THIS WEEK YOU NEED TO KNOW
It's Still the Economy, Stupid!
The two dominant developments of the week of May 27-June 2, 2002 were: 1) the accelerating collapse of the world economy and the global financial system; and 2) the panicked drive by the utopians in and around the Bush Administration to consolidate a police-state structure, to impose a Roman imperial "Cross the Rubicon" dictatorship on America, to curb resistance to inevitable severe austerity measures, and, at all costs, to block the adoption of Lyndon LaRouche's solutions to the unfolding collapse of civilization.
In numerous locations and over many years, LaRouche has called for the bankruptcy reorganization of the global financial and monetary system, the convening of a New Bretton Woods conference, modelled on the original 1944 Franklin D. Roosevelt initiative, to revive the role of sovereign nation-state governments in steering a global recovery of physical production, through a series of great development projects, centered around the Eurasian Land-Bridge.
Support for such measures is growing globally, as the financial system continues to plunge towards oblivion, dragging down the world's productive economy with it. These themes were prominently developed by LaRouche, in an international webcast Memorial Day Address on May 28, the transcript of which appears in this issue of EIW.
Evidence of the accelerating financial and real economic collapse dominated the news throughout the week:
Both London's Financial Times and Daily Telegraph on May 31 highlighted the collapse of corporate America under a mountain of unpayable debt, compounded by trillions of dollars in credit derivatives. Today, only eight major American corporations have AAA ratings from Moody's and Standard & Poor's. This has major repercussions for the countless millions of Americans who are dependent on current and future pension funds, which are tied to corporate stocks and bonds. Such major U.S. corporations as ATT, Xerox, GE, and Citigroup, are borrowing on short-term capital markets, to cover daily operating costsa sign of pending collapse. The U.S. current account deficit, projected at $465 billion, can only be sustained by a continuing inflow of over $1 billion a day into the United States in the form of foreign purchases of Treasury certificates, stocks, bonds, and assets. This cash flow is beginning to dry up, and this spells doom for the United States.
Indeed, last week, the U.S. dollar fell to a 16-month low against the euro, and a two-year low against the Swiss franc. It continued to crash against the Japanese yen, despite two major interventions by the Bank of Japan. Another key indicator of growing fear of a global financial crash, was the precipitous rise in the price of gold, which peaked at over $327 an ounce at the end of the week.
The IT sector continued to lead the parade of losers. Adelphia, the cable-TV giant, will be delisted by Nasdaq on Monday, June 3, and this is likely to trigger an immediate default on $1.4 billion in corporate bonds that will be called in. Subsidiaries of Adelphia already defaulted on May 31. Qwest is also expected to file for bankruptcy protection this week, after it was downgraded by Moody's by two notches on May 30. Its European affiliate has already gone under. And a further sign of the looming, next-phase crash of the IT sector, was the announcements on May 31 by Hewlett Packard and Sun Microsystems that they will order 400,000 employees to take a one-week vacation without pay in July.
Perhaps the most volatile "shock front" within the U.S. economy, is the real-estate bubble, which has been the leading factor driving continued U.S. consumer spending. The home-mortgage bubble alone is a $10 trillion, highly inflated, and highly leveraged mess, with Fannie Mae and Freddie Mac in jeopardy of crashing. This past week, there were urgent calls for tougher regulations to be imposed on the two quasi-public mortgage giants, to avert another Enron-style collapse, with far more dire consequences.
On May 30, the Argentine daily newspaper Clarin announced that Brazil was facing imminent financial and economic collapse, caused, in part by "contagion" from Argentina. As the Clarin story reported, a crisis in Brazil would have global implications, with countries like Spain, Portugal, and Ukraine heavily invested in Brazil's financial and industrial sectors, as well as government bonds.
And in Japan, there was an immediate and violent reaction from the Bank of Japan, after Moody's rating agency downgraded Japan's government bonds two notches on May 30, placing Japanese government paper at near-junk levelsbelow every other G-7 country (including Italy) and many Third World countries, including Botswana! Nikkei put out a wire warning that should any other rating agency make a similar move, every commercial bank holding Japanese government paper will come under immense pressure to sell, opening up the possibility of a sudden crash of the Japanese banking system and the yenjust what some of the utopian lunatics at the American Enterprise Institute have been pushing for months.
The day before the Moody's action, the Japanese media were forecasting a dollar crash.
A Most Prescient Warning
At the end of the week, Attorney General John Ashcroft and FBI Director Robert Mueller announced a major overhaul of the FBI and DOJ, eliminating all the 1970s guidelines and restrictions on police-state violations of Constitutional rights of American citizens, ostensibly to aid in the "war on terror" on the homefront. These actions by Ashcroft and Mueller came in the context of other draconian measures:
*The Pentagon bureaucracy in the Secretary of Defense officei.e., the Paul Wolfowitz cabalis moving ahead with the establishment of a new Northern Command, responsible for the United States, Canada, Mexico, and parts of the Caribbean. A call to the Pentagon press office on May 31 confirmed that the new Northern Command will be a "full combatant command," reporting directly to the Secretary of Defense. This is flagrantly unconstitutional, but is being rammed through with breathtaking speed. The Northern Command is scheduled to go operational on Oct. 1.
To boost the climate of fear and submission, the media propaganda mills were churning out reams of scare stories. On May 31, the Washington Times ran a front-page story by Bill Gertz, claiming that the FBI has proof that "terrorists" have smuggled shoulder-held, surface-to-air missiles into the United States, and may be targetting commercial airliners. The story was based, almost exclusively, on the fact that an empty SA-7 Russian SAM casing was found near a U.S. air base in Saudi Arabia. The next day, the Washington Times ran two additional editorial pieces, claiming that an unknown number of Soviet-era "suitcase nuclear bombs" have fallen into terrorist hands.
*Attorney General John Ashcroft was in Alexandria, Va. on May 30, promoting his own little Gestapo operation, the Citizens Corp Volunteers in Police Service (VIPS) program, which calls on millions of Americans to become FBI snitches, spying on their neighbors, and reporting all suspicious behavior to the local FBI office, which will now have enhanced powers to spy on Americans.
Witness the cultural deterioration which has taken place from the 1970s up till today: In the mid-1970s, when the FBI and CIA were exposed for violating the Constitutional rights of American citizens, there were guidelines imposed, Congressional hearings, purges, etc. Today, the FBI is caught in a massive intelligence failure, and they are given even greater police-state powers!
While Ashcroft, Mueller and their Congressional boosters, led by Sens. John McCain (R-Ariz) and Joe Lieberman (D-Conn), were promoting their police-state power-grab under the Big Lie that the new authority is needed to defeat the terrorist threat, Lyndon LaRouche had warned of precisely such a move as early as Jan. 16, 2001and he revealed that it had nothing to do with terrorism. At that time, LaRouche's campaign spokeswoman, Dr. Debra H. Freeman, delivered testimony before the Senate Judiciary Committee, opposing the nomination of Ashcroft as Attorney General.
She told the Senators: "My opposition to Mr. Ashcroft's confirmation is shaped by two considerations that go beyond the normal factors that one would weigh, in considering a candidate for the top law enforcement post in the U.S. Federal Executive Branch.
"The first of those factors is the extraordinary global financial and monetary crisis that will be the first and overriding order of business confronting the incoming Bush Administration....
"The second factor, in this context, is the role that the next Attorney General will play, as a leading member of the Executive Branch crisis team, dealing with the global financial and monetary crisis, and the other consequent regional and domestic crises, that will arise from these extraordinary circumstances. As the chief law enforcement official of the Federal Executive Branch, the next Attorney General will have responsibilities in this broader crisis-management team setting, that will often supersede his more immediate role within the Justice Department and subsumed Federal law enforcement agencies, proper. Thus, no assessment of Mr. Ashcroft's qualifications can be competently made, without first considering his role within a Presidential team, focussed on dealing with this now unavoidable series of crises.
"These rather blunt words are necessary at this time," she continued. "They underscore the danger represented by the confirmation of John Ashcroft, under circumstances compounded greatly by the Scalia-Rehnquist majority on the current U.S. Supreme Court, which further increases the danger of a Hitler-style, crisis-management dictatorship...."
She next quoted from an international webcast address that Lyndon LaRouche had delivered on Jan. 3, 2001: "What you're going to get with a frustrated Bush Administration, if it's determined to prevent itself from being opposed, you're going to get crisis management. Where members of the special-warfare types, of the secret government, the secret police teams, will set off provocations, which will be used to bring about dictatorial powers and emotion, in the name of crisis management.
"You will have small wars set off in various parts of the world, which the Bush Administration will respond to, with crisis-management methods of provocation. That's what you'll get. And that's the problem. And you have to face that. You've got to control this process now, while you still have the power to do so."
The mobilization of LaRouche supporters in opposition to the Ashcroft nomination produced 42 Democratic Senate votes against Ashcroftenough votes to have defeated him on a filibuster. However, Democratic (then-)Minority Leader Tom Daschle decided to let the Aschcroft nomination go through, a decision that now has come back to haunt the American peoplejust as LaRouche warned.
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