[The following was the
lead story in the March 31, 2001 issue of FTW for paid subscribers
only. In accordance with our reprint policy we are posting
it here for free, just ahead of our 30 day embargo. This
is also to honor our commitment to Nexus Magazine, www.nexusmagazine.com
who had purchased advance rights to the story. For reprint
permission please visit the Home
Page at www.copvcia.com. - FTW]
MOSCOW ECONOMIC CONFERENCE DRAWS 200 FROM RUSSIA, GERMANY,
MID EAST AND ASIA
* TOP RUSSIAN POLITICIANS,
BANKERS, ECONOMISTS ATTEND TWO DAY MEET ON U.S. ECONOMY
MOSCOW - A two-day conference
on March 6-7, sponsored by an Agency of the Russian government
and focusing entirely on the U.S. economy, attracted more
than 200 investment bankers, scholars, diplomats, economists
and members of the Russian Parliament. Inspired by developing
weakness in the US economy, the conference overcame initial
reservations that its intent was simply to promote investment
in Russia. It quickly established itself as an invaluable
forum for fresh perspectives on the single most dominant
factor in the world economy today - the United States of
America. The two dominant psychological themes of the many
presentations were: "If the US economy crashes how
does the rest of the world keep from crashing too?"
and, "Given the ever more obvious weaknesses in the
US economy what can Europe and the industrialized world
do proactively to achieve a measure of independence?"
A general consensus emerged at the end of the conference
- reflecting trends that are already emerging - that a healthy
Euro currency and a strong, self-reliant and cohesive European
economy are obvious answers to both questions.
Prior to the conference
it was difficult for this writer to grasp how much globalization
is dominated by the United States and how closely the rest
of the world watches and analyzes - with striking originality
- every aspect of US economic activity. The participants
at The World Finance Congress on the Globalization Process
and Hidden Menace of the Crisis of World Currency Reserves,
unburdened by the spin of American media, offered some amazing
insights. As noted by Congress Chairman Igor Tolstoshein
of The Federal Foundation of Appraisal, "From an expert's
point of view a very important factor that led to small
and medium investor losses is the withholding of information
by [American] news agencies as many of them are directly
involved in manipulations of the stock markets and depend
upon their fluctuations. Therefore the [American] policy
of constant good news doesn't prove itself in the growing
weakness of the markets... The real numbers behind the US
economy... are below forecasting data by 1.5 - 2 times."
There is much to be learned
by seeing how the rest of the world sees the US. Because
of space limitations FTW will limit our coverage to a summarization
of the major points made by the main presenters. As a wise
man once said, "It's not what you don't know that will
kill you. It's what you don't know that you don't know."
DR. JONATHAN TENNENBAUM
- Scientific Advisor to the Schiller Institute and the Executive
Intelligence Review (EIR), Wiesbaden, Germany.
Dr. Tennenbaum opened the conference with a detailed history
of the US economy from the 1930s forward. He described a
major shift in the US economy when, in 1971, the United
States abandoned the post war Bretton Woods agreement linking
the dollar to gold and other direct measures of real productivity.
Incorporating the "artificially manufactured"
oil crisis of 1973, floating-rate currency accords in the
70s and financial deregulation of the 70s and 80s, he described
in precise detail how the US has systematically destroyed
its own manufacturing base.
In discussing the current
US economic bubble Tennenbaum revealed that that the US
financial "derivatives" market has a volume of
$300 trillion dollars. [Derivatives are any financial instrument
or commodity derived from a real source of wealth such as
stocks, land or gold. For example, a gold "future"
is a derivative. Stock options and margins are derivatives.]
Derivatives have no connection to real productivity or value.
The price of gold has been suppressed to disguise inflationary
pressures and speculation in leveraged gold nearly destroyed
the world economy in 1998. [see FTW, 9/00] This resulted
in the exposure to public view of the so-called Plunge Protection
Team in the US, consisting of the Treasury Secretary, the
Fed Chairman and the former head of Goldman Sachs, Robert
Rubin. At this point it became apparent that US markets
are no longer operating under free market principles of
performance and fairness. US markets are rigged and controlled
at the expense of other nations and/or of small and medium
sized US investors.
Like everyone who spoke
at the conference, Tennenbaum agreed that a major global
crisis is imminent. "This is not simply a U.S. crisis,
but rather a chaotic collapse of the entire postwar economic
and monetary order. There is no way the system can survive
in its present form. It is totally rotten, and any attempts
to make "adjustments" will only make the situation
worse." Tennenbaum advocated a plan devised by EIR
founder American economist Lyndon LaRouche. The reactions
of many of the Russians at the Congress to LaRouche were
not unlike reactions I have seen in America. I share a near
universal respect of the La Rouche organization's detailed
and precise research. I have not, however, always agreed
with EIR conclusions. (La Rouche is a staunch drug warrior
while FTW favors decriminalization.) I chuckled when a Russian
banker leaned over during the presentation and quipped,
"Oh no, not the Queen again." This referred to
a perception that LaRouche believes that the British royal
family is the root of all economic evil. However, Tennenbaum
held complete attention when he spoke. He drew some audible
"Ahas!" by explaining that the Y2K non-event was,
in reality, a faked crisis permitting the Federal Reserve
to transfer massive amounts of cash into the banking system
without raising suspicion. [I am grateful for his translations
on the second day of the conference.]
Five aspects of the LaRouche
plan made obvious good sense. First, the plan calls for
a return to a Bretton Woods format for monetary policy.
The plan also includes the objective of restoring the concepts
of "common good" and national sovereignty to policy
making, re-regulation of financial markets, freezing and/or
cancellation of claims connected with speculative debt and
the writing off of a major portion of international debt
"in accordance with common benefit and moral considerations."
DR. MIKHAIL KHAZIN - Director
of Business Development, CBT Consulting.
Khazin, an economist, has previously worked in various Russian
government positions in the Yeltsin Administration. His
2000 article entitled "The Crash of 2000" has
been frequently referenced in FTW . Khazin is also the author
of a new Russian book entitled The Collapse of the Dollar.
Khazin's refreshing analyses of the US economy continued
as he discussed the disequilibrium between the so-called
"New" computer economy and the "Old"
manufacturing economy. He observed that, historically, new
technologies were absorbed into larger economic spheres
making the whole more productive. But, with the speculative
nature of technology stocks, the newer technologies have
become a distinct economy. This separate economy has not
significantly contributed to the productivity of the whole.
He observed that the over-capitalization of the dot com
economy with its "virtual value" has expanded
to the point of instability that now threatens everything.
Khazin predicts a "destruction
of stereotypes." This will happen with the elimination
of $7-15 trillion of stock market values, prompting massive
bankruptcies of banks and financial institutions worldwide,
followed by an outbreak of inflation. This will trigger
a shift back to tangible value items such as precious metals
and diamonds, which is already occurring. He predicts a
total collapse of the World Trade Organization (WTO) and
a return to nationalistic protectionist measures. Although
Khazin predicts that the dollar will ultimately fail as
a world currency he adds that the Euro will not take its
place in the short term. His overall analysis and predictions
were strikingly similar to the situation at the start of
the Great Depression in 1929. Massive social unrest and
dislocation will result from the collapse and no portion
of the globe will be exempt as total world demand for goods
and services contracts by 1.5 - 3 times over the course
of the crisis. Of the three major regions, Europe was best
prepared to survive the collapse but Asia and Japan would
be particularly hard hit.
VLADIMIR ZHIRINOVSKY -
leader of the Liberal Democratic Party (LDP), vice-speaker
of the Russian Parliament (Duma).
Zhirinovsky is widely perceived as an ultra-nationalist.
A charismatic speaker, he rarely elicits a neutral reaction.
He is a lightning rod, capable of galvanizing popular sentiment
though not generally regarded as a political threat to President
Vladimir Putin. In his presentation entitled Financial Economic
Drug Addiction he divided the world into a "Golden
Billion" of rich nations, a "Third World"
of traditional poor nations and a second world comprised
of Russia and Eastern Europe. He likened "reserve currencies,
especially the dollar, to a drug that the nations have become
dependent upon. "They will sell their territory, their
people, anything to get their share of the dollar pie."
He suggested alternatives like a Golden Yuan from China
or a Golden Ruble as alternatives.
I was introduced to Zhirinovsky
at the break. I found this man, who represents many views
of ordinary Russians, quick and friendly. I made the point
that the world economy is also hooked on drug money, a pattern
which the CIA understands very well. He had no trouble understanding
me at all. Drug money is as universal language.
DR. JOERG STEPHAN - Official
representative of the German Central Bank (Bundesbank),
stationed at the German Embassy, Moscow.In very diplomatic
and mild remarks Stephan dealt with the ongoing, step-by-step
process for the introduction of the Euro which is already
in bookkeeping use and will replace all Western European
national currencies in January of next year. At that time
the Euro will also be monetized for the first time with
the debut of currency and coin. Although Stephan was reluctant
to juxtapose the dollar and the Euro he made it clear from
the German perspective that there was a future for the Euro
in context beyond that of the European Union. He cited Europe's
declining dependence on imported oil, low inflation, increasing
productivity and cooperation from European trade unions
as grounds for optimism about the future of the Euro. [We
wonder what effect Mad Cow and Hoof and Mouth are having
on these rosy economic forecasts - FTW]
ALEXANDER ANISIMOV - Researcher
at the Central Economic-Mathematics Institute of the Russian
Academy of Sciences (Specializing in Chinese issues).
Anisimov is co-author of the book Crash of the Dollar. Anisimov's
basic perspective is that the Chinese Yuan is a possible
rival to the dollar in the event of a US economic collapse.
He pointed out that in certain areas of production the Chinese
economy had met or surpassed the US and that the well-regulated
Chinese economic system is geared to serving the needs of
rapid economic growth. Pointing to Chinese efficiency he
recalled how the Chinese government crushed speculators
and hedge funds making a run at the Hong Kong dollar during
the Asian financial crisis. Many at the conference disagreed,
however, with his assertion that a collapse of the US economy,
with its resultant drop in demand for imports would have
little effect on China.
PROFESSOR RABBI ABRAHAM
SMULEVICH - Bar-Ilan University, Israel.
An ad hoc approach to understanding the crisis does not
work. This needs to be viewed from a spiritual and historical
viewpoint like the fall of Rome 1500 years ago. The world's
economic "center" has moved from Rome to Constantinople
to Eurasia under the Mongols back to Europe and then to
the US. Taking this point of view a US collapse is natural.
However, civilization will change as a result of US decline
but those with something to lose will try very hard to prevent
the collapse. The Arab world is too closely linked to the
United States to separate itself and Europe is the only
viable alternative for economic leadership. Islamic fundamentalism
is threatening European unity as it remains a source of
conflict in Kosovo, Albania and Macedonia.
PROFESSOR ANDREI KOBYAKOFF
- University Lecturer; Editor, Expert Magazine.
Economic crashes usually occur inward from the periphery
as globalization progresses. This crash will be worse because
it originates in the economic center, the US. The only previous
economic situation similar to the current picture is that
of 1929. The overcapitalization of the US market is unprecedented,
now at about twice Gross Domestic Product (GDP). This is
a reference to the Price to Earnings ratio so often discussed
by Catherine Austin Fitts and known on Wall Street as "The
NASDAQ is even gloomier.
With the capitalization of February 2001 it will take 250
years for the NASDAQ Index to reach profitability. With
accumulated debt approaching $30 trillion US markets have
a huge potential for further collapse. The only reason that
there has been no inflation is because credit is being pumped
up artificially. Kobyakoff likened this paradigm to a pyramid
scheme stating, "It all depends upon the inflow of
liquidity and the continued greed of the participants."
To illustrate how devastating the coming crash would be
to average Americans Kobyakoff pointed out that in 1975
only 15% of all stock ownership in the US was by households.
By 2000 American households owned 75% of all stock shares
in circulation. "If this is going to be a soft landing,"
he said, "I will eat my parachute!"
M.G. DELYAGIN - Director
of the Institute of Globalization, member of the Industrial
committee of the State Duma of the Russian Federation.
This was easily one of the most compelling presentations
of the Congress. The US has four basic problems. There is
huge internal differentiation along racial, economic and
geographic lines. The US is not a monolith and Bush will
only make the strains worse. The US governmental system
is not adapted to world leadership. It has a "Let them
eat Big Macs" attitude. The dollar is being challenged
by the Euro and the Yuan and the US will respond in defense.
The Republican Party under George Bush will disrupt a domestic
and world system that offered a degree of stability.
National Missile Defense
is being opposed successfully by the rest of the world.
It is a threat to peace but intended to ensure US technological
superiority for a long period. The US represents 30% of
the world economy, 51% of the world's capitalized property
and 80% of the world's technological assets. The US plans
strategically and globally - long term. It has temporarily
shifted its economic crisis to Japan. An emerging Macedonian
War threatens the European economy and its unity and there
is a possibility that Russia will be turned into a Yugoslavia.
MR. GAVITSKY - Member of
the State Policy Committee on Economics of the Duma.
Good money creates a good economy. Bad money creates a bad
economy. The main worldwide fear around the dollar is that
it is not legitimate. This at the same time that the world
depends upon the dollar. The US behaves in the world without
caring about other countries. There should be a world currency
but no one can decide how to do it.
If something replaced
the dollar as the world's leading reserve currency then
all of the dollars would go home to the US. That would cause
hyperinflation in the United States. Only Russia is capable
of opposing US manipulation of world politics and economic
forces. Russia should help create a legitimate world currency,
a basket of currencies that benefits all nations. Since
all crime is connected to cash, the solution to crime is
to eliminate cash.
DAY TWO, MARCH 7
- Attendance on the second
day, which lasted until approximately 2 PM was limited to
around 70 people including the presenters from Day One and
representatives from various agencies of the Russian government
including the Foreign Ministry and the Ministry of Defense.
No translators were available. When he wasn't speaking,
Dr. Tennenbaum acted as a translator for me. The session
was conducted in a large 3rd floor conference room previously
favored for small gatherings by Boris Yeltsin, the man who
once called Russia a "mafiocracy." Several pictures
of Yeltsin were prominently displayed on the walls. At the
center of the room was a large circular round table that
accommodated approximately 30 of the participants. I was
asked to sit at the table.
More details of Russian
research on the US economy emerged. Exchanges between an
analyst Kirill V. Tremasov of Zerich Capital Management
supporting the Bush economic philosophy, and Khazin, arguing
the Realpolitik of recession disclosed a great deal. The
next US investment bubble will be Biotech stocks. Khazin
disagrees that T-Bills are a good investment. The customary
seesaw relationship between T-Bills and securities has changed.
Both are falling at the same time. As Tremasov predicts
stability in US bond markets Khazin notes that diamond prices
are rising rapidly. Khazin keeps drawing the discussion
back to human elements while Tremasov resists, pointing
to his calculations. Tremasov and Khazin agree that the
Asian economy is in real jeopardy. Tremasov argues for loosened
credit in Europe.
The conference was closed
by an insightful dissertation by Malaysian Ambassador Datuk
Baba on Malaysia's mostly successful battle against currency
speculators like George Soros during the Asian crash. Baba
acknowledged the role of covert operations in the world
economic sphere. Recognizing a trend toward regionalization
of economic interests Baba reinforced arguments suggested
elsewhere that economic nationalism and world stability
are not mutually exclusive concepts. He walked a fine line
on the edge of the diplomatic sword acknowledging that Malaysia
was seeking expanded economic relations with Russia in perilous
times but acknowledged the fact that the US was his country's
single largest trading partner. It was a dilemma that everyone
TO MOSCOW CLOSES ECONOMIC CONFERENCE WITH WISDOM AND A PROFOUND
Ambassador Datuk Yahya
Baba attended both days of the Russian economic conference.
His presentation to the open Congress on March 6 was a clear-cut
presentation of Malaysia's experience and interests as a
strong economic partner of both the United States and Russia.
However on the second day of the conference, when participation
was limited to around 70 people, Ambassador Baba revealed
a keen understanding of how politics and economics merge.
His description of Malaysia's struggle for independence
from the IMF and the World Bank revealed his country's real-world
experience in a quest for economic autonomy.
Baba described Malaysia's
dismay, in the mid 1990s, to find that it's currency, the
ringgit, was being traded on Wall Street without care for
the impact in Malaysia. "Money has become a commodity
to be traded upon," said Baba. He described how his
country had fought off speculators like George Soros by
instituting bottom-up economic reform with simple requirements
such as a mandate that those who invest in Malaysia must
leave their money in the country for a year. As a result
of strong self-protective measures the exchange rate for
the ringgit was fixed in 1998 at 3.8:1 (US) and has held
to this day.
I had made my analysis
of covert operations focusing on money laundering approximately
one hour earlier. I remain totally humbled by the Ambassador's
final words closing the conference, ever doubtful that we
can be worthy of the praise which he gave to FTW:
is a good deal of non-transparency in the global financial
situation. There are a great many undercurrents behind the
current situations. We all need a greater appreciation of
these undercurrents. We will have to wait for 'From The
Wilderness' to come from California to tell us what is happening.
We cannot match your expertise."