German Chancellor Angela Merkel and her Finance Minister, Wolfgang Schaeuble, remained blind to reality yesterday, issuing ineffectual denials of any problems in the German economy or banking system. But in an interview with the daily Die Welt, David F…
The German weekly Der Spiegel experienced a very tough interview at the hands of Sergey Karaganov, honorary chairman of the Kremlin’s Council on Foreign and Defense Policy and Foreign Policy Advisor to Russian President Vladimir Putin. The excerpts below are taken from Spiegel‘s English translation.
When asked whether Russia and NATO could “stumble” into a war, Karaganov said he had already been warning of the danger eight years ago, during the conflict in Georgia, saying that
In its nasty way, Spiegel asked if he was referring to Russian propaganda, to which Karaganov retorted:
referring to the stationing of Soviet SS-20 intermediate-range ballistic missiles and the American reaction. Karaganov continued:
Lyndon LaRouche commented that Karaganov is absolutely correct in this comparison and regarding reversal of roles; i.e., the West is rotten inside, but thinks it is strong. LaRouche said this shows that the “danger comes from the British.”
Karaganov replied to Speigel‘s question on what proposals he has put forth to ease East-West tensions:
Spiegel followed up with a question about Russia’s withdrawal of troops from Syria, but then leaving the West guessing how many troops had actually been withdrawn. Karaganov replied,
Spiegel queried why Russians take pleasure over the problems in Europe. Karaganov replied with a cold dose of reality:
Commenting on whether “Russia wanted to be part of Europe — but the Europe of Konrad Adenauer and Charles de Gaulle,” Karaganov said,
Regarding NATO’s stationing of units in the Baltics, Karaganov said:
As for the NATO-Russia Council, which is meeting Wednesday, Karaganov said:
Even while fools such as Angela Merkel and Wolfgang Scheuble insist that both the Italian banks and Germany’s largest bank, Deutsche Bank, are in no serious trouble, David Folkerts-Landau, the chief economist of Deutsche Bank, has expanded on his earlier warning that the entire EU banking system is on the brink of collapse. He blamed it largely on European Central Bank president Mario Draghi’s QE — buying ailing bonds without limits — and reducing interest rates into negative territory. “Europe is seriously ill,” he said in an interview with Die Welt, adding that urgent treatment was required, particularly measures that spark economic growth again, because without growth, the banking crisis cannot be overcome.
Folkers-Landau said that the living standards across Europe are severely threatened, and that this is a major reason for the rapid rise of anti-EU sentiment across Europe.
Lyndon LaRouche has intervened directly into this crisis, pointing to the actual cause of the unfolding disaster — the assassination of Deutsche Bank Chairman Alfred Herrhausen in 1989, whom LaRouche identified as the last German banker who understood the necessary role of banks in fostering credit for the real economy. Since his assassination, Deutsche Bank and German banking generally have been taken over by the British, both literally in the sense that the British now own Deutsche Bank, and in terms of shifting to speculation rather than productive investment.
The economies of most nations in the trans-Atlantic region are implicitly bankrupt, LaRouche said in a discussion Wednesday with his Policy Committee. But the German economy has within it the means to save the European economies, and beyond, due to the historic German dedication to investments into science and technology. If Deutsche Bank were to collapse, he warned, the result would be not only European-wide economic breakdown, but war — global war.
While a recapitalization of Deutsche Bank is therefore urgent, it must not be a matter of money per se, but a reorganization of its vast, largely worthless derivative exposure and non-performing loans and a return to productive investment, as envisioned by Herrhausen. The German economy could then provide the margin required to bring the European economy back to the creation of real profit.
The danger of war could not be more apparent than it is today. One of Putin’s top advisors, Sergey Karaganov, told Der Spiegel today that the extensive NATO deployment of forces to the Russian border, as further implemented at the Warsaw NATO Summit last week, is a military provocation, saying that “If NATO initiates an encroachment — against a nuclear power like ourselves — it will be punished.”
At the same time, China’s Ambassador to the U.S. Cui Tiankai Tuesday responded to the multiple military threats to China since Obama’s “pivot to Asia” and the U.S. intervention against China’s sovereignty in the South China Sea, saying: “Sending these carriers and bombers is a manifestation of the law ‘might makes right’. Therefore China has to oppose and reject it. This is in the true spirit of international law. And if it happens to us, it could happen to anyone.”
There are no partial measures to deal with the existential economic and strategic crisis now confronting mankind. There must be a creative solution based on new principles, resting on the understanding that every human being has the creative potential to contribute to the common aims of mankind. An end to geopolitics, to the beastial philosophy of “one against all,” between individuals and between nations, is urgent, possible and necessary.
Tuesday’s edition of the London Guardian writes that the new report issued by the U.S. House Financial Services Committee (HFSC) on July 11 said that direct British government interventions prevented HSBC from being charged with money-laundering by the Obama administration in 2012. The report said the British government “played a significant role in ultimately persuading the DOJ not to prosecute HSBC.” Instead of pursuing a prosecution for crimes including terrorist aid and drug money laundering, the bank agreed to pay a record $1.92 billion fine.
The HFSC report charges that British Chancellor of the Exchequer George Osborne (who holds the same post to this day) and a British banking regulator warned of “global financial disaster” if HSBC were prosecuted.
The report published letters and emails from Osborne and Financial Services Authority (FSA) officials to their U.S. counterparts, warning that launching criminal action against HSBC in 2012 could have sparked a “financial calamity.” Osborne wrote to Ben Bernanke, who was then the Federal Reserve Chairman, and Timothy Geithner, then Treasury Secretary, to warn that prosecuting a “systemically important financial institution” like HSBC “could lead to [financial] contagion” and pose “very serious implications for financial and economic stability, particularly in Europe and Asia.”
The report charged that the FSA was “problematic,” “weighed in very strongly,” and caused a “firestorm,” which led then-U.S. Attorney General Eric Holder to overrule the advice of his own prosecutors and not pursue criminal action.
“FSA has been on the phone for the criminal discussions,” officials wrote in emails released in the House report. “That’s what has caused the latest firestorm. The contents of that discussion are included in the Chancellor’s letter.”
The FSA was so desperate about the possibility of HSBC losing its charter to operate in the United States, that the FSA repeatedly warned that even the threat of possible charter withdrawal could have caused a fresh global financial crisis. Furthermore, the report said Holder “misled” Congress about the Justice Department’s reasoning for declining to prosecute. It said the Department did have enough evidence to pursue criminal charges against HSBC, despite Holder’s claim to the contrary, and pointed out that the bank had already admitted to the U.S. government that it had broken money-laundering rules.
The report said: “Rather than lacking adequate evidence to prove HSBC’s criminal conduct, internal Treasury documents show that DOJ leadership declined to pursue [its legal team’s] recommendation to prosecute HSBC because senior DOJ leaders were concerned that prosecuting the bank `could result in a global financial disaster’— as the FSA repeatedly warned.”
This is a dramatic, “smoking gun” confirmation of Lyndon LaRouche’s repeated insistence that the Obama administration’s policies, including salvaging the criminal banking system, are dictated by the British Empire.
As we approach the 15th anniversary of September 11, 2001, our nation, far from having recovered from that day of infamy, is now more violent, more terrorized, more impoverished and more despairing than ever before. That the truth about what happened on that day, when close to three thousand Americans perished, has not been told to the American people, and that justice has not been done, is a primary cause of the devastation our nation and much of the world are currently experiencing.
Fifteen years ago, four planes were hijacked, from Boston, Newark, and Dulles Airport in Virginia. In each case, all the passengers crashed to their fiery deaths. 265 people died on the planes, 125 people were killed at the Pentagon, and 2606 died in the World Trade Center.
This death count does not include the several thousand Americans killed in the wars in Iraq and Afghanistan and other locations in the so-called “war on terror,” nor does it include the hundreds of first responders who have died since 9-11 due to illness caused by the debris which they inhaled as they tried to rescue people and clean up the damage. It also does not include soldier suicides which are now at close to 25 per day in the United States.
This death count does not include the hundreds of thousands of Iraqis, Afghanis, Somalis, Libyans, Pakistanis, Yemenis, Syrians and others who have died in these wars or as “collateral damage” from drone strikes.
Not only have hundreds of thousands of lives been lost in these wars, but the number of deadly terror attacks has been increasing, not decreasing. From Paris, to Brussels, to Baghdad, to San Bernardino, to Orlando, and now to Dallas, mass killings are shattering the order of human affairs.
In Britain, the Chilcot Inquiry of former Prime Minister Tony Blair has concluded that the 2003 invasion of Iraq was NOT a war of last resort, but, by implication, a war of aggression. As the London Guardian put it, “Tony Blair is damned.” Parents and family members of the 179 British soldiers killed in Iraq are now filing suit against him for the deaths of their loved ones in an unnecessary war.
What about Presidents Bush and Obama, as well as former Vice President Cheney, who pursued this war and other wars at the cost of thousands of American lives and the safety of us all?
Remember, although 15 of the 19 hijackers were from Saudi Arabia, the Bush Administration and the Saudi Government waged a massive public relations campaign to place the blame elsewhere, first by placing the blame almost entirely on the bin Laden network, and then focusing on an alleged threat from Iraq, implementing a policy that has plunged the United States into a state of perpetual war for over a decade.
We the undersigned believe that the world has paid too a high price for the cover-up of the events of 9-11. We demand justice for all those who died on September 11th, 2001 and its aftermath. We demand the following:
1. The immediate public disclosure of the 28 pages (the final chapter of the Congressional report by the Joint Inquiry into Intelligence Community Activities before and after the Terrorist Attacks of September 11, 2001), which can help to reveal the Anglo-Saudi apparatus which supported the 9-11 hijackers as they trained and prepared for their attack on the United States.
2. Public disclosure of the “Al Yamamah” weapons for petroleum deal negotiated by then British Prime Minister Margaret Thatcher and Saudi Prince Bandar which created the sufficient off-the-books finances needed for the 9-11 attacks.
3. A thorough investigation (including the FBI’s release of thousands of pages they have been withholding) of areas which hosted these hijackers, including, but not limited to, Falls Church, VA; Sarasota, FL; San Diego, CA; and Paterson, NJ.
4. A “Chilcot Inquiry” investigation of both the Bush and Obama administrations to determine their complicity in the cover-up and protection of the 9-11 terror apparatus, as well as whether they, like Tony Blair engaged in “aggressive war,” in violation of International law.
5. United States collaboration with Russia to eradicate terrorist networks in the Middle East and Northern Africa, as well as a reconstruction of the region so that the millions of displaced people may return safely to their homes.
Let us honor those who have died as a result of the September 11, 2001 attacks, by dedicating ourselves to creating a world where this never happens again.
On the very day of the imperial ruling by the Hague Court of Arbitration against China on the Philippines’ claim over the South China Sea, CSIS, the neocon center in Washington, DC, held a full-day forum on the South China Sea, beginning with a keynote by Sen. Dan Sullivan (R-AK). Sullivan, Sen. John McCain’s cohort on the Senate Armed Services Committee, gave a speech which would have fit well at a Nazi Nuremberg rally, only to be then exposed by EIR’s Bill Jones as a spokesman and hitman for the British Empire in its modern guise of the bipartisan war hawks backing Obama’s war mobilization against Russia and China.
Sullivan, like many others at the CSIS conclave, repeated Defense Secretary Ash Carter’s line that the US military can and will “fly, sail and operate wherever international law allows.” He had the gall to say that the US wants to use its military power so that “wars of aggression will be relegated to the past.” He said that the Founding Fathers wrote “freedom of navigation” into our Declaration of Independence against a tyrant that restrained that freedom, and that we are continuing that defense of freedom of navigation today with our military in the South China Sea.
EIR’s Washington bureau chief, Bill Jones, said that for him history was important, as one of his forefathers had been killed in that same American Revolution, and that he had a correction to make on Sullivan’s history lesson. “Our founding fathers had revolted against a British Empire,” Jones said, “the Lord of the Seas at the time, which also claimed that they represented the “rule of law”, THEIR law, and we had insisted that we had the right to determine our own destiny.” “Now we seem to have adopted the roll of the British Empire and are insisting China do the same thing. Think of how China is viewing this from the standpoint of their own history. If we follow up on your proposal to build up our military forces in the region on behalf of “freedom of navigation,” or any other pretext, this will lead to war,” Jones said.
Sullivan was thoroughly destabilized, as the audience was silent and clearly nervous.
“We don’t set the rules,” he finally babbled. “We may be the leaders, but this is the rules-based order. To say we are some sort of dictator is wrong. We disagree on that. We want freedom of navigation and commerce. More and more countries are calling on us to help because we are trusted. Look at the NATO meeting last week [!]. They trust us, that we have no territorial demands, they need our help to fight back against nations that use coercion, like Russia and now China.”
The very next question was posed by Defense News, whose reporter said: “In following up that last question, you said that now we should send two aircraft carrier groups to be permanently deployed in the region. Isn’t that going to be an escalation which leads to further tension?” Again Sullivan stood exposed, responding defensively: “I don’t view our country standing with our allies militarily, for trade and commerce, as some kind of a threat.”
The Nuremberg rally proceeded, nonetheless, in lock-step.
[All quotations above are close paraphrases of the respective comments.]
Speaking at CSIS after the conclusion of CSIS’s day-long drumbeat for war, Cui Tiankai, the Chinese ambassador to the United States, gave a rather thorough response to Tuesday’s decision by the Arbitration Court.
“China rejects the court’s decision,” Cui said, because “the case violates the general practice on having the states themselves consent to proceed to arbitration.” Secondly, he noted, the court “exceeded its authorization since territorial issues are not subject to UNCLOS.” The decision to take the case was a matter of “professional incompetence’ and “questionable interpretation”. In addition, he added “it was not done in good faith.” “UNCLOS,” he said, “calls for mutual cooperation and understanding. But this was an attempt to use the legal system for an extraneous purpose. It will also undermine the willingness of nations to engage in negotiations in order to resolve territorial disputes.” “Abusing the arbitration procedures in this way will weaken the motivation of states to negotiate. It will intensify conflicts and even cause confrontation. In effect, it will undermine international law,” he said.
He then went on, regarding the deployment of U.S. warships to the region. “Sending these carriers and bombers is a manifestation of the law ‘might makes right’,” Cui said. “Therefore China has to oppose and reject it. This is in the true spirit of international law. And if it happens to us, it could happen to anyone.” “China,” he said, “would not use international bodies in that way, but they would defend their sovereignty. Because if any country fails to defend its sovereignty, it has no dignity to speak of.”
And the problem did not begin with China, he said. China and other countries had been well on the way to overcome their differences. “The tensions started to rise five or six years ago when we started to hear about the ‘pivot’,” Cui said. “And has anybody benefited from this? I don’t think so. If economic growth is weakened, everybody will be hurt,” he warned. “And to those who hereby think they have a ‘free ride’ because of this, I urge them go to Iraq and to Syria and see how things worked out there. Be careful what you wish for,” he said.
Cui also noted that China was not the first, but rather the last country to build structures on the islands and reefs, which were in their territorial claims, and the facilities they built, like lighthouses, benefited all. On freedom of navigation he distinguished between freedom of navigation for commercial vessels, which have never been threatened by China, and military vessels. “China supports the freedom of navigation for commercial vessels since commerce is extremely important for China. The deployment of naval warships, on the other hand, could actually threaten the freedom of navigation for commercial vessels.” “Negotiations and consultation offer the most successful way to resolve the issues,” Cui said. “Peace cannot be brought by a fleet of aircraft carriers,” he said.
The Permanent Court of Arbitration at the Hague Tuesday issued a unanimous, provocative, and over-reaching decision in the South China Sea arbitration case filed by the previous government of the Philippines. The Tribunal ruled against China on all major points, surprising even backers of the initial Philippine filing. This is the ruling which Obama and crew have claimed for months that China must obey or the US will “enforce” by military means, whether any of the South China Sea nations wish it or not.
The Court acknowledged that it has no mandate to rule on sovereignty over land territory and does not delimit any boundary between the Parties, but then proceeded to de facto rule on sovereignty. The Tribunal “concluded that there was no legal basis for China to claim historic rights within the sea areas falling within the ‘nine-dash line’,” which China has historically considered its sovereign territory. So, too, the Tribunal ruled that “it could—without delimiting a boundary— declare that certain sea areas are within the exclusive economic zone of the Philippines, because those areas are not overlapped by any possible entitlement of China.” This ruling rested on the incredible finding that the 110 acre Taiping Island, occupied by Taiwan and housing a military garrison, a hospital, and a farm, is not an island at all, but just a rock, and therefore is not granted the 200-mile Exclusive Economic Zone due any island. That 200-mile zone overlaps the other Spratly islands and reefs. Thus the magic of the “impartial Court.”
China never recognized the Arbitration Court’s right to even take up the case, and Tuesday the Chinese Foreign Ministry reiterated what the government has been stating for months: China “solemnly declares that the award is null and void and has no binding force. China neither accepts nor recognizes it.”
President Rodrigo Duterte’s government in the Philippines, which has put forward, since it was sworn in at the end of June, a policy of resolving disputes with China on the basis of dialogue on mutual economic development, responded to the ruling with caution. Presidential Communications Secretary Martin Andanar stated that the Solicitor General would study the decision and provide the President with “a complete and thorough interpretation in five days,” and Presidential spokesperson Ernesto Abella specified that no public statements would be issued until the matter had been thoroughly discussed.
The Wall Street Journal quickly published a perspective for how the ruling can be used to overturn Duterte’s policy of working with China, and line up all of Southeast Asia against China. Citing “experts,” Wall Street’s rag asserted that Duterte can’t appear weak in defending Philippine sovereignty now that the Court has ruled (especially that the ruling gave the Philippines sovereignty over one of the artificial islands built up by China), and so will have to bow to the alleged “overwhelming public opinion” against China in the country.
The U.S. lawyer who represented the previous Philippine government’s filing at the Hague, Paul Reichler, of the U.S. law firm Foley Hoag LLP, told journalists after the ruling that it would encourage other countries in the region to stand up to China. As reported in the Journal, Reichler insists “the Tribunal’s ruling not only benefits the Philippines, it also benefits other states bordering the South China Sea like Indonesia, Malaysia and Vietnam. If China’s nine-dash line is invalid as to the Philippines, it is equally invalid to those states and, indeed, the rest of the international community.”
Statement issued by Helga Zepp- LaRouche, Chairwoman of the German Civil Rights Movement Solidarity (BüeSo), on July 12, 2016.
The imminent threat of the bankruptcy of Deutsche Bank is certainly not the only potential trigger for a new systemic crisis of the trans-Atlantic banking system, which would be orders of magnitude more deadly than the 2008 crisis, but it does offer a unique lever to prevent a collapse into chaos.
Behind the SOS launched by the chief economist of Deutsche Bank, David Folkerts-Landau, for an EU program of €150 billion to recapitalize the banks, lurks the danger openly discussed in international financial media, that the entire European banking system is de facto insolvent, and is sitting on a mountain of at least €2 trillion of non-performing loans. Deutsche Bank is the international bank which, with a total of €55 trillions of outstanding derivative contracts and a leverage factor of 40:1, even outdoes Lehman Brothers at the time of its collapse, and therefore represents the most dangerous Achilles heel of the system. Half of DB’s balance sheet, which has plummeted 48% in the past 12 months and is down to only 8% of its peak value, is made up of level-3 derivatives, i.e., derivatives amounting to circa €800 billion without a market valuation.
It probably came as a surprise to many that Lyndon LaRouche called today for Deutsche Bank to be saved through a one-time increase in its capital base, because of the systemic implications of its threatened bankruptcy. Neither the German government with its GDP of €4 trillion, nor the EU with a GDP of €18 trillion, would be able to control the domino effect of a disorderly bankruptcy.
The one-time capital injection, LaRouche explained, is only an emergency measure which needs to be followed by an immediate reorientation of the bank, back to its tradition which prevailed until 1989 under the leadership of Alfred Herrhausen. To actually oversee such an operation, a management committee must be set up to verify the legitimacy and the implications of the obligations, and finalize its work within a given timeframe. That committee should also draw up a new business plan, based on Herrhausen’s banking philosophy and exclusively oriented to the interests of the real economy of Germany.
Alfred Herrhausen was the last actually creative, moral industrial banker of Germany. He defended, among other things, the cancellation of the unpayable debt of developing countries, as well as the long-term credit financing of well-defined development projects. In December 1989, he planned to present in New York a plan for the industrialization of Poland, which was consistent with the criteria used by the Kreditanstalt fuer Wiederaufbau (KfW) for the post-1945 reconstruction of Germany, and would have offered a completely different perspective than the so-called “reform policy,” or shock therapy, of Jeffrey Sachs.
Herrhausen was assassinated on November 30, 1989 by the “Third Generation of the Red Army Fraction,” whose existence has yet to be proven to this day. It happened only two days after Chancellor Helmut Kohl, who counted Herrhausen among his closest advisors, had presented his ten-point program for gradually overcoming the division of Germany [between East and West]. The cui bono of the terrorist attack remains one of the most fateful issues in the modern history of Germany, and one which urgently needs to be clarified.
The fact is that Herrhausen’s successors introduced a fundamental paradigm change in the bank’s philosophy, which brought Deutsche Bank into the wild world of profit maximization at all costs, and also into countless unpunishable and punishable legal entanglements, which those responsible have avoided until now, mainly because of the “too big to fail” premises.
The transformation of Deutsche Bank into a global investment bank with the highest derivatives exposure, combined with the simultaneous credit crunch for German small and medium-sized enterprises, is symptomatic of the folly which has led to the current catastrophe.
We must now act with resolution, but not in the way Folkerts-Landau proposes, that is, not with more of the same medicine, which would certainly kill the patient. Although it has mainly operated over the past years out of London and New York, Deutsche Bank is too important for the German economy, and therefore for Germany, and ultimately for the fate of all of Europe. Its reorganization in the spirit of Alfred Herrhausen is not only the key to overcoming the banking crisis, but also for averting the acute danger of war.
Herrhausen’s assassination has gone unpunished. However, there exists “the dreaded might, that judges what is hid from sight,” which is the subject of Friedrich Schiller’s poem “Die Kraniche des Ibykus.” The Erinyes have begun their dreadful dance.1Friedrich Schiller, “Die Kraniche des Ibykus”
It is now incumbent upon all those who, in addition to the family, have suffered from the assassination of Herrhausen, upon the representatives of the Mittelstand, of the German economy and the institutional representatives of the German population, to honor his legacy and to seize the tremendous opportunity which is now offered to save Germany.
Europe is facing three triggers for a blowout of the trans-Atlantic financial system, any one of which could detonate at any moment. And these are by no means the only sources of collapse of the trans-Atlantic, London/Wall Street-led system.
First, the Italian banks are on the verge of collapse. It is officially admitted that the leading Italian banks are carrying 360 billion euros in non-performing debt—and unofficial estimates put that number much higher. As Italian Prime Minister Renzi correctly warned, however, the crisis surrounding Deutsche Bank is “a hundred times worse.” DB is sitting on $72.8 trillion in current derivatives contracts and is carrying a mountain of non-performing debt. On Sunday, DB chief economist David Folkerts-Landau called for an immediate, emergency 150- billion-euro bailout of the big European banks—starting with his own DB . Under European Union laws, in effect since Jan. 1, banks must be put through bail-in before any bailout, and this, itself, is a certain trigger for a systemic blowout.
As of Monday, major London real estate funds were facing an investors’ run, in the wake of the Brexit vote, and the prospect of an imminent blowout of the entire British real estate bubble is very real. In a clear panic over the accelerating disintegration, the ruling Conservative Party strong-armed one of the two remaining candidates for party chair to quit the race, so that Theresa May could be installed as Prime Minister on Wednesday—to have a government in place to deal with the onrushing crisis.
This imminent, systemic crash cannot be separated from the growing danger of nuclear war, following the Warsaw NATO heads-of-state summit last week.
It is precisely because of this combined danger of a collapse into chaos and potential war of annihilation that Lyndon LaRouche has called for a one-time bailout of the German banks, to staunch the bleeding long enough to launch a genuine policy change, based on his own Four Laws for how to revive the world economy, through credits directed at improving the productive powers of labor, through investment in infrastructure, frontier scientific research, led by a massive expansion of the space program and similar actions. LaRouche warned colleagues on July 10 that if Germany plunges into chaos, war is imminent. Germany holds the key to a new European policy towards Russia, based on strategic and economic cooperation, and if this relationship is wrecked, the consequences are catastrophic.
It’s time to face the reality of the current crisis, LaRouche demanded, and to act on the emergency basis that it demands.
Video of nszzo7W2o4k
Our weekly Policy Committee discussion will be broadcast at 1:30 pm eastern today.
Now not only Société Générale, but the British-German monster Deutsche Bank is demanding that the European Union suspend its “bail-in” rules and conduct a “European TARP” bank bailout to avert looming bank failures.
Deutsche Bank chief economist David Folkerts-Landau, interviewed by Welt am Sonntag, demanded a EU150 billion (roughly $165 billion) Europe-wide bailout to “recapitalize” banks, specifically without “bailing in” bank bondholders or depositors. Folkerts-Landau called his demand a TARP for Europe, but apparently thought it would be reassuring that he was recommending only $165 billion and not $700 billion. One might anticipate checking back with the distinguished bank economist on that figure in a week or two.
Immediately, the statement knocks the props out from under German Finance Minister Wolfgang Schäuble’s opposition to allowing Italy to conduct such a “no bail-in bank bailout.” Schäuble has said that he is ready to “stand by” Deutsche Bank in its difficulties, while claiming they were not serious. Folkerts-Landau evidently knows better; but he particularly called a bailout for Italian banks “urgent,” and said that “to stick so strictly to the [bail-in] rules would cause greater destruction than setting them aside.”
He obviously was asking for Deutsche Bank and other London-centered giants as well. “Europe is extremely sick, and must attack the existing problems extremely quickly, otherwise we are threatened with an accident,” he told the Sunday edition of Die Welt. These illnesses, with bank stock collapses as their symptoms only, included “a fatal combination of weak growth, high government debt and the approach of dangerous deflation.”
Folkerts-Landau is an investment banker who heads both the research division of Deutsche Bank’s investment bank, and the “think-tank” of the bank holding company. This was rightly called dangerous when he took over the jobs in 2012; but since Deutsche Bank is essentially not a bank but a giant broker-dealer/hedge fund, it was not surprising.
Italian Prime Minister Matteo Renzi told reporters during a recent joint press conference with Swedish Prime Minister Stefan Lofven that, no matter how serious Italy’s banking problems are, they are dwarfed, by comparison, with Deutsche Bank. “If this non-performing loan problem is worth one, the question of derivatives at other banks, at big banks, is worth one hundred.” Renzi’s remarks were described by Alex Christoforou as a not-so-subtle pressure move by Renzi against German Chancellor Angela Merkel and German Finance Minister Wolfgang Schäuble, over their refusal to bend the rules to allow Italy to bail out Banca Monte dei Paschi di Siena without invoking the EU’s bail-in policy, in force since Jan. 1. The “derivatives at big banks” referenced by Renzi was directed at Deutsche Bank, which has been widely described in recent weeks as the most volatile bank in the entire trans-Atlantic system, with a derivatives exposure of $75 trillion, 20 times bigger than the GDP of Germany, and a 40:1 leverage rate, far beyond the Lehman Brothers case in 2008.
Zero Hedge on Saturday further detailed the Deutsche Bank disaster under the headline “Charting the Epic Collapse of the World’s Most Systemically Dangerous Bank.” Tyler Durden wrote “If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.” But according to a time-line of recent events, Deutsche Bank is now on the edge of blowout, with massive implications for the entire London-Wall Street centered system of trans-Atlantic finance. On June 2, two former Deutsche Bank employees were charged in the ongoing U.S. Justice Department probe of the Libor rigging scandal. A total of 29 Deutsche Bank officials are still under investigation in that probe. Following the Brexit vote, Deutsche Bank, the largest European bank operation in London, has been further reeling. On June 29, the IMF issued a warning that “DB appears to be the most important net contributor to systematic risks.” The next day, the Fed announced that DB had failed the stress test as the result of “poor risk management and financial planning.”
Deutsche Bank shares are now selling at 8% of the peak price in May 2007, with 9,000 employees having been recently laid off, and the bank shutting down operations in 10 countries. However, the real problem is Deutsche Bank’s enormous derivatives exposure, the largest of any bank in the world. Zero Hedge warned: “Now that Deutsche Bank’s dirty laundry has been exposed for all to see, Renzi’s gambit is clear: If Merkel does not relent on bailing out Italian banks, the collapse of Italian banks will assure the failure of Deutsche Bank in kind. And since in a fallout scenario of that magnitude DB’s derivatives would not net out, there will be no change to save the German banking giant, bail out, in or sideways.”
The trans-Atlantic financial system is at an imminent blowout point, and what’s happened just in the last day, Italian Prime Minister Renzi had made a statement during a joint press conference with the Swedish Prime Minister, saying that, while Italy’s banks are in big trouble and need a bail-out, this is very minor compared to the major European banks that are facing a massive derivatives blowout. He was referring very specifically to Deutsche Bank which has $75 trillion in derivatives exposure and is being universally described as the biggest single source for a new systemic blowout.
Renzi was putting pressure on Merkel and especially German Finance Minister Schäuble to back down and allow Italy to abandon the bail-in requirements that have been enforced in Europe since January 1st, to do a bail-out of Monte dei Paschi and other Italian banks.
What actually has happened since then, is that Deutsche Bank has publicly come out calling for a massive European bank bail-out, obviously starting with themselves, and that basically they are calling precisely for a cancellation, temporarily at least, of the bail-in rule. This is a statement that was made by Deutsche Bank’s chief economist David Folkerts-Landau in Welt am Sonntag on Sunday. He says, the banks need a EU150 billion bail-out to recapitalize, and it has to be done without bailing in the bondholders and depositors.
In response to these dramatic developments, American political economist Lyndon LaRouche issued a dramatic call for action:
“Exactly what we have to do is support, the fact of a temporary reorganization of the economy of those banks, and we have to secure that in order to stop the bleeding. In other words, the point is, stop the bleeding and integrate and bring in conditions which will enable us to sustain that kind of operation.
“In other words, you’ve got to create, because the whole German economy is a crucial thing. It’s a mess. We all know it’s a mess. It’s been a mess; it became a mess — Schäuble and so forth have made it a mess! We know that. But we’re not going to shut down the German economy on the basis of the fact we got a bunch of crooks or suspected crooks who might be in certain departments. What we’re going to do is, we’re going solve this thing; we’re going to fix it and we’re going to back it up, for a one-time backup.
“Clean the whole thing out, set up a program which will secure the banking system of Germany to function. Once that has happened, now you can work from there!”
Such a one-time move would necessarily involve cancelling out this $75 trillion in derivatives and going in a direction a bank separation and the sorts of things that would allow for credit to the real economy.
LaRouche elaborated: “You’ve got to qualify the thing further, saying we are doing it as a one-time operation, for the sake of saving the economy. That’s it.
“This is a rescue of the economy, despite all the mistakes made, we’re going to take it one time, because we’re going to try to save the economy of Germany. And that’s what’s at risk. And Schäuble is not a useful person, nor is Merkel.
“We’ve got to help Germany, because without sustaining a stable German system, we cannot prevent war!
“What we need is a program which gives credit to the German economy, a one-time German economy credit. And you have to present it that way, and put it to people that way for giving them confidence in what they’re doing, and telling them ‘don’t do what you did before.’ That’s the point.
“You have to say to the Germany economy, ‘Look, you’ve made mistakes, serious mistakes. Now, we’re going to bail you out, but you’re going to have to obey yourself; you’re going to have to get on the job and do what you should do, and don’t try to cheat any more.’
“I’m saying, Germany is an emergency case. We have to organize the thing in such a way that Germany can escape from this problem. Assuming that the organizations of the German economy are going to operate, in such a way as to win the battle.
“And Schäuble is not really high on my level on that, you know…. But concentrate essentially on the provisions which must be made, which enable this thing to go. You’ve got to have some system, which will secure the system of the German economy, the financial economy, and you’ve got to do that; and you’ve got to make it work. If you don’t, you’re going to go into chaos.”
LaRouche referred to the period of 1989, when the Berlin Wall came down and Germany was moving towards reunification, and the Helmut Kohl government was looking to revive economic and political ties to Eastern Europe and what would soon be post-Soviet Russia:
“We had a case at that time of a great leader, of the economy of Germany, who was assassinated by the French—Deutsche Bank President Alfred Herrhausen. So we don’t want another Herrhausen abuse. Let the Germans be free, and let the others go into the pen. I mean, because that’s what happened. Because you had a point here, you had a leading figure for the leading office of German policy, and you shut that down, and you moved the thing out to a different way, you destroyed the beginnings of the German economy!
“So we have to tell some of the people in that area that they made a big mistake and they should be a little bit more generous in their matters of dealing with this thing.”
Former State Councillor Dai Bingguo, one of the key partners in the US-China relationship before his retirement, returned to Washington to give a major speech at a gathering organized by the Chongyang Institute for Financial Studies and the Carnegie Endowment for International Peace on July 5. In his speech, Dai warned that the “confrontational rhetoric” needs to be toned down and that the US’s “heavy-handed intervention in the South China Sea issue” needed to be “scaled back.” “The rhetoric of a few people in the US has become blatantly confrontational,” Dai warned. “How would you feel if you were Chinese and read in the newspapers or watch on TV reports and footage about US aircraft carriers, naval ships and fighter jets flexing muscles right at your doorstep and hear a senior US military official telling the troops to be ready “to fight tonight”? Wouldn’t you consider it unhelpful to the US image in the world? This is certainly not the way China and the US should interact with each other.
“Having said that,” he continued, “we in China would not be intimidated by the US actions, not even if the US sent all the ten aircraft carriers to the South China Sea. Furthermore, US intervention on the issue has led some countries to believe that the US is on their side, and they stand to gain from the competition between major countries. As a result, we have seen more provocations from these countries, adding uncertainties and escalating tensions in the South China Sea. This, in fact, is not in the interest of the US. The risk for the US is that it may be dragged into trouble against its own will and pay an unexpectedly heavy price.” Dai also said that it is urgent that the Philippines withdraw their arbitration submission. “If the tribunal insisted on its way and produced an ‘award’, no one and no country should implement the award in any form, much less force China into implementation. And the Philippines must be dissuaded from making any further provocation,” he warned.
At the same time Dai underlined that China was always prepared to negotiate with the Philippines and also to work together with the U.S. to resolve the growing tensions. “China has all along been committed to resolving the disputes peacefully through negotiation and consultation,” he said. Even though the South China Sea is clearly not an issue between China and the US, China is willing to maintain communication with the US on maritime issues, and work with the US and all other parties to keep the situation under control, considering our shared interest in peace and stability in the Asia-Pacific. Our two sides may work together to find ways to jointly promote regional peace and stability through constructive dialogue on matters such as regional confidence-building, effectively managing disputes and advancing maritime practical cooperation.
“What we need,” he added, “is not a microscope to enlarge our differences, but a telescope to look ahead and focus on cooperation. Both China and America are great nations with insight and vision. As long as the two sides work for common interests, respect each other, treat each other as equals, have candid dialogue, and expand common ground, China and the US will be able to manage differences and find the key to turning those issues into opportunities of working together.”
Dai was giving the keynote at a closed event at Carnegie. While there were a variety of views represented on the U.S. side, there was general agreement with the mainstream line, that China should accept the results of the upcoming arbitration decision and cease the construction on the islands claimed by them. The first point was clearly underlined by Ambassador John Negroponte, who was the U.S. responder to Dai’s speech.
Negroponte said “The United States considers the arbitration to be a legally binding dispute resolution.” One of the U.S. participants even urged China to “put aside” its territorial claims, provoking a strong rebuke from one of the Chinese scholars. One U.S. Naval Academy scholar even went so far as to say that China’s signing of the UNCLOS maritime treaty in 1996 effectively abrogated any previous territorial claims, a claim, which is absurd on the face of it, as that UNCLOS treaty has no authority to regulate ANY territorial dispute. Nevertheless there was a general understanding at the event that the concentration of military forces in the region can easily lead to a conflict that could spiral out of control.
