Only Glass Steagall Can Save Europe From Fascism and War

July 16, 2015

The public leaking of a July 14 IMF staff report, admitting that the so-called deal reached over the weekend with Greece cannot work, and that Greece will need a massive debt cancellation or restructuring, has once again demonstrated that there are circles in Europe, typified by both the British Monarchy and German Finance Minister Schaeuble, who are out to commit Nazi-style genocide.  The IMF document proposed, as one of three options, that there should be a 30-year moratorium on Greek debt payments—both principal and interest—to avert a total collapse of the Greek nation.

In stark contrast, Schaeuble is demanding full payment, combined with profound austerity, as a rationale for Greek expulsion from the European Monetary Union (EMU).  The City of London, on behalf of the Crown, is calling for the looting of Greek deposits in a bail-in, more far-reaching and criminal than the Cyprus bail-in.  High-level US intelligence sources are warning of a pending military coup in Greece, as part of an overall move towards outright fascism throughout Europe.  When Ukraine, under Yanukovych, rejected the murderous European Union Eastern Partnership swindle, Nuland and company engineered a coup d'etat, using outright neo-Nazi Banderist killers to do the job. Now, the same fate is being proposed for a full European Union and EMU member state, Greece.

Under these circumstances, Lyndon LaRouche on Wednesday reiterated that the only solution to the complete disintegration of the entire trans-Atlantic region is the immediate passage of Glass-Steagall in the United States.  The push for Glass- Steagall, coming out of the US Senate, is driven by a clear recognition, among a handful of key Senators, that the situation throughout the trans-Atlantic region has reached a point of no return.  Either Glass-Steagall is pushed through immediately in the United States, or Europe is doomed.

There is a clear sense that the London/Wall Street system is on the edge of utter disintegration.  US Treasury Secretary Jack Lew was dispatched, on emergency basis, to Berlin, Frankfurt, Paris, and Brussels on Wednesday, to directly intervene.  Lew, like Obama, has no solution, but is desperate because the whole Wall Street system is on the very edge.  A Greek default triggers a massive derivatives blowout, that will hit Wall Street, London, Frankfurt, and Paris instantaneously.

Momentum for Glass-Steagall continues to grow, accompanied by a building backlash against Hillary Clinton, for her failure to join the fight for Glass-Steagall.  Former Clinton Administration Labor Secretary Robert Reich, on Wednesday, penned a scathing critique of Hillary, who was on the scene as First Lady for the takedown of Glass Steagall—and the consequences of that coup against her husband.  "She should know better," Reich concluded.

It is no secret that Lyndon LaRouche called the shot on this entire breakdown crisis, long before the 2007-2008 crash; and he also spelled out the only available remedy, starting with the immediate passage of Glass-Steagall, just as it was originally promoted by FDR.  Wall Street is hopelessly bankrupt, the British Crown is pursuing a policy of mass genocide, now playing out in the heart of continental Europe, and the LaRouche solution is the only sane option.

That reality is impossible to avoid at this point.  A Glass- Steagall victory is within reach, and that changes everything.

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IMF Leak Spurs Firestorm Over Debt Deal

Reuters was leaked a copy, Tuesday, of an IMF staff report dated July 14, that candidly admitted that the austerity deal struck over the weekend between the EU and Greece cannot work, and that Greece needs a huge debt write-down. The leaking of the report, the second such document produced by the IMF staff in the past two weeks, caused a firestorm of news coverage in Europe and the United States, and put the full genocidal nature of the deal in stark relief.

The IMF report began with a blunt assessment: "Greece's debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far." The staff document concluded that, under the terms of the weekend deal, Greek debt would soar to more than 200% of current GDP within two years.

The concluding paragraph of the IMF document spelled out three options:

"The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date—and what has been proposed by the ESM [European Stability Mechanism]. There are several options. If Europe prefers to again provide debt relief through maturity extension, there would have to be a very dramatic extension with grace periods of, say, 30 years on the entire stock of European debt, including new assistance.

This reflects the basic premise that debt cannot be assumed to migrate back onto the balance sheet of the private sector at interest rates close to the current AAA rates before debt levels have been brought to much lower levels; borrowing at anything but AAA rates in the near term will bring about an unsustainable debt dynamic for the next several decades. Other options include explicit annual transfers to the Greek budget or deep upfront haircuts. The choice between the various options is for Greece and its European partners to decide."

Under the IMF charter, the Fund cannot make loans that are judged "unsustainable." In effect, the report, along with its public disclosure, was tantamount to an announcement by the IMF that they were pulling out of the Greek bailout. Germany had insisted that the IMF had to be a participant in any new debt agreement.

The media coverage of the IMF report and its implications was thunderous. The New York Times headlined a story by Josh Barro "The IMF Is Telling Europe the Euro Doesn't Work." The article made clear that the Greek crisis has brought the euro system to its "Emperor has no clothes" moment, "one that may finally force eurozone members to either move closer to fiscal union or break up." Since fiscal union is out of the question, the Times openly admitted that the entire Maastricht System is going down.

Business Insider headlines screamed, "The IMF Has Triggered a 'Political Earthquake' in Greece's Bailout Negotiations." Zero Hedge announced, "IMF May Walk Away from Greek Bailout," and Ambrose Evans-Pritchard, writing in the Daily Telegraph, wrote, "IMF Stuns Europe with Call for Massive Greek Debt Relief," leading with, "The International Monetary Fund set off a political earthquake in Europe, warning that Greece may need a full moratorium on debt payments for 30 years and perhaps even long-term subsidies to claw its way out of depression."

A prominent U.S. intelligence official told EIR that he sees a danger of an outright military coup in Greece to overthrow the Tsipras government in what he called a "fascist turn in Europe." It may be, the threat of such a coup and similar threats were behind the fact that, late Wednesday night, the Greek Parliament ratified the debt deal. The German Bundestag will convene on Friday, July 17, for a similar vote. Schäuble and an even more hardline faction in the CDU/CSU oppose the deal, preferring to kick Greece out of the euro altogether.

Varoufakis Details EU-ECB Plot To 'Humiliate' Greece

In a long interview with the New Statesman published July 13, former Greek Finance Minister Yanis Varoufakis described how the Eurogroup and the ECB from the beginning plotted to put Greece up against a wall and force it into a humiliating defeat.

In the Eurogroup, comprising the euro area finance ministers, Varoufakis was simply ignored by his fellow finance ministers; his interventions and proposals at meetings were not responded to. The Eurogroup used dilatory tactics and then accused Greece of implementing those tricks. Germany's Schäuble once blurted out that he would not discuss the program, because it has been accepted by the previous government and "we can't possibly allow an election to change anything. Because we have elections all the time, there are 19 of us; if every time there was an election and something changed, the contracts between us wouldn't mean anything."

At that point, Varoufakis stood up and said: "Well, perhaps we should simply not hold elections any more for indebted countries," and there was no answer.

In Varoufakis's reconstruction, the decisive role of the ECB in strangling Greece is briefly but clearly described: 

"My view was — and I put this to the government — that if they dared shut our banks down, which I considered to be an aggressive move of incredible potency, we should respond aggressively but without crossing the point of no return.

"We should issue our own IOUs, or even at least announce that we're going to issue our own euro-denominated liquidity; we should haircut the Greek 2012 bonds that the ECB held, or announce we were going to do it; and we should take control of the Bank of Greece. This was the triptych, the three things, which I thought we should respond with if the ECB shut down our banks.

"... I was warning the Cabinet this was going to happen [the ECB closing our banks] for a month, in order to drag us into a humiliating agreement. When it happened — and many of my colleagues couldn't believe it happened — my recommendation for responding 'energetically,' let's say, was voted down."

"Hillary, of All People, Should Remember"

Former Bill Clinton Labor Secretary Robert Reich yesterday attacked Hillary Clinton's refusal to back reinstating Glass-Steagall—according to her economic advisor Alan Blinder—as "a big mistake"— politically, because many believe she is too close to the Wall Street banks, and "economically," because "the repeal of Glass-Steagall led directly to the 2008 Wall Street crash."

Reich goes through the Glass-Steagall basics: it was passed after the 1929 crash to restore the public's faith in the banking system, by preventing banks from both taking deposits and gambling.

Reich quotes Sen. Elizabeth Warren on her Glass-Steagal bill: "The idea is pretty simple behind this one. If banks want to engage in high-risk trading — they can go for it, but they can't get access to insured deposits and put the taxpayers on the hook for that reason."

Noting that it worked for six decades, until its 1999 repeal, Reich adds, "A personal note. I worked for Bill Clinton as Secretary of Labor and I believe most of his economic policies were sound. But during those years I was in fairly continuous battle with some other of his advisers who seemed determined to do Wall Street's bidding. On Glass-Steagall, they clearly won."

Reich then debunks the canards about Glass-Steagall's irrelevance to the 2008 crash:

"The real culprits were non-banks like Lehman Brothers and Bear Stearns." 

Reich says, "Baloney. These nonbanks get their funding from the big banks" as lines of credit, mortgages, and repurchase agreements. How could they get easy credit on bad collateral? Because Glass-Steagall was gone."

"Mortgage brokers" were the culprits.

Reich says they share some of the blame, but again, it was the big banks who were enablers. "The mortgage brokers couldn't have funded the mortgage loans if the banks hadn't bought them, and the big banks couldn't have bought them if Glass-Steagall was still in place."

"None of the big banks actually failed."

This, Reich says, is like arguing that lifeguards are no longer necessary at beaches where no one has drowned. If the government hadn't thrown them lifelines, many would have gone under. They were bailed out because they were too big to fail."

"This is precisely what the Glass-Steagall Act was designed to prevent—and did prevent for more than six decades. Hillary Clinton, of all people, should remember."