E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 32, No.22, May 31 2018

E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER
Volume 32, No.22, May 31 2018

Trans-Atlantic Establishment is Frantic  over Dwindling Power The trans-Atlantic establishment reacted to the negotiations on forming a new government in Italy with sheer panic. The fact that the issue of leaving the Eurozone was even  broached in Italy, and that the two coalition parties (M5S and Lega) call for bank separation in their platform threw the eurocrats and their controllers into a complete flight forward to block the process (cf. below). Their efforts may have worked temporarily in Rome, but that won’t prevent the European populations from revolting against the policies of globalization, deindustrialization, and austerity of the past decades, with has led to rising poverty on both sides of the Atlantic, while rescuing the bankers and speculators. It was just such a revolt that led to Donald Trump’s surprise win in the U.S. The Establishment’s hysteria is explained at least in part by the fact that another financial crisis is about to hit, with even worse consequences than in 2007-2008, as recognized by a growing number of “experts”. The Mauldin Economics website headlined its May 17 editorial “A Liquidity Crisis of Biblical Proportions Is Upon Us,” in reference in particular to the explosion of corporate debt globally. Deutsche Bank may have recognized the danger if the statements by its chief economist are any indication (cf. below). Meanwhile, a different perspective is shaping up in Asia. Despite the uncertainties surrounding the Trump-Kim summit, and the virulent opposition to it that the US President has to deal with domestically, diplomacy is moving forward on the Korean peninsula. Negotiations are also proceeding between Washington and Beijing on a solution to the huge trade imbalance. As for Russia, it has re-asserted its own role internationally at the just concluded Saint Petersburg International Economic Forum. The special guest countries were Japan and France, with Prime Minister Shinzo Abe attending as well as French President Emmanuel Macron who was also paying his first official visit to Russia. Chinese Vice President Wang Qishan was also there, as a sign of the importance of Sino-Russian cooperation. Despite the international sanctions, the Forum featured a record number of participants and of agreements signed. The largest delegation came from the United States (apparently undeterred by “Russiagate”), with more than 550 people, followed by Japan and France. President Macron stated his openness for dialogue and co
operation with Russia. Chancellor Merkel has recently been to Russia and China for discussions. Could they jump on the bandwagon of win-win cooperation before it’s too late? That seems doubtful, but if Donald Trump does manage to defeat the “war party” and the “deep state”, it would certainly become more likely. Italy: an ECB Coup by Any Other Name What happened on Sunday evening, May 27, in Rome, with the rejection of the “populist” option for an Italian government, can rightly be called a coup. It was executed by State President Mattarella, but the real string-puller is the ECB. Just as in summer 2011. The message has gone out once again – if the powers that be don’t like the choice of the voters, they will disregard it! Mattarella claimed that the government presented by designated PM Giuseppe Conte “could provoke, probably or even inevitably, Italy’s exit from the euro” because of the views of designated Finance Minister Paolo Savona. This, despite the fact that Savona had made clear, in a statement that same day, that, putting aside his well-known euro-critical views, he would uphold the government program which does not contemplate an exit from the single currency and aims to reduce the debt/ GDP ratio by increasing growth. Nevertheless, Mattarella gave a highly partisan speech, warning that “The uncertainty on our position on the euro has alarmed Italian and foreign investors”,  and painting a frightening picture of a sovereign debt crisis, an increase of the spread on Italian bonds, a stock market collapse and a threat to Italian savers. “Membership in the Euro is a choice of fundamental importance for the future of our country and our youth”, Mattarella stated in his explanation of why he rejected the proposed government. Prior to Mattarella’s announcement, the market’s “invisible hand” had made sure that the yield on Italian bonds increased, helped by rating agencies such as Fitch and Moody’s that announced a review of Italy’s debt and a possible downgrading. That is the same scenario implemented in 2011, when the ECB toppled the Berlusconi-Tremonti government. Soon after his statement, Mattarella announced that he would give the mandate to form a government to Carlo Cottarelli, a technocrat whose views run entirely counter to the program approved by the voters. A Cottarelli government will not obtain a majority vote in Parliament, but will stay on to run
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everyday affairs until early elections can be held, in September/ October at the earliest. Cottarelli is the man of the markets. After a career at the IMF, he was called by the Letta government to make a “review of spending”. When he proposed to cut 60,000 jobs from the public sector, it was even too much even for Letta’s successor Matteo Renzi who fired him. Cottarelli’s think-tank “Osservatorio sul debito” (Debt Watch) produced the report claiming that the Lega-M5S government program would mean up to €125 bn in new debt. A technocratic cabinet in Italy won’t last long but it can certainly inflict damage in the meantime, starting with decisions to be taken at the June EU summit on the next five-year budget and EU integration and migration policies. With this move, the EU elites have once again shown their will to do “whatever it takes” to hold on to their power. By doing so, they fuel the popular revolt against them, thus ensuring that their demise will be even more painful for them. Eurocrats Warn of Doomsday Scenario in Italy The reaction of the European Union  – or more precisely of the Empire – to the perspective of a so-called “populist” government in Italy shows what is at stake is the future of the EU, no more nor less. That “Empire” deployed all of its brutal forces, including the rating agencies, EU officials, the entire “Fourth Power” (the media) and possibly more, to prevent any Lega-M5S government from coming into being. Their campaign has focused on the candidate for Finance Minister Paolo Savona, an experienced banker and former minister who, on the basis of experience, went from a Euro-enthusiast to a Euro-critic. First the economic hitmen: on May 25, Moody’s announced they were reviewing Italy’s credit rating, currently at BBB2, because the coalition program might “weaken Italian fiscal capacity” and block “structural reforms”. The implicit threat is to downgrade the rating, which would jeopardize ECB purchases of Italian bonds. It is to be presumed that ECB chairman Mario Draghi, who was reportedly in continuous contact with State President Mattarella, delivered the threat personally. And speaking of interference, Emmanuel Macron rang designated PM Giuseppe Conte directly on Sunday, while the latter was preparing his list of ministers. All this on the backdrop of a massive international campaign about the catastrophic consequences of a “populist” takeover in Italy. First, it was the Financial Times with a warning on “The Barbarians before the gates of Rome”, whose hysteria was topped by last week’s Spiegel calling Italians (as a people) “beggars” and “aggressive scroungers”. “How should we call a Nation which first stretches out his hand to have others finance their good life – and then threatens its donor if the latter reminds them that debts should be paid?” That choice headline was followed by a text full of cliches and insults. It claims that Italians are rich but prefer to beg for money and Draghi helps them. “Begging would be the wrong term. A beggar at least says thanks when someone fills his bag. Aggressive scrounging is more adequate.”  Schiller Institute founder Helga Zepp-LaRouche responded to Der Spiegel and other outrageous German comments on May 27, dismissing them as “an incredible combination of arrogance and economic incompetence”. “It is no coincidence that the reactions to the new government in Italy from neo-liberal circles are as hysterical as the reactions to Trump’s victory”.
she wrote. Interesting how “those circles that normally get all worked up about an alleged lack of democracy in China have no problem deriding the electoral results of an EU member state.” Instead of the financial collapse they promise, Zepp-LaRouche proposes to “take advantage of the positive programmatic points in the coalition contract of the Conte government, such as the Glass-Steagall Act and an Investment Bank, to implement the anyway urgent reorganization of the transatlantic financial system”. Russiagate: No More Doubt  of British Meddling in US Election The allegation that the FBI sent an informant into the Trump campaign in order to set it up, which is now known as “Spygate”, demonstrates conclusively that it was the United Kingdom, through its various intelligence units, which “meddled” in the 2016 U.S. presidential election, in collusion with antiTrump intelligence officials in the Obama administration. The mainstream U.S. media are attempting to cover-up for that operation by the deep state, by reducing “Spygate” to a semantic debate over whether deploying operatives into the Trump campaign is “spying”, “infiltration,” a necessary defense against Russian aggression, or a figment of Trump’s paranoia. The story is complicated, as we shall see in what follows, but enough has now emerged that it can be stated definitively that there was a joint operation by Anglo-American intelligence, designed to entrap Trump campaign officials, through a classic “sting” operation. Key to this are three operatives with ties to the CIA, FBI and MI6 -- Joseph Mifsud, Alexander Downer and Stefan Halper. These three were deployed to manipulate lowlevel Trump officials Carter Page and George Papadopoulos into believing they would be working with Russian intelligence networks which wanted to help Trump. The purpose was to establish links which could be cited as channels of Russian influence into the Trump campaign. This operation was conducted between July and September of 2016, around the time that Trump won the Republican Party nomination, and shortly after Obama’s CIA Director John Brennan had set up an inter-agency task force, with the Director of National Intelligence James Clapper, purportedly to investigate alleged Russian efforts to influence the outcome of the election. Brennan was initially steered in this direction by Robert Hannigan, then head of Britain’s electronic warfare division, GCHQ. He and Clapper then convinced FBI Director James Comey and other top agency officials -- including the FBI’s liaison with Brennan, Peter Strzok -- to open an FBI investigation. Strzok was directed to meet with “ex”-MI6 agent Christopher Steele in London on July 5, to be briefed on the “memos” Steele was drafting, alleging multiple channels of Russian influence on Trump, including fictitious sexual blackmail tapes. By July 31, 2016, the FBI “investigation” was launched, which was used to justify the deployments of the “spies,” who were, in fact, in motion before then. The purpose of the Mifsud/Downer/Halper operation was summarized by George Parry in the American Spectator on May 22, 2018. In “The Papadopoulos Affair: Such a Downer,” Parry writes that the hapless Papadopoulos was “manipulated to repeat a planted, fictitious story about Clinton dirt and emails in order to create the appearance of collusion by the Trump campaign with the Russians and a prefabricated predicate for the FBI investigation of that campaign.” In other words, this was a classic sting operation, where the “investigators” suggest the “crime” and then blame it on their targets.
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All Roads Lead to London From the beginning, the LaRouche movement has reported that there was no Russian meddling or Trump collusion, but a joint effort by U.S. and British intelligence agencies to defeat Trump, or remove him once he was elected. In addition to Parry’s article, which confirms the analysis of LaRouche, a spate of others making that point have appeared. Publius Tacitus, on the Sic Semper Tyrannis blog of former military intelligence specialist Col. Pat Lang wrote that the new evidence “removes any doubt that British and U.S. intelligence services collaborated in a devious and fabricated scheme....” Another article appeared in the American Spectator on May 25, by George Newmayr, “The London-to-Langley Spy Ring,” which details the new evidence emerging. Most significant is the Gateway Pundit blog, with an article by Jim Hoft, who writes that a foreign government did meddle in the election, “but the government identified is the U.K., not Russia.” He asserts that those behind Russiagate “were willing to risk World War III with Russia rather than face a Trump Presidency.” Unstated in this article is what those running the sting feared the most, which is that Trump would overturn the hostile geopolitical policies promoting confrontation with Russia and China on which their careers and their fortunes depended. That Trump might bring the U.S. into a full collaboration with the New Paradigm emerging, led by China and Russia, explains the unprecedented hysterical campaign against him, which has been carried out in lock-step by the establishment media, in Europe as well as the United States. This is what led to the fiction known as Russiagate. Whatever one may think of Trump’s policy and style, he was elected by the American voters, and the “deep state” should not be running a criminal regime change operation against him. To inform the citizens of what is going on, The LaRouche Political Action Committee has put out a statement in the United States calling on President Trump to end the “Special Relationship” with Great Britan, and have all the secret documents concerning his campaign declassified. President Trump Should Hold Early Summit with President Putin A petition has been posted on the White House website and on the Russia House website, calling on Presidents Donald Trump and Vladimir Putin to meet as soon as possible for the sake of preventing war. It is intended for signing by citizens throughout the world, and we would urge our readers to do so. Our newsletter has consistently campaigned for just such a summit, including to counter the entire “Russiagate” narrative which has poisoned U.S.-Russian relations.  If 100,000 people sign the petition by June 30, the White House will have to respond to it. The text of the petition is short and to the point: “Ronald Reagan famously said: ‘A nuclear war cannot be won and must never be fought. The only value in our two nations possessing nuclear weapons is to make sure they will never be used.’ Unfortunately, today a new Cold War between the US and Russia again poses an existential threat to the people of both nations and to the whole world. Therefore, we urge President Trump to follow in the steps of Ronald Reagan and to start a direct dialogue with President Putin in search of solid and verified security arrangements. As President Trump said repeatedly ‘only haters and fools’ do not understand that good US- Russia relations are also good for America. By all indications President Putin feels the same way for his country. A summit should be arranged as soon as possible.” Sign the petition here https://petitions.whitehouse.gov/peti
tion/president-donald-trump-should-hold-early-summit-russian-president-vladimir-putin In a full page ad in the Washington Times on May 21, Edward Lozansky, President of the American University in Moscow, and Jim Jatras, former U.S. diplomat and former adviser to U.S. Senate leadership, explained why they were initiating such an action. Namely, “there is no denying that a second Cold War is today a reality,” and in some ways “this second Cold War is even more dangerous than the first one.” In addition to the massive nuclear arsenals on both sides, “new military technology has continued to make rapid progress in such areas as hypersonic weapons and cyber-warfare”. “We believe this headlong inertia toward catastrophe can only be broken by the personal intervention of President Donald Trump and President Vladimir Putin. We therefore urge the two presidents to schedule a summit meeting at the earliest possible date.” The ad shows two striking images of Russian-American cooperation in the past. One of Abraham Lincoln and Alexander II shaking hands, to evoke how Russia was ready to intervene during the U.S. Civil War, , if necessary, to support the Union against the British-created Confederacy. The second  is of President Ronald Reagan shaking hands with President Mikhail Gorbachov. In their article, Lozansky and Jatras underscored that in the era of these two leaders, the initiatives were begun that would eventually lead to the end of the first Cold War, reflecting “the desire on both sides to end a useless and dangerous confrontation...”. The Ghost of Herrhausen  Hovers over Deutsche Bank The May 24 announcement by  Deutsche Bank that it would slash “well over” 7,000 jobs (some say 10,000), or more than 10% of its 97,000 employees, with its investment bank expected to lose 25% of its employees, was more than enough to spread great anxiety among London bankers. Earlier in the week, in an interview in Handelsblatt , Deutsche Bank chief economist David Folkerts-Landau reviewed the sins of the bank and its management since the 1990s, which turned Germany’s largest bank into an Anglo-Saxon style investment bank, making it in effect a hedge fund (a term he himself used). He targeted former CEO Josef Ackermann, who was dismissed in 2013, with being “fixed on the magic goal of a return on equity of 25% before taxes” which “could only be achieved by accepting major financial and ethical risks.” Folkerts-Landau’s mea culpa did not prevent the downward slide of the bank’s shares and fuelled a near revolt  at the bank’s annual general meeting where an attempt was made to oust Deutsche Bank’s Chairman Paul Achleitner. Although it failed, it seems Achleitner’s days are numbered and he may look forward to returning to his native Austria. Even Christian Sewing, who has spent his entire career at the bank and replaced British CEO John Cryan last month, came under criticism. Although he promised to “rebalance” the investment and commercial sides of the bank, it remains to be seen whether he will bring back the principles of sound commercial banking back or is just preparing a little clean-up and a downsizing in a desperate bid to save the bank. But time is running out. Deutsche Bank stocks have dropped in value so much that the market capitalisation of the bank is now €18 bn. And the bank’s “Level 3” derivatives alone (assets whose market value is zero) are 33 bn. Stocks are now floating around the dangerous threshold of €10, which would unleash a panic sell-off and make it impossible to avoid bankruptcy.
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Nonetheless, the current management policy shift brings up the question raised by Lyndon LaRouche in July 2016 when he called for Deutsche Bank to be saved through an emergency one-time increase in its capital base, because of the systemic implications of its threatened bankruptcy, because neither the German government with its GDP of €4 trillion, nor the EU with a GDP of €18 trillion, would have been able to control the domino effect of a disorderly bankruptcy. However, LaRouche conditioned that call on an immediate reorientation of the bank to the tradition which prevailed until 1989 under the leadership of Alfred Herrhausen, which was oriented to supporting the interests of Germany’s real economy. Prior to his assassination in 1989, purportedly by the “Third Generation of the Red Army Fraction,” Herrhausen defended the cancellation of the unpayable debt of developing countries, as well as extending long-term credit to well-defined development projects. At the time of his assassination, he argued for the industrialization of Eastern Europe, consistent with the criteria used by the Kreditanstalt für Wiederaufbau (KfW) for the post-1945 reconstruction of Germany, a completely different perspective from the shock therapy later applied. A return to the sound banking principles of Herrhausen would transform Deutsche Bank into a very useful partner in China’s Belt and Road policy. MERICS,  AThink Tank Chasing Windmills In 2013, the German Mercator Foundation founded a new department expressly to deal with China’s Belt and Road Initiative, called the Mercator Institute for China Studies (MERICS). That illustrious Institute recently had to admit that contrary to its own forecast, Chinese policy under the leadership of the Communist Party has not only produced an extraordinary economic success, but has also ensured that the country will soon achieve excellence in top technologies if it hasn’t done so already. MERICS concedes that its assessment of China policy generally was wrong. And goes on to discuss openly how to put obstacles in the way of that development strategy. What are they worried about? The entire “green lobby” (including MERICS) was hoping that China would follow the example of Germany’s energy transition. Chancellor Merkel and her close adviser John Schellnhuber never tired of praising China’s large investments in socalled renewable energy projects. Not any more.... In fact, the Chinese leadership has systematically worked toward increasing energy consumption per capita. The aim is to reach a level of 5,500 kWh by the year 2030, and then 8,500 kWh by 2050, which is more than double the current per capita consumption. That would bring China up to the threshold of the 25 highest consumer countries in the world. Chinese leaders, contrary to others, have understood that the development of the world population without sufficient and constantly growing energy supplies, is simply not possible. Compare that to Germany, where the goal of Agenda 2030 and the “energy transition” is to reduce energy consumption by 30% by the year 2050, bringing it down to only 4500 kWh, which is about the equivalent of Portugal today. Although China is still the country in the world with the most wind and solar plants, the euphoria that once surrounded them has long since disappeared, since, as expected, the problems due to dependency on the weather conditions are no smaller in China than anywhere else. In 2016, new wind energy projects were stopped in those regions with the highest winds, because the surplus energy produced endangered the entire grid and ended up not being used.
Moreover, it has became clear that coal will have to be used as fuel in power plants for the foreseeable future, which is even officially permitted until 2030 under the Paris Agreement. Therefore, China has decided to invest in modern, efficient, low-emission coal power plants, including for export to other Asian countries. Talk is now of building thousands of such new plants. At the same time, China has quickly developed its nuclear power plants, with 36 already operating as of November 2016, and 40 more under construction, while plans are to have fast breeder reactors in operation sometime after 2040. Over the longer term, the optimal solution for energy supply is thermonuclear fusion, with Chinese scientists and researchers already involved in a number of international projects. Such optimistic, future-oriented perspectives are impossible for the dinosaurs in Western think-tanks such as MERICS to grasp. China Considers Lifting Limits on Births,  to Foster Creativity China’s Global Times published an insightful “Observer” column on May 22 taking up the possibility that the Chinese government could end all limits imposed on the number of children a family can have. In 2015, the limit was raised to two. Author Yu Ning refers to a report published the day before in Bloomberg , which cites sources “familiar with the matter.” He writes that there is no confirmation of the report, but, “one thing is certain: China’s understanding of population has been changing and a growing population is now being considered more of an asset than a burden. “The old view holds that population is a burden, and when resources are limited, controlling the population will help reduce the pressure on resources, employment and economic development. “Now, however, China is seeing that people, “especially young people, are a source of creativity. It’s believed more people will create more opportunities and inspire more exuberant creativity. Nowadays talent is being highly sought after by Chinese cities with an eye for further development. This indicates the idea that population, especially talent, as a resource has been widely accepted by local governments and society.  A huge population not only provides a bigger pool of human capital, but also creates demand and spurs greater consumption. The sheer size of China, a huge country with a population of over 1.3 billion, is one of China’s core advantages. Why did China’s high-speed rail develop faster than any other country in the world? Its large population and frequent migration of people propped up the huge demand for high-speed rail as a popular means of transportation.” Yu adds that with the“huge consumption demands brought about by its population, China has made a greater contribution to the global economy.”
E.I.R. STRATEGIC ALERT        www.eir.de  Published by: E.I.R.GmbH,  Bahnstr. 9a, 65205 Wiesbaden Tel.: 0611/73650, Fax: 0611/9740935, 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, Printed in Germa