E.I.R.STRATEGIC WEEKLY NEWSLETTER ALERT Volume 34, No. 14, April 2, 2020

E.I.R.STRATEGIC WEEKLY NEWSLETTER 

ALERT Volume 34, No. 14, April 2, 2020 

The Developing World Is Key to Establishing the New Paradigm The two crises the world is facing now – the Covid-19 pan- demic and the imminent blowout of the trans-Atlantic financial system – are a test of mankind’s moral fitness to survive. The response to these crises shows which leaders and forces are committed to fighting for the common good, and which are in- tent on propping up a rotten, profoundly unjust system, even at the cost of millions of lives. 

While the so-called developed world is struggling to con- trol the spread of the novel Coronavirus, the real danger will become apparent when the pandemic hits the Southern Hemisphere full force, in particular Africa and Latin America. The emergency teleconference of the G20, that took place on March 26, recognized the risks, but it remains to be seen what they will do. 

In an appeal addressed on that occasion to the G20, Africa’s Foreign Ministers call for a suspension of interest payments on their multilateral and sovereign bond debt due in 2020. That would free up some $44 billion (peanuts compared to the sums announced by the EU) to confront the coronavirus and its economic impact. A moratorium on principal as well as interest is urged for the most “fragile” African nations. Many of these countries have no health system to speak of, compounded by very limited access to water and severe undernourishment. 

Ethiopian Prime Minister Abiy Ahmedi made the point most eloquently in a guest column in the Financial Times of March 25, which echoes the statement by Helga Zepp-LaRouche on the absolute need for a “global victory”, worldwide, to defeat the pandemic. Abiy points out that “advanced economies are unveiling unprecedented economic stimulus packages. African countries, by contrast, lack the wherewithal to make similarly meaningful interventions. Yet if the virus is not defeated in Africa, it will only bounce back to the rest of the world. That is why the current strategy of uncoordinated country-specific measures, while understandable, is myopic, unsustainable and potentially counter-productive. A virus that ignores borders cannot be tackled successfully like this.” 

The Schiller Institute, for its part, has long supported a mor- atorium on the foreign debts of Africa and Latin America, most of which are illegitimate to begin with. The Institute is also campaigning for an immediate lifting of economic sanctions imposed on Iran, Venezuela, Russia, China, etc., and it sup- 

ports the call by UN Secretary General Antonio Guterres for an immediate ceasefire on conflicts “in all corners of the world”. 

Very importantly, SI Chairwoman Helga Zepp-LaRouche has demanded the shutdown of global financial markets to prevent the crises from spinning out of control (cf. SAS 13/20), as a first step toward the necessary implementation of Lyndon LaRouche’s four laws. 

These, and related issues will be discussed at the confer- ence organized by the Schiller Institute on April 25 and 26, with international participation. Originally planned to be held in New York City, the event will now be held via Internet, and we would urge all our readers to follow it from home. 

The Bankrupt Financial System Cannot Be Saved with Liquidity There is something morbidly indecent about using the anxiety provoked by the Coronavirus to push through a new mega- bailout, yet that is precisely what the desperate financial es- tablishment, in conjunction with the Federal Reserve, is doing. The $2 trillion “relief” bill which passed the U.S. Congress on March 27 does contain absolutely essential funding to help the newly-unemployed -- over 3 million of whom filed last week – as well as state and municipal governments, hospitals, and small businesses, in the face of widespread economic devasta- tion caused by the virtual lockdown of the U.S. economy to deal with the pandemic. 

Yet stuck in the middle of this bill was a measure under which the Federal Reserve will be granted over $450 billion from the Treasury. Those funds can then be leveraged up to 10 times, by creating “special purpose vehicles” to provide bailout funds, which will go primarily to the shadow banking system. This is not a bailout plan for the American people, but one giving huge amounts of “helicopter money” to investors and speculators, to buy up depressed assets which they expect will appreciate in the future. 

An “oversight board”, headed by BlackRock, the world’s largest equity fund, will administer the flow of liquidity. Un- like standard Federal Reserve practice, meetings of the board will be secret, with no minutes of the decisions made reported to the public. 

The plunge into the latest mega-bailout began in Sept. 2019, when the Fed was forced to come in to provide funds for the overnight lending market known as the repurchasing 

bonds on the secondary market, so that future issues of sov- ereign debt will be backed by the ECB. Of course, it would be better to have the ECB purchase those bonds directly, as it does with corporate bonds, instead of buying them from the banks. But that is another aspect of the problem with the EU: its raison d’etre is to serve the financial markets and not the people. 

France: the Government Will Eventually Be Called to Account After decades of slashing the budgets for public services, mon- etarism oblige, France’s health system found itself totally un- prepared to cope with the outbreak of the Coronavirus. In ad- dition to the austerity imposed on public hospitals, which had led to unprecedented strikes and protest actions only recently suspended, the policy of “zero stocks”, outsourcing and “just in time” production has made the country dependent on medi- cal supplies and medications produced abroad. 

While Germany has 25,000 reanimation beds and can carry out 500,000 tests per week, France has only 5,000 such beds and has only carried out 14,000 “confirmation” tests per week until now. There is a chronic lack of masks, respirators and anesthesia medications needed for artificial respiration, which is no longer considered a “priority” for people aged 80 and over. In order to save money at the time, the stocks of medi- cal masks were never reconstituted after the H1N1 influenza epidemic of 2009. Just last week, France ordered from China one billion masks, as well as extra ventilators which are being delivered via a special “air lift”. In the meantime, the shortages are costing lives. 

The North-East of France is an epicenter of the Covid-19 pandemic, following infections spread at a nation-wide annual religious event. The hospitals and funeral services have been overwhelmed, but the reaction from Paris has been too little and too late. Instead of using private clinics and re-organizing Congress centers, as in Madrid, a makeshift military hospital with 30 beds was set up on the parking lot of the Mulhouse hospital, which was quickly overrun. Now, patients are being evacuated on specially equipped high-speed trains toward oth- er regions in France, or Switzerland and Germany. 

The unpreparedness, incompetence and lack of concern shown by the government have shocked the French. As late as March 6, during the state of partial confinement, Emmanuel Macron demonstratably attended a theater performance to in- dicate that life could continue as usual. The government also decided to hold the municipal elections, as scheduled, on March 15, rather than postponing them as Jacques Cheminade had demanded (cf. SAS 11/20). Since then, the former Health Min- ister Agnès Buzyn, who resigned on Feb. 16 to be able to run in the elections, just made a shocking confession to Le Monde: she knew that the elections were “a farce”, and she knew the Covid-19 tsunami would be devastating, but she never said so in public. 

Given such statements and the government’s bungling of the crisis, in particular the glaring lack of medical equipment and personnel, a physicians’ collective called C19 is suing the Prime Minister Philippe and Agnès Buzyn for “culpable negligence”, for “not anticipating a crisis, of which they knew the serious- ness”. Other legal actions are also expected. 

For the moment, the great majority of medical workers are totally focussed on the task of healing patients and saving lives, many saying they are “beyond the point of anger”. Once 

market, or repo. When it begn, the Fed said the amounts would be limited, perhaps in the range of $25 to $40 billion, and it would be done for a few weeks only. Yet in the days leading to the passage of the relief bill, the Fed announced it would provide more than $2.5 trillion for repo lending, in ad- dition to $700 billion in Quantitative Easing. Further, the Fed is buying virtually any financial instrument available, including commercial paper, corporate bonds -- many of which are rated at or below junk levels -- and even stocks, though that is not allowed in their charter! 

There are many more details beyond the scope of this re- port. Suffice it to say, this is not a recovery plan, but a replay of failed 2008-09 bailout. 

Faced with the Worst Crisis in Its History, the EU Put on Life Support The European Union is facing the worst crisis since its incep- tion, and may not survive the next two weeks. An emergency meeting of the European Council, convoked on March 27 to draw up urgent measures to deal with the Covid-19 pandemic, decided to postpone decisions for two weeks – while people are dying. The requests forwarded by a group of nine coun- tries led by Italy, France and Spain, were rejected by a group, including Germany, the Netherlands and Austria on the front line. The “hawks” rejected the request of creating EU bonds to finance the emergency and offered the stability mechanism (ESM) as the only option. 

“A community that drops its members in trouble does not deserve its name”, the German weekly Die Zeit aptly com- mented. 

The depth of the split inside the “community” was shown by remarks from Dutch Finance Minister Wopke Hoekstra, who requested an investigation by the EU Commission into why some EU member states (meaning Italy and Spain) have no budget resources to deal with the emergency. This, coming from a country that has always insisted on strict application of the austerity policies which have dismantled most of national health systems in the Union. Those statements, described as “repulsive” by Portuguese Prime Minister Antonio Costa, are an expression of something worse than racism; a culture of death that has led some academicians to accuse Italy of spend- ing too much for elderly people. Frits Rosendaal, head of the epidemiological department of the Medical Centre of Leiden University, declared that the Italian health system is so strained because the Italians “treat patients whom we would not treat because they are too old”. 

While it is true that some among the ranks of the “hawks” are coming very close to Nazi ideology, the “doves” are fully off-target with their proposals. Coronabonds/Eurobonds are the wrong answer to the crisis. They are just an intensifica- tion of the same paradigm that is co-responsible for the crisis. European countries need to boost their capacities for national credit, if necessary pooling their reserves together in multilat- eral institutions, as opposed to supranational institutions that are in fact controlled by the financial markets. 

As some economists have pointed out, there is no need for a financial rescue through Eurobonds. The deficit rules of the Stability Pact have been suspended and as Ursula von der Leyen has stated, member countries can “pump as much liquidity in the economy” as they want. Furthermore, the ECB has lift- ed quantitative and qualitative restrictions to the purchase of 

EIR STRATEGIC ALERT WEEKLY NEWSLETTER 2 N°14 / 2020 

Surprise: Draghi Now Favors More Public Debt A proposal launched by former ECB chairman Mario Draghi to expand national debts in order to cope with the Coronavirus emergency has generated consensus by financial markets and seduced even his opponents. However, it contains a huge trap couched in nice words about concern for the public welfare and the fate of producers and consumers. 

The key part in Draghi’s proposal, published in the March 26 Financial Times and aimed at European heads of state and government, is the following: “While different European countries have varying financial and industrial structures, the only effective way to reach immediately into every crack of the economy is to fully mobilise their entire financial systems: bond markets, mostly for large corporates, banking systems and in some countries even the postal system for everybody else. And it has to be done immediately, avoiding bureaucratic delays. Banks in particular extend across the entire economy and can create money instantly by allowing overdrafts or open- ing credit facilities. Banks must rapidly lend funds at zero cost to companies prepared to save jobs. Since in this way they are becoming a vehicle for public policy, the capital they need to perform this task must be provided by the government in the form of state guarantees on all additional overdrafts or loans. Neither regulation nor collateral rules should stand in the way of creating all the space needed in bank balance sheets for this purpose. Furthermore, the cost of these guarantees should not be based on the credit risk of the company that receives them, but should be zero regardless of the cost of funding of the government that issues them.” 

Mario Draghi’s proposal might sound good if banks were banks, i.e if they performed the classical function of collect- ing deposits and issuing loans to enterprises and families. But in the Eurozone and in the trans-Atlantic world, we have so- called “universal banks”, i.e. they are totally intermingled with the financial casino of derivatives and speculative debt. Pump- ing money in the banking system today, as central banks are already doing, and Draghi wants now national governments to earmark those liabilities, means inflating the speculative bubble. Not a cent of QE has gone or will go as credit to the real economy. 

No, Mr. Draghi has not converted on the way to Damascus. He is still and always concerned with bailing out the bankrupt financial system. 

Xi Jinping and Donald Trump Pledge Collaboration to Fight Global Pandemic A conversation on March 26 between U.S. President Trump and China’s President Xi Jinping offered hope that not only the worsening of relations over false charges regarding the origins of the coronia virus may be halted, but a true collaboration to defeat the pandemic is being forged. The pledge of solidarity occurred as the U.S. has become the “epicenter” of the dis- ease, according to the World Health Organization, with soar- ing numbers of infections and deaths, while China’s success in Wuhan, where the disease was first identified, and where aggressive measures were applied to contain it, has enabled business and industry to end the lockdown and cautiously re- start production. 

Following the one hour phone call, Trump tweeted, “Just finished a very good conversation with President Xi of China. Discussed in great detail the CoronaVirus that is ravaging large parts of our Planet. China has been through much & has de- 

the health crisis is over,however, they can be expected to call to account those responsible for creating the disaster. 

Has the German Government Just Kissed the “Zero Deficit” Goodbye? With the package of emergency economic and financial mea- sures decided last week, the German government likely said farewell to the “black zero” cult of strict budget austerity – without fully realizing it. Indeed, the guiding idea behind the €700 billion of financial support programs launched by the government may be a rapid return to previous policies “after” the Covid-19 pandemic. But things “after” will never be the same again. The attempt to repay to the financial sector the billions of euros handed out now to mitigate the effects of several weeks of production shutdown, would lead straight into the next catastrophe. 

The reality behind the impressive figures of government programs to directly support businesses is sobering. Of the €156 billion which the German Ministry of Finance will make available, only 30% is direct support. All the rest is bridging loans, which entrepreneurs must commit to reimburse with- out knowing what their situation will look like in two or three months from now. The sum of €50 bn in non-repayable one- off support for enterprises hit by the lockdown (€9,000 for those with up to 5 workers, and €15,000 for up to 10 work- ers), will not make much of a difference for them. 

The more positive part of the support programs is the spe- cial loans facility of 100 billion euros run through the state Credit Institute for Reconstruction (KfW), which offers to ar- range loans to companies at a maximal interest of 2.12% over five years. This is credit the KfW raises on the free capital markets, using its status as a highly-rated state bank to get favorable conditions from private banks and funds. 

This approach could be the basis for a new credit strategy in the framework of an overall restructuring of the banking sector along the Glass-Steagall model. However, it would need to be accompanied by a “lockdown” of the speculative banking sector, which has so far not been envisaged by the German government. On the contrary, the lion’s part of the package involves €400 bn in loan guarantees, i.e, the government is counting on the financial sector to grant that sum of credit troubled companies, and the reimbursement will be guaran- teed by the state. 

Another interesting part of the measures is the perspec- tive that industries such as the automobile sector, which is the single largest employer in the German economy, could reopen and retool for the manufacture of equipment and parts for the dramatically under-supplied medical sector. This involves mass- scale production of protective gear and masks, ventilators for respiratory treatment of hundreds of thousands of pandemic patients in intensive care units, as well as the production of new hospital beds, the building of new hospitals, ambulances and the like. The capacities which have become idle due to the decreed lockdown, including 3D printers, could be put back to productive use under a crash program. 

Doing that now in the war on the pandemic could become a step toward prioritizing the real economy, if combined with a new credit strategy that gives priority to long-term low-in- terest loans with lengthy grace periods. Industry could set the course now for future production that is oriented to meeting the economic needs of the world, rather than earning “share- holder value” for investors. 

EIR STRATEGIC ALERT WEEKLY NEWSLETTER 3 N°14 / 2020 

U.S. Attorney General William Barr announced a multi-count indictment of President Nicolas Maduro, 14 of his close collab- orators, and two leaders of the Revolutionary Armed Forces of Colombia (FARC) cocaine cartel, on charges of narcoter- rorism, corruption and drug trafficking, among other things. Does that mean that the Criminal Division of the Justice De- partment (DOJ), that issued the indictments, is finally deter- mined to stop drugs? Hardly, when one considers that those same notoriously corrupt elements have never shut a single major international bank for laundering trillions in drug money through the U.S. banking system, or even imposed a serious fine on any one of them... 

In any case, Mike Pompeo’s State Department, through its Narcotics Rewards Program, simultaneously offered a $15 million bounty for information leading to the arrest and/or conviction of Maduro, and lower amounts for other of his cur- rent and former collaborators. 

And Juan Guaido, the man who self-proclaimed himself “president” of the country, posted a video on his Twitter ac- count warning that no multilateral institution will release the billions of dollars in Venezuelan revenue seized under prior sanctions, to any government indicted for narcoterrorism. Those monies, however, are urgently needed to face the epi- demic. Therefore, Guaido argued. the Armed Forces and oth- ers should join an emergency government with him. 

Tightening the economic and financial blockade against Ven- ezuela at this time is tantamount to seeking mass death. Years of sanctions, on top of prior economic problems, have turned the country into a petri dish for disease. According to a Feb. 25 assessment of the UN World Food Program, roughly one- third of Venezuela’s 28.5 million people — more than 9 mil- lion people — do not have enough to eat. Between 60-75% of Venezuelan families eat less than before, and rely on cere- als, roots or tubers for their daily diet; beans, lentils or other pulses perhaps three days a week; and dairy products four days a week. Consumption of meat, fish, eggs, vegetables and fruits is below three days a week for these families. 

At the same time, the health system and the physical econ- omy which sustains it have collapsed to catastrophic levels, as epitomized in the finding of the 2019 National Hospital Survey that at least 70% of health centers had access to water sup- plies only one or two times a week, and 63% reported regular electricity blackouts. 

As humanity rallies to defeat the virus, however, the regime- change crowd is losing power. Two days after the U.S. indict- ments, UN Secretary Antonio Guterres and President Maduro discussed how to coordinate delivery of humanitarian aid to Venezuela. Maduro thanked Guterres for including Venezuela in its Global Humanitarian Response Plan, and for his cam- paign to get all sanctions lifted globally. 

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 

veloped a strong understanding of the Virus. We are working closely together. Much respect!” 

Xi Jinping, according to the Xinhua, said “Both sides will benefit if we cooperate, both will lose if we fight each other. Cooperation is the only correct choice. I hope the U.S side could take real actions. The two sides should work together to enhance cooperation fighting the virus and develop non- confrontational” relations. 

Trump reiterated the importance of this conversation dur- ing his daily press briefing on March 27, mentioning his close friendship with Xi, and stressing how much can be learned from the Chinese experience. 

Tensions had escalated between the two nations, after a Chi- nese Foreign Ministry official responded to repeated taunts from U.S. officials, by accusing a U.S. soldier of bringing the disease to Wuhan during war games last autumn.Secretary of State Mike Pompeo and Defense Secretary Esper repeatedly called the disease the “Chinese virus” or the “Wuhan virus”, and Trump himself used the expression a few times in brief- ings last week. Pompeo and other war hawks have accused China of a lack of transparency, which they claim undermined U.S. efforts to take measures to prepare for the onslaught of the disease. During a G7 Foreign Ministers call, Pompeo raised the issue of China’s “malign influence and authoritarianism”, repeating his frequent charge that China poses “a substantial threat to our health and our way of life.” 

Meanwhile, the Chinese have been engaged in an unprec- edented campaign of material support and data sharing to more than 80 nations, providing essential aid in a moment of profound need. In the interests of humanity, it is time for Mike Pompeo to be fired, and the anti-China hysteria to end. 

Schiller Institute Call for Four Power Summit Circulates in Ukraine The acknowledged number of Covid-19 cases in Ukraine is still relatively low, but generally believed to be a big understatement, due to the lack of tests available. In addition, Dr. Natalia Vitren- ko, leader of the Progressive Socialist Party of Ukraine, reports that a recent spike in pneumonia deaths likely means that the coronavirus had spread, before being recognized as such. 

The country’s healthcare system is in shambles, as is the en- tire economy, since the Anglo-American-supported putsch on the Maidan and the civil war that followed. And yet, the IMF is still dangling money while demanding a “reform” agenda of more austerity. 

In this unstable situation, Natalia Vitrenko on March 18 posted a video under the headline “The coronavirus is smash- ing the capitalist world order. A plan of salvation from Natalia Vitrenko and Helga Zepp-LaRouche,” in which she presents the Schiller Institute calls for implementation of LaRouche’s four laws (See available in Russian at https://www.youtube.com/w atch?v=fqVoiNVtWNs&feature=youtu.be). 

U.S. Department of Justice Indicts Venezuelan Government The U.S. Departments of Justice and State announced sweep- ing new measures against the Venezuelan government leader- ship on March 26. They constitute an unconscionable effort to leverage the threat of the Venezuelan people dying from Covid-19 to bring about the regime change sought without success for over a year. 

EIR STRATEGIC ALERT WEEKLY NEWSLETTER 4 N°14 / 2020