E.I.R.STRATEGIC ALERT
WEEKLY NEWSLETTER
Volume 35, No. 8, February 25, 2021
Biden Announces that “America Is Back”, As He Woos Europe
The international Schiller Institute, in collaboration with EIR, has initiated a series of round table discussions on the urgent need to improve relations between the so-called trans-Atlantic world and both Russia and China, in order to avoid the disas
ters of war, economic disintegration, and pandemics. The next forum will be held online (in English) on Feb. 27 at 20:00 (see https://schillerinstitute.nationbuilder.com/20210227- roundtable-event).
The Biden Administration in Washington has made known its commitment to uphold the “unilateral world”, and Joe Biden himself expressed it in his speech to the gathering of the Munich Security Conference on Feb. 19. That event itself was reduced to a short, online discussion among leaders of the western powers, together with representatives of inter
national institutions, with no one from Russia, China, or other countries invited to participate. It followed a G7 virtual con ference, which was deemed just as little newsworthy by the media, reflecting the actually waning power of those seven in the world.
Joe Biden’s main message was clear and stated repeatedly: “America is back”. He stressed that the partnership between Europe and United States will “remain the cornerstone” of fu ture relations, and that the U.S. will work closely with our partners “from Rome to Riga to meet the range of shared challenges we face.” Those challenges, he explained, are Rus sia which “attacks our democracies and weaponizes corruption to try to undermine our system of governance,” and China, where the government’s “economic abuses and coercion un dercut the foundations of the international economic system.” He did, however, warn against any return to the “rigid blocs” of the Cold War. The Chinese leadership apparently hopes that bilateral relations will improve under Biden, at least when compared to the wild China-bashing of the Pompeo era.
Ursula von der Leyen, speaking on behalf of the European Union, could scarcely contain her joy at Biden’s pledges. While noting the growing “assertiveness” of China as well as Russia’s disregard for “international rules”, she was especially apprecia
tive of cooperation with America on the two “major items” on the global agenda, climate change and the green deal. The new head of the Pentagon, General Lloyd Austin, deliv ered a similar message to Biden’s to the NATO Defense Min isters virtual meeting on Feb. 17-18. By all accounts, he was
received with enthusiasm by his colleagues for promising a return to full support for NATO. Among the multiple threats and challenges facing the Alliance that he cited were the de stabilizing behavior by Russia, a rising China, terrorism, and global challenges such as COVID-19 and climate change.
Financial and Monetary Realities Confirm LaRouche’s Collapse Function
Lyndon LaRouche used his “typical collapse function”, also called the “triple curve”, to illustrate the dynamics of the col lapsing financial system. The function shows a stagnating or declining physical economy on the bottom (first curve), in re lation to a growing amount of monetary aggregates (second curve) and an exponentially growing amount of financial ag gregates (third curve). The crossover point of the monetary/ financial curves would indicate either financial collapse or hy
perinflationary explosion, LaRouche pointed out. To predict which of the two comes first, or when, is not possible, because of the human factor. Indeed, central banks have delayed the blowout of the system for decades by doing “whatever it takes” to keep banks and hedge funds on life support systems.
Financial aggregates: Figures released by the Bank for Inter national Settlements show that total financial aggregates (vis ible debt excluding OTC derivatives) have reached $281 tril lion, up $21 trillion or 7.5% in the past year. Total U.S. debt
rose to $69 trillion, up 15% during the past year. The Federal Reserve’s balance sheet has reached $7.6 trillion, indicating it has increased bank reserves by $3.9 trillion in one year by monetizing Treasury debt and buying mortgage backed secu
rities from big banks (including another $96 billion last week for reasons unrelated to the mortgage securities markets). The ECB has acted similarly, expanding its balance sheet to €7.08 trillion as of Feb. 12, which is an increase of 2.4 trillion in 12 months.
Monetary aggregates: The U.S. money supply (M2) has in creased by 26% since Feb. 2020, the largest one-year jump since 1943. M2 in the Eurozone went up by 11% in the same period. However, Europe experienced a dramatic plunge in GDP of -6.4% on average. The largest economies had the largest drops: - 9.9% in the UK, 8.8% in Italy, 8.3% in France and 5% in Germany, according to data released Feb. 22 by the EU’s statistical office Eurostat.
Physical economy: In the U.S., unemployment benefits re-
mained at 19 million people in the week ending Feb. 7, with 7 million more “out of the workforce but wanting work.” In the euro area, the seasonally-adjusted unemployment rate stood at 8.3% in Dec. 2020, up from 7.4% in Dec. 2019. The fig
ures for the EU’s unemployment rate in the same period were 7.5% and 6.5%, according to Eurostat. These data conceal the fact that many countries have imposed a layoff ban, which will be lifted sometime soon.
The above data show a collapse of the lower curve but a sharp rise in the two upper curves, with a special focus on the monetary curve, as per LaRouche’s “typical collapse function”. The crossover point has become closer and the the global financial bubble has reached such a point of instability, that more financial analysts are echoing LaRouche’s warning on the demise of the system.
Financial Crash: New Warnings from the Inside Oliver Bäte, the CEO of Europe’s largest insurer Allianz, ex pressed his worries about “a dangerous speculative bubble” at a press conference to present the company’s financial report on Feb. 20. He compared the situation on the stock markets to the one preceding the 2008/2009 and the 2000 crashes. “You have some celebrity buying Bitcoin and the price of such assets explode,” Bäte said. “That is really crazy, we must be very careful.”
Bäte was referring to the $1.5 bn in Bitcoins purchased by Tesla head Elon Musk, which caused the speculative cryptocur rency to climb by 65% since. Tesla itself represents a giant financial bubble; it produces E-cars at a loss, and is only able to come up with figures in the black due to generous government bonuses and the sale of CO2 certificates to GM, Fiat-Chrysler etc. Were Musk to sell his Bitcoin to cash in on gains, it might suffice to trigger a financial collapse.
According to stock analyst Warren Ludford, the bubble is just waiting to burst for one of multiple reasons. In an ar ticle on Seeking Alpha, he has put together charts showing the bubbles in the high-tech, start-up and other sections of the market inflated by central bank liquidity, plus savings due to lockdowns, plus margin debt.
One trigger could be a return of inflation, fed by an unprec edented expansion of M2, which has increased by just over 25% in the U.S. over the past year, more than at any other point in the last 30 years. If inflation rises, central banks would raise interest rates and boom, the financial crash is there.
Another scenario could be an economic recovery that in creases commodity prices, as is already occurring. Inves tors who are aware of the high-end of the above mentioned stock bubbles, would move their investments out of so-called “growth stocks” into commodities or value-stocks.
And finally, inflation: the 1.3% rise of the Producer Price In dex in the United States last week might be a signal of coming inflation. Neokeynesians and followers of the Modern Mon etary Theory rule out a return of inflation, as they insist that as long as there is idle manpower, governments can increase spending and central banks can monetize debt ad libitum. They focus on the current debt deflation and call for more stimulus, thus adding more gasoline on fire.
Experience shows that only by reintroducing bank separa tion, undoing more than 30 years of financial deregulation and cutting all sorts of safety nets for speculators, will “stimulus” policies have a chance to provide credit to the real economy. The time is more than ripe for that.
Time to Break up the Incestuous
“Big Three” Asset Management Funds Since the financial crisis of 2008, three asset management funds have accumulated a mind-boggling amount of financial, economic and political power, less due to what they own than to what they manage. The “Big Three” are New York-based BlackRock, with $8.67 trillion in assets under management (including $5 billion in Exchange Traded Funds), followeggd by The Vanguard Group, based in Philadelphia, with approxi mately $6.2 trillion, and State Street Global Advisors (SSgA), based in Boston, with $3.1 trillion.
The cumulative sum is $3 trillion more than the GDP of China (the world’s second largest economy) and more than three quarters of the U.S. GDP. With their profits, the Big Three have bought shares of more than 17,000 companies around the world, including major financial groups, the big tech companies known as GAFAM, as well as the world’s larg
est arms producers and rating agencies. Taken together, they are the largest owner in 88% of the S&P 500 companies. They are able to influence corporate policy not only by being shareholders, but by managing huge amounts of assets.
In terms of government policy, BlackRock, as we have re ported, has been hired by the world’s largest central banks (Federal Reserve, European Central Bank) to “advise”, monitor and supervise the banking crisis. Now, with the Biden Adminis tration in Washington, the world’s largest asset management firm has directly entered the White House. Adewale Adeyemo, the former chief of staff to BlackRock’s CEO Larry Fink, is number two in the Treasury Department, while Brian Deese, until now director of BlackRock’s Global Sustainable Investing, heads Biden’s National Economic Council, while Mike Pyle, the fund’s chief investment strategist, was named chief economist of Vice President Kamala Harris.
This is all the more ominous as BlackRock, and in particular Larry Fink, is a major partner of the World Economic Forum in pushing the “Great Reset” and “green deal”. For market actors who refuse to go along with that agenda (zero carbon emis
sions, etc.), the major funds can threaten to simply withdraw their investments from them.
What is less known to the public is the incestuous relations the Big Three maintain among themselves. In fact, one can say that they “own” each other. (The figures given below are taken from the Solidarité & Progrès website, including with overviews in the form of graphics at:
https://solidariteetprogres.fr/documents-de-fond-7/economie/ biden-blackrock-et-les-trois-gros.html.)
* In the case of BlackRock Inc., the parent company, 7.55% of the shares are held by Vanguard, 4.55% by Black Rock Fund Advisors (its asset management division), 3.99% by State Street Global Advisors (the asset management divi sion of State Street).
* As for American Vanguard Corp, 12.67% of the shares are held by BlackRock Fund Advisors, 9.17% by Vanguard Group, Inc (the second largest shareholder), 2.90% by State Street Global Advisors.
* Coming to State Street Corporation, 8.79% of the shares are held by Vanguard, 4.77% by BlackRock Fund Advi sors, 4.74% by State Street Global Advisors.
Fidelty is sometimes as a major “competitor” to the Big Three, but its largest shareholder is Vanguard (8.55%), its fourth is Blackrock (4.24%) and its fifth is State Street (2.58%). So much for the free market and competition!
EIR STRATEGIC ALERT 2 WEEKLY NEWSLETTER n°8 / 2021
Rating Agencies, Megabanks, GAFAM, Defense Giants: the Big Three Call the Shots Rating agencies, as we know, issue credit ratings for compa nies, institutions and governments. The assessment given is key for the conditions in which all those categories can borrow funds or, a contrario, be cut off from credit. There are three main rating agencies: Standard & Poor’s, Fitch and Moody’s. For the first two, our “big three” come in as the three largest shareholders, while for Moody’s, they are among the top five.
Looking at the ten largest banks in the United States, Black Rock, Vanguard and State Street collectively hold between 12% and 20% of the shares. Vanguard is the among the top two shareholders in nine of the ten, State Street is one of the top three in three of them, and BlackRock is among the top five shareholders of three major banks.
Let’s consider the Big Five Techology companies. Google: Vanguard is number one shareholder, and Black Rock number two.
Amazon: the top three are Vanguard, BlackRock and State Street, in that order;
Facebook: Vanguard is number one, BlackRock number three and State Street number five, (Fidelity is number two); Apple: Vanguard is the first, BlackRock the second and State Street the third;
Microsoft: again Vanguard heads the list, BlackRock comes in fourth and State Street in fifth position.
As for the top five weapons producers, the shareholders break down as follows:
Lockheed Martin: State Street number one, Vanguard sec ond and BlackRock fourth;
Boeing (85% of whose business is military equipment): Vanguard is second, State Street third and BlackRock fourth ; Northrop Gumman: State Street is first, Vanguard second and BlackRock third ;
Raytheon Technologies: State Street first, Vanguard sec ond and BlackRock third ;
General Dynamics: Vanguard first, State Street sixth and BlackRock seventh.
It should be obvious to all that such a concentration of power – stretching from Wall Street to the Military Industrial Complex and on to top governments – is extremely dangerous. It is clearly time to rein in the worldwide financial casino, and re-establish effective government regulations. With the “great reset” and “green new deal”, the intention of such actors as BlackRock is not to save the climate, but to save a hopelessly bankrupt oligarchical system.
How Green Policy and Neoliberalism Left Texans to Freeze
As expected, the backers of the Green New Deal have been working overtime to convince listeners that the failure of “re newable” power systems, such as windmills and solar parks, had little to do with the near collapse of the Texas power grid, which began on Feb. 14, when a Polar Vortex dumped a pow erful winter storm on the state. They are wrong, as figures released by the grid operator, the Electric Reliability Council of Texas (ERCOT) prove.
The total megawatt hours (MWh) of electricity produced by wind, which provides on average nearly one-quarter of the electricity produced in Texas, is often inconsistent, but the number dropped drastically from more than 8,000 MWh statewide on the 14th, to 649 MWh on the morning of the 15th, as wind turbines literally froze.. According to an ERCOT
spokesman, the grid was “seconds or minutes” away from a catastrophic failure and a complete blackout, had there not been controlled outages, some of which lasted for more than 48 hours. Over four million customers lost power, and days later, almost half the counties in Texas were still experienc
ing water problems, due to power loss at water treatment plants. Contrary to widespread “anti-nuclear” media reports, three out of Texas’s four nuclear reactors continued to oper ate at 100% throughout the storm. The one reactor, which had to shut down on Feb. 15 due to a cold weather-related failure of pressure sensing lines to the feedwater pumps, has since restarted, and had already reached 14% of output by the afternoon of Feb. 17.
Though Texas remains one of the most oil and gas rich states in the world, a law was passed in 2005 mandating an increase in wind power. The shift from “black gold” (oil) to wind energy was pushed by legendary oilman T. Boone Pick
ens, who believed Texas would soon run out of oil, in tandem with fanatic anti-growth “environmental” lobbyists, and was facilitated by cheap credit from financial interests hoping to profit from the emerging “green” bubble. Under pressure from Michael Bloomberg’s Beyond Coal initiative -- into which he personally poured $500 million -- three major coal-fired power plants have been shut down in recent years, eliminat
ing 1,800 mwh and increasing the dependence on wind and solar power.
But the failure of inefficient and unreliable renewables is not the whole story. Beginning in 2002, legislation in the state introduced a full deregulation in electricity production, in or der to “increase competition.” As a result, Texas was overrun by distribution companies promising cheaper electricity rates to customers. To make a profit, these companies cut costs, neither investing in upgraded systems nor standard mainte nance, such as winterizing the privatized grids, which explains why electricity production also dropped in plants burning coal and natural gas. Under stress from extreme cold, the system buckled, and people died.
While the failure of the “renewable” energy systems has been identified by figures such as former U.S. Energy Secre tary Rick Perry -- a former Texas Governor -- and current Tex as Governor Gregg Abbott, few have pointed to privatization and deregulation as a significant contributor to the disaster. The unholy merger of green ideology and neoliberal market policies, which characterizes the dangerous plans of the Davos billionaires (the Great (financial) Reset and the Green Deals), is designed to create mega-profits for those corporations in the energy cartel and their financiers, while creating life-threaten ing conditions for the people dependent on them for energy.
WFP Warns of Famine Stalking Syria The World Food Program issued a warning on Feb. 17 that more than 12 million Syrians – or 60% of the population -- are now food insecure. An economic crisis, job losses as a re sult of COVID-19 and soaring food prices have added to the plight of Syrians who have been displaced and worn down by a decade of conflict. “The situation has never been worse. After ten years of conflict, Syrian families have exhausted their savings as they face a spiralling economic crisis,” said WFP Representative and Country Director in Syria Sean O’Brien.
The 2020 Food Security and Livelihoods Assessment car ried out by WFP and partners also estimates the number of people who are severely food insecure -- meaning they cannot survive without food assistance -- has doubled in just one year
EIR STRATEGIC ALERT n°8 / 2021 WEEKLY NEWSLETTER 3
and now stands at 1.3 million people. Unless urgent action is taken, an additional 1.8 million people are at risk of falling into severe food insecurity, the report continues. Over the last year, food prices across Syria have soared, and the price of basic items has increased by 236%, just as the value of the Syrian pound has plummeted.
The report doesn’t mention U.S. and European economic sanctions on Syria, but they are undoubtedly a major factor in this disaster.
In Yemen also, the situation is even more critical. UN Coor dinator for Humanitarian Affairs Mark Lowcock, warned the UNSC on Feb. 18 that the country “is speeding towards the worst famine the world has seen in decades.” It is estimated that somewhere around “400,000 children under the age of 5 are severely malnourished across the country. Those children are in their last weeks and months…. Across Yemen, more than 16 million people are going hungry—including 5 million who are just one step away from famine.”
Perseverance Begins Her Search for Life on Mars NASA’s Mars rover, Perseverance landed precisely on schedule, down to the minute, at 21:55 CET on Feb. 18, 203 days after launch. It was the fifth time NASA has successfully landed a spacecraft on the red planet, with each mission more chal lenging than the one before. For the first time, American and European orbiters already at Mars were able to photograph and film the craft’s entry, descent, and landing, and the first ever video of such an event, taken by the rover itself, is now available on the NASA website.
The Jezero crater, where the rover landed, is the site of an ancient lake. Near the entrance is a very rich “delta” region, thought to be ideal for finding Martian micro-organisms. In deed, the advanced equipment on board is specially designed to search for signs of previous life on Mars.
Perseverance is a major advance over its solar-powered, golf-cart-sized predecessor. Beside weighing a ton and being as big as an automobile, she is nuclear-powered, with a multi mission radioisotope thermoelectric generator (MMRTG). The system converts heat generated by the natural decay of plutonium-238 into electricity and will keep the rover’s tools and systems running at optimal levels throughout her journey (cf. below for more).
The first few days after landing were spent checking that all systems and infrastructure were working properly, after which new upgraded software worked out while the spacecraft was flying to Mars, will be slowly and carefully uploaded to avoid any glitches. The next big step will then be to undertake the first drive, only some 5 meters, and then back.
Those preliminaries met, Perseverance will set out to find a good “helicopter site,” which provides the conditions needed to test the novel Ingenuity. Since the helicopter is stored un derneath the rover, blocking use of the auto-navigation sys tem, helicopter testing is the mission’s first task, and travers ing to the testing site must be done carefully. Since where an appropriate site will be found is, of course, unknown at this time, when it will be reached is also unknown. Once arrived at, it might take up to 10 Martian days to release Ingenuity, move the rover away, etc., and then begin to carry out the five planned tests of Ingenuity.
After the rover’s auto-navigation system is then tested, the rover will head off to wherever the Science Team chooses to begin the first sampling of the mission. The sample-caching
system is one of the most exciting and complex features of the mission, as it will collect and store soil samples to be recovered and returned to Earth by the first “round trip” Mars mission which must follow. The tubes being used to collect samples were put through a highly rigorous sanitizing process, to make sure that any microorganisms found would actually be Martian in origin. The European Space Agency is working with NASA on the project to transport the samples to an orbiter.
The plan, as summed up by NASA Deputy Project Manager Jennifer Trosper, is to be flying in the spring, and sampling in the summer. But don’t be surprised if the tasks go slower or faster, she noted.
NASA and ESA Prepare New Missions in Space The Perseverance rover of NASA is powered by a MMRTG, which was developed in partnership with the U.S. Department of Energy (DOE). This is the first time in more than 30 years that a rover uses domestically-produced plutonium-238 to provide the electricity needed for the entire mission. The DOE is currently working to scale up its production of Pu-238 to support NASA’s goal of producing 1.5 kg per year by 2026, to guarantee the supply needed for future space missions.
The DOE and NASA also plan to develop a “Dynamic Radio isotope Power System”, again using Pu-238 as a heat source, for use in a potential lunar demonstration mission. It should be three times more efficient than the technology used on the Perseverance rover, and therefore be installed on larger sys tems for deep space missions. The World Nuclear Association’s Director General Sama Bilbao y Leon welcomed this perspec tive, exclaiming that Perseverance “is just one more example of the many ways in which nuclear science and technology con tributes to the advancement of humankind.”
In Russia as well, development of new nuclear power sys tems for deep space missions is on the drawing board. The Troitsk Institute of Innovative and Thermonuclear Research (Triniti) in Moscow plans to build a new thermonuclear reac tor by 2030, according to Deputy Director General Kirill Ilyin. Triniti’s task, he said, is to develop “a plasma rocket engine based on magnetic-plasma accelerators”, which are needed for different purposes, some new possibilities in low-earth orbit as well as in exploration of deep space.
In Europe, the European Space Agency (ESA) has signed a contract with the Americans on three more modules to be pro duced by the Airbus company for the Gateway lunar orbiter, bringing to six the total number of modules. This is an impor tant step toward being able to produce the larger quantities required for future lunar missions. Just last week, ESA also announced its first recruitment drive in 11 years for new as tronauts A long overdue decision, in the perspective of building ESA’s “Moon Village”, that is, a permanent lunar base staffed with scientific and other astronautic personnel from many na tions, emphatically including in Europe.
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EIR STRATEGIC ALERT 4 WEEKLY NEWSLETTER n°8 / 2021
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