South Africa) summit on Sept. 3-5 in Xiamen, China, focused on fostering south-south cooperation for economic development. Our forecast has been borne out: the Belt and Road Initiative has become the locomotive of global growth and the “new paradigm” is now unstoppable. Another decisive factor in 2017, of course, has been the Trump presidency in the United States, which still has the world largely guessing what Donald Trump will do next. He did upset the geopolitical “apple cart” his predecessors had supported, in particular by his wish to maintain good relations with other countries, most emphatically Russia and China, and to end “regime change” policies, although not everyone in his administration, to say the least, agrees with that agenda. In any case, Donald Trump has been hounded domestically by an unprecedented level of dirty tricks and negative media coverage (see more on that below). Here in Europe, the process of disintegration of the EU has accelerated. Countries in Central and Eastern Europe are increasingly balking at the dictates coming from Brussels and turning to China to ensure their development (cf. below). But also Greece, Spain, Portugal and Italy, all victims of the vicious Troika policy and/or bail-in, are shifting their focus to the East. France provided another indication of the instability in Europe in May, when the two major parties, the Republicans (conservative) and the Socialists, suffered severe losses in the first round of the Presidential election, with relative new-comer Emmanuel Macron, who is not anti-establishment but also not tied to a specific party, and the extreme right-wing Marine Le Pen taking first and second places. And now in Germany, the other “pillar” of the EU, for the first time since 1949 there is still no German government a 
full three months after the election that handed stunning losses to both the CDU-CSU and the SPD – the two parties that are now supposed to form another grand coalition. The paralysis in Germany has brought European “integration” to a halt, increasing the entropy of the system by the day. The EU in its present form is doomed and a new institutional framework is needed to avoid disaster. On the strategic level, just over two years after Vladimir Putin committed Russian military force to eliminating the terrorist-jihadist extremists in Syria, ISIS has been nearly totally defeated in both Syria and Iraq. The battle is not over, but continues to wage in Afghanistan and Libya in particular, but crucial progress has been made. Attempts to resolve the crisis around North Korea are advancing, with increased cooperation among China, the United States and Russia. Importantly, Japan and South Korea, whose relations with China have been rocky in the recent past, particularly under President Obama’s Asia Pivot, have come completely on board the efforts with China . A great danger remains the lack of action on the bankrupt trans-Atlantic financial system, which could blow at any moment, inflicting tremendous hardship on the populations concerned (cf. below). On that front, the program proposed by the Schiller Institute worldwide must define the immediate agenda for 2018. “Russiagate” Flounders, Amid Evidence of Interference from the FBI and British Intell The investigation into alleged Russian meddling in the US presidential election to ensure the victory of Donald Trump, aka the “Russiagate affair”, has still not produced any evidence of those assertions, but it has brought to light the outrageous attempts of the FBI and the Justice Department to undermine the Trump presidency, as we have reported. The counterattack by some in Congress has turned up damning elements of that conspiracy that began well before his election, as soon as Trump began to eliminate his 16 contenders one by one in the Republican Party primaries. The Intelligence Committees of both the Senate and the House of Representatives are looking into a huge scandal, which bears out Trump’s charges that the “deep state” is working overtime against him. On Dec. 12, the Justice Department released to the public 375 text messages that Peter Strzok, the number two man in the FBI Counterintelligence Division, 
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had exchanged with FBI attorney Lisa Page, with whom he was having an affair, which clearly indicate they were plotting to prevent Trump’s election. One of those texts, the most explicit, refers to a meeting that took place in Aug. 2016, likely in the office of FBI Deputy Director Andrew McCabe (referred to as “Andy”), which Strzok and Page both attended. On Aug. 15, Strzok wrote to Page: “I want to believe the path you threw out for consideration in Andy’s [McCabe’s] office that there’s no way [Trump] gets elected, but I’m afraid we can’t take that risk. It’s like an insurance policy in the unlikely event you die before you’re 40.” What exact strategy they discussed is not revealed, but the stories about Russian collusion with Trump and the Russian hacking of the Democratic Party emails were probably part of it. As Senator Chuck Grassley wrote in a letter to the deputy Justice Minister Rod Rosenstein, these texts point to a highly politicized FBI, ready to carry out witch hunts. Strzok is also the FBI official who changed the wording of FBI director James Comey’s official assessment of Hillary Clinton’s use of her personal email account when she was Secretary of State, from “grossly negligent” (and thereby liable for prosecution) to “extremely careless”. Other text messages exchanged between Strzok and Page show they were tinged with animus toward Donald Trump (they are also very disparaging of Bernie Sanders, by the way, which likely influenced the Democratic Party primary.)  And that’s not all. On Dec. 13, Representative Matt Gaetz of Florida relentlessly questioned Rosenstein in a Judiciary Committee hearing on the fact that his deputy at the Justice Department, Bruce Ohr, had met with Glenn Simpson, the co-founder of the firm hired by the Democratic Party during the campaign to “get dirt on Trump” to discredit him. The firm, Fusion GPS, had in turn hired “ex” British intelligence agent Christopher Steele to put together the infamous dossier, which was later leaked (cf. SAS 50/17). To make matters worse, it was further revealed on Dec. 11, that Bruce Ohr’s own wife, Nellie Ohr, had worked for Fusion GPS during the summer and fall of 2016! Conflict of interest, anyone? Bill and Hillary Clinton’s long-time pollster and strategist Mark Penn is certainly worried. He wrote in The Hill on Dec. 14, that 63% of all voters believe that the FBI is refusing to provide information to Congress on the Clinton and Trump investigations, 54% believe Robert Mueller has “conflicts of interest that prevent him from doing an unbiased job”, and 61% favor an investigation of “the funding of the salacious GPS Fusion document”. Mistrust of Robert Mueller and of the entire FBI-DOJ nexus has reached such a point that Penn calls for a complete clean up. “When you look at the polling numbers and the stream of revelations, the current course is simply untenable, and likely to go from a crisis in confidence to a full-blown constitutional crisis if not corrected.” Even the Wall Street Journal expressed deep concern in a Dec. 13 editorial, reviewing the corruption in  Mueller’s team. Evidence is building, they write, “that some officials at the FBI -- who have worked for him -- may have interfered in an American presidential election.” ARTE Documentary Exposes Draghi’s  and London’s Role in Italian Banking Crisis A documentary film broadcast by the French-German ARTE channel on Dec. 12 shines a spotlight on the role of ECB head Mario Draghi, who was then head of the Bank of Italy, and of the City of London in first engineering, and then covering up, 
the Monte dei Paschi banking crisis which became the pivot of the so-called “Italian banking crisis”. Watching Death of a Banker , one gets a sinister feeling that Draghi’s famous uttering in 2012 “Whatever it takes” could mean going beyond saving the euro-denominated bubble and the banks at all costs. The film, which can be viewed in French and German on the ARTE website starts from the mysterious suicide of the MPS head of communications, David Rossi, on March 6, 2013. It reconstructs the dynamic of Rossi’s fall from the window of his MPS office, with the help of forensic experts and witnesses interviewed by film author Moritz Enders, to conclude that Rossi could have never done it alone. It then goes into the reasons why Rossi could have been “suicided”: he knew about criminal actions involving very high-level people, inside and outside the bank. (Meanwhile, the prosecution in Siena has re-opened the investigation on Rossi’s death and is conducting new forensic analyses and interrogation of witnesses). The film focusses on the three elements of the MPS crisis: 1. the bizarre acquisition of Banca Antonveneta from Santander in 2008; 2. the derivatives contracts concluded to cover the losses incurred; 3. large loans to political friends, that became NPL (non performing loans). Documents show that Mario Draghi, as head of Bank of Italy, ignored his own supervisors by allowing MPS to purchase Antonveneta and cheated on the real cost of the operation. The trail then leads to London, where another strange suicide occurred. Will Broeksmit, the former “Risk Assessment Manager” for Deutsche Bank London, was was found dead in his flat in Jan. 2014. Broeksmit must have known about the derivative called “Santorini”, which Deutsche Bank had sold to MPS in order to cover its losses. Former Sen. Elio Lannutti, head of the consumer association ADUSBEF, says in the film that Mario Draghi is responsible for “criminal activity”. What is not investigated is Draghi’s possibly higher motive. In fact, the takeover of Antonveneta occurred in the midst of the global financial collapse, and especially in the aftermath of the ABN Amro insolvency, the largest in European history with over 60 billion euros. To avoid a systemic chain-reaction, a consortium of three banks was put together to take over ABN Amro’s liabilities (including Antonveneta): Royal Bank of Scotland, Fortis and Santander. The latter, however, then found itself in urgent need of a capital injection, which was no longer needed once it was paid 18 billion by MPS to purchase Antonveneta. Remember that Draghi was also head of the Global Stability Forum at the time, and his main concern was to preserve the stability of the financial system “whatever it takes”... EU and NATO Policy Increasingly  under Fire in Eastern Europe At the European Union (EU) summit in Brussels on Dec. 14-15, such a degree of disunity among member governments was on display that one wonders how this conglomerate of 27 states will manage to survive. The European Commission plans to formulate a new centralized policy on refugees by July 2018 were flatly rejected by Poland, the Czech Republic and Hungary, leaving the perspective that 24 governments at most will accept the planned quotas for redistribution of refugees. Moreover, neither Denmark nor Malta will join the EU’s new “defense union”. Clearly, Brussels’ “one size fits all” no longer works. The Commission also met a dead-end in its attempt to discipline Poland over its judicial reform, which led Brussels to 
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threaten to cut funds for the government and to strip it of its voting rights in the EU. Asked on Dec. 8 by the host of a news program on TV Trwam what he thinks of this development, the new Polish Prime Minister Mateusz Marowiecki retorted that the Poles “will not accept being arm-twisted by anyone.” Marowiecki, who was Economics Minister just a few days before being named to head the government, is the number one enemy of the neo-liberal economists, as he has stated his intention to renationalize Poland’s banking and industrial sectors, to carry out long overdue infrastructure projects, and to fight tax and capital evasion, which is certain to lead to open confrontation with the Brussels eurocrats. Other East European governments have also been rebellious. In the Czech Republic, euro-skeptic Ivo Babis is the new Prime Minister, while President Milos Zeman is an outspoken critic of the EU’s anti-Russian and anti-Chinese views. And Hungary has openly declared its intent to carry out national infrastructure projects with China that are long overdue, since the EU will not fund them. The Hungarian government is not only backing Poland against Brussels on the refugee issues, but has also vetoed a planned meeting of the NATO-Ukraine Commission, because of the repression by Kiev of the Hungarian minority living in Ukraine, in spite of complaints from Budapest. The late November  Budapest summit of the “16 plus 1” (16 Central and Eastern European countries plus China) featured numerous initiatives to carry out transportation projects in the cross-border corridors that have been on the drawing board since 1994. Among others, the railroad from Belgrade to Athens via Skopje, the highway from Durres to Varna; or, the Danube-Morava Canal. Vladimir Putin Promotes   Russian Diplomacy in the Middle East Russian President Vladimir Putin called his American counterpart on Dec. 17 to thank him personally for intelligence passed to Russia by the CIA that helped thwart a suicide bombing attack in St. Petersburg, and assured him that the Russian security services would provide similar intelligence to the Americans in the event they receive any. Just four days before, President Trump had called Putin after the latter’s annual press conference and the two leaders spoke for 90 minutes. While the Dec. 14 call was heavily focused on the North Korea situation, it is almost certain that the two leaders also discussed the Middle East. President Putin had just returned from a brief trip to the region, which included an unannounced stop in Syria, and visits to Egypt and to Turkey. In Syria, Putin visited the Khmeinim air base, where he announced some troop withdrawals in light of the defeat of the Islamic State (ISIS). In Egypt, he met with President el-Sisi and the two men advanced a planned $30 billion nuclear power plant project, which Russia will build, as a first phase of a more expansive nuclear power project. The need to establish security in Libya was also high on the agenda (cf. SAS 49/17). The two leaders also took up the Palestinian issue in the context of Donald Trump’s announcement that the United States would recognize Jerusalem as the capital of Israel, which had the effect of throwing a hand grenade into the region. Putin attempted to calm the situation during his trip, noting while in Egpyt that Cairo and Moscow both “call for promptly resuming direct Palestine-Israel dialogue on all issues, including the status of Jerusalem”, and to conclude agreements that are “in line with the decisions previously made by the global community.” The issue was also taken up in Turkey, where Presidents Putin 
and Erdogan advanced the sale of the Russian S-400 advanced air defense system. Russia and Turkey, together with Iran, have been jointly hosting the Astana talks, aimed at achieving a complete ceasefire in Syria. And while Putin has cultivated close ties with Iran, he also hosted an October 2017 visit to Moscow by Saudi Arabia’s King Salman and the Crown Prince Mohammed bin-Salman. Russia is also engaged in diplomacy aimed at securing the rapprochement between Fatah and Hamas, and at ending the civil strife in Libya. In effect, Russia has emerged as a significant player in the Middle East, beginning with the September 2015 Russian intervention into the Syrian war, which reversed the tide and has now reached the point where the defeat of the jihadist insurgency is in the final phase. Idlib province is the last serious pocket of ISIS and Nusra strength. While western mainstream media have attempted to portray that shift as a defeat for Washington, Russia-US engagement in the region is not a zero-sum game. Russian and American military forces have maintained a robust deconfliction channel in Syria, and the two forces have managed to avoid any serious incidents for more than two years. Tax Reform in the United States  Threatens New Financial Shocks The so-called “Trump tax reform”, which could possibly be passed into law before Christmas, is not what the American economy needs to recover jobs and productivity, and it is seen globally as a potential trigger for a financial shock. Although the Federal Reserve has stated that the potential effects of the reform on inflation and liquidity levels within the United States have already been discounted by the recent rate increases, many fear that the Fed will nonetheless be forced to implement further and more frequent rates hikes, leading to an imbalance that the global system can barely survive. That view, however, overlooks the fact that the global financial system is already deeply unbalanced, with gigantic debt and derivatives bubbles which are growing much faster than the real economy in the trans-Atlantic region. As concerns the tax reform, it was devised by the Republican Party and not by President Trump, who came to the White House as an outsider and is usually not supported by his nominal party. Missing from the bill, for instance, is the tax increase for hedge funds which Trump had promised during the election campaign. In an interview with CBS in 2015, he complained that hedge funds “are getting away with murder”. “The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.... They make a fortune. They pay no tax. It’s ridiculous, ok?” In particular, Trump promised he would eliminate the loophole that allowed hedge funds to pay only 20% on the carried interests. But the reform now on the table maintains that loophole. In general, the tax legislation will eliminate tax revenues that could be leveraged for desperately needed new infrastructure investments, which Republican leaders oppose. Nonetheless, Trump would still have time to remedy that with an infrastructure plan, which he should deliver at the latest in his State of the Union address. Otherwise, it aims to lure American corporate profits abroad back to the States, by offering a tax level of only 12 to 14%. It is also expected to hit China hard with capital flowing out of the country. In that light, a Dec. 11 editorial in Global Times titled “China Must Act To Blunt Impact of US Tax Cuts”, recommended 
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controls on capital outflows and increases in total factor productivity (technological productivity) in China’s own economy (see http://www.globaltimes.cn/content/1079972.shtml). U.S. Commits to Space Exploration On Dec. 11 at a White House ceremony, U.S. President Donald Trump signed Space Policy Directive 1 which, he said, “will refocus America’s space program on human exploration and discovery,” including the return of astronauts to the Moon and establishing “a foundation for an eventual mission to Mars and perhaps, some day, to many worlds beyond.” Standing next to the President were former astronauts Buzz Aldrin, who was part of the Apollo 11 mission which landed the first man on the Moon, and Harrison (Jack) Schmidt, of the Apollo 17 mission in 1972, which was the last time astronauts were on the Moon, as well as two current astronauts. The new policy directive fulfills a promise made by Trump during his campaign, that he would “free NASA from the restriction of serving primarily as a logistical agency for low Earthorbit activities,” and “instead focus on space exploration.” This should mean the end of the dead-end goal pushed by former President Obama, who rejected a return to the Moon by saying “We’ve already been there,” favoring instead a landing on an asteroid! Following Trump’s announcement, NASA Acting Administrator Robert Lightfoot characterized the mood at his agency with the words “We’re pretty excited,” as it provides a “sense of urgency” to NASA’s endeavors. Lu Kang, a spokesman for China’s Foreign Ministry, welcomed Trump’s statement, saying “China is glad to see countries making progress in the exploration and use of outer space for peaceful purposes.” The U.S. currently prohibits meetings and cooperation between U.S. space scientists  and their Chinese counterparts but that will hopefully change soon. The Chinese have their own plans for lunar landings, and even for mining the Moon to extract Helium 3, as a fuel for nuclear fusion energy production. The Chinese have opened the doors to many other nations, to join with them in creating a Silk Road initiative in space. The approach to take, as different astronauts have stressed after being in outer space and looking down on Earth, is that we are all part of same mankind and should seek cooperation in taking up the great challenges of the future. For the United States, the orientation on space exploration opens another great perspective, that of reversing the ongoing decline of high-tech manufacturing in the U.S. The original mission launched by President John F. Kennedy, to land a man on the Moon, and return him safely to Earth, spurred a leap in productive employment, through fostering advances in science and technology as a central feature of that mission. While other Presidents have stated the commitment to restore the space program, the science driver which characterized Kennedy’s vision has been lost during a three-plus decade decline, which accelerated under the Bush and Obama administrations. To fully restore it will require implementation of Lyndon LaRouche’s “Four Basic Laws” for economic development. Schiller Institute Enhances the Fight  for a New World Economic Order The Schiller Institute of Germany held its bi-annual membership convention on Dec. 17 in Wiesbaden, which was keynoted by its founder and chairwoman, Helga Zepp-LaRouche, who used the occasion to review both the guiding principles and the crowning activities of the Institute. 
Back in 1984, a notable surge in NATO’s military buildup had just occurred, with the stationing of Pershing missiles in Germany, and there was great fear that a new world war could erupt at any time between the Warsaw Pact and NATO. In Germany and in Europe, anti-Americanism was growing quickly, while the Americans were increasingly turning against Europe. It was at that time, Helga Zepp-LaRouche recalled, that she decided to found the Schiller Institute, in order to propose and promote a new basis for international relations, one based on the best traditions and cultural achievements of each nation involved. And she came to the conclusion that the best reference point for such an order was the great poet Friedrich Schiller, and his idea that the “most perfect work of art is building true political freedom”, which must be the aim of all statecraft and of education. From its founding conference near Washington in July 1984, to its founding in Europe in September of the same year, in Wiesbaden, Germany, the SI has pursued a dual goal: bringing about a new world economic order able to ensure economic development for all nations on the basis of Lyndon LaRouche’s principles of physical economy, and promoting a renaissance of classical culture, to allow each individual to develop his creativity to the fullest. For Europe, this is represented by the Italian Renaissance, the French Polytechnique education system, the German classical period in poetry and music, and the Alexander Pushkin tradition in Russia, just to name a few. Helga Zepp-LaRouche gave many examples of the prodigious development plans the SI has worked out over the years for India, Latin America, Africa, etc., but also for the common development of Eastern and Western Europe after the fall of the Berlin Wall. Today, she noted, it is a most fortunate coincidence that China is able to actually implement concretely a number of the SI’s proposals in the framework of the New Silk Road and Belt and Road Initiatives. In that sense, one can speak of “an affinity” between the ideas of the Schiller Institute and those of the Chinese leadership, which in turn are inspired by Confucianism, a tradition that is being actively promoted throughout the country today. She likened President Xi Jinping’s idea of a “shared destiny of the future”, to Schiller’s notion that one must be both “a patriot and a world citizen”, as we all seek to serve the common interests of humanity. Given the success and heightened recognition for the SI worldwide, Helga Zepp-LaRouche proposed  to launch an allout membership drive in order to greatly expand the Institute’s activities and means. Season’s Greetings Best wishes to our readers for the holiday period. Your first issue for 2018 will be dated January, 4.
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:  info@eir.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