E.I.R.STRATEGIC ALERT WEEKLY NEWSLETTER

E.I.R.STRATEGIC ALERT
WEEKLY NEWSLETTER

Volume 33, No. 34, August 22, 2019

Bailouts, Green Economy, and Destabilizations
Won’t Save the Financial System
In the December 2018 annual report of the House of Lords,
British Foreign Policy in a Shifting World Order, (cf. SAS

02/19 ) the British imperium targeted four nations for inter-
vention and disruption: China, Russia, India, and the United

States. These are exactly the four powers that Lyndon La-
Rouche identified as the countries which, if allied, would have

the economic potential to not only survive the collapse of the

British imperial financial system, but emerge from that col-
lapse at a higher level of productivity and culture.

Consistent with British imperial strategies, those four coun-
tries are today targeted for destabilization: China through the

“color revolution”-style insurgency in Hong Kong (cf. below);
India through the Kashmir trap, which could ignite a hot war
between India and Pakistan in a region crossed by a major
Belt and Road corridor; Russia, where the western-backed

Novalny group has been staging unauthorized protests caus-
ing hundreds of arrests that receive prominent coverage in

Western media; and the United States, where the campaign to
topple President Trump has shifted from the failed Russiagate
coup to the attempt to label him as a “racist” and jeopardize
his re-election.

Behind these various destabilizations is the accelerated col-
lapse of the bankrupt financial system. A liquidity crisis is

looming on the horizon, generated by a global debt that must

be refinanced on the backdrop of the ongoing global reces-
sion. Central banks are now scrambling with the only tool

they have at their disposal, i.e. printing money (quantitative

easing) and debasing it at the same time with negative inter-
est rates (cf. below). This can only make the problem worse,

leading to a hyperinflation that will destroy not only the real
economy and household savings, but also those banks that
were supposed to be bailed out.

The attempt to create a new giant bubble, by funneling in-
vestments into the “Green Economy”, and thus save the finan-
cial system, will not work either (cf. SAS 32-33/19). But the

green deindustrialization drive needs to be stopped before it
creates irreparable damages.
The suppression of the Bretton Woods system on Aug. 15,

1971, just 48 years ago, was the origin of many of the cur-
rent economic problems, as Lyndon LaRouche warned already

at the time. Contrary to some opponents, who confuse it with

the British gold standard, the Bretton Woods system was ba-
sically a credit system, in which gold was the reference for

parities established among the dollar and all other national
currencies, which could be adjusted by sovereign decision if

necessary on the basis of physical economic values. The bank-
ing system was regulated, providing protection for institu-
tions that issued credit for companies and households and

prohibiting ordinary deposit banks from engaging in financial
trading. Derivative bets were prohibited as well.
The suppression of the Bretton Woods system and then

eventually of the banking regulations allowed for the priva-
tization of money and credit, shifting economic sovereignty

from governments to the financial markets. Surely, it is time
to undo it.
Beyond Geopolitics, the Statecraft
for a Truly Sustainable Future
Reviewing the international destabilizations described above

in an article dated Aug. 17, 2019, Schiller Institute chair-
woman Helga Zepp-LaRouche raised the question: “Is there

a connection between all these different events? And more
fundamentally, is mankind heading for a new catastrophe, or

will we be able to adopt a common order, to establish a sys-
tem of international relations among nations that guarantees

the long-term survival of the human species?”
She notes that the common denominator in most of the

crises mentioned is “the attempt by the forces of the old, fail-
ing system to torpedo the rise of new partnerships based on

completely different principles.” A very concrete example of

the thinking of those forces can be found in the above-men-
tioned annual report of the British House of Lords, which calls

for “a more agile, active and flexible diplomacy” to maintain
the British empire’s influence in the world and its system of
geopolitics.

Helga Zepp-LaRouche goes on in her article to call for plac-
ing international relations on a higher level, corresponding

to the common aims of mankind. Specifically, she proposes

that Europe and the United States work together with Rus-
sia, China, India and others towards the realization of fusion

energy, which would ensure energy and raw materials secu-
rity for all, and on a space exploration program, including

EIR STRATEGIC ALERT 2 WEEKLY NEWSLETTER n° 34 / 2019
the colonization of Mars, to fulfill mankind’s “extraterrestrial
imperative”.
The Demise of the Neo-Liberal System:
China Is Not to Blame!

As warnings proliferate among mainstream media commenta-
tors of an impending “recession”, the consensus among them

is that the “trade war” between China and the United States is
the principal cause of the crisis. It is China’s imperial overreach
embodied by the Belt-and-Road Initiative (BRI), they claim,
together with Trump’s “incompetence” and “impulsiveness”
that are the problem. Rather than recognizing the systemic
nature of the crisis, their analysis is designed to protect the
neo-liberal axioms of present economic policy, even as those
axioms are again proving to be dangerously incompetent, and
a threat to the continued existence of society.

We should first dispense with one of the frequent false ex-
planations put forward, that China is responsible for an un-
sustainable build-up of debt, and is imposing a “debt trap” on

those nations joining its BRI. In fact, China’s debt is primarily
in the form of credit channeled to physical economic activity,

with an emphasis on scientific advances producing new tech-
nologies, and building a modern platform of infrastructure

to enhance global production and trade. As leaders of China’s
trade partners in Asia and Africa insist, this is not a “debt
trap”, but a greatly desired credit infusion to lift them out of
the colonial status imposed by the present financial system.
Ironically, those pushing the debt trap line ignore both the
trillions of dollars of debt created by Quantitative Easing, etc.,
to bail out failing financial institutions and sustain the face
value of worthless financial assets, and the austerity policies
dictated by the IMF and central banks, which prevent credit
from going to productive sectors, leading to systemic debt
problems (as in Argentina).
Further, the collapse of manufacturing in the trans-Atlantic
economies, which has led to miniscule growth levels, and even

contraction, as in Germany in the 2nd Quarter, has been dic-
tated by “market” policies, including “free trade” agreements

which promote outsourcing to economies dominated by cheap

labor, and force the remaining industrial capacities to pro-
duce for exports. This has led to reduced levels of purchasing

power for those who lost jobs in manufacturing and related
industries, forcing households formerly earning decent wages
to live on expensive credit.

This reality has not been imposed by China, but by the fi-
nancial interests centered in the City of London, Wall Street

and Brussels, which use the cheap or free credit from central
banks to speculate in derivatives and other instruments of
“financial innovation”, or by corporations to buy back their
own stocks. The resulting stock bubble is hardly a sign of
prosperity, but is instead a rotting fruit set to fall from the
diseased tree

The solution is to break with the current neo-liberal im-
perial system and its speculative bubbles, and build the real

economy. To that end, China’s development perspective is part
of the solution, not the problem.
Central Banks Move to Expand
Negative Interest Rates
Already now, one fourth of all bonds globally (or $15 trillion
worth) are trading at negative rates, and yet, central banks

are opting for more rate cuts and more asset purchases in
order to avoid a liquidity crisis. That approach is as irrational
as it is futile, because it will destroy the system in the attempt
to avoid its bankruptcy.
In an interview with the Wall Street Journal, ECB board
member Olli Rehn declared that the Frankfurt-based bank
should go beyond expectations on rate cuts and Quantitative
Easing in order to be effective. That creates a dilemma for the
ECB, in that if the Sept. 12 board meeting does not exceed
expectations, there will be a selloff, financial analysts say.
Rehn is considered to be a member of the hawkish faction

and close to Bundesbank head Jens Weidmann. Thus, his dov-
ish statement is seen as motivated by the slowdown of the

German economy, but even more so, by the crises at Deutsche
Bank and Commerzbank.
On Aug. 17, Deutsche Bank shares hit a new low at €5.8.

Its market capitalization is 12 billion, while the Level III de-
rivative assets on its balance sheet amount to 22 bn. Its“Bad

Bank” is supposed to absorb seven times more assets than its
capital. The state of bankruptcy of Deutsche Bank is shown by
the fact that in order to sell its subordinate bonds, the former
megabank has to offer a 13.5% yield. As for Commerzbank,
its capital has dropped below 6 bn.

In the United States, where 10-year Treasury yields are al-
ready at a historical low, pressure is mounting on the Federal

Reserve to either implement a series of rates cuts or to an-
nounce one dramatic reduction at the next board meeting.

A policy of negative rates is just another form of inflation,
since borrowers repay less than the amount they borrow. An
IMF staff study released last February discussed the limits of
such a policy, and suggested that to avoid having depositors
withdraw their money from banks due to no interest paid,
cash money should be depreciated as well (cf. SAS 16-17/19).
Such a system is technically feasible, the study concluded, but
did recommend providing an appropriate legal framework.
Italy: A Government Crisis
Plotted with the EU
The decision to provoke a government crisis in Rome was
in effect taken in mid-July, when one of the two coalition
partners, the Five Stars Movement, cast the decisive vote for

Ursula von der Leyen as the new head of the European Com-
mission at the European Parliament. The deal was then fine-
tuned during von der Leyen’s visit to Prime Minister Giuseppe

Conte on Aug. 2, according to rumors in the City of London.
Italian financial analyst Mauro Bottarelli wrote: “For many of
those attending London trading rooms, the final act of the
yellow-green government was accomplished on Aug. 2, when
Ursula von der Leyen visited Giuseppe Conte in Rome, as part
of her post-election tour. Not accidentally, [Lega head and
Deputy Prime Minister Matteo] Salvini made his first direct
and explicit threat to the survival of the government two days
later, on Aug. 4.”
The deal struck involves a “regime change” in Rome, which

would see the ouster of the Lega in favor of an alliance be-
tween the Five Stars and the pro-EU Democratic Party (al-
ready dubbed the “Ursula government”), which would sup-
port the Commission’s radical Malthusian agenda. Of course,

von der Leyen is not acting on her own, but rather as the
executor of decisions taken at the highest level in Brussels,
Paris and Berlin.

EIR STRATEGIC ALERT n° 34 / 2019 WEEKLY NEWSLETTER 3
The government crisis then erupted on Aug. 8 after a vote

in Parliament on a motion introduced by the Five Stars oppos-
ing the Turin-Lyon high-speed rail project, which the Lega sup-
ports, prompting the latter to file a no confidence motion. But

it is in fact motivated by a deep conflict on EU policy between
the two (former) partners, as Lega Foreign Policy spokesman
Marco Zanni and Senate Banking Commission head Alberto
Bagnai explained in a radio interview Aug. 9. According to
Bagnai, Prime Minister Conte has kept the Lega members of
government out of major negotiations, such as on the reform
of the European Stability Mechanism.
Moreover, it is suspected that as part of the deal with Berlin,
Paris and Brussels, Italy will get a major economic portfolio
in the EU Comission provided it does not go to a Lega figure
who might sabotage the radical green agenda.
In an interview with EIR magazine, Italian economist Nino
Galloni explained that “The Five Star movement has always
had two contradictory souls in economics: one post-Keynesian
(which in my re-elaboration is very close to Lyndon LaRouche’s
ideas, and can be characterized as ‘responsible growth’) and
one of “de-growth” and mainstream environmentalism.”
On Aug. 20, PM Conte will speak in front of Parliament,
followed by a debate and possibly a vote on the no-confidence
motion. All options are still open, including a new M5S-PD
majority or early elections, which, according to polls, would
by won by the Lega with nearly 40% of the votes.
Just What Is Washington’s Policy
Toward China and Hong Kong?
With the launching of what the Chinese are calling a “color

revolution” in Hong Kong, on top of the swings back-and-
forth in trade negotiations between the US and China, and

the charges of Chinese “imperial aggression” related to its Belt
and Road Initiative, there is legitimate concern in Beijing over
who is running Washington’s China policy.
The matter of Hong Kong provides one clue as to what is
happening. Many U.S. political figures, in both parties, as well
as most media, have been sharply attacking President Trump
for not taking a hardline against China regarding the protests
(cf. SAS 32-33/19). Led by members of his administration,
such as National Security Adviser John Bolton and Secretary
of State Mike Pompeo, there has been a steady stream of
threats against the Chinese government not to intervene

there. Two notorious anti-China crusaders, Republican Sena-
tor Rubio and Democratic Senator Ben Cardin, introduced a

bill which threatens Hong Kong with the loss of its special
U.S. trade status if Beijing intervenes directly to crack down
on the increasingly violent so-called pro-democracy protests in
the city. A leading State Department official in the Hong Kong
Consulate office has been caught meeting with leaders of the
demonstrations, while the infamous National Endowment for
Democracy admitted providing nearly $2 million to bolster

the protests. The Chinese have responded sharply by describ-
ing the events, some of which include violence against police,

as an emerging color revolution.
Yet, while such meddling by U.S. agencies is occurring,

President Trump has insisted that this is an “internal mat-
ter”, and seems disinclined to intervene. He tweeted that

he has “ZERO doubt “ that President Xi can act “quickly and
humanely [to] solve the Hong Kong problem.”

A similar split within the administration exists on trade
talks. After a phone conversation between U.S. and China
representatives on Aug. 12, Trump announced that he would
postpone the imposition of new tariffs on $300 billion in
Chinese goods, referring to what he called “a very good talk
yesterday...a very, very productive call.” A Chinese official said
they hope the “U.S. side will meet China half-way”, through
seeking “mutually acceptable solutions through dialogue and
consultation.”

According to various reports, most of Trump’s cabinet offi-
cials opposed the new tariffs, but Trade Representative Navar-
ro and Trump himself supported them, but then reversed his

position. It would certainly benefit both sides for Presidents
Xi and Trump to engage directly to overcome the impasse.

Clearly, such problems need to be approached from a high-
er strategic perspective, above the zero-sum game defined by

geopolitics which holds that if one side wins, the other must
lose. Donald Trump forged a relationship with Xi Jinping over
his interest in the Chinese view that there can be a “win-win”
outcome for all. He needs to act on that basis.
Argentine President Smashed in Primaries,
Sowing Panic on Wall Street and in London
Argentines woke up on the morning of Aug. 12 to learn that

their neo-liberal President Mauricio Macri had suffered a hu-
miliating defeat in the previous day’s primary election, known

by the acronym PASO. The ticket of the Front for All coalition,
with longtime Peronist politician Alberto Fernández running
for president, and former President Cristina Fernández de
Kirchner as his running mate, garnered 47.7% of the vote
to only 32% for Macri’s coalition (“Everyone for Change”).
The PASO is not a binding election, but really serves to give
a reading on voter sentiment heading into the first round of

presidential elections Oct. 27, and winnow out those candi-
dates who do poorly.

Macri’s loss stunned the markets. Stock of Argentine banks
and corporations crashed on Wall Street, some by as much
as 50%; the peso plummeted by 42% to 61 to the dollar, a
historic low, and interest rates shot up to an unheard-of 72%.

Currency and market instability have continued, as specula-
tors and investment funds pulled their money out of the

country, and reserves hemorrhaged. International financial
press shrieked about “catastrophe” for Argentina, warning

that Macri’s “shock defeat” could lead to a return of “popu-
lism”, a code word for protectionism, currency controls, and

anti-austerity policies associated with the previous Kirchner
governments.
Macri, whose pollsters told him the PASO would result in

either a tie or a loss of a few percentage points, was so de-
stabilized by the results that he could only blame the “Kirch-
neristas” for the market chaos that followed the vote, while

praising the economic results of his own government.
But the reality is that he brought about his own stunning
defeat by imposing the vicious neo-liberal policies dictated by

the International Monetary Fund (IMF), provoking the coun-
try’s worst economic crisis since 2001, with widespread so-
cial unrest and popular rage. Brutal austerity—budget cuts,

astronomical increases in utility and transportation rates, re-
duction in social services—hit middle-class and lower-income

sectors of the population the hardest, increasing the poverty

EIR STRATEGIC ALERT 4 WEEKLY NEWSLETTER n° 34 / 2019
rate to close to 35%, up from 28% when he took office in
Dec. 2015.
Although abundantly complaining of the “tough inheritance”
he was left by former President Cristina Fernández, the truth
is that it is Macri’s successor, most likely Alberto Fernández,
who will inherit the “debt trap” laid by the IMF. During his 3.5
year presidency, Macri has increased Argentina’s foreign debt

by a whopping $100 bn., including the IMF’s $57 bn. bail-
out package, making Argentina the most indebted country in

Ibero-America. On Aug. 13, veteran Clarín reported that he is
now appealing to the U.S. Treasury for a $20 bn. loan to help
weather the uncontrolled financial and currency instability
wracking the country. Alberto Fernández has said he intends
to renegotiate the IMF standby loan, as there is no way his
government can pay that debt under the austerity conditions
the Fund demands.
Big Hedge Funds Behind the Climate
Radicals at XR
The so-called “grass roots” movement known as Extinction
Rebellion (XR) is generously financed by some of the world

biggest financiers. According to documents of the British-
founded organization acquired by Breitbart, mega-specula-
tor George Soros tops the list, but the amount he gave was

blacked out in the relevant document.
Other European funds came from the Children’s Investment
Fund Foundation which donated no less than £121,140. The
word “children’s” is deceptive, since the foundation belongs to

a notorious London-based hedge fund, the Children’s Invest-
ment Fund Management. The CEO of this foundation, which

has an endowment of over 2 billion pounds, is Kate Hampton,
who also serves as vice chair of the key European Climate
Foundation and is a board member of the Carbon Disclosure
Project (CDP).
Another hedge fund donor is Alasdair Breach, the founder
of the London-based Gemssock Hedge Fund, who transferred
£50,000 through his investment company, Furka Holdings
AG, in Andermatt Switzerland.
In addition to Greenpeace, which donated £10,000, the
European Climate Foundation came up with a contribution
of £20,000. Note that the ECF is financed by the Rockefeller

Brothers Fund, Bloomberg Philanthropies, the Children’s In-
vestment Fund and the Growald Family Fund. The latter was

founded and is led by one Paul Growald, who started his ca-
reer as public relations representative for the notorious Paul

R. Ehrlich, author of The Population Bomb.
From the United States, the sum of £7,454 was donated by

the Tides Foundation, which has been funding environmental-
ism for decades.

Not to be outdone, the “Climate Emergency Fund” an-
nounced its establishment earlier this month, and has com-
mitted to providing £500,000 to XR and other groups. It is

led by Rory Kennedy, the daughter of Robert Kennedy, by
Aileen Getty, the daughter of the late rabid anglophile John
Paul Getty Jr., who became a British citizen and was knighted
by the Queen, and by one Trever Neilson, who co-founded the
investment company IX Investments. On its advisory board,
one finds author and environmentalist Bill McKibben, who set
up 350.org, and David Wallace Wells, author of Uninhabitable
Earth.

Neilson’s partner in IX investments is Howard W. Buffett,

the grandson of famed investor Warren Buffet, the third rich-
est man in America. The Buffet family are long time financiers

of the environmental movement.
Neilson himself started out as a servant of Bill Gates, the
second richest American. He was a founding member of the
team that created the Bill & Melinda Gates Foundation, where

he served as the Director of Public Affairs. He was also Ex-
ecutive Director of the Global Business Coalition (GBC) cre-
ated with investments from Bill Gates, George Soros and Ted

Turner. This organization was headed by Richard Holbrooke,
former United States Ambassador to the United Nations and

President Obama’s former Special Representative for Afghani-
stan and Pakistan.

An Eco-Terrorist Movement in the Making
There has been a marked radicalization of the save the climate
movement on the ground, reflected in the growing role of
Extinction Rebellion (XR), in coordinating and carrying out

blockades and sabotage of mining and other industrial infra-
structure. Following a five-day summer camp of Fridays for

Future in Lausanne, where the transition from mere protests

to blockades was discussed during workshops, Greta Thun-
berg arrived at the Hambach Forest in North Rhine Wesphalia,

Germany, which has been the scene of months’ of such direct
actions against lignite mining projects of the RWE company.
Thunberg met with activists of the notorious “Ende Gelände”
group, standing at one point next to a masked activist of the
group, as seen in an image later circulated on on the web.
Apparently timed with this, the former captain of the Sea
Watch NGO, Carola Rackete, who is on a private warpath
against the Italian government under the pretext of rescuing
refugees in the Mediterranean, appeared in a T-shirt showing
the XR emblem in the Aug. 7, prime time Dunja Hayali Show
on German TV channel ZDF. The widely-watched show gave
prominent publicity to the kind of aggressive activism Rackete

is known for, which she learned while working for Green-
peace before running her own vessel.

XR and other such groups plan to sabotage the upcoming
automobile fair IAA in Frankfurt, in September, with “die-ins”,

blockades of the entries to the fair, bicycle convoys on high-
ways around the city and other actions, including against the

international airport, to attack the car-making industry and
car driving.
Note that Pope Francis has also endorsed the climate craze,

warning in the Aug. 8 La Stampa that “On July 29th [over-
shoot day], we used up all the regenerative resources of

2019. From July 30 we started to consume more resources
than the planet can regenerate in a year. It’s very serious. It’s
a global emergency.”

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 Germany