The Financial Crash Is On: Only a Transatlantic Policy Revolution Can Avert Disaster

December 14, 2015

The entire trans-Atlantic London-Wall Street financial system is on the very edge of total collapse. It could happen any hour, any day. The critical signs are already there, for anyone who is not willfully blind. Four Italian banks have gone under in the past week, with the European Union imposing bail-in looting of depositors funds. Puerto Rico has already announced it will default on a $1 billion debt payment by Jan. 1, the front end of a $72 billion debt bubble; and vulture funds are fully exposed. Already, a number of hedge funds, exposed to the Puerto Rican debt and to the shale oil and gas sector bankruptcies, have collapsed. These are merely harbingers of a total breakdown of the trans-Atlantic system that is imminent.

The crisis is compounded by the imminent danger of world war, triggered by London and Wall Street desperation over their imminent bankruptcy. NATO and the Obama Administration have done everything possible to provoke Russia, from the eastward expansion of NATO to the deployment of a unilateral ballistic missile defense system on the borders of Russia, to the modernization of tactical nuclear weapons to be soon deployed throughout Eastern Europe. Russian Armed Forces Chief of Staff Gen. Gerasimov briefed foreign military attaches in Moscow this week on the added threat of NATO's plans for asymmetric warfare aimed at regime change in Moscow. Under President Putin's clear leadership, Russia will not capitulate to the threats from the likes of Obama and Cameron. The danger of a thermonuclear war of extinction is greater today than at the height of the Cold War at the time of the Cuban Missile Crisis. It is driven, purely, by the bankruptcy of Wall Street and London.

Lyndon LaRouche has made clear that the only option at this late moment is for Republicans and Democrats to abandon the partisan madness and come together around pre-emptive actions to avert the total blowout and the chaos that will follow, if there is no action now. This requires a total break from the policies associated with President Obama, Hillary Clinton and Donald Trump. This means a genuine revival of the policies adopted by President Franklin D. Roosevelt in his first hundred days in the White House. Yes, Glass Steagall is vital, and beyond that, a massive infusion of Federal credit, as FDR did through the Reconstruction Finance Corporation, is urgently needed, to create jobs, build infrastructure and trigger a boost in the productive powers of labor, which have been wiped out through four decades of insane monetarist policy.

Lyndon LaRouche, many months ago, spelled out the four cardinal laws for a genuine physical economic recovery:

* Reinstate Glass Steagall, fully separating commercial banking from the gambling activities of investment banks, hedge funds, and proprietary trading desks that gamble with depositors' money with no concern for the collapse of the productive economy. Such vital action means the immediate wiping out of Wall Street's debt, which is unpayable and illegitimate in the first place. Glass Steagall wipes out the political power of the Wall Street/London bankers cartel.

* Launch a massive infusion of Federal credits, through that restored commercial banking system, into the real economy. This Hamiltonian solution is the only viable option today. By restoring Hamilton's concept of national banking and Federal credit, a fundamental change in direction can be quickly kick-started. It may take years to fully realize the shift, but it must begin immediately.

* Concentrate on those areas of investment that most increase the energy flux density of the economy as a whole, including infrastructure, scientific and technological R&D. This means trillions of dollars in capital investment, to build a 21st century infrastructure grid and train a new generation of currently unskilled youth to become the highly skilled workforce to revive a modern system of physical production.

* Pursue areas of frontier scientific exploration, keying off of the work of the great 20th century Russian scientist, V.I. Vernadsky in the field of bio-chemistry and the noösphere. This must include an international crash program to achieve commercial fusion power, an essential feature of the next phase of space exploration, as well as solving the energy and water requirements of a world facing a breakdown crisis of Dark Age proportions;

In Europe, similar bold actions are required, starting with the dissolving of the European Union, which has become nothing more than a vehicle for imposing outright fascist austerity policies, which have now reached levels of genocide, on the formerly sovereign nations. In Italy, when four banks recently went under, the EU imposed bail-in looting of depositors savings. There has already been one suicide, triggered by this EU-led assault. Similar genocidal conditions have already been imposed on Greece and Cyprus, and Spain, Portugal and Italy all face existential crises, under the EU tyranny.

This crisis is here and now. These urgent actions can and must be initiated in the immediate days ahead—before the trans-Atlantic crash triggers the kind of chaos and genocide that can rapidly become unstoppable. A major mobilization of leading institutions and courageous citizens on both sides of the Atlantic is required to force through the urgently needed changes in policy.

Mankind has been endowed with the unique capacity to create a future, in which the common aims of humanity are pursued through cooperation among leading nations, grouped around projects like the World Landbridge. The question now on the table is: Will you and your fellow citizens and leaders demonstrate the moral fitness to survive by breaking with past trends and adopting a truly human course of action? The very survival of mankind is on the table, awaiting your decision.

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Gerasimov: Russia Develops In Response To Threats

Russia chief of the general staff, Gen. Valeriy Gerasimov delivered a lengthy report on the Russian military to defense attachés in Moscow, yesterday morning.
He said at the outset:

"Aggravation of global and regional security problems characterizes the situation in the world nowadays. First and foremost it is connected with the expansion of the international terrorism and radical extremism...First of all, the NATO military policy, unfriendly towards Russia, is a matter of concern. The alliance expands its military presence and enhances the activity of its armed forces along the borders of the Russian Federation."

With the deployment of ballistic missile defense and the development of new weapons war, he said, "the problem of imbalance of strategic forces is getting worse."

Other threats include color revolutions (he didn't use the term but his description clearly shows that's what he was talking about) to overthrow governments, proliferation of weapons of mass destruction; cross-border crimes and narco-trafficking; separatism; and uncontrolled migration and xenophobia. He said:

"The assembly of these reasons and presence of inveterate intergovernmental tensions create a threat for escalation of new and current conflicts. Unfortunately, the number of such conflicts is just increasing...Joining efforts of all the world community against the common challenges and threats, first and foremost international terrorism, is the increasingly evident necessity."

With respect to Syria, Russia is forging relationships with many countries concerning that conflict.  Gerasimov said"

"All the more, the modern history has examples of successful cooperation of the Western countries with the Russian Federation. Among them joint activities during the operation of the International Security Assistance Force in Afghanistan, solution of the problem of chemical weapons in Syria, 'boosting' conversations on the 'Nuclear program of Iran', singing and implementation of 'Minsk Agreements', fighting against piracy in the area of the Horn of Africa...Under these conditions, the Russian Armed Forces are the main instrument of the state in providing military security in any situation as well as in solving tasks during military conflicts of different intensity."

Much of the rest of the report was devoted to the modernization efforts of the Russian military, in the realms of manpower, training and equipment which are quite extensive. Most significant was the stress that Gerasimov placed on the modernization of Russia's nuclear deterrent, which, he said, will be developed "to maintain the strategic offensive and strategic defensive forces at a level, which would provide assured deterrence against aggression towards the Russian Federation and its allies." Other areas that Gerasimov reported on where progress in re-equipping the military services towards the 70% goal of modern equipment by 2020, and the professionalization of the manpower of the services.

Savage Vulture Funds Are Killing Puerto Rico

An article to be published in the winter edition of American Prospect magazine, documents in great detail the extent of the looting, predatory lending and demands for blood practiced by the murderous vulture funds which hold, according to some estimates, anywhere from a third to a half of Puerto Rico's $72 billion in debt. Not surprisingly, the same vultures that prey on Puerto Rico, such as Aurelius Capital Management, whose founder Mark Brodsky is appropriately named "The Terminator," have also bought up the debt of Detroit, Argentina and Greece.

Author David Dayen explains that some years ago, as hundreds of U.S. corporations left the island because they lost their tax-exempt status, unleashing a deep economic crisis, Puerto Rico tried to deal with the crisis by issuing more debt. The vulture funds egged them on, since municipal bonds are free from federal, state and local taxes. Public debt has increased every year since 2000, when the debt stood at $25 billion. Once credit rating agencies began to downgrade Puerto Rico's debt in December 2012, the vultures moved in rapaciously, buying up debt on the secondary market at pennies on the dollar, and then demanding repayment of the bonds' full dollar value.

Today, these predators have become the only "investors" willing to lend to Puerto Rico, making up almost all of the participants in the 2014 sale of $3.5 billion in low-rated, 8.7% General Obligation Bonds (on which there is a constitutional guarantee of repayment)—the biggest U.S. municipal junk bond sale in history. They were willing to lend even more this past summer, even after Governor García Padilla warned on June 1 that the island's debt was "unpayable." Vultures such as DoubleLine Capital and Avenue Capital were still buying up discounted debt as recently as November.

Jeffrey Gundlach of DoubleLine has called Puerto Rican debt "his best idea" for investors. One group of vultures succeeded in overturning a Puerto Rican law that would have allowed public corporations to restructure their debt, hiring Bush League thug lawyer Ted Olson to argue the case.