E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER Volume 32, No. 51-52, December 20, 2018

E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER
Volume 32, No. 51-52, December 20, 2018

Europe’s Mission for the New Year:  Develop Africa As 2018 draws to a close, the trans-Atlantic world is in a turmoil, not least because of the growing danger of a financial crash worse than that of 2008. In Europe, the mass protests in France are but the latest manifestation of an overall revolt sweeping the old continent against the neo-liberal paradigm, with its social injustice, brutal austerity and geopolitics. French President Macron, who vowed to establish a “Jupiterian presidency” after winning the election, has been abjured by a population infuriated at his defense of the interests of “Mount Olympus” against their own. Although the government had to make a few concessions in the end, there are unlikely to calm the popular anger. Moreover, the fact that Brussels is willing to accept the increase in the deficit for France that those concessions imply, but not for others such as Italy, will exacerbate the unrest within the European Union. Meanwhile, the situation is the United Kingdom is highly unstable, as Theresa May’s government fights for survival, amid squabbles with the EU over the Brexit conditions. A huge question mark remains what will happen with the City of London and its derivatives market. In that context, former Prime Minister Tony Blair, a dyed in the wool lackey of the British Empire who has zero popular support in his own country due to his illegal wars, just went to Brussels to call for a second referendum on Brexit, to overturn the results of the first democratic vote. On the strategic level, the EU maintains a confrontationist stance toward both China and Russia. At the EU summit on Dec. 13, the sanctions against Russia were renewed for another six months, as tensions over Ukraine continue to mount. Moreover, after the House of Representatives in the United States unanimously voted up a non-binding resolution on Dec. 11 opposing the Nord Stream 2 project, to transport Russian gas to Europe through a pipeline under the Baltic Sea, on grounds that it endangers European “energy security” and harms U.S. interests (the sale of U.S. natural gas) the European Parliament hastened to hold a vote the very next day, which ended with a strong majority calling for cancellation of the project. What then can be done to break Europe free of geopolitics? The Schiller Institute, since its founding, has maintained said that the litmus test for the moral fitness of Europe to survive is the fate of Africa. Today, as yesterday, the historic mission of Europe is to ensure the economic and social development of Africa. In that sense, the recent conference on migration in 
Marrakesh was a great deception, as nothing was done to attack the causes of the problem. On the other hand, China has already helped transform the continent through its Belt and Road Initiative, bringing development and, even more importantly, opening positive perspectives for the future. Chinese leaders have repeatedly proposed to carry out joint projects in Africa together with European countries. Now is the time to mobilize so that Europe will seize that occasion and fully join the New Paradigm. Warnings of New Financial Crash  Make the Case for LaRouche Plan A very sharp warning was issued by former Federal Reserve Chair Janet Yellen on Dec. 10, which was covered by CNBC-TV under the headline “Yellen Warns of Another Financial Crisis: ‘Gigantic Holes in the System.’” In her interview with economist Paul Krugman, Yellen echoed the analysis we have often presented here, namely that the total volume of debt, especially that of corporations, has ballooned to the point of being unsustainable, and has become a threat to the system as a whole. Yellen’s about-face is all the more remarkable, as just 18 months ago, on June 27, 2017, she was asked if there would be another financial crisis, to which she replied with confidence: “I do think we’re much safer and hope it will not be in our lifetimes and I don’t believe it will.” Last week, she warned that corporate indebtedness is now very high, and in the event of a downturn, it could “lead to lots of bankruptcies in the non-financial corporate sector. I think a lot of the underwriting of that debt is weak,” just as it had been preceding the crash of 2008. The former chair of the Fed from Feb. 2014 to Feb. 2018 noted that non-financial corporate debt is now double what it was in 2007, up to $9.1 trillion, compared to $4.9 trillion then.  Regulators’ powers to address debt panics have been reduced, she said, so she now worries that “we could have another financial crisis.” In other words, an admission that Fed’s so-called efforts to “detect threats to financial stability,” have been less than successful! A similar warning came from Federal Reserve Governor Lael Brainard, who told the Peterson Institute on Dec. 7 that there are “strains” in the corporate leveraged loan market, exacerbated by “deteriorating underwriting standards”, and that the largest twenty banks do not have an adequate “crisis capital buffer” which could withstand a blowout of the corporate debt bubble.
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Such alarms demonstrate that the causes of the crash of 2008 were never addressed. Instead of re-regulating the financial system, as economist Lyndon LaRouche urged, beginning with restoring Glass-Steagall banking separation, and putting the largest banks and financial institutions through orderly bankruptcy reorganization -- which should have included a drastic write down, or write-off, of bloated financial paper, such as derivative obligations, collateralized loan obligations, swaps, etc. -- central banks, with full support of western governments, provided a flood of cheap money, through “Quantitative Easing” among other mechanisms, which allowed financial institutions to continue trading worthless paper assets, and keep them on their books, at face value or higher, knowing they could rely on the central banks to bail them out when they imploded. Could the Case of General Michael Flynn  Unravel Russiagate? Retired General Michael Flynn, the National Security Advisor of the newly-inaugurated President Trump for 24 short days before resigning, is scheduled to be sentenced on Dec. 18, on a single charge of lying to the FBI, about the contents of a perfectly legal discussion he had had with the Russian ambassador to the United States before taking office. That sentencing, if it occurs, has already produced a nightmare for Special Counsel Robert Mueller. The presiding Judge, Emmet Sullivan, ordered Mueller to produce documents related to Flynn’s guilty plea, filed on Dec. 1, 2017 after months of investigation and harassment by the FBI.  At stake is whether Flynn’s conviction can withstand the scrutiny of Judge Sullivan, who must consider whether the retired general was deliberately “entrapped” by the FBI. In a previous case, Sullivan had overturned the conviction of former U.S. Senator Ted Stevens, based on his finding of deliberate government misconduct, including by the FBI. Though Sullivan demanded all documents relevant to the interview the FBI conducted with Flynn in Jan. 2017, which led to the charges that he told one lie, Mueller turned over only two: a memo from (since fired) FBI Deputy Director McCabe, which set up the interview; and the 302 form, a report on the interview which must be filed within five days. Typical of Mueller’s tactics, the 302 which he produced was drafted six months after the interview, possibly because the original one stated that the FBI agents who drafted it, including disgraced FBI agent Peter Strzok, did not believe that Flynn had deliberately told any untruth! Mueller’s office acknowledged this, saying that the agents “had the impression at that time that the defendant was not lying or did not think he was lying.” Nevertheless, the special counsel concluded that Flynn did lie, and the circumstances surrounding the meeting are irrelevant. Among those circumstances are that Flynn was told he did not need to have an attorney present. There are many other details about this case which demonstrate the corrupt practices used by those who targeted President Trump, including the use of wiretaps of a call between Flynn and former Russian Ambassador Kislyak; the illegal “unmasking” of Flynn; and the leaking to the Washington Post of the contents of the call, which was classified. The call by Flynn to Kislyak was NOT illegal, and the latter two points are felonies, committed by officials of the Obama intelligence team. There are other unsavory aspects to the Special Counsel’s tactics, such as threatening to bankrupt Flynn due to the staggering legal costs he had to incur, plus a threat to prosecute Flynn’s son, unless he were to submit a guilty plea. Indeed, 
Flynn acknowledged he was doing so to protect his family and their future. Why was Flynn targeted in the first place? For one, he shared Trump’s view that it were better for the U.S. to be friends with Russia, rather than adversaries. Further, when he served as head of the Defense Intelligence Agency, he openly objected to the Obama administration’s support for terrorist networks in Syria, and was fired for that reason. There is no question that General Flynn was targeted and entrapped by the FBI, but it is unclear whether Judge Sullivan do the honorable thing and expose this blatant example of government misconduct. Conference in Italy with Strategic Alert Editor Addresses Loss of National Sovereignty A conference dealing with the issue of national sovereignty in Ascoli Piceno on Dec. 14, featured prominent Italian economists Antonio Maria Rinaldi and Nino Galloni, as well as EIR Strategic Alert co-editor Claudio Celani. They were joined by Ascoli Bishop Mons. Giovanni D’Ercole, who runs a popular program on national television, and Ascoli Mayor Guido Castelli, who is also financial spokesman of the National Association of Mayors. Francesco Caprioli moderated the conference with two rounds of questions to the speakers and a Q&A section, which offered the possibility to address international, national and local issues. Celani started by describing the so-called “sovereignist” movement as part of a general revolt throughout the trans-Atlantic region against a globalization which is leading us a second, larger financial crisis. In a second round, Celani addressed the solution to the financial crisis, namely reintroducing Glass-Steagall bank separation. Mons. D’Ercole shared the view that globalization has created inequalities that demand to be corrected and expressed confidence that the opportunities offered by the crisis will be seized. Prof. Rinaldi took up a question on everyone’s mind, concerning the ongoing negotiations between the Italian government and the EU Commission, by dismissing fears that the government “is capitulating” to EU austerity demands. The government’s agreement to reduce the budget deficit from 2.4% to to 2.04% “is written on water”, he said, implying that the real deficit will be higher as has regularly been the case with past governments. Rinaldi, who is known to be very close to several members of the government who have been members of his economic association, also explained the double standard used by Commissioner Moscovici with the French government, whose intention to exceed the 3% deficit rule was not deemed worth a procedure by the EU. France is allowed to do that in virtue of the unwritten euro rules, under which France allowed German reunification in exchange for political primacy in the EU. Another unwritten rule of that agreement was to make Italian industries unable to be competitive. Nino Galloni, while supporting the general thrust of the Italian government policy, called for much more deficit spending in order to deliver a positive shock to the economy. He also added a personal note, recalling how at the beginning of the 1990s, when he was director general of the Budget Ministry, his plans for economic reforms were considered dangerous on an international level, and he was “purged” through an intervention from Germany. Mayor Guido Castelli recounted the negative effects of the infamous letter sent to the Italian government on Aug. 5, 2011 by the ECB, a supranational, non-elected body. Because of that letter, the national government was toppled and the pro-EU Monti government was installed, which proceeded to increase local taxes, but the extra revenue generated went to Rome. As 
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a result, municipality of Ascoli, for example, was forced to cut key services such as kindergartens. Questions from the audience took up issues such as a national bank, financial markets and national debt, as well as migration from Africa. Austrian Transport Sector Urges Europe  to Join the “Project of the Century A leading transport journal of Austria, Verkehr , ran a 20-page special in its issue 49 on the New Silk Road and what it offers to Austria in particular, but also to the rest of Europe, which is advised to overcome skepticism toward China and take an active role in the shaping of European-Asian connectivity. The project of extending the Russian broad gauge railroad from Kosice (Slovakia) to Vienna is a leading item in several of the articles, but other aspects of economic cooperation, with an emphasis on the high-tech sector, are also prominently referenced. Interviews with leading representatives of industrial and transport associations as well as other institutions are worked into the special, including Thomas Kargl (Rail Cargo), Stefan Barisitz (Austrian National Bank), Martin Glatz (Austrian Economic Mission to China), Rudolf Thaler (Austrian Economic Mission to Kazakhstan), and Danai Budas (Federation of Austrian Industries). Not by chance, EIR’s Special Report The New Silk Road Becomes the World Land-Bridge has been circulating among these layers for many months now. The special consists of two parts: an overview of 12 pages, and an 8 page section which is a paid ad (!) by the Austrian Transport Ministry. An English language version of the special is included, in order to have a wider international impact. The same theme was taken up at an international conference in Vienna on Dec. 14, organized by the UTLC-ERA (United Transport and Logistics Company – Eurasian Rail Alliance) in cooperation with the Austrian National Bank, under the banner “Connecting Europe with Asia”, The conference was keynoted by Alexei Grom, CEO of the UTLC, which is a joint venture of Russia, Kazakhstan and Belarus created in 2014. Grom, who just returned from a visit to China’s leading railway pivot Chengdu, reported that Chinese companies are increasingly interested in land routes by rail, to replace transportation by sea. Container freight by rail between Asia and Europe increased by 32% in 2018 as compared to 2017, but the volume handled by UTLC was up by 60%. Austrian companies intend to increase their already considerable share in that UTLC volume by making Vienna a central logistics hub for freight by rail and road. CEO Grom announced that the aim of UTLC is to be able to annually transport 1 million standard containers by rail in 2025, i.e., a five-time increase over the figure for 2017. Efforts will also be made to speed up the journey from China to Europe, as freight trains currently cover a maximum of 1,000 km per day. Having the broad gauge connection to Vienna, involving the construction of 400 km of new track, would reduce travel time along the northern Silk Road rail route, which could then run uninterrupted from the Kazakh border with Russia to Europe. ILO Report: Wages Collapse in the West, Increase in China According to the latest Global Wage Report of the International Labor Organization, the growth of global wages in 2017 fell to its lowest growth rate since 2008, remaining far below the levels obtaining before the global financial crisis. In China, however, the average nominal minimum wage nearly 
doubled between 2011 and 2018, and wages for workers in state-owned enterprises rose even faster. In the advanced G20 economies, on the contrary, average real  wages grew by a mere 0.4% in 2017, compared to 1.7% growth in 2015. In the U.S., real wages were up by 0.7% (against 2.2% in 2015), but they stagnated overall in Europe, where small increases in some countries were offset by declines in France, Germany, Italy, and Spain. An article by Economics Professor Jayati Ghosh highlighted these facts in an article in the South China Morning Post. Given the global output recovery of recent years, she asked, why have conditions for workers in most parts of the world not improved commensurately? “Neither of the usual suspects, trade and technology, is entirely to blame”, in her view. But social spending of the type that improves living standards and increases public employment, has been held back because of an obsession with fiscal consolidation and austerity, as well as a more favorable regulatory environment for large corporations. In short, writes Prof. Ghosh, “neo-liberalism’s intellectual capture of economic policy-making across a wide range of countries is resulting in the exclusion of most wage earners from the gains of economic growth.” But this was not inevitable, she concludes, as seen in the case of China. American Study Shows Chinese Investments Decrease Inequality in Developing Sector Yet another international study, this one carried out by the AidData Institute at William and Mary College in Virginia  and released in September, confutes another common claim head in the West about Chinese investments in poor countries. The study was financed by the UN, the Singapore Ministry of Education, the German Research Foundation, USAID, and several other foundations. The authors looked into 3,485 infrastructure projects carried out between 2000 and 2014 in 138 countries around the world, including airports, seaports and roads. Their conclusion: “We find that Chinese development projects in general, and Chinese transportation projects in particular, reduce economic inequality within and between subnational localities,” and “produce positive economic spillover that leads to a more equal distribution of economic activity.” Traditional Western development organizations on the contrary, the authors indicate, tend to widen economic disparities in a given country, but the Chinese focus on “connective infrastructure” has the opposite effect. The report includes a fascinating interactive map of the world with lights for each of the thousands of Chinese projects around the world – many of which began even before the launch of the Belt and Road Initiative. Just over one year ago, AidData had released another study based on the most comprehensive data set to date of China’s development financing internationally (cf. SAS 11/18). Its conclusions show that the BRI is in no way a form of “Chinese imperialism”. It found that four-fifths of China’s development lending is on concessionary terms at below-market interest rates, and is not motivated by acquiring natural resources or supporting authoritarian regimes. John Bolton Raves against Russia’s  and China’s Policy in Africa Apparently, studies such as those cited above, have not been perused by U.S. National Security Advisor John Bolton who, in a speech on Dec. 13 at the Heritage Foundation, accused China of using bribes, opaque agreements, and debt “to hold states 
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in Africa captive to Beijing’s wishes and demands.” Moreover, its investment ventures do not meet “the same environmental or ethical standards as U.S. developmental programs.” The Belt and Road, he charged, is “predatory” and aimed at “advancing Chinese global dominance”. Russia was not spared either by Mr. Bolton, who accused Moscow of advancing its relationships in Africa with little regard for the rule of law or transparency, and selling arms and energy “in exchange for votes at the United Nations that keep strongmen in power, undermine peace and security, and run counter to the best interests of the African people”. He futher charged both China and Russia with posing “a significant threat to U.S. national security interests.” Bolton was at the Heritage Foundation to present the Trump administration’s new policy on Africa, called “Prosper Africa”. He claimed that President had approved that policy just the day before, although its contents are the same British geopolitics that Donald Trump had repeatedly denounced, while calling for cooperation with China and Russia. African leaders note that the same accusations against China and Russia uttered by Bolton are usually levelled against the United States and Europe. The shameful failure to deal, in particular, with the migration crisis today by offering immediate and vast economic development has discredited Europe in the eyes of many. Fortunately, the Italian government is now attempting to remedy that situation. At a conference in Rome in the first December week, Italian Finance Minister Giovanni Tria stressed that “Africa is a continent of great change and opportunities”; but Europe has not yet grasped the fact that its own future lies not in the North, but in the South. Stockholm: A First Step  Toward Reversing War Atrocities in Yemen The worst humanitarian crisis in the world finally moved towards a political solution with the agreement on Yemen reached in Stockholm on Dec. 13. Backed by the presence and active intervention of UN Secretary-General Antonio Guterres, the agreement calls for halting the military attack on the vital port city of Hodeidah. The battle around the port has already blocked the only route by which to bring urgent food supplies to the 80% of the population now suffering from hunger. Continued warfare would quickly seal the fate of millions of already starving Yemenites. The agreement calls for an immediate cease fire and removal of all armed forces from the city and from the ports of  Hodeidah, Salif and Ras Issa, and for letting a special Redeployment Coordination Committee take charge under the leadership of the UN and the warring parties. The responsibility for security should lie with local security forces. The agreement states it is not to be considered as a precedent in future negotiations, but is being pushed through to open the flow of humanitarian assistance to the starving population. (https://osesgy.unmissions. org/full-text-stockholm-agreement) The agreement amounts to a diplomatic breakthrough for the Yemeni government in Sana’a under president Mahdi AlMashat.The head of the Ansar Allah party and head of the Supreme Revolutionary Committe, Mohammed Ali Al Houthi, also deems it a victory. It is the first time that the functioning government in Sana’a has been respected as a negotiating partner in the now nearly four year-long Yemen war. However, Saudi air forces continued to furiously bomb the 
city of Hodeidah in the days following the deal, carrying out 236 air raids in just three days, which shows how fragile the cease-fire is. But even more, it shows that the Hadi government, holed up in a hotel in Riyadh, has no influence over the Saudi and Emirati leaders, even though it is officialy recognized as the Yemen government. Representatives of Hadi in Stockholm did agree to the exchange of prisoners and to continued negotiations early next year. The willingness of the “hotel government´to start talking with their fellow countymen indicates they understand how weak the Saudi Kingdom now is and, behind the Saudis, how much opposition is growing in Western countries (U.K., U.S. and France) to this regime-change war of the utmost barbarism. The “Miracle Report” for Reconstruction Launched in Yemen The General Investment Authority in Sana’a, Yemen, has launched the Schiller Institute report Operation Felix as their reconstruction plan and published it in their newsletter. The plan in Yemen is called the “economic miracle report”, as it takes as models the examples of the “miracle” post-war reconstructions of Germany, South Korea and Japan. The different chapters of Operation Felix have served over the past months as the basis for a series of seminars to discuss Yemen’s reconstruction and its connection to the Belt and Road with relevant officials from the ministries and the national administration of Yemen (cf. SAS 43, 28, 24/18). At the Dec. 5 seminar, devoted to the Chinese model of development and cooperation, a letter by Hussein Askary, the author of the Operation Felix report and the Southwest Asia coordinator of the Schiller Institute and , on China’s new credit policy was presented. The plan outlined by the Schiller Institute is crucial at this time, as the government in Sana’a seeks a peace agreement with the exiled government of former president Hadi. A perspective of reconstruction of the entire nation is the basis on which all the different factions can come together to cooperate. An indication that the government in Sana’a is already using the plan came on Dec. 5 from Deputy Prime Minister and Finance Minister, Dr.Hussein Maqboli, who called for a greater focus on agriculture and industry, which is in line with the Operation Felix proposal. The agricultural sector, he pointed out, accounts for 30% of the value of imports, because although Yemen has large agricultural areas, only a very small percentage of them are being cultivated. Season’s Greetings We extend our best wishes to our readers for the holiday period. Your first issue in 2019 will be dated January 3.
E.I.R. STRATEGIC ALERT        www.eir.de  Published by: E.I.R.GmbH,  Bahnstr. 4, 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 German