Author: Alicia

The financial publication Market Oracle Sunday runs a forecast by Graham Summers that “The EU’s banking system will crash” in 2016. Summers notes that the entire banking system of the City of London and the rest of Europe, with negative interest rates and expanding quantitative easing (QE) by the ECB, is now leveraged at 26:1, rivaling the leveraging of the Wall Street banks by the end of 2007.

With the mandatory policy of bank bail-ins, the costs of that crash will be looted out of the lives of European populations.

Summers correctly adds Japan’s financial system, which is “insolvent. The country has no choice but to continue to implement QE, or else it will go to crash in a matter of months. However, with the Bank of Japan already monetizing ALL of the country’s debt issuance, the question arises, just what else can it buy?”

But Market Oracle leaves out the U.S. financial system. Standard and Poor’s has just reported that the portion of “high-yield” or “junk debt” in the U.S. financial system which is distressed—i.e., delinquent—reached a peak of 24.5% in December, the highest level since—of course—late 2008. S&P calls this debt sector “speculative grade,” meaning largely junk bonds and leveraged loans. The oil and gas sector accounted for about 30% of the distressed high-yield debt issuers, whose distressed debt spiked from $180 billion to $233 billion in a month, from November to December. The S&P finding was reported in the publication Oil and Gas Weekly on Jan. 2.

The U.S. junk debt bubble has reached $3.6 trillion, according to the FDIC, having grown by 20% ($750 billion) in 2015. This is $1.5 trillion in non-investment grade (junk) bonds, $1.9 trillion in leveraged loans, and $250 billion in collateralized loan obligations. And the interest rate on this $3.6 trillion has jumped up to range from 9.8% (BB bonds and leveraged loans) to 18% (CCC junk bonds), making it all nearly impossible to refinance, or to service. By contrast, the U.S. subprime mortgage bubble reached a total $1.4 trillion in MBS in 2007. Nor did subprime delinquency rates ever get above 25% before the 2008 bank crash.

The Financial Times added, in a Dec. 30 commentary, the question of derivatives poison: “The downturn in commodity debt is exacerbated by increased financialisation, which converted commodities into tradeable equivalents. Cash flows from future sales were monetised to raise large amounts of debt to finance expansion. The collateral value of commodities secured expansion in borrowing and trading. Derivatives allowed new participants, other than consumers and producers, to invest in and trade commodity price expectations.”

The financial publication Market Oracle Sunday runs a forecast by Graham Summers that “The EU’s banking system will crash” in 2016. Summers notes that the entire banking system of the City of London and the rest of Europe, with negative interest rates and expanding quantitative easing (QE) by the ECB, is now leveraged at 26:1, rivaling the leveraging of the Wall Street banks by the end of 2007.

With the mandatory policy of bank bail-ins, the costs of that crash will be looted out of the lives of European populations.

Summers correctly adds Japan’s financial system, which is “insolvent. The country has no choice but to continue to implement QE, or else it will go to crash in a matter of months. However, with the Bank of Japan already monetizing ALL of the country’s debt issuance, the question arises, just what else can it buy?”

But Market Oracle leaves out the U.S. financial system. Standard and Poor’s has just reported that the portion of “high-yield” or “junk debt” in the U.S. financial system which is distressed—i.e., delinquent—reached a peak of 24.5% in December, the highest level since—of course—late 2008. S&P calls this debt sector “speculative grade,” meaning largely junk bonds and leveraged loans. The oil and gas sector accounted for about 30% of the distressed high-yield debt issuers, whose distressed debt spiked from $180 billion to $233 billion in a month, from November to December. The S&P finding was reported in the publication Oil and Gas Weekly on Jan. 2.

The U.S. junk debt bubble has reached $3.6 trillion, according to the FDIC, having grown by 20% ($750 billion) in 2015. This is $1.5 trillion in non-investment grade (junk) bonds, $1.9 trillion in leveraged loans, and $250 billion in collateralized loan obligations. And the interest rate on this $3.6 trillion has jumped up to range from 9.8% (BB bonds and leveraged loans) to 18% (CCC junk bonds), making it all nearly impossible to refinance, or to service. By contrast, the U.S. subprime mortgage bubble reached a total $1.4 trillion in MBS in 2007. Nor did subprime delinquency rates ever get above 25% before the 2008 bank crash.

The Financial Times added, in a Dec. 30 commentary, the question of derivatives poison: “The downturn in commodity debt is exacerbated by increased financialisation, which converted commodities into tradeable equivalents. Cash flows from future sales were monetised to raise large amounts of debt to finance expansion. The collateral value of commodities secured expansion in borrowing and trading. Derivatives allowed new participants, other than consumers and producers, to invest in and trade commodity price expectations.”

Justice for the victims of the Sept. 11, 2001 attacks has been stopped for too long by George W. Bush and Barack Obama; and now, heading off world war depends on doing that justice.

The mass executions by the barbaric Saudi regime on Jan. 2, which are now polarizing the entire Muslim world again, must be denounced widely by all civilized people, before Saudi actions trigger a new global war.

The first and immediate step must be the immediate release of the secret 28 pages from the original Congressional Joint Inquiry into 9/11, which detailed the direct role of the Saudi Monarchy in organizing those attacks on New York and Washington. President George W. Bush buried those 28 pages, and President Barack Obama has kept them buried. House bill HR 14 and Senate bill S 1471 have been demanding their release. But the time has come to bring the contents of those 28 pages to the floors of the House and Senate, and to all Americans.

Had those contents been out, there would be no Islamic State threat today, and the Saudi sponsorship of global jihadist terrorism would have been halted 13 years ago. The actions by Bush and Obama, in protecting that dirty Saudi secret, are tantamount to acts of treason against the American people, starting with the 3,000 Americans who perished in the Sept. 11, 2001 attacks.

The barbaric mass executions on Jan. 2 should be the clearest reminder that the leadership of the Kingdom is indistinguishable from the leadership of ISIS.

We also stand at one minute to midnight of a financial crash worse, in its effects on people, than 2008.

Today, Jan. 4, begins the policy of “bail-in” all over Europe and in the United States. Government regulators and bankers know the policy; but you probably don’t: They will try to “recapitalize” any bank that fails, by taking its creditors’ bonds, and then taking its depositors’ money.

And banks will fail. In Europe a string of bank failures and “bail-ins” of savers has already hit Italy and Portugal just before New Years. In the U.S. financial system, the “junk debt” bubble connected to commodities has gotten 150% larger than the 2008 subprime mortgage bubble ever was; and the delinquent part of that junk debt suddenly spiked in December to 25% — that’s as high as subprime mortgage defaults ever got before, the crash.

Clear and direct action is required against Wall Street. The “bail-in” swindle has been embraced by President Obama and passed into law, in the Dodd-Frank Act, by a cowardly and corrupt U.S. Congress. That Congress reconvenes Tuesday, Jan. 5 — it must be held to the fire immediately.

Congress could have shut the Wall Street casino down in 2010, by restoring the Glass-Steagall Act and other measures of President Franklin Roosevelt’s first months in office. Congress caved in to Wall Street instead. They passed trillions in bailouts and then a Dodd-Frank Act which is now about to produce the even more devastating “bail-in” — bailing your savings into insolvent banks. Now, the Wall Street/London banking system which is set to blow, can really kill you.

No consideration should be given to any more bail-outs, or any bail-ins. Wall Street has no authority to collect these bad debts or replace them with your savings. To prevent economic catastrophe and general war, shut Wall Street and Obama down.

Make them put Glass-Steagall through now! House bill HR 381 and Senate bill S 1709.

Former Maryland Governor Martin O’Malley has stated the intention to restore Glass-Steagall more clearly than any other Presidential candidate — the Wall Street Journal called him “Wall Street’s enemy number-one” as a result. Will he get the support to do it?

The Vatican is behind a new attack on the poor—this time an attack on nuclear power development. As in the case of the COP21 agreement—for which Pope Francis had effusive praise—it is done in the name of the poor. The Southern African Catholic Bishops’ Conference (SACBC), through its Justice and Peace Commission, has called on the South African government to suspend its nuclear build of 9600 MW and concentrate on “renewable energy,” in a Dec. 29 statement.

The parent body of the SACBC Justice and Peace Commission, the Pontifical Council for Justice and Peace, in Rome, is headed by Cardinal Peter Kodwo Appiah Turkson, a contributor to, and advocate for the papal encyclical Laudato Si’. The SACBC Justice and Peace Commission would not have acted without approval—explicit or implicit—from Rome.

Because the Vatican has accepted the falsified science and perverse logic of the British oligarchy, as to what is in the interests of the poor, the SACBC initiative may herald a broad mobilization of the Vatican against nuclear power.

The Dec. 29 statement signed by Bishop Abel Gabuza, Chairman of the Justice and Peace Commission, declares that “the economic risks and safety risks of the nuclear option outweigh its economic benefits, and the government should therefore concentrate its efforts and fiscal resources on renewable energy. …. The Commission has therefore appealed to the government to urgently call for a nuclear referendum.”

But no developing country has a future without charting a course of continual advances in science and technology, including nuclear: Much of Africa, including South Africa, will have no source of baseload electric power (that includes hydroelectric) commensurate with the need, when coal runs out, without nuclear. The Vatican must know that the boutique “renewable” sources that the SACBC statement calls upon the government to rely on, such as wind and solar, will never be baseload sources. Has the Vatican confused the two meanings of “pastoral”?

Dr. Kelvin Kemm, CEO of Nuclear Africa, in Pretoria, told EIR Dec. 31, “There will be no referendum.” Kemm reports a broad agreement in South Africa in favor of the nuclear build, in government and banking, and among energy producers and engineers.

Kemm pointed to the double standards in economic judgment used by the SACBC and others. “In cases of national necessity, you don’t ask, ‘Can we afford it?'” he said. “When Hitler invaded Poland on September 1, 1939, Britain declared war on Nazi Germany two days later. But no one in Britain said, ‘Oh, wait, we have to check our budgetary limitations!'” Similarly, he said, it is widely known that providing abundant, cheap electricity is a stimulus to development. One doesn’t wait to build nuclear plants until someone’s projections say it is needed. Yet these are the false standards—”South Africa can’t afford it” and “South doesn’t need it yet”—in this and earlier SACBC documents.

“Other developing countries such as Vietnam, Indonesia, and Ecuador,” Kemm added, “are looking to South Africa’s nuclear program as a flagship program and as a source of expertise—expertise relevant to building nuclear in a developing country—that they can draw on.”

The SACBC knew, or should have known, that its statement is an attack on the poor which, if implemented, will cost countless lives. The SACBC office and some of the South African bishops were sent EIR‘s August 2015 study, “Costs of the Failure To Go Nuclear—Part 1,” as well as the September 2015 EIR Special Report, “‘Global Warming’ Scare Is Population Reduction, Not Science,” with its chapter on “Increasing Energy Flux-Density.” It has also had access to the work of Dr. Kemm and others. 

Saudia Arabia brought in the new year with a mass execution of 47 people on January 2. Most were claimed to have been al-Qaeda members, but also a prominent Shi’ite Muslim cleric, Nimr al-Nimr, was on the gruesome list according to a Saudi Interior Ministry statement broadcast on state television.

The execution of a Shi’a cleric drew strong responses from the Shi’a communities in Lebanon, Yemen, and of course Iran. In Bahrain, which has a large Shi’a population, there were demonstrations.

Iran’s Foreign Ministry spokesman Hossein Jaber Ansari accused Riyadh of hypocrisy. “The Saudi government supports terrorists and takfiri [radical Sunni] extremists, while executing and suppressing critics inside the country,” he said on Iranian state news agency according to the Guardian.

The Supreme Islamic Shi’a Council in Lebanon called the execution a “grave mistake” and Yemen’s Houthi movement called it “flagrant violation of human rights.”

Iranian cleric Ayatollah Ahmad Khatami told the Mehr news agency: “I have no doubt that this pure blood will stain the collar of the House of Saud and wipe them from the pages of history. The crime of executing Sheikh Nimr is part of a criminal pattern by this treacherous family … the Islamic world is expected to cry out and denounce this infamous regime as much as it can.”

The Saudi Interior Ministry statement  justified the executions by quoting from the Koran. Saudi Grand Mufti Sheikh Abdulaziz Al al-Sheikh appeared on television soon after to describe the executions as just.

Starting the new year with 47 executions promises to make 2016 a record year. In all of 2015 there were 157 executions.

Putin signed a new strategic doctrine for Russia yesterday. Although it has not yet been translated into English, there are reliable indications of many of the main points.  Given who Putin is and what he represents, the thrust is positive, and most of the points are true,— but unfortunately even the truest will be generally misunderstood.  The document calls for a revival of the role of science, for instance, which is absolutely necessary,— but most people today, even most Russians, have no idea what science is.

But some of the thinking that went into it was first-rate, reminiscent of Ben Deniston’s intervention into the last ten minutes of the LaRouchePAC webcast of last Wednesday, Dec. 30, where he forcefully polemicized that actually, totally new ideas are required now if mankind is to survive,— thus pushing forward the polemic LaRouche has been waging around Brunelleschi.

To return to the Russia-centered process: the U.S. Army published Putin’s November address to the United Nations in the current issue of its journal, Military Review, along with a February 2013 article by Russian Chief of General Staff Valeriy Gerasimov and an explanatory article by a U.S. specialist on Russia.  Gerasimov’s article went through the thinking behind the later, May 2014 Moscow conference on “Color Revolutions” on which we reported at the time.  But the mental processes of Gerasimov, and obviously some others, went far beyond what we knew then.

“We must not copy foreign experience and chase after leading countries, but we must outstrip them and occupy leading positions ourselves.  This is where military science takes on a crucial role,” Gerasimov wrote.  Gerasimov notes that the outstanding Soviet military scholar Aleksandr Svechin wrote, “It is extraordinarily hard to predict the conditions of war.  For each war it is necessary to work out a particular line for its strategic conduct.  Each war is a unique case, demanding the establishment of a particular logic and not the application of some template.”

“The state of Russian military science today cannot be compared with the flowering of military-theoretical thought in our country on the eve of World War II,” Gerasimov wrote.  [yet] “at that time, there were no people with higher degrees and there were no academic schools or departments.  There were extraordinary personalities with brilliant ideas.  I would call them fanatics in the best sense of the word.  Maybe we just do not have enough people like that today.  People like, for instance, Georgy Isserson,” who predicted exactly how the next war would begin with attacks long-prepared in secret before any declaration of war.  Isserson, a wide-ranging pioneer in military thought, was arrested in 1941 and not released until 1955.

“The fate of this ‘prophet of the fatherland’ unfolded tragically.  Our country paid in great quantities of blood for not listening to the conclusions of this professor of the General Staff Academy.  What can we conclude from this?  A scornful attitude toward new ideas, to nonstandard approaches, to other points of view is unacceptable in military science.  And it is even more unacceptable for practitioners to have this attitude toward science.

“In conclusion, what I would like to say is that no matter what forces the enemy has, no matter how well-developed his forces and means of armed conflict may be, forms and methods for overcoming them can be found.  He will always have vulnerabilities, and that means that adequate means of opposing him exist.”

After some discussion of the Russian background, Lyndon LaRouche responded as follows.  He said that most people today are pretty stupid.  It’s because they get one of these shibboleths,— come up with various shibboleths,— and they say this policy is the policy.  And it’s always something like a deductive model.  And they have no understanding of that because they’re not creative; they’re absolutely not creative.  They call themselves creative, but the minute you run into something where the group decides to make a decision of what is right, with finality,— this is where things fall apart.  Because they insist on adapting to some group-think kind of thing, and they assume that has to be the policy.  But they get into this practical attitude, and they lose the creative spark, which is the secret of all good war-winning.

LaRouche continued: the idea,— like communism,— you’ve got to come to an agreement.  Everyone has to step into line, or more or less.  Or if they’re not stepping into line, then that becomes the issue and ultimately the problem.  Most organization’s leadership, with a few exceptions,— is pretty much dumb, in that way.  That they’ll be clever in designing a scheme, but the scheme is rarely going to work.  And they’re reluctant, they’re just so reluctant to give up on that method of thinking.

Even before the ironclad principle of “bank bail-ins” is imposed across Europe on Jan. 1, ominous events around its dying “zombie banks” are signalling that the entire trans-Atlantic world is heading into one huge and chaotic financial explosion.

“Europe’s Zombie Banks,” headlined the German financial daily Handelsblatt; “they will now be shut down very quickly.”

The sudden imposition of “bail-in” will turn that financial crash into mass impoverishment and death for millions who lose everything they have. The early squalls of the storm were seen already in 2012 in the virtual shutdown of the economy of Cyprus due to big bank bail-ins; again in Spain in 2013. This past month’s bank failures and expropriation of 10,000 ordinary citizens has caused a furor in Italy; today it struck Portugal.

Throughout Europe from Jan. 1 onwards there will be, as even Fortune magazine admitted today, “a brutal transfer of wealth on a large scale from one class of people to another” as insolvent banks are bailed in, their depositors and creditors looted to make survival “capital” for the bank.

“Italy is not ready for bail-in,” noted today’s Financial Times — its banking system will crumble from bank runs. Neither is the rest of Europe ready for the bail-in policy which has come down from Brussels and London and the Obama White House, from German Finance Minister Schäuble and his infamous “black zero” austerity.

In the United States it is the hedge funds which are dropping faster and faster as the so-called high-yield credit markets collapse, while Puerto Rico’s debt defaults Jan. 1. Wall Street is ready to blow out, if we do not shut down that casino by government action first.

On Dec. 13, EIR‘s Founding Editor Lyndon LaRouche pinpointed the turn, Jan. 1, 2016, into a trans-Atlantic financial blowout, of which so many warnings were appearing yesterday. LaRouche now adds that “when we look at these facts, we should adduce the study of history.”

“The great Renaissance of the 15th Century ended, was crushed, in this way, by a policy of reducing the human population. The Catholic Church at that time was actually an agent of that mass murder, impoverishment, religious warfare.”

The Pope today embraces the scientific fraud of “man-made global warming,” whose aim is to reduce the population.

But it is the Wall Street system which must be shut down. Employ Glass-Steagall now, which has been blocked on Wall Street’s orders since 2010, by Obama and the disgusting Barney Frank and Chris Dodd. Shut Wall Street and let the speculators eat their losses, not bail the mass of citizens into them.

We must follow President Franklin Roosevelt in creating Federal credit for new employment and productivity. But first we must do what FDR did to those Wall Street speculators, whose “hatred” he welcomed. It’s them or us.

With just days now until “the catastrophic threat of bank bail-in” becomes reality all over Europe, the warnings are proliferating. “Europe’s Zombie Banks” is the headline of an article in the global edition of Germany’s financial daily Handelsblatt Dec. 29, authored “by Handelsblatt staff” — a major piece. The banks are loaded with bad debts — 400 billion euros of toxic debt in Italy’s banking system alone — and have been kept open by various government bailouts for eight years since the financial crash. Now the European supranational agencies and European Central Bank have decided, as Handelsblatt quotes one senior European diplomat, “We need to get rid of the zombie banks very quickly.”

The chaos started days early, on Dec. 30, when Portugal’s Novo Banco — the already bailed-out “good bank” remains of the entire collapsed Espirito Santo Banking Group — was found 1.4 billion euros short of capital, and the government expropriated that amount from the bank’s bondholders to “recapitalize” it. Instantly, the remaining bondholders “ran” on the bank; the value of Novo Banco’s bonds fell from 94 cents on the dollar in the morning, to 14 cents in the afternoon.

The Financial Times on Dec. 30 noted that Italy, where 10,000 savers were already expropriated in the insolvency of four “zombie banks” smaller than Novo Banco, is “not ready for bail-in.” A Bank of Italy official had already admitted to Parliament that bail-in will trigger “bondholders’ runs” as well as depositors’ runs on banks across the country; the Portugal case today proved it.

Fortune, in a Dec. 30 piece entitled, “Things That Will Go Wrong for Europe in 2016,” stated that “As of January 1, regulators (that’s the ECB [European Central Bank] for most of the banks that matter) will get sweeping new powers to close down insolvent or undercapitalized banks, bailing in even bondholders and large depositors if need be. It’s meant to weed out the zombie banks from the healthy ones. But clean-ups like this invariably mean brutal transfers of wealth from one class to another, causing the kind of political storm hated by governments.”

The article points to Italy and Portugal “impos[ing] losses on retail savers who didn’t read the small print of investment products that they thought were deposits (and thus insured), but turned out to be subordinated debt (which weren’t).” And notes, that the attempt to organize Europe-wide deposit insurance has been brought to a halt by — again — Wolfgang Schaeble’s Germany. Thus in countries like Italy, Portugal, Greece, Spain even the 100,000 euros of depositors’ money is not insured when several, even smaller banks are going under at once.

The financial site ValueWalk posted “The Catastrophic Threat of Bail-In” Dec. 30. “The term — bail-in — describes a scenario in which a bank confiscates private property to indemnify itself for losses it has suffered,” the article explains. “A bail-in is a totally lawless theft of assets.”

This lawlessness, now about to be unleashed throughout the trans-Atlantic economies, will wreak mass impoverishment and death on their inhabitants. The really deadly zombies will walk from Wall Street and the City of London, unless they are shut down.