Club of e cults· the American �,- rboI:.e 6are of crisis' in Caribbean? nut policy. can productl ty coDapse be re¥

e Trilateral on

to · back the 19308 [THIS PAGE IS INTENTIONALLY BLANK] Editor-in-chief: Daniel Sneider Associate Editor: Robyn Quijano Managing Editors: Kathy Stevens, Vin Berg Art Director: Deborah Asch Circulation Manager: Lana Wolfe

Contributing Editors: From the Lyndon H. LaRouche, Jr., Criton Zoakos, Nora Hamerman, Editor-in-Chief Christopher White, Costas Kalimtgis, Uwe Parpart, Nancy Spannaus

INTELLIGENCE DIRECTORS: Africa: Douglas DeGroot Asia: Daniel Sneider Counterintelligence: Jeffrey Steinberg Economics: David Goldman Energy: William Engdahl and Marsha Freeman Europe: Vivian Zoakos Latin America: Dennis Small Law: Felice Merritt "N 0 real recovery is possible until there is real recession", con­ Middle East: Robert Dreyfuss cluded David Rockefeller, founder of the Trilateral Commission on Susan Welsh Military Strategy: March 27 after a meeting of the Commission in London. He thus Science and Technology: Morris Levitt announced the Commission's strategy to let financial markets crash, Soviet Sector: Rachel Douglas conduct all-out financial warfare against Europe, and put into place a United States: Konstantin George corporatist apparatus in the U.S. to salvage whatever pieces of bank­ United Nations: Nancy Coker ing and industry they deem essential, under their direct control. INTERNATIONAL BUREAUS: The crash these gentlemen have designed, the "real recession," Carlos Cota Meza Bogota: will be a depression more shattering than the last with more hideous Bonn: George Gregory and Thierry LeMarc political consequences if their war against the European Monetary Brussels: Christine Juarez System alternative is won. This economic restructuring of the U.S. Mitchell Hirsch Chicago: economy along lines resembling 1933-39 Germany was initiated by Copenhagen: Vincent Robson Mexico City: Josejina Menendez House Banking Committee Chairman Henry Reuss (D-Wisc.), and Milan: Muriel Mirak Fed Chairman Paul Adolph Volcker. Their legislation and policy New Delhi: Paul Zykofsky measures leads the trail of evidence which proves the Trilateral's Paris: Katherine Kanter and Sophie Tanapura intention. Rome: Claudio Celani Our Special Report this week documents the legislation of this Stockholm: Clifford Gaddy corporatist take-over and the war on Europe. We present you with all Washington D.C.: Laura Chasen the evidence, in interviews and source documents. Our intention, and Susan Kokinda Wiesbaden: (European Economics): however, is more than good reporting. We have prepared the evidence Mark Tritsch and Laurent Murawiec in order to place it on the desks of every official and executive capable Executive Intelligence Review is published by of acting to assure that the 1930s strategy is not carried out. New Solidarity InternationalPress Service We also draw your attention to another important report, "Club 304 W,58thStreet,New York,N. Y.10019. In Europe: Executive Intelligence Review Na­ of Rome death cults: killing the American dream." Here we reveal the chrichtenagentur GmbH., 6200 Wiesbaden, unified command and the common source of environmentalism, F.R.G., Schiersteineritt. 6. Managing Direc­ tors: Anno Hellenbroich and Michael Liebig. religious cults, and the policy behind them: to manipulate the popu­

Copyright c 1980 New Solidarity lation into launching its own war against scientific and technological International Press Service progress, so essential to Trilateral designs. All rights reserved. Reproduction in whole or in part without permission strictly prohibited.

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Departments Economics

1 From the Editor-in-Chief 6 Tax policy: Can the productivity collapse be 5 InSight reversed?

"1984" ... by 1981 How can tax policy enhance the performance of the economy? 46 Middle East Report The Riemannian computer­ applications model has been The Iran-Libya connection applied to evaluate three prominent tax proposals, that of 47 Dateline Mexico the Joint Economic Committee's More oil for Japan? Annual Report; that forwarded by Democratic candidate 59 Campaign 1980 LaRouche, the Riemannian model's designer; and the Reagan 60 Congressional Calendar tax policy associated with economist Arthur Laffer. Only 64 Energy Insider one of the proposals would actually improve industrial Decreeing a gas shortage output, the computer showed.

The JEC Report

The Reagan policy

The LaRouche alternative

15 Gold· Engelhard traps the Hunts

16 Foreign Exchange Will the dollar bust?

18 Agriculture The fa rmers denounce the embargo

19 Domestic Credit The crunch is on

20 Business Briefs Volume 7, Number 14 April 8-14, 1980

SpecialReport International National

38 Italians and French join 50 The New York transit in crackdown on terrorists strike: 'ordered Unprecedented cooperation from on high' across national borders led to a A transit strike in New York major terrorist round-up in three could subtract enough from total countries. two conclusions national economic activity to resulted: terrorism is a unified trigger a recession all by itself. international deployment, and But Paul Volcker declared a "above-ground" radical transit strike in New York "a organizations have a membership David President Carter signs budget legislation as good thing." And his administration's economic policymakers interchangeable with Rockefeller declared a recession look on. Photo: UPI "underground" terrorist groups. in the nation "a good thing." And a transit worker said the 39 Italy 22 The Trilateral strategy strike could be settled immediately, "but somebody big to bring back the 1930s A Carter phone call to a Roman squillo is gumming things up." As Rockef eller announced at Meanwhile, the city's population the close of the London Trilateral 41 Latin America is being acclimatized to Commission meeting, the U.S. catastrophe. will be put through a crash-this A turn to the East in trade programs time with fat worse consequences 52 Club of Rome death cults: intended for both America and killing the American dream Europe than the last great Is Cuba fomenting depression. The evidence is in, revolution A conference of the U.S. chapter and assembled for every official to get Mexico's oil? of the Club of Rome convened in and executive who can play a Maryland and mapped out a Including interviews with massive campaign to build cults part in preventing this calculated Georgetown policymakers, and a catastrophe. throughout the United States. report on Franco-Cuban talks Their hero: Elizabeth Kubler Documentation: Ross, whose celebration of death • Henry Reuss interviewed 48 International Intelligence and dying is to be applied to • Reuss and Proxmire aides Americans en masse to gain their interviewed acceptance of economic collapse. • The Reuss-Miller letters Documentation: • The Omnibus Banking Bill • Kubler-Ross on child murder • The Credit Control Act of 1969 • An Episcopal priest on • Proposal for a trade-war dep t 'life after growth' • J. Rifkin on 'fundamentalism' I. A bank-collapse bill • Aspen Institute view of 'The Great Transition' II. The casualties 62 National News III. An economic restructuring'

IV. A NATO buildup

V. The war on Europe Executive Intelligence Review

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A groupof over 200economists, mathematicians, physiCiSts, historiansand military speCialists work in 40 Cities of the western and nonalignedworld to monitor developments24 hours a day, 365 days a year. They have been doing so for the last ten years-producingthe world's only unchallenged record of ac­ curate predictions on every major international issue. Every week. the work of this team is available to you in theExecutive Intelligence Review. This groupof scientistswas created underthe leadership of theforemost political economist of the 20th century, Lyndon H. LaRouche, Jr. LaRouche's executive direction of the Executive IntelligenceRevtew team aims for coherence in evaluating the world as a whole-based upon studies in the theory of knowledge ranging from Lawrence Kubie and Leibniz back to Avicenna and Plato. The ExecutiVe Intelligence Review has predicted, months ahead of theiroccurrence, everysignificant development over the past five years, including:

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by Nora Hamerman

"1984" . • • by 1981

The "One World" conspiracy that this review ex­ endorsement of some of the state's most prominent posed only four months ago has come dangerously labor leaders. close to succeeding in imposing its will over the Such a monstrous fraud could only occur if the United States. As the news stories in this issue United States were already living under fascism, document, the Carter administration is fully com­ they protest. And yet there are no swastika-wield­ mitted to imposing the economic devastation of ing storm troopers marching in the U.S. streets. . 1936-38 Germany on the nation; and the psycho­ Indeed. The kind of fascism that has begun to logical warfare experts of the Club of Rome are descend on the United States-and will be irrever- . prepared to put the population through the process sible by next September unless the presidential of "bereavement" advocated by death cultist Elis­ election process takes a drastic turn is "fascism abeth Kubler-Ross, to make Americans learn to with a democratic face," Orwellian fascism. live with the loss of technological supremacy. This is the kind of "American" fascism under As in Italy in 1922 and Germany of the early which a candidate can address 20 million Ameri­ I 930s, there can be no question about the intentions cans with a coherent overview ofthe problems that behind the ruling circles that are opening pushing disturb them most (the economy, Iran, the energy the race science ofa William Shockley, the euthan­ crisis) and the next day the news media are silent­ asia doctrines of the "die with dignity" movement, LaRouche does not exist. Big Brother says so. the extermination of "useless eaters" that mascar­ Most sobering for our overseas allies.is the ades under fiscal austerity. The only question is realization that Americans are even less Prepared whether the American people will accept fa scism­ to fight fascism today than the Italians in 1922-25; there is no other word for it. or the Germans in 1932-33. The nation has morally Our allies in Europe find this hard to under­ deteriorated to the point that most Americans stand. They are perplexed that in the U.S. primaries blindly accept what the media proclaims as truth. Carter consistently polls over 50 percent of the vote The fundamental reason lies in the destruction on the Democratic side, even though his policies of American culture, cut off from its roots in the are visibly leading the nation into cataclysm. They tradition of Western European humanism. Most are astonished at the vote levels attributed to such Americans do not know that the United States was media creations as the strange John Anderson and fo rmed to be the first of sovereign industrial repub­ Jerry Brown. They cannot believe that a man as lics spanning Europe and what came to be the badly advised in economic and foreign policy as "colonial" sector. They are ignorant of the great Ronald Reagan could be winning the support of international alliances formed by Benjamin Frank­ large numbers of voters-and yet all of this oc­ lin and his friends and successors, including Mar­ curred April I, again, in the past week's Wisconsin quis de Lafayette, that built this nation and saved it primary. repeatedly from destruction. And in Wisconsin Lyndon LaRouche, regarded It is the blind, woefully ignorant American by many leading Europeans as the only presidential chauvinism-stubbornly convinced that fascism candidate who understands Europe, was credited, "cannot happen here"-that can watch the repub­ again, with less than 2 percent of the vote, even lic be turned into a fascist nightmare far quicker after a major media advertising campaign and the than Germany itself succumbed in 1933.

EIR April 7- 14, 1980 InSight 5 ITillEconomics

TAXPOLICY Can the productivity collapse be reversed

by David Goldman and Alice Roth

EIR, two issues ago, released a groundbreaking analysis electoral and congressional debate are evaluated: the of energy, inflation, and productivity, demonstrating Joint Economic Committee Annual Report, which em­ that the Carter administration's "energy conservation" ployed a "supply-side" model developed by Otto Eck­ strategy was not only incompatible with the successful stein of Data Resources, Inc.; a proposal forwarded by functioining of the American economy, but represented LaRouche, now a candidate for the Democratic presi­ the chief cause of structural inflation. In the subsequent dential nomination; and the Reagan tax policy associated issue, EIR Contributing Editor Lyndon H. LaRouche, with University of Southern California economist Dr. Jr. presented an economic model capable of analyzing Arthur Laffer. the effects of such policies that appear perverse and The core of our analysis is a computer-generated random to all other econometric models. analysis employing the "LaRouche-Riemann Model" This week, we continue in this survey the application which defines the objectives of tax policy from the stand­ of this economic model to answer the question: how can point of the growth of the tangible product of the Amer­ tax policy enhance the performance of the American ican economy. The controversy over the employment of economy? Three proposals prominent in the current tax reductions to stimulate economic growth has cen-

1. Real economic performance, 1971-1979

6 Economics EIR April 7- 14, 1980 tered on the admitted unreliability of the analytical and the economy in forecasts made in May 1979 and October computer models hitherto employed. Apart from other 1979. As the JEC notes, Chase, Wharton and DRI were considerations, the failure of such models to make the unacceptably far from the mark. Governor Reagan's distinction between productive and nonproductive in­ tax-policy advisor Dr. Laffer has not offered similar vestment that has prevailed in all economics through forecasts during 1979. However, his reputation as a David Ricardo renders their analysis useless. The results forecaster became something of a public scandal during presented below show how sterile the debate is between the Nixon administration, when Laffer offered an inac­ "demand-side" tax cuts to stimulate consumption and curately high forecast of GNP growth while a consulting "supply-side" tax cuts to stimulate investment. economist to the Office of Management and Budget. The Joint Economic Committee report, chosen as a The LaRouche-Riemann model is a four-dimensional congressional consensus view in favor of so-called supply analytical view of the economy, examining both gross side economics, presents the results of a study by DRI's tangible output of the economy and the "free energy" Eckstein with this caveat: ratio of that tangible output, and both gross energy "The inability of the forecasters to accurately predict consumption and the flux density of that energy con­ employment, unemployment, and inflationin the face of sumption. This "hydrothermodynamic" method of anal­ reasonably accurate real GNP forecasts suggests that ysis comprises the first scientific evaluation of the econ­ there are problems with either the structures of the omy as a physical system, including a competent method models themselves or their assumptions respecting the of national accounting to replace the discredited GNP behavioral responses of the consumers and businesses." approach. That is, although DRI, Chase Econometrics, Wharton The current analysis employs a simplified version of Economic Forecasting Associates and others fairly ac­ the LaRouche-Riemann model, treating the two output curately predicted change in Gross National Product parameters noted above. The results are displayed in (GNP), their GNP forecasts were useless in predicting three groups of computer-generated graphs: other measures of economic behavior. As EIR has em­ phasized repeatedly, GNP, as an agglomeration of all (1) A display of revised national income statistics in sales of goods and services in the economy, is an entirely constant 1972 dollars through Dec. 31, 1979, showing misleading way of accounting for national income. the replacement cost of labor (Variable Capital, or V); The JEe's self-critique continues, "The failure of the the replacement costs of capital (Constant Capital, or C); model builders to foresee the huge jump in OPEC prices gross tangible surplus above replacement costs, or S; and in June, and the heightening of world tensions and their the portion of surplus available for reinvestment, or S'. economic consequences at year end, should make us (2) A projection through 1983 showing the effects of a doubly cautious in accepting current economic forecasts tax program designed to increase the proportion of the for, if anything, political uncertainty is much greater tangible surplus (S) available for reinvestment (S'), or an now than it has been in the past." increase in the net free energy of the system. In its first generation, the LaRouche-Riemann model employed by EIR predicted and incorporated into fore­ (3) A projection through 1983 under the same conditions, casts both the changes in the oil price and the world but assuming a more modest growth rate of productivity security situation, and accurately charted the course of through the same period.

EIR April 7- 14, 1980 Economics 7 2. Economic performance, 1975-1983, projecting a 5 percent average annual growth in productivity

The graphic display of the 1970-1979 measures of the Therefore, in strictly physical terms, the economy, if tangible economy make the present economic problem it is to grow, must apply a greater portion of its surplus immediately apparent. They show that the post-1975 above payments to labor and productive capital mainte­ period of economic recovery, shown in the rise in gross nance to reinvestment, and less to overhead. It must do tangible surplus, was in no sense a recovery in terms of so at higher productivity levels. No other criteria for surplus realized in new investments. Virtually all the fiscalpol icy is admissable from the facts presented in the surplus was consumed in additional overhead. The Rie­ firstfo ur graphic displays in this series. mann model's data base counts as overhead the con­ The second and third group of graphs, showing sumption of non-goods-producing employees, defense, projections through year 1983, indicate what a tax policy environmental, and other forms of nonproductive invest­ must aim toward. Two scenarios are shown, including ment, and depreciation of fixed capital (measured by low and moderate assumptions concerning labor pro­ capital consumption allowances). ductivity. Both assume a substantial transfer from over­ As noted in the earlier studies in this series, S', or head types of employment to goods-producing employ­ investible surplus, passes below the zero level at the end ment. The scenarios assume reallocation of slightly less of 1979, and subsequently continues below the zero level, than $30 billion in tangible product from overhead cate­ judging from the available data for January and Febru­ gories (in constant 19 72 dollars) to variable and constant ary. This defines a condition of general instability char­ capital improvement. acterized either by hyperinflation or by unmanageable We estimated that the post-1973 growth in wholesale bankruptcy of large sections of the financial structure. and retail trade, finance, insurance, real estate, and serv­ Negative free energy means that the economy, to contin­ ices (other than health, education, social and repair ue, must cannibalize its existing capital and labor base. services) could be cut back and reassigned to goods­ The classic model fo r this predicament is the 1936-1939 producing categories of employment, returning the German economy.

3. Economic performance, 1975-1983, projecting a 2 percent average annual growth in productivity

8 Economics EIR April 7-14, 1980 economy to the labor composition of the beginning of The result of these projections is shown in the follow­ the decade. Under these sets of assumptions, the volume ing table: of reinvestible surplus would be substantially increased. The productivity assumptions employed are extreme­ ly conservative. The LaRouche-Riemann model employs entirely different measures oflabor productivity than the 1983, Percent growth over 1979 Bureau of Labor Statistics publishes. Instead of output per man hour, the model uses the ratio S/V, or the Optimistic* Conservative* * amount of surplus generated by a certain input of labor. S 48.1 23.1 The benefits of this measure of "global productivity" are C 31.2 18.0 immediately evident. V 36.9 23.3 The BLS approach would count into productivity, • 15 percent risein productivity over four years; fo r example, a new method of digging holes in the •• 8 percent rise in productivity over four years. ground and filling them up again that resulted in more holes dug and filled per manhour. EIR's measure of productivity changes much more rapidly than the conventional one. For example, in 1975- To summarize, a change in the investment allocation 1976, a 25 percent rise in this productivity measure took of tangible output as of year-end 1979 is capable of place merely due to rehiring of laid-off workers and producing growth rates of 7 percent in terms of real, restarting of production. The more optimistic of the two tangible output by 1983. scenarios published here does not return the economy to The question remains: what sort of fiscal policies 1976 productivity levels until 1983. would tend to promote this shift in investment policy?

EIR April 7-14, 1980 Economics 9 7.2 percent by 1990. The increased stock of capital would raise potential GNP by l.l percent by 1985 (0.2 percent annually in the first half of the decade). The improved capital to labor ratio would add 1.2 percent to the level of productivity by 1985 (0.5 peecent annually). It would • raise real wages by 0.9 percent by 1985 and would help to produce a 0.7 percent increase in real consumption. It would help reduce the core inflation rate by 1.3 percent The supply side of by the end of the decade." There are two principal problems with this approach. First, the content of the GNP increases are not stated the tax-cut debate in the Eckstein study. However, they are stated explicitly by the JEC in accompanying recommendations. Recom­ mendation No. 26 of the report states: "An energy On Feb. 28, the Joint Economic Committee of the U.S. productivity index should be developed to measure prog­ Congress issued its Annual Report wherein it proposed ress toward improved national energy utilization. Sepa­ a change in national tax policy based on data supplied by rate energy productivity indices should be developed for a "supply-side" model of economics developed by Otto each of the major U.S. industries, fo r each consuming Eckstein of Data Resources, Inc. Proponents of this sector, and fo r the economy as a whole." These indices model advocate tax cuts as a means to stimulate invest­ "would facilitate establishment of national energy con­ ment. The JEC Report,explains: servation goals." "We are convinced that we need to consider a modest The report hails the drop in energy consumption per tax cut on the order of $25 billion to take effect no later GNP constant dollar, which fell by 4 percent between than the summer of 1981, even though there is consider­ 1978 and 1979, noting "our real GNP has risen almost 20 able uncertainty surrounding the economic outlook. percent since 1975, while energy consumption has grown "The tax cut we propose here is not the conventional by only II percent." It concludes, "Further increases in kind which mostly benefits consumers. On the contrary, energy efficiency can occur in ways that do notjeapordize at least half of the tax reduction should be targeted to economic growth." enhance productivity through savings and investment This is devastatingly wrong, as our earlier study, with the remainder going to help relieve taxpayers of the "Energy and Inflation," showed exhaustively. Diversion pressure of increased taxes and higher energy costs. of investment resources to "energy efficiency" is the "It is important to recognize why a conventional tax principal reason for the drop of the free-energy index (S') cut is not in order. We do not need another boom in to below the zero margin at end-1979. The implied policy consumer spending. Savings and investment must com­ mix of the JEC package is tax incentives fo r investment mand a larger percentage of our GNP or we will fail to in an environment of extreme pressure to conserve energy reverse our dismal productivity performance with the in industrial processes. result that we will make little headway in our efforts to slow inflation and raise real incomes. Moreover, it is Flaws in important that whatever tax relief is given to the business the policy community, it be given on the basis of expanding plant In the prevailing economic environment, additional and equipment expenditures. We leave it to the tax­ leeway for investment would tend-due to current ad­ writing committees to work out the precise details of the ministration energy policy-to move into what is strictly tax cut proposed here." an overhead cost to the economy. Factoring out invest­ The model employed by econometrician Otto Eck­ ment in various forms of energy investment, including stein on behalf of the JEC "assumes that we raise the replacement of auto assembly lines to make fuel-efficient investment tax credit by 2.7 percentage points beginning cars, purchases of more fuel-efficient aircraft,coal con­ in 1980; finally, it assumes that we hold monetary and version by utilities, and so forth, little is left of total fiscal policies neutral so that the demand rate ofinflation business capital formation by military-related'invest­ ' is zero on average over the decade of the 1980s. ments and pollution abatement equipment-as EIR's "By comparison with the outcomes that would previous study documented. emerge in the absence of these tax policy changes," the Under this policy environment, the JEC recommen­ Eckstein study concludes, "real business fixedin vestment dations, modest as they are relative to the economy, would be up 5.7 percent by 1981 and 15.5 percent by exacerbating the most counter-productive trends in the 1990, raising the capital stock by 3.5 percent by 1985 and economy through fiscalme ans.

10 Economics EIR April 7-14, 1980 celebrity among economic advisors preferred by conser­ vatives, Arthur Laffer, reputedly the "theoretician" be­ hind the bill. Earlier, Reagan's campaign rode the popularity of the Kemp-Roth bill. More;. recently, the new crop of Reagan advisors added officially to the staffon Feb. 26 has been pushing the philosophy of Kemp-Roth toward the background, in favor of Friedmanite packages. Reagan's advisors in The time has clearly come when all serious discussion of the economic-policy issues facing the nation must include careful analysis of the policy-issues being re­ debate on the issue viewed within the Reagan camp. If Reagan were to become President, under the control of the same sort of by Lyndon H. LaRouche. Jr .• Contributing Editor Friedmanite thinking controlling Carter administration practices now, the only important question facing the The Wall Street Journal on March 27 featured a front­ American voters would be how and where to emigrate. page lead item, reporting the seething policy-debate Comparatively speaking, Kemp, Wanniski, and Laf­ among the leading economic-policy advisors of Repub­ fe r have been searching in the right direction. Laffer's lican front-running presidential candidate Ronald Re­ "curve" is unscientific, but far more sensible than Fried­ agan. The article, by-lined Albert R. Hunt, contrasts the man's arguments. expansionist economic thinking of Reaganite tax-cutter, Kemp's friends are right when they argue that stim­ Congressman Jack Kemp (R-N.Y.), with the pro-Milton ulating the private sector will increase the tax-base. They Friedman group of Governor Reagan's advisors. are right in insisting that the way to bring the federal - Rep. Kemp, coauthor of the tax-cutting "Kemp­ budget into balance is to increase the tax base by expan­ Roth Bill," is associated with former Wall Street Journal sion of the private sector . They are also right in arguing figure Jude Wanniski, now an influential gad-fly as that the social service component of the federal budget political consultant on economic-policy issues. Closely could be reduced significantly by lowering federal in­ associated with Wanniski and Kemp is a rising, maverick come-tax bites out of the basic incomes of households.

long-time political confidants. (The noted economist Milton Friedman, while and independent force, often What wassaid in the sides with the traditionalists.) Wall Street Journal Essentially, these advisers feel the Californian's 15-year preaching against the evils of big government Following are excerpts fr om the Wall Street Journal of enjoys unprecedented public support these days, and March 27 which reported on the economic debate in they see a rare opportunity to cut back the fe deral Gov. Reagan's camp_ establishment. Further they worry that to stress tax cuts and economic growth, rather than shrinkage of ... two views reveal a basic dichotomy in the government would be both economically dubious and Reagan inner circle .... politically perilous .... The neopopulists (Jack Kemp), while favoring So fa r Mr. Reagan has certainly embraced the tax­ smaller government, want Mr. Reagan to stress tax cutting gospel. He constantly campaigns for a three­ cuts and economic growth. The more traditional con­ year, 30 percent across the board cut in individual servatives, while supporting tax cuts to stimulate the income taxes. He argues that this deeptax-ultim ately private sector, believe the size of government-and of around $90 billion a year-not only would provide government spending-is the essential issue .... enough economic stimulus to increase revenue, but The pressure to emphasize·reduction in govern­ also would curb both inflation and unemployment, ment is coming from a group of traditionalists; these obviating a painful choice between those evils. include former Nixon/Ford administration officials Mr. Reagan also favors eliminating the $6 billion William Simon, George Schultz, and' Alan Green­ estate and. gift tax, and he would end most taxes on span, plus Martin Anderson, the campaign's chief savings interest. For corporations, he espouses more­ domestic-issues expert, and some of Mr. Reagan's liberal depreciation write-offs ....

EIR April 7-14, 1980 Economics 11 A healthy economic policy-discussion could be built around a discussion of the question whether Kemp's proposals are the right means for reaching the sound objectivesthis group has adopted. The first fault of the Kemp group's measures is that they address only the smaller part of the problem of inflation-the 2-4 percent inflationary trend of the past decade and a half. Although Kemp did consider support­ The Emergency ing the European Monetary System proposals some time past, he and his group have since turned away from all 1. Whereas,both the federal government and national consideration of the problem of double-digit inflation. economy of the United States stand in imminent fiscal Without a new, gold-based world monetary system, built and monetary jeopardy, be the following emergency around the European Monetary System, there is no measures of tax reform enacted as an integral part of the practical solution to the problem of double-digit hyper­ several measures required to remedy this state of affairs. inflation. 2. The purpose of this act is to channel savings of Within the setting of U.S. cooperation with France's individuals and households, as well as retained earnings Giscard and Germany's Schmidt, including remonetiza­ of partnerships, corporations, and other business enter­ tion of the U.S. gold reserves, double-digit inflationcan prises into that sort of capital-intensive investment in be stopped short-leaving us with the problem of ending production of useful, tangible commodities which will the single-digit component of overall inflation. It is that increase the income tax base of the nation, raise the level latter, second part of the overall problem which situates of productivity in our economy, and give substance to a competent review of the Kemp group's proposals. the presently imperiled currency of our nation. The Kemp group is correct in arguing that tax-cuts­ 3. Thispurpose is to be served by shiftingthe weight not budget cuts-are the point to be emphasized. A of taxation from basic income of households and from combination of tax-incentives promoting private, job­ earnings of employers producing tangible commodities creating investment in agriculture, manufacturing, min­ to those portions of income otherwise employed. ing, construction and transportation is a major part of 4. The category of tax-accounting heretofore known the proper package. Substantial cuts in the below­ as "capital gains" is herewith discontinued, except as $25,000 income-level portion of household income is the otherwise provided within the body ofthis act, shall now remainder of the basic package required. be treated as part of ordinary income. The problem with the Kemp package is that it does s. Reforms of the Federal Income Tax Schedules not shape the combination of increased and decreased A. Excepting incomes of households earning a tax-rates competently. We must raise the rates on the gross income of less than $20,000 in a tax year, there general progressive income-tax schedule, including tax­ shall be a 50 percent increase in the taxation derived by ation of ordinary capital gains-to penalize speculation the fe deral income tax from such households, partner­ and wasteful forms of investment and spending of in­ ships and corporations, except as hereinafter specified. comes. We must, at the same time, sharply cut federal B. The per capita exemption from taxation for the taxes on basic household incomes, while qualitatively income of households for the current tax year shall be increasing the amortization, depreciation and tax-credit increased to $2,500per person, to $3,750 per deducti­ stimulants to farmers, manufacturers, construction ble person fo r the next tax year, and to $5,000 per firms,min ing, and transportation, and also provide cred­ deductible person fo r the next year following that. it for these tax-deductions to individual household in­ There shall be an additional $1,000deducti on for each comes invested in or lent to capital-intensive, job-creat­ dependent currently matriculating in study of the ing expansion of productive capital stocks and related physical- sciences, biology, medicine, engineering, fo rms of improvements. agronomy, or teacher training at an institution of Provided such a tax package is tied to the promotion higher learning during the tax year. of high-technology exports, in cooperation with Japan C. The per capita exemption shall be doubled fo r and the Europeans, the U.S. economy can be turned each member of a household who is legally blind, around rapidly. Under that combination of circumstan­ disabled, or over 65 years of age. Persons suffering a ces, bringing "hard commodity" lending back to the 4-6 partial disability shall qualify fo r a quarter, half, ,?r percent prime rates, we can achieve rapid growth in the three-quarter credit during the period of such disabili­ economy and the tax base-the Kemp objectives. ty. This is what· the shape of the national economic­ D. There shall be a substantial increase in amorti­ policy discussion ought to become. The Wall Street zation and depreciation and depletion allowances for Journal has missed the vital points. capital improvements in agriculture, manufacturing,

12 Economics EIR April 7-14, 1980 Tax Reform Act of 1980

construction, mining, forestry, and public transport of interest and which some federal agency would be passengers and freight. obliged to undertake if private initiative did not. E. Allowed depreciation, amortization, and deple­ G.3. Tax credits fo r this shall be apportioned to tion shall be predicated upon adjustments for current investors in the same manner as for depreciation, replacement costs, such that the total amount allowed amortization, and depletion. over the full term of such deductions shall be equal to H. The Department of Commerce shall specify for the replacement cost at the point of asset liquidation. the current fiscal year and for each subsequent fiscal F. The tax deduction credits earned by individ­ year in a like manner a list of high-technology exports ually owned, partnership-owned, and corporate farms of tangible capital goods, agricultural commodities, and businesses shall be extended to individuals and and engineering services for which the producer of households investing in the equity earning such depre­ those goods or services shall receive a tax credit. ciation, amortization, and depletion, and shall be ex­ H.I. This shall include high energy-flux-density tended as a proportional share of the tax-credit earned energy systems, including high-head hydroelectricand by the business entity making the relevant investment. water-control projects, high-technology agricultural Explanation: If a household uses part of its income improvements, high-technology industrial capital gained during a tax year as a primary investment in a goods and related engineering services. business, transferring such sums as investment during I. Foundations and related tax-exempt institutions the same tax year that portion of income was earned, shall be taxed for all income earned in excess of or transfers an equivalent portion of past-accumulated $10,000,000in any tax year, except as herein specified. savings, that household shall share a proportionate Exceptions shall include income directly used for reli­ part of the whole investment's depreciation, amorti­ gious and educational uses or wholly used for research zation, and depletion earned as a deduction for that in the physical, biological, and medical sciences, or year and over the subsequent life of such a primary directly employed for the development and delivery of investment. There is no benefitaccrued from purchase medical and dental services, or used for payments of of equities in secondary markets. contracted pensions either as payments to pensioners G. Subject to rules and restrictions hereinafter according to contracted or adjusted schedules, or paid stipulated in this Act. the Executive Branch of the into sinking funds to aggregate amounts not exceeding fe deral government shall establish annually for this those warranted by implicit pension obligations. current year and each year thereafter a list of categories Except that gifts shall be treated as under standards of research and development fo r which individuals, and practices established immediately prior to the partnerships, and corporations shall be entitled to a passage ofthis Act. direct credit against federal income taxes due. 6. "Productive" Defined The rules governing such deductions are as follows: For the purposes ofthis Act. the term "productive" is G.I. To qualify for such credits, the beneficiary defined in a manner consistent with the 1791 Report to of the credit must be an establis.hedfarm or business Congress on the Subject of Manufactures by Treasury firm using gross profits from sale of commodities Secretary Alexander Hamilton. other than the product of such research and devel­ "Productive" means the promotion of scientific and opment as a source of funds applied to the item of technological progress, and the mediation of the implicit research and development being considered. Only benefitsof such progress into rises in the realized produc­ that portion of the gross profit of the business or tive output of labor through capital-intensive invest­ fa rm shall be qualifiedfor investment tax credit. ments in the production of tangible wealth. G.2. The governing philosophy for establishing However, there are two mediating steps in the process categories of such investment tax credits is a deter­ leading to improvements in output of tangible, useful mination that private farming and business interests. goods which are not productive in and of themselves, but are engaged in a currently not-net-profitable form which are indispensable for providing the potential for of research and development which is in the national rises in national productivity. These are the promotion

EIR April 7-14, 1980 Economics 13 of scientific and technological progress as such, and savings into capital-intensive productive capital invest­ those processes of public and higher education through ment. in agriculture, manufacturing, construction, min­ which the potential productivity of the labor force is ing, and transportation, aiding this by a combination of enhanced. Essential services, such as medical services, tax incentives fo r such purposes, and by increasing the which enhance the health and longevity of a skilled labor penalties for income exceeding basic household-con­ force are also forms of nonproductive services which are sumption requirements disbursed in some other fashion. indispensable to the quality of the households from B. To shift the ratio of the total labor fo rce employed which the labor fo rce is recruited. as productive operatives toward 50 percent. 7. National Goals C. To increase the rate of scientificand technological At the close of World War II, over 60 percent of the progress through emphasis on G .1. Basic research and national labor force was employed as productive opera- I development in the physical sciences, the biological sci­ tives either in agriculture, or manufacturing, or construc­ ences, in medicine, and in the emphasis on related knowl­ tion, or mining, or transportation. During 1979, the edge and skills in public and higher education. percentile of the labor fo rce so employed was in the order D. To fo ster capital-intensity in investment in em­ of 38 percent or worse. ployment of productive operatives. Although public and private administration and serv­ E. To promote those forms of energy production ices are intrinsically necessary to firms and government, which represent energy-flux densities equal to or in excess they represent at best nonproductive "overhead" burden, of those presently used for production of electrical energy paid for fr om the gross profits earned by the national by public utilities, with emphasis on the development of economy and individual firms through production and magnetohydrodynamic production of electrical energy sale of tangible useful product. Although increases in the from energy sources and the promotion of advancements ratio of capital to labor in direct production requires an and applications of nuclear energy technologies. increase in services and administration, especially the F. To promote the United States' development as an ratio of scientists and engineers combined per 10,000 exporter of high-technology capital goods and related productive operatives employed, the postwar growth of engineering services for the present and the future. administration and services far exceeds the growth of 8. Medium-term Balancing of the Federal Budget aggregate gross profit earned by the national economy Provided that the United States enters into agree­ through production and sale of useful tangible product. ments with its allies of the European Monetary System, It should be our national goal to increase the ratio of the and others, . to establish a new, gold-based monetary total productive labor force employed in high-technolo­ system which reorganizes the dollar-obligations, some­ gy positions as productive operatives to about 50 percent times termed "Eurodollars," held outside the territorial over the immediate years ahead. The loss of national United States, and that the United States values its gold productivity caused by excessive growth in the ratio of reserves, the largest of any nation in the world, at prices administration and services is aggravated by combined for monetary gold agreed upon in concert with those under-investment and obsolescence in high-technology allies, the United States can sustain the temporary imbal­ forms of agriculture, manufacturing, construction, min­ ances in the Federal Budget that this Act will probably ing, and transportation. Productivity is best measured as incur without perpetuating the double-digit inflation the an increase in the ratio of energy employed per produc­ dollar has suffered during the recent period. tive operative over and above muscle-power. This con­ Over approximately a two-year period, the combined nection is mediated through the capital equipment pro­ effect of the measures stipulated by this Act and our vided for the productive employment of operatives, and nation's participation in creating an efficient fo rm of correlates with a required increase in the energy-flux­ new, gold-based world monetary system will be to ex­ density of energy production for household, agricultural, pand the taxable income of the United States and to industrial, and other basic usages. render certain present categories of federal direct and Therefore. it is the intent of the Congress, as attested indirect social expenditures of welfare obsolete and un­ - by this Act, that the implementation of this Act and other necessary. The "tax dividends" generated in that way statutes by the Executive Branch of the federal govern­ will serve to bring our Federal Budget into balance over ment shall be directed to effect the following trends in such a period, aided by the role of the new monetary the evolution of our national economy. system and federal Executive action to bring prime rates A. The use of the power of taxation of the federal back into the 4 percent to 6 percent range indispensable government to fo ster. the flow of household and business for sustained economic growth and prosperity.

14 Economics EIR April 7- 14, 1980 Gold by Alice Roth

Engelhard traps the Hunts ity" fall-back position in the event When the silver market collapsed, the Hunt brothers were that the U.S. Federal Reserve's credit crunch brings down the Eu­ caught holding the bag, and certain British interests came rodollar market. Ironically, Engel­ away with Hunt properties. hard's little experiment in "lifeboat economics" came very close itself to triggering a full-blown financial crisis. Engelhard Minerals and Chemi­ In an April 1 editorial, the Wall Bache Halsey Stuart Shields, cals Corporation, a highly secre­ Street Journal dropped a strong the fifth largest U.S. brokerage tive, multi-billion dollar commod­ hint that the Hunt brothers, sons firm veered close to bankruptcy, ities trading company, emerged of the late Texas oil billionaire disclosing trading losses as high as last week as the prime beneficiary H.L. Hunt, had not merely fa llen $50 million. Bache is 6.5 percent in the demise of the Hunt brothers' because of miscalculations in the owned by the Hunts and had con­ silver empire. According to news­ silver market but had been pushed: ducted large-scale silver trades on paper accounts, the Hunts agreed "Mr. Hunt ... tried to corner the their behalf. According to the Se­ last fall to buy 19 million ounces silver market. And since the people curities and Exchange Commis­ of silver from Engelhard in the who run markets have always fe lt sion, at least seven U.S. brokers future at $35 an ounce. When the that cornering gives markets a bad experienced "some degree of ex­ contract came due on March 31, name and thus threatens the in'­ posure (to the silver price col­ silver closed at only $14.20 and the comes of people who make their lapse-A.R.) and, in some in­ Hunts might have taken a $400 lives running markets, they sprung stances, losses." million loss. Instead, Engelhard a trap on Mr. Hunt." British commodity traders, negotiated a new agreement which The Wall Street Journal is, of such as Rudolf Wolff, who did a resulted in the Hunts turning over course, too polite to mention En­ booming business in silver up until major Canadian oil and gas hold­ gelhard by name, but the implica­ late January are also likely to have ings to Engelhard as well as 8.5 tion is there. Of course, as the fe lt the pinch. Market sources re­ million ounces of physical silver. Rotterdam market demonstrates port that on March 28 the Balik of What is Engelhard Minerals all too well, Engelhard and asso­ England intervened to prop up the and how did it secure such an ciates are themselves no strangers London silver market, permitting armlock on the unwary Hunts? to anti-social behavior. prices to stabilize at around $14 an Although scarcely a household In carving out a chunk of the ounce (up from the March 27 low word, Engelhard ranks thirteenth Hunts' oil and silver holdings, En­ of $10.80.) The Bank of England among Fortune 500 corporations, gelhard has further extended the reportedly acted on the urgent re­ boasting 1979 revenues of $18 bil­ British oligarchy's "hard commod- quest of the U.S. Fed. lion. More important, Engelhard

is closely tish ______tied to elite Bri finan- ______cial and intelligence circles London afternoon fixing 800 through its relationship to the La­ zard Freres investment bank. Phi­ 7SO lipp Brothers, an Engelhard sub­ sidiary, is reputedly the world's 700 largest crude oil trader. According to oil market sources, Philipp 650

Brothers, along with British Petro­ 600 leum and Royal Dutch Shell, played a major role in the specu­ � ..... A. 5SO lative manipulation of the Rotter­ ':-� 7V,,- ..... � 500 dam spot market last year, result­ "'-' ing in crude oil prices of over $40 .... · 450 a barrel. 2/28 3/6 3/13 3/20 3/27 4/3

EIR April 7-14, 1980 Economics 15 ForeignExchange by Richard Katz

Will the dollar bust? Europe, citing the heavy depend­ The interest rate spread has kept the dollar high, but a ence of the American market on foreign funds. The Europeans are, certain investor "safe ty fa ctor" ensures that it will go down therefore, waiting for the "first bad again, and awfully fa st. news," i.e. the beginning of the actual crisis due to "internal fac­ tors" in the United States, so that there will be no imputation that Europe is responsible for New York's problems, one European Both American and European to stabilize the relative parities of banker believes. analysts believed that this past EMS currencies against each The importance of the safety week might have been the peak of other. factor came out strongly in Amer­ the dollar's spectacular rise against One top West German banker ican markets this week in the sud­ European currencies. On April 1, predicts"at the first bad news from den widening-by more than 1'/2 the dollar touched Om 2.00 in late the American financial markets, all percent-of the spread between New York trading, and had fallen the short-term funds will flow out, Treasury bills and similar-maturity back to Om 1.96 in Frankfurt trad­ and there will be a terrible crash in bank 10Us. Bills generally bear ing' April 3. A certain stability the New York market." The dol­ lower interest because they are remains behind the dollar' s lar's situation is as fundamentally guaranteed by the Federal govern­ strength for reasons of simple unstable as the British pound's was ment as much as green backs are, arithmetic: there is now a stupen­ two years ago, when the Bank of and represent a place of refuge in dous 10 percent spread between England had to support it with the worst market conditions. If the Eurodollar and Euro-deutsche­ similar interest rate differentials. American investors place this type mark interest rates. A speculator The Europeans must liquidate of question mark over the certi­ holding dollars assets and mark their dollar positions at a certain ficates of deposit of large commer­ liabilities for, say, six months, will point precisely because the Federal cial banks, European suspicions still make money even if the dollar Reserve has such grave reasons to are an order of magnitude higher. falls to OM 1.75 over the entire maintain their dollar positions! In For the moment, Eurodollar period. The extra interest is great other words, the safety factor, dealers are still buying into long­ enough to displace even a fairly however marginal, must outweigh term dollar paper on the grounds sharp loss in the dollar's foreign the interest rate differential at a that the underlying interest rate exchange value. short period of time. When this factor will maintain the dollar's However, there is more to the threshold is crossed, "the dollar strength for the immediate future, dollar's weakness than simple in­ will go down awfully fast," pre­ and foreign exchange dealers have terest rate differentials, especially dicts a leading New York bank not discovered any significant in the opening phase of a full-scale economist. movement into short positions financial crisis on the American This makes timing an entirely against the dollar. Various Wash­ markets. To put the problem in­ unpredictable factor. Added to the ington oracles are assuring the Eu­ versely: toe fact that West Ger­ requirement of safety is the politi­ ropeans that American interest many has not had to raise interest cal consideration that Europe rates will remain high even if the rates while the interest differential would, in effect, be severing a large economy fails, in order to maintain between the mark and dollar rose part of its financial links to the the dollar's stability. 4 points indicates that the West United States by taking responsi� No conventional formulas Germans believe the dollar rise is bility fo r worsening an already should be applied to this market. a short-term phenomenon. They grave financial situation on the The dollar financial structure IS have not attempted to prevent the other side of the Atlantic. Some moving into a basic crisis-in fact, dollar rising on what are essential­ New York bank economists are is being pushed into one by the ly thin European markets. Virtual­ already speaking in low tones of a Federal Reserve-and past rules ly all intervention has taken place "Crash of '79" style pullout by will not apply.

16 Economics EIR April 7-14, 1980 The dollar in deutschmarks -N�w York late afternoon - - 1.95 '" � � 1.90

- � r 1.85

.J 1.80 ---- -' 1.75 2/27 3/5 3/12 3/ 19 3/26 4/ 2 - 2/20 2(13 The dollar in yen New York late afternoon 260

---.. -- "- 250 I " .I, - - - "'" 240

230

220 2/13 2/20 2/27 3/5 3/12 3/ 19 3/26 4/2 The dollar in Swiss francs New York late afternoon ...... 1.85 � 'fill'" J 1.80 , -- -' 1.75 -/ - -- 1.70

- � I 1.65 .,.., 2/27 3/5 3/12 3/19 3/26 4/2 ...... -;;The BrItis. . h pound6"" ID. dollars

-New York late afternoon 2.30 - ...... -- " 2.25 ' - A -- � 2.20 """1lIIIo..-- '" ...... " 2.15

2.10 2/ 13 2/20 2/27 3/5 3/12 3/ 19 3/26 4/2

EIR April 7-14, 1980 Economics 17 Agriculture by SusanB. Cohen

The farmers denounce the embargo ment's loan crop support program. They waited and waited fo r Carter to honor his promises, Lifting of these requirements, as is anticipated, however, is not but finally the fa rmers got fe d up . taken seriously by producers: like the Administration's vaunted pro­ gram to purchase stockpiled grain through theCommodi ty Credit Cor­ poration (CCC), only a limited amount of grain will be absorbed. O n Friday, March 28, the Amer­ hollow as its original campaign The Administration has advertised ican Farm Bureau Federation for­ promises "never" to use the food that it does not want to take pos­ mally withdrew its support fo r the weapon. Worse, the Administra­ session of any corn, since it would Carter Administration's embargo tion is engaged in a systematic have to hold it at government ex­ of more than 17 million tons of effort to lie and cover-up the actual pense until the price level topped wheat and feed grains shipments situation now faced by producers. $3.15 per bushel on the open mar­ to the Soviet Union. In repudiating Com producers have gotten the ket, and that would interfere un­ the embargo, the Farm Bureau­ brunt of it. Not only did they duly with the budget austerity pro­ representing more than three mil­ produce a record-breaking bumper gram. lion farm families-charged that crop of corn in 1979-fully 7.76 Most recently, according to the the grain trade cut-off was "inef­ billion bushels-but of the up­ Journalof Commerce, several firms fe ctive and damaging both to wards of 20 million tons of grain hit by the embargo, including a American agriculture and to the embargoed to the Soviet Union, division of Englehard Minerals, nation's economy." fully 14 million tons was corn. have been observed trying to buy The Bureau's reversal is pow­ Most of this grain is backed up on Argentine corn for sale to the So­ erful testimony both to the ex­ the farms and at the local elevators viet Union. Meanwhile, one of the tremely serious economic condi­ throughout the corn belt, parts of grain trading firms affected by the tions developing in the farm sector which-for instance, Minnesota, embargo, Goodpasture, Inc. of and to the growing popular rejec­ Iowa and North Dakota-have Houston, announced this week tion of the Carter Administration's been saddled with transportation that it is closing its grain trading economic policy. Bureau president snarls. This has put tremendous business as a result. The CCC, Robert Delano pointed to the fact pressure on prices at the local level. Goodpasture explained, was roll­ that Agriculture iecretary Berg­ This is the hub of the Carter Ad­ ing over contracts calling fo r land had promised the farmers that ministration's lie that prices have spring delivery until August or as they would not incur losses as a recovered to pre-embargo levels. late as October. Since the firms result of the embargo. "We have Under the tight credit condi­ aren't paid until the grain is loaded waited fo r three months," Delano tions im osed since October, pro­ for export to destinations other p ' said. "It is past the best time to act ducers may be forced to sell at than the USSR, this creates a fi­ in keeping this promise." huge losses just to gather necessary nancial strain that is impossible for The embargo was summarily cash for the next planting. The smaller companies to bear. imposed on January 4. A reluctant paid government land diversion Even counting a net 3 million fa rm population was herded into program, a potential source of ton increase in corn exports for line behind the otherwise explicitly cash in the first quarter for pro­ 1979-80, attributable to the fortui­ unconstitutional "food weapon" ducers, was canned by the Carter tous development of a drought in on the grounds that Soviet activity Administration for purposes of Argentina, American corn produc­ in Afghanistan constituted a austerity. Further, since most of ers will be stuck with a 45 percent "threat to national security." the com producers did not partic­ rise in stockpiles this year over Now, three months later, the ipate in the 1979 set-aside pro­ last-a needless and costly burden Carter Administration's promises gram, they have not been eligible on the agricultural sector and the of protection are shown to be as to take advantage of the govern- American economy as a whole.

18 Economics EIR April 7- 14, 198C Domestic Credit by Lydia Schulman

The crunch is on price thus becomes the critical With rates on the Euromarket soaring, the question of who question. Charles Lott of Keefe, Bruyette, the bank stock firm, said goes bankrupt and who doesn't will be determined by who in an interview that he is worried gets control of the Federal Funds market. about the thrift institutions but not the large commercial banks. "The big banks can help each other out. They have Federal funds which they can pass around to help each other out. They will give these fu nds to the banks that they think worthwhile to keep out of trou­ Short-term interest rates went reserve requirements as high as it ble." Who ever controls the Fed­ through the ceiling on the Euro­ deems fiUt is an open secret that eral funds market will determine dollar market March 31: 20% to many of the nation's smaller finan­ who gets bailed out. 201/2 percent for one month de­ cial institutions will not survive the Despite some initial squeals posits; 20 to 19% percent for three squeeze. from leading money center bank­ months; and 193/4 to 19% percent According to Jeffry Nichols of ers, it has become quite clear that for six months. March 31 tax pay­ Argus Research, the area where they welcomed and encouraged the ments and other end-of-the-quart­ the Fed's credit crunch will strike March 14 measures. In a recent er factors may have put added the hardest is bank borrowings interview, Bankers trust economist steam under the Eurodollar rates. from the Eurodollar market (a cat­ Donald Wooley commented that However, the primary reason is a egory known as "managed liabili­ with the cost of funds skyrocket­ scramble fo r short-term funds by ties"). The Eurodollar market has ing, all of the major banks wanted banks who are cash short in the been a major source of additional to retrench on their loan portfo­ fa ce of the Federal Reserve's new liquidity fo r the U.S. economy lios. The only thing stopping them reserve requirements. over the last year. As of the current was the concern that if they went In the current bank reporting bank reporting week, all supple­ it alone, they might jeopardize week which ends April II, the new mentary borrowings over a base their market share and lose out on marginal reserve requirements un­ period by the money center banks future business. "There was some veiled by the Federal Reserve to fu nd outstanding long-term measure of satisfaction with the March 14 go into effect for both loans or make new loans will be Fed measures,'� he said, "because Federal Reserve members and non­ subject to a heavy penalty of lO it imposed discipline on everyone member banks. This prong of the percent reserve requirements. to ,retrench together." Fed's program is designed to jack A significant portion of the Many of the nation's smaller up the banks' cost of fu nds, there­ banking system's demand for banks have no choice but to re­ by "encouraging" them to cut short-term fu nds has already been trench fa st. Smaller retail-oriented back on loan expansion. deflected to the Federal funds mar­ banks are particularly impacted by The Fed's authority to impose ket, the overnight interbank mar­ the new requirement to place 15 reserve requirements on nonmem­ ket, where major banks are report­ percent reserves in interest free de­ ber banks stems from the Credit edly borrowing between $4 and $5 posits with the Fed on loans made Control Act of 1969. The Deposi­ billion per day. Since Fed fu nds above the base period. "Our strat­ tory Institutions Deregulation and purchased from other major banks egy is to make sure there is no Monetary Control Act of 1980, are exempt from the new margin increase in our loan portfolio to signed into law by President Carter requirements, they are a cheaper avoid the penalty, " stated the March 31, subjects nonmember fi­ source of funds than certificates of banker at one small New York nancial institutions to reserve re­ deposit (CDs) which are subject to state bank. As a result, all but the quirements as a matter of course, the reserve requirements. most "credit-worthy" customers and allows the Fed to raise those Who gets Fed funds at what face an imminent credit cutoff.

EIR April 7-14, 1980 Economics 19 Business Briefs

International Credit tory and netted the workers a pay in­ Chrysler difficulties is the beating the crease of 16 percent despite an 18 per­ auto industry is taking generally under British budget hailed cent inflation rate. the Carter-Volcker austerity regime. On Tuesday, Detroit automakers an­ as model fo r U. S. nounced that production schedules for Corporate Strategy the second quarter of the year were British Prime Minister Margaret being slashed by 21 percent from 1979 Thatcher's new budget was hailed by Will Chrysler be levels-the lowest second-quarter out­ the Washington Post in a March 7 edi­ put in 15 years. Normally, second quart­ torial as a possible model for the United sunk after all? er production is high, as spring sales States. Thatcher's budget calls for steep boost demand. But tightening retail cuts in public spending, which is sched­ On Monday, March 31, the Chrysler credit on the one hand, and the impos­ uled to drop 4 percent in real terms by Corporation was to appear before the sibly high cost of financing inventories 1983-84. The Thatcher regime has Senate Ranking Committee in Washing­ on the other-on top of unusually poor pledged itself to stick to this target ton to presennhe details of $1.5 billion sales-forced producers to retrench. despite Treasury minister Geoffr ey in new private financing that would At Ford, where sales have declined Howe's admission that real GNP could allow it to receive an equal amount in by 24 percent so far this year, 10 percent decline by as much as 2'/2 percent. federal loan guarantees to stay in busi­ of the support staff will be laid offand "Mrs. Thatcher is now completing ness. On Monday, Chrysler officials re­ white collar salaries chopped down, the first year of a great experiment that ported that they were unable to meet spokesmen announced on Tuesday. is a calculated and abrupt break with the deadline; they were still talking with fo ur decades of British political tradi­ their bankers. tion," wrote the Post, under the headline Incredibly, a senior Chrysler official "Mrs. Thatcher's Experiment." "It's too said that missing the deadline-a devel­ Domestic Credit early to know whether the experiment opment which renewed questions as to will succeed. But if it does, there will be whether Chrysler would or should be Credit squeeze hits rising pressure to repeat it in the United bailed out-this week would not be fatal livestock industry States." to the company's long-range efforts, The Thatcher cuts are concentrated noting that Chrysler had missed other largely in housing, education, industrial crucial target dates for raising monty News that the nation's third largest live­ subsidies and manpower training, with over the past year. Spokesmen for the stock producer, Monfort of Colorado, spending on defense and police the only 300-bank syndicate involved in the ne­ was in trouble early this week was con­ items to show a significant rise. Taxes gotiations with Chrysler refused com­ firmed yesterday when Kennety W. have also been hiked in such a way that ment on the situation. Some observers Monfort, the son of the founder of the they will fall heaviest on working class pointed to the fact that questions had company, announced that he was taking families. been raised recently about bank enthu­ over again as president and chief exec­ Meanwhile, British newspapers have siasm when two Chrysler creditors who utive officer "because there was a dif­ greeted last week's steel strike settlement are not members of the syndicate had fe rence of opinion on the amount of as a vindication of Thatcher' austerity sued the automaker for nonpayment of cutback we needed to do to save the policy. An April 2 London Times edi­ loans. Treasury Assistant Secretary and company." Monfort, which runs beef torial stated that, "The outcome of steel former Lehman Bros. partner Roger C. packing plants, feedlots and other agri­ strike is the most significant success that Altman added to the doubts raised when cultural activities, lost $6.8 million in its the Government has had in the domestic he admitted to the Senate Banking second quarter, ending March I. field since it took office ...The govern­ Committee that so far the financial in­ Monfort's bad news was accom­ ment's economic strategy depends on stitutions have shown no willingness to panied by bad news from the meatpack­ changing people's expectations. The ex­ provi de truly fresh loans." ing arm of one of the nation's biggest perience of its first year has shown how A first-quarter collapse of the cor­ cooperatives, Farmland Industries. deeply ingrained these can be, and how poration was precluded by hasty "inter­ Farmland Foods, Inc. announced that slowly the assumption fades that every­ im" patchwork financing in the form of it had laid off all 400 workers at its one has a right to pay increases at least payment deferrals and belt-tightening. meatpacking plant in Garden City, parallel to the rise in the cost of living." Day-to-day operations are being sus­ Kansas because of reduced demand for The strike against the publicly­ tained by that and an infusion of cash beef and a dwindling supply of cattle. owned British Steel Corporation was the from Peugeot. Livestock raising and feeding is a longest strike in Britain's post war his- The backdrop to this new round of typical, highly leveraged business-rais-

20 Economics EIR April 7-14, 1980 Briefly

• HAMISH McRAE, economics columnist for the London Guard­ ing has very long lead times and feeding the State and City University budgets. ian newspaper has nothing but is an intensive operation with high turn­ Governor Carey promptly criticized the high praise for the blow-out of over and low margins. A twenty percent budget as unacceptable and demanded the silver market last week which prime rate is poison to this industry, $300 million worth of items cut. In the nearly brought down the world's and the etTects are beginning to show. view of some state legislators, Carey's monetary system. McRae writes Slumping demand for beef in the face behavior paved the way for Moody's April 3, "This is destroying mon­ of high retail prices and tough compe­ action. ey, it's like making a huge bonfire tition from plentiful chicken and pork The lack of a rating isn't the only of hundreds of millions of dollars, supplies has been sending cattle prices problem New York faces. "The big and as everyone knows, the more down the limit on commodity markets commercial banks traditionally absor b money is destroyed this way, the this week-a development which will the bulk of these notes," Phil Cohen of more there is for the rest of us to kill, once again, any hope that cattle Bear, Stearns, the municipal bond hou­ have." raillCrs will finally be able to begin re­ se, noted."However, this year money is building herds. very tight, and the banks don't have the cash to throw around. Therefore, we're looking for individuals to pick up the • GEORGE SCHULTZE is at­ Banking notes." For a $3. 1 billion sale, that's a tempting to improve his status as lot of individuals. advisor to the Reagan campaign New Yo rk may not on the basis of his alleged person­ al friendship with West German market 53.1 billion Chancellor Helmut Schmidt. Pri­ Energy vately, however, Schultze himself A $3.1 billion dollar loan to New York admits that he opposes Schmidt's scheduled for this week may not occur, Synthetic fuels special relationship with Franc e's falling victim to Paul Volcker's credit Valery Giscard d'Estaing; he also crunch. According to sources in the to distort economy admits he espouses policies iden­ municipal bond market, the decision by tical to those of Schmidt's · chief Moody's Investor Service to hold otTon The synthetic fuel program got a tre­ political opponent, Christian rating the bonds could force the state to mendous push when President Carter Democratic Union leader Franz postpone the sale of bonds indefinitely; signed into law the "windfall profits" Josef Strauss. Recently, Schultze tight money conditions mean that the tax April 2, which will place about IS to announced that he opposed the use state will have to pay 10 to 11 percent 20 percent of the total $227 bill ion in of gold as the basis of the world's for its money when, and if, the bonds tax revenues over 10 years at the pro­ monetary system, and is quite op­ reach the market. gram's disposal. Expenditures for syn­ posed, therefore, to the nature and New York State markets revenue­ thetic fuels will be enormous and could the objectives of the European anticipation notes every spring, advanc­ distort the economy to the point of Monetary System created by Gis­ ing cash payments to localities prior to sucking otT half its productive output card and Schmidt. receiving tax revenues over the course into producing small amounts of very of the April-March fiscal year. If this expensive fuel . year's $3 .1 billion borrowing fa lls According to a study released by chairman through, $885 million in payments to Resources for the Future, a coal con­ • WILFRIED GUTH, of West Germany's largest bank, school districts fall through also. This version plant that can produce 50,000 the Deutschebank, warned last includes $235 million for New York barrels of synthetic oil a day will require week that overly high U.S. inter­ City, all due on April IS. 5 to 8 million tons of coal a year; cost est rates are forcing all countries Moody's made the decision on $1.5 to $3 billion to build, would occupy to tighten credit. A prolonged pe­ March 31, withholding the state's tra­ one square mile of land and employ riod of high rates in the U.S. ditional MIG (Moody's Investment 4,000 people to work it. But Carter's would disrupt the recycling of pe­ Grade) rating to put maximum pressure program is calling for 1.5 million barrels trodollars and would require ma­ on the state legislature to come up with of coal liquids a day to be produced by jor intervention by official mone­ a balanced budget for 1980-8 1. Earlier 1990. Doing the appropriate mathemat­ tary institutions to assist debtor in the day the legislature voted up a $14 ics, one finds, Carter's coal conversion countries, Guth said. billion budget, which increased school plan will consumer 270 million tons of aid by $3.99 billion for the coming coal annually. They will also cost be­ school year and restored cuts made in tween $50 to $100 billion to build.

7-14, 1980 EIR April Economics 21 ITillSpecia1Report

The Trilateral strategy to bring back the 19305

by David Goldman

'Carter's interest rate policy should finally tip the U.S. economy into a real recession, as opposed to a pseudo-recession that never materializes. Then contraction will start to bite. No real recovery is possible until there is a real recession. Then there will be room for fiscal measures to be taken.' David Rockefeller, Chairman of Chase Manhattan Bank and fo under of the Trilateral Commission, made these remarks March 27 following a meeting of the Commission in London. Since echoed throughout the American financial press, Rockefeller's statement announced a policy decision to permit American financial markets to crash. But contrary to the rationalizations for "purgative action," the expected result is not a reduction of the inflation rate, but a top-down reorganization of the American economy along lines resembling 1933-39 Germany. This much is stated in so many words by House Banking and Currency Committee Chairman Henry Reuss. After President Carter signed into law April 1 the Reuss-sponsored Omnibus Banking Bill of 1980, following Carter's invocation of the Credit Controls Act of 1969, Federal Reserve Chairman Paul Adolph V olcker has more power concentrated in his hands than Hj almar Schacht ever wielded from his cockpit at the Reichsbank in the 1930s. Federal Reserve officials and congressional staffers whQ worked closely with Reuss and Volcker to design this steamroller believe, and state frankly, that the result of their actions will be widespread bankruptcy among the financial and corporate sector. These bankruptcies will lead to a general reorganization under control of the Federal Reserve Board and corporatist industry-labor-business panels. Few in the financial community, or the general population for that matter, expect that the nation's financial structure will avoid a major crisis

22 Special Report EIR April 7- 14, 1980 Chase Manhattan Bank chairman David Rockefe ller flanked by Elmore C. Pattern, chairman of Morgan Guaranty Trust (left), and Edward Palmer, Chairman of Citibank in 1977 Senate hearings on Federal loans to New York City.

Photo:Wide World in the immediate weeks ahead. But the nation's man­ agement is in the hands of a faction that believes that this crisis can be managed with the result detailed In thissection exhaustively in this special report. This report was prepared by a team under the "Bubbles of all sorts build in any period of virulent direction of Economics Editor David Goldman, inflation," the Wall Street Journal wrote in an editorial including National Editor Konstantin George, Ka­ April 2 that summarizes the apology for the "purgative thy Burdman, and Richard Freeman. It features: crisis." "They are finally punctured when authorities finally move toward correction. When the Fed stops I. A bank collapse bill printing money, the ensuing credit crunch shakes out Including the Omnibus Banking Bill, the Credit the rickety structures that the inflation built. We are Control Act of 1969 and interviews with aides to already seeing the Hunts taking a bath in silver, Chrys­ Rep. Reuss and Sen. Proxmire ler unable to come up with the loans to qualify for its II. The casualties federal bailout, New York City suffering a transit strike Where the fi rst bankruptcies will hit that may be a precursor of its financial problems III. An economic restructuring of the U.S. evolving into real pain. We see institutions in danger, Including an exclusive interview with Henry Reuss the long-term bond market destroyed and the whole on his proposal for a new Dept of Trade & Industry savings and loan industry endangered ... The danger is IV. A NATO military buildup that the pain of correction may become so acute that Including statements by McGeorge Bundy and the Fed will be swayed from its course." NATO policy spokesmen There are two reasons why this perspective is insane. V. The war on Europe As Reuss's advisors indicate, this assumes that the Including an interview with Reuss's speechwriter, a administration and the Federal Reserve can drag West­ statement by Senator Birch Bayh, and correspond­ ern Europe into a crash along with the United States. ence between Reuss and Treasury Secretary G.W. The current issue of Business Week, for example, Miller contains a lead story insisting that the first "victims" of

EIR April 7-14, 1980 Special Report 23 the Federal Reserve's credit-tightening will be Western However, even in the worst-case eventuality that the European and particularly German banks, whose re­ entire Eurodollar market froze due to the chain-reaction serve positions are allegedly worse than those of Amer­ interruptions in payments, Europe has the mechanism ican banks. This point is made frequently in private through the European Monetary System to issue gold­ conversations among New York bankers. If the result backed liquidity to its own banks and freeze the fo reign of a crisis in America is merely the replacement of the dollar balances. This is strictly a political question. If Eurodollar market by a gold-backed monetary system, the links to the Arab world consummated last month however, Western Europe will walk away from a col­ in French President Giscard's trip to the Persian Gulf lapsing American economy and make its own arrange­ remain intact, there are no objective obstacles to Europe ments to survive economically in combination with the insulating itself from the worst effects of an American Arab world, the developing sector, the Soviet Union crisis. "Our only way out is through an export drive and the East bloc. and deals with OPEC," a top West German banker told Currently, the American short-term credit markets EIR. "There will be a terrible, terrible crunch for the are supported by short-term foreign investments into American banks. We will be hurt. But we will survive." dollar paper, due to the incredible 10 percent spread Rep. Reuss and fo rmer Secretary of State Henry between Eurodeutschemark and Eurodollar interest Kissinger are currently in West Germany demanding, rates. A massive, coordinated flight of such funds is not in effect, that West Germany stay "in phase," to use only possible, but considered likely by most New York the euphemism, with the American depression. What City bank economists. A collapse of the dollar under Western Europe will do is a political matter that Paul these circumstances could trigger a financial panic in Volcker, Henry Reuss and Company have not left out the United States. However, if all national sectors were of account. This week's visit may unpleasantly surprise equally affected, there would be no special damage to them. dollar markets. However, whether or not the international condi­ tions prevail for the political success of the "managed depression" policy, there is a much deeper reason to characterize this policy as insane. The graph accompa­ nying, generated by the LaRouche-Riemann computer model, shows that the net "free energy" (or all tangible Real economic goods available for reinvestment) in the American econ­ omy became negative at the beginning of 1980. The performance, 1971-1979 reason is that the "overhead costs" of industry, in the form of environmental and energy regulation, now absorb more than the useful, tangible surplus of pro­ Reinvestible surplus (S') ductive industry. (in billions of 1972 dollars) The American economy has entered a self-cannibal­ ization mode identical to the 1936-38 crisis in the Nazi German economy. Virtually the entire margin of the so-called recovery from the 1974-75 industrial break­ down is due to production to meet overhead costs. This is identical to the 1933-36 German "recovery" based on arms expenditure, which led to a potential breakdown crisis. The Nazis solved this problem with well-known methods. The terrible irony of the American situation is that Volcker, Reuss and their collaborators propose to force a financial crisis in order to obtain a top-down reor­ ganization of the economy. That reorganization itself would constitute the worst crisis that the Americ an economy had ever endured, forcing the economy into fu rther counterproductive channels in the energy and military fields, and cutting away the economy's flesh 1971 1975 1979 and bone. Physically-as the cited computer-model shows-the economy cannot stand this. The result would be a crisis past Mr. Volcker's imagining.

24 Special Report EIR April 7-14, 1980 I. A bank-collapse bill

On April 1, President Carter signed into law the "Prox­ Credit control mire-Reuss Depository Institutions Deregulation and and bank warfare Monetary Control Act of 1980," familiarly known as the The passage of the "Omnibus Banking Bill" closely Omnibus Banking Bill. With it the U.S. Federal Reserve follows the invocation ofthe Credit Control Act of 1969, has been given by the liberal Congressmen Henry Reuss also authored by Proxmire and Reuss, by President and William Proxmire.from Wisconsin a legal dictator­ Carter in his March 14 "sacrifice" speech on the econo­ ship over the U.S. credit system. Reuss, Proxmire, and my. The bill gives the Federal Reserve carte blanche to Fed Chairman Volcker have already signaled their inten­ "regulate and control any or all extensions of credit'.' tions to use this power to cut credit to the U.S. economy The Credit Control Act's invocation means that Fed so severely that the U.S. will go into an industrial decline Chairman V olcker will be able to put the broadest inter­ more severe than the 1930s. pretation possible on the Omnibus Bankin g Bill. In "With this bill you won't have any need for a credit particular, the bill has no provisions regarding volume control act," boasted one of Proxmire's aides to the of credit to be cut or interest rate limits on Federal March 24 Business Week. The Proxmire-appointed chief Funds, the key source of funds to banks in the federal economist of the Senate Banking Committee continued: money markets, which are provided by the Fed. With the "The Fed can do it all." Credit Control Act invoked, Volcker can raise interest The dictatorial provisions of the bill speak for them­ rates throughout the economy as high as he dares. selves. They are: The press and Reuss's congressional office were 1) Require all depository institutions to keep reserves unanimous this week that the bill will triage whole with the Federal Reserve System. sections of the U.S. banking system. "Let the Banks 2) Provide the Federal Reserve with emergency au­ Compete," read an April 2 editorial of the New York thority to raise reserve requirements to any level it likes. Times. 3) Waive all state anti-usury laws. State-chartered Go bankrupt is more the idea. "The banks gave into depository institutions are permitted to make loans at 1 the bill because they feared that if there was no legislation percent above the Fed discount rate. and there was a financial crisis with 600 or 700 banks 4) Permit the National Credit Union Administration bailing out (of)the Fed, worse would happen . .. they all to lift the 12 percent usury ceiling for federal credit want to have access to the Fed's discount window when unions for up to 18 months. the crisis hits," said Proxmire's Senate Banking Commit­ 5) Repeal Regulation Q, which allowed savings banks tee chief economist. "But mainly now we're thinking to offer higher interest rates than commercial banks, about ways to stop a lot of thrift institutions from going enabling them to attract capital to loan to the housing under." Tens of billions of funds must be rolled over by market. This measure alone will destroy housing and savings banks caught in the Fe d's high interest rate bankrupt hundreds of savings and loan institutions. squeeze-rates they can't afford to pay." 6) Preempt state usury laws for mortgage loans, A top Reuss aide agreed with the Wall Street Jour­ lifting present state ceilings. nal's assertion March 31 that the "Fed will engineer ... Through the Reuss-Proxmire legislation, Volcker something akin to the Franklin National Bank collapse" will soon have total say as to how much credit and at with its current interest rates. "Sure, the Fed is looking what rates each and every financial institution in the into liberalizing the procedures whereby larger institu­ United States may charge. tions can absorb those savings banks that are going Sen. Robert Morgan (D-N.C.) commented: "I think down the tubes." Asked what else the Fed planned this bill should be entitled the 'Depository Institutions and whetlierit would be willing to financiallyhelp banks Abolition Act' ... the effect could be the destruction of threatened with bankruptcy, he responded, "No, the Fed the savings banks and the mortgage industry of the is just saying that if they go down the tubes, they go United States." down the tubes."

EIR April 7-14, 1980 Special Report 25 During the 6-year phase-out period, the quarter­ point differential for thrift associations will remain in effect.

IV. Powers of thrift institutions The Omnibus (a) Investment authority is expanded to enable thrifts to earn more in order to pay higher interest rates on BankingBill deposits. Federal savings and loans will be able to invest up to 20 percent of assets in consumer loans, commercial paper, and corporate debt securities; to offer credit cards Below are excerpts/rom Rep. Henry Reuss'scomments on the and lines of credit; and to offer trust and fiduciary services .... banking legislation which he sponsors in the House as they were publishedin TheCongressional Record 0/ March 20. VII. Insurance of accounts Mr. Speaker, next week the House will have before it The limit on federal deposit insurance is increased the conference report on H.R. 4986, the Depository from $40,000 to $100,000. The FDIC may change its Institutions Deregulation and Monetary Control Act of assessments to cover itS increased exposure. 1980-the most comprehensive legislation affecting fi­ VIII. Bank reserves and Federal Reserve membership nancial institutions and the users of their services since the 1930s .... Membership in the Federal Reserve remains volun­ H.R. 4986 is timely and crucial legislation. A sum­ tary. mary of major points of the Senate-House conference Reserve requirements are imposed uniformly for all agreement follows: ... depository institutions on transaction deposits (checking and checking-type accounts such as NOW accounts, share drafts and automatic transfers) and on nonpersonal III. Regulation Q and ceilings on time deposits. interest paid on savings deposits On transaction accounts, the initial rate is 12 percent Authority to set interest rate ceilings, by majority (with a range of 8-14 percent) on deposits above $25 vote, is given to a committee composed of the heads of million. This includes telephone transfer accounts. Vault the Federal Reserve Board, Federal Deposit Insurance cash counts toward meeting the reserve requirement. Corporation, Federal Home Loan Bank Board, National On nonpersonal time deposits of all maturities, the Credit Union Administration, and the Secretary of the initial rate is 3 percent (with a range of 0-9 percent). Treasury, with the Comptroller of the Currency serving The Federal Reserve may impose reserve require­ as a nonvoting member. The NCUA will continue to set ments outside the statutory limits, in extraordinary cir­ ceilings for credit unions. The committee, to be known cumstances, for up to 180 days. as the Deregulation Committee will meet in public ses­ The Federal Reserve is also given authority to impose sion at least quarterly. a supplemental reserve requirement on transaction ac­ All authority for interest rate ceilings on all types of counts of 0-4 percent. A vote of at least 5 members of the deposits will end in six years. The Deregulation Commit­ Board is required to do this. The Federal Reserve will tee is given a strong directive to phase out the ceilings as pay interest on these supplemental reserves at the rate it expeditiously as economic conditions and viability of earns its own portfolio, currently 8.5 percent. depository institutions permit. A "target" phase-out rate Reserve requirements for non-Fed members will be is established as follows: one-quarter percentage point phased in over 8 years. Members will have their require­ increase in the ceilings within 18 months; another 1/2 ments phased down over 4 years. The phasing will begin percent within the next 18 months; and 1/2 percent each immediately. Any new types of accounts that may be year for the following three years. authorized will be subject to full reserve requirements. The committee may phase the ceilings out either That includes NOW accounts except in the 8 states where . faster or slower than the "targets." they already exist. . . . The conferees agreed that the phase-out must be The effect is to reduce reserve requirements on mem­ accomplished in a way that ensures equity for small ber banks and spread the burden evenly among compet­ savers, and ensures competitive equity among financial ing institutions. Reserves will have to be posted at the institutions. It must also be accomplished with due re­ Federal Reserve by 4, 165 nonmember banks, 1,360 gard fo r the financial condition of depository institu­ S&L's, and 70 mutual savings banks that now have no tions. such requirement. ...

' 26 Special Report EIR April 7-14, 1980 The Credit Control Act of 1969

On March 14, President Carter invoked the Credit (1) require transactions of persons or classes of Control Act of 1969, handing over to Federal Reserve either to be registered or licensed. Chairman Paul Volcker what the March 13 Business (2) prescribe appropriate limitations, terms, and Week "martial law" powers over the u.s. economy. conditions for any such registration or license. Th e act is the most dictatorial legislation on the books in the United States today, and placed in the (3) provide for suspension of any such registration hands of a government fa ction dedicated to "controlled or license fo r violation of any provision thereof or of disintegration " of America's industrial base, it is the any regulation, rule, or order prescribed under this only tool that fa ction would really need to accomplish Act. i i s aim. Th e Credit Control Act, Title II of Public Law 91-151, delegates authority to the President to imple­ (4) prescribe appropriate requirements as to the ment a regime of "unprecedented credit controls," as a keeping of records and as to the form, contents, or congressman at the time described it. substantive provisions of contracts, liens, or any rele­ The act awards the U.S. President standby powers vant documents. to direct the Federal Reserve to cut off credit selectively (5) prohibit solicitations by creditors which would fo r the purpose of combatting inflation and, ifnecessary, encourage evasion or avoidance of the requirements of gearing up the economy fo r war. Th e act was inspired of any regulation, license, or registration under this by the Congressional Joint Committee on Defense Pro­ Act. duction under the chairmanship of Senator William Proxmire (D- Wisc. ) and grew, in fa ct, out of plans (6) prescribe the maximum rate of interest, maxi­ drafted by the Offi ce of Emergency Planning fo r stand­ mum maturity, minimum periodic payment, maxi­ by credit controls on consumer credit and other mecha­ mum period between payments, and any other speci­ nisms fo r ensuring the defense production capabilities of fication or limitation of the terms and conditions of the economy in the event of conventional or nuclear war. any extension of credit. ... Some of the key provision of the law read as fo llows. (8) prescribe the methods of determining purchase prices or market values or other bases for computing §1904. Credit controls permissible extensions of credit or required down (a) whenever the President determines that such payment. action is necessary or appropriate for the purpose of preventing or controlling inflation generated by the (9) prescribe special or different terms, conditions, extension of credit in an excessive volume, the Presi­ or exemptions with respect to new or used goods, dent may authorize the Board to regulate and control minimum original cash payments, temporary credits any or all extensions of credit. which are merely incidental to cash purchases, pay­ ment or deposits usable to liquidate credits, and other (b )The board may, in administering this Act, uti­ adjustments or special situations. lize the services of the Federal Reserve banks and any other agencies, federal or state, which are available (10) prescribe maximum rations, applicable to any and appropriate. class of either creditors or borrowers or both, of loans of one or more types or of all types.

§1905. Extent of control (A) to deposits of one or more types or of all types. The [Federal Reserve] Board, upon being author­ (8) to assets of one or more types or of all types. ized by the President under section 1904 of this title and fo r such period of time as he may determine, may (11) prohibit or limit any extensions of credit under by regulation any circumstances the Board deems appropriate .....

EIR April 7-14, 1980 Special Report 27 Bergsten and Jerry Newman are handling this. Working REUSS AIDE with Axilrod ... My next immediate effort is the stringent criticism The Fed and Mr. Reuss that Carter's measures are inadequate. I'm advising 'don 't plan any Reuss to hold hearings and write letters to the Fed, bailouts' urging the Fed to just put the discount rate up to at least 1 8 percent, make it a penalty rate! ... In fact the discount Following is an interview with Lloyd Atkinson. the chief rate should be above the prime .... economist fo r the Joint Economic Committee of Congress And if things go as I've warned we'll certainly have and Rep. Reuss's chiefinternational economic advisor. controls by summer. Even if the banks hang in in there, we'll have controls by September at the latest. Q: Did you see the Wall St. Journal lead of March 31 which said that the Fed is going to pull off a Penn Central/Franklin National bankruptcy deliberately? A: Sure. What the Fed is doing is looking into liberaliz­ PROXMIREAIDE ing the procedures whereby larger institutions can ab­ sorb those savings banks that are going down the tubes. 'Wefull y anticipate afinancial crisis' Q: Wouldn't this require legislation? A: Lawyers at the Fed have a different interpretation, as Following is an interview with Steve Roberts. the chief a regulatory agency, they can .... This will also involve economist fo r the Senate Banking Committee. which is the FDIC, C. Fred Bergsten's group at the Treasury, chaired by William Proxmire. Jerry Newman at the Treasury Office of International Monetary Affairs, and Steven Axilrod's office of Mone­ Q: Why didn't the regional banks and savings banks tary Affairs at the Fed. The lawyers are trying to figure complain about the Omnibus Banking Bill's enforced out how much authority they have. The S&Ls are pretty Fed membership? much alright but most of the savings banks, biggies like A: They realized they could have been subjected to a the Dollar, are in trouble . ...We' re going to see a few much rougher reserve requirement . ... They know the sizeable institutions collapse ..The commercial banks Fed has to clamp down. There were 600-700 banks who don't show up quite so much in the data I have. announced they were going to leave the Fed altogether. They were afraid that if the banks did pull out they'd get an even worse mandatory system. They feared that if Q: You mean the Fed is going to refuse to bail anyone there was no legislation and there was a financial crisis out? with 700 banks bailing out of the Fed, worse would A: If they go down the tubes, they go down the tubes ... happen, a collapse of the bond market deeper than we've It's hard to tell on a time frame, we'll see a few fairly had, with the economy going into recession. . ..They sizeable financial institutions collapse .... Some of them didn't want to see the Fed weakened and they all wanted will be absorbed and the rest will just go down the tubes. �o have that access to the discount window when the The Fed is just saying if they go down the tubes, they go crisis hits. down tubes, There's lots of nonfinancial institutions, construction firms, that fold. They don't see any reason Q: What is the implication of this bill passing in the midst to treat financial institutions any differently ....The Fed of the Credit Control Act having been invoked? is aware of what the implications of its policies are. Some A: If this bill passes, I think the Credit Control Act might financial institutions are in very serious trouble. And as well be repealed, because the Fed will then be in a they're not going to loosen credit for them ... There are much stronger independent position of tightening mon­ some instances reported already of larger commercial etary policy. The Fed will be able to apply reserve banks seeking absorption of savings banks in trouble. requirements however much they want, within the liinits of the law, and in emergency situations, however high Q: And the Heinz Amendment on the Omnibus Bill says they want. The Emergency Provision of the law in both fo reign banks can come in if a bankruptcy is in question? the House and Senate versions says you can set reserve A: Exactly. The Fed and the Treasury are treating this as requirements outside the limits of the bill for 180 days if the same as any other bank trying to absorb a bank. Fred there are emergency conditions ....

28 Special Report EIR April 7-14, 1980 II. The casualties

Intense meetings are now occurring at the Federal De­ The erosion of bank spreads is just the first level of posit Insurance Corporation (FDIC), according to a top the problem that banks are fa cing, but a very real one. official at the agency, on what to do "with failing banks The savings and loan industry has found that the high or banks that will come under tremendous financial interest spiral kicked offby Volcker is causing a massive pressure." One feature of the discussion is that it has disintermediation of fu nds, as erstwhile depositors now already proposed allowing commercial banks to pur­ seek the higher yields given by money market instru­ chase savings and loans and savings banks, which would ments and Treasury bills. Whereas in January and Feb­ require a fundamental change in the government's bank­ ruary of 1979 the savings and loans took in $7.5 billion in ing laws which segregates ownership of these different new savings, in the same two months of this year they banks. Arrangement of mergers and buyouts among took in just $2.2 billion, less than a third of the 1979 rate. commercial banks is also being discussed. An announce­ At the same time, the Volcker high interest bubble is ment by the FDIC, jointly with the Federal Reserve distorting the entire lending picture of savings and loans. Board, the Controller of the Currency's Office and the Thrifts are now paying almost 16 percent on money office of House Banking Committee Chairman Henry market certificates issued at the prevailing six month Reuss (D-Wis.) will be made next week outlining what Treasury bill rate, and cannot recoup sufficient earnings the measures will be, this spokesman added. on their lending, even at 17.5 percent, to the housing Mergers and bailouts of banks are now the order of market. So, in a true perversion of the banking function, the day and the sotto voce discussion on Wall Street the savings and loans are investing in large CDs issued because the tightening of interest rates by Fedetal Re­ by the commercial banks. This, however, cannot stave serve Chairman Paul Volcker has left banks in a vise that off bankruptcy fo r many savings and loans, and accord­ is "bleeding them to death," in ·the words of one bank ing to one economist 20 percent of the savings and loans analyst. The banks currently are finding it hard to obtain are losing money with the ratio expected to go up fast . funds; in some cases paying more for funds than can be On the commercial bank side, the overall problem of obtained by lending them; and finding that with each negativity in lending spreads is the same. The total fixed new hike in the prime interest rate, which reached 20 assets of several troubled banks consists of holdings of percent April 2, the level of customers able to afford to corporate bonds and mortgages, as well as consumer borrow is becoming more narrow. Volcker's induced mortgages which were locked into when rates were con­ retrenchment of the banking system, once .started, will siderably lower. This is putting the utmost strain on these now set off a spiral of bankruptcies and shakeouts. banks. Any attempt by these banks to liquidate their While top New York commercial bankers such as bond holdings, however, runs the risk of dumping them David Rockefeller of Chase Manhattan say that "a real into a falling market and pushing the market lower. recession that bites" is healthy, the fact of the matter is This process must continue to push the prime rate that Rockefeller's Chase and practically every other bank into higher ranges, placing even more pressure on the in the economy could go under. Confirming this, a top banking system. As this process continues it will soon be Wall Street investment bank partner reported March 31: discovered that some banks have outpriced their cus­ "Everybody has their list of banks that are in trouble. tomers and their bad paper outweighs both their bank Mine includes the Philadelphia banks, none of which are capital and their earnings potential fo r the year. Then very good; First Chicago, which is heavily in the paper one has the classic case of bankruptcy. market. I wouldn't go near Chemical Bank or Bankers So the( banks are searching for cheap sources offunds. Trust and I'm not too sure of Citibank (of New York). But it is here that Volcker's credit tightening bites hard­ It's not just their domestic loans. Their international est. Each new commitment in managed liabilities (liabil­ portfolio is in big trouble." ities above the level of deposits) above the level of late

EIR April 7- 14, 1980 Special Report 29 last year must be met with a 10 percent reserve require­ ment. This rules out for many companies the traditional area of a good amount of cheap funds. The drying up of cheap sources of funds, and the expense of the discount window for large banks with over $1 billion in assets (which covers 70 percent of all U.S. banking deposits), has thrown every bank into a mad scramble onto the federal funds (interbank) market. m. Aneconomic Individual banks are gobbling up as much as $4 to $5 billion a day on this market. If there is a sudden drying up of the fe deral funds House Banking Committee Chairman Henry Reuss has market, the banking system is through. Already, certain developed a program for what can only be politely large money center banks are exercising Ii' profound i� termed "fascism with a democratic face" in the United influence over the future solvency of the banking system States. Referred to by Reuss and his aides as Economic by determining which banks will get federal funds. "The Restructuring for the 1980s, it is a plan to triage large large banks now will decide among themselves who gets chunks of American industry through credit cutoffs im­ the money," reported JeffNic hols, economist for Argus plemented by the Federal Reserve under the authority of Research Co. in New York. "They will decide whether a Reuss and Senator William Proxmire's various banking bank deserves to go through bankruptcy or not." bills such as the Omnibus Banking Bill and the Credit But the drying up of federal funds to some banks is Control Act. just the trigger for a chain reaction of bankruptcies, as Reuss introduced a congressional proposal on March one firm's asset is always someone else's liability. Me­ 10 fo r the establishment by the President (under the diated through the industrial and agricultural economy, emergency Government Reorganization Act of 1977) of as specific companies are sent down the tubes because of a new Department of Trade and Industry which would the bankruptcy or inability of some banks to lend, other not only take over fo reign trade functions, but control banks will be impaired. This dance of withdrawals and all domestic U.S. industrial production. It would oversee, shutdowns can end in a 1930 Kreditanstalt which "the long term restructuring of industry," an aide said, plunged the world into the last great depression. "j ust like in a Third World country. Not only would the department encourage foreigners to build their plants Corporate shakeout here, but they would take over encouragement of new Not surprisingly a chain reaction of bankruptcies is plant building by domestic corporations," he said. threatening the corporate sector as well. If the DITI proposal fails, Reuss's officeplans to get • The Chrysler Corporation an nounced this week an Executive Order for doing the entire reorganization that it may be brought down by the unwillingess of key through a revamped Department of Commerce, his aide banks to lend to it. Two Chrysler creditors, who are not revealed. members of -the 300 member syndicate of banks with The remaining industry, "those sectors which wili be loans out to Chrysler, sued the company fo r nonpayment saved," as a Reuss aide put it this week, will be of loans. As a result, the country's tenth largest industrial organized into "tripartite boards of government, indus­ company and third largest automaker was informed by try, and labor"- technical corporatism -"modeled on the Senate Banking Committee March 31 that as a result Germany both before and after the war," the sourcesaid. of Chrysler's inability to get new loans, the $1.5 billion These tripartite corporatist boards will organize a "ma­ federal loan guarantee. on which Chrysler's survival jor structural overhaul of the economy, through the depends, may be canceled. creation of a national economic consensus and putting • A recent Department of Commerce survey of the together a group of people in a bipartisan way to get the inventory-to-sales ratio, particularly on the manufactur­ job done .... The crisis allows us to do this," he said. ing level, are, when defla ted, greater than during almost any time in postwar history. Financial dictatorship • Montford Meats. the Colorado-based third largest Reuss also introduced the Federal Reserve ReDJod­ meat packer in the country, was reportedly forced tu ernization Act of 1980 (H.R. 7001) on April I, which close and file for bankrutpcy. would "give the Federal Reserve an advisory role, serv­ • Itel Corporation, one of the largest computer com­ ing as the economic staffing fo r all the departments of panies in the nation, defaulted on $38 million worth of government and to industry and labor," as Reuss himself loans, which is probably the last step before that compa­ put it, that is, to the entire economy. "The Federal ny's liquidation. Reserve has all tbese economists, real estate, and com-

30 Special Report EIR April 7- 14, 1980 restructuringof the U.S.

puters .. .I want to put it at the disposal of the President export aiding activities. All the export functions need to and the Department of Trade and Industry and teams of be concentrated in the new Department of Industry and labor and industry under the White House," he stated. Trade. There needs to be added the Office of the U.S. As Reuss told Federal Reserve Chairman Volcker in Trade Representative ... and the Export-Import Bank congressional hearings March 27, he expects the Fed and and OPIC." his committee of Congress to jointly tell industry, According to Reuss, the new department would use through these tripartite boards, exactly what they may the Federal Reserve System to implement policy. "Op­ build and how much credit they may have. "I sponsored erating economies can be obtained for the new depart­ the Credit Control Act," Reuss told Volcker in hearings. ment by utilizing the personnel of the Federal Reserve "You are quite right in using it. ... I understand you will System, without in any way compromising the indepen­ get a report on the loan portfolios ofthe major banks on dence of the Federal Reserve. The new productivity the first of every month. What I want to work out with increases, structural reforming, reindustrializing activi­ you in Congress is how we can gain access to these ties of the Department of Industry and Trade could be reports so that we can play a role in monitoringcompl i­ enhanced by drawing on the expertise of the 40,000 ance of the banks." Federal Reserve employees ...no w at work in Washing­ The immediate aims of Reuss's program, as an aide ton, D.C. and in the 12 cities housing the Federal District put it, are wage/price controls, "the barbicans" of banks and in their 26 branches and 46 centers." Reuss's "citadel," the first defenses of his program. This Reuss declared that the department would oversee means immediate implementation of wage/price con­ a restructuring of the U.S. economy. It would use tri­ trols, total control over monetary aggregates (credit), partite corporatist boards modeled on those used by and fiscal budget cuts. Longer-term triage of the econo­ Mussolini. "Its technique would frequently in­ my would follow. volve the use of government, business, labor teams to make indicative plans and to propose solutions for those sectors of our economy that are lagging in productivity. ... In railroads, proceeding with the electrification of high traffic rail routes using coal-generated electricity ANOTHER REUSS PLAN and thus saving imported oil; and rationalizing rail systems generally. In food distribution, discerning new An agencyfor efficiencies that can bring about lower prices. In a whole range of industries," consumer electronics, conductors, trade warfare · textiles among them, determining why we are losing competitiveness and what can be done. In health care On March to, Representative Henry Reuss (D-Wisc) working for more rational delivery systems ... proposed that a Department of Industry and Trade be "These structural reforms need to be surrounded by established by executive fiat underthe Government Re­ at least fiveauxili ary outworks: organization Act of 1977. "Mr. Speaker, we ought to I. a fiscalpoli cy that aims at a balanced budget now upgrade and give a real mission to the present Depart­ as much for its symbolic as well as its substantive effects, ment of Commerce by creating in its place a new Depart­ 2. a monetary policy that continues firmcontrol over ment of Industry and Trade. Such a department to the monetary aggregates ... revitalize the American economy could be achieved un­ 3. an employment policy that focuses on the structure der the President's reorganization power," said Reuss. of the labor market in our central cities and in our Reuss also proposed that the new department control pockets of rural poverty, all U.S. overseas trading as well. "The Department of 4. gasoline rationing, and Industry and Trade would put. ..unde r one tent all of our 5. a temporary wage-price freeze."

EIR April 7-14, 1980 Special Report 31 Exclusive Henry Reuss talks to EIR

Rep. Henry Reuss granted the fo llowing interview to Ex­ want them to put it at the disposal of the President and ecutive Intelligence Review on April 2. the Department of Trade and Industry and teams of Q : Congressman you have proposed a Department of labor and industry under the White House. These teams Industry and Trade that will deal both with the domes­ have the task to make plans for a troubled economy. tic economy and exporting. I understand its function is For example, the Federal Reserve would advise the a restructuring of the economy. How would that work? different agencies. An example is that the railroad situation is very bad. The Department of Transporta­ A: The Department of Commerce as a result of last tion needs some staff help. The Chicago Federal Re­ fall's reorganization has a much more expanded export serve is the homebase of the Milwaukee Railroad. The power. What currently needs to be done is a Depart­ Federal Reserve could have given help on that. They ment of Industry fo r here at home, so that we can could have proposed the abolition of the ICC which I recoup U.S. industry, such as the steel industry and think should be done. auto. Our auto industry, in conjunction with govern­ If we had this then, for example, Detroit would not ment and Labor has to recapture the American-built be such a mess. Four years ago we would have told compact. We have to enable the steel industry to devel­ Chrysler to stop focusing on gas-guzzler cars and we op its casting capability. We have to reindustrialize America, increase productivity, competitiveness. would have had whatever regulatory measures were needed to do that. Instead Chrysler kept up with their Q: I see you proposed the Fed staffthe new department. silly ways and they and Ford and GM are in deep A: I introduced a bill yesterday to reorganize the Fed­ trouble. eral Reserve in that regard. It's beautifully decentral­ ized. I would use the Federal Reserve fo r staffingand Q: What has been the response of labor? solving these problems. It would work. The Federal A: They are fa vorable. I know this by my discussions Reserve has personnel devoted to monetary policy, but late at night with labor leaders. I want it to work also on structural policy. My total proposals for restructuring are: I) a strong Q: Your bill deals with export questions. The Europe­ White House which is central to this, 2) a revived and ans have been subsidizing exports and there is much revised Department of Commerce, 3) help on this re­ discussion in Congress about either stopping this in structuring by the Federal Reserve; and 4) establish­ Europe or beginning such a policy here. ment of business, government and labor teams. A: There is too much subsidizing of exports there. But . we can't call our dogs offunt il they do. Q: What response have you had from the administra­ tion? Q: You are going to Europe next week to discuss some A: I have talked to Commerce Secretary Klutznick and of your proposals with them. Where are you speaking ' Assistant Secretary Hodges. They're sympathetic. and what will you tell them is Europe's role? Q: Can you go into more detail about your proposal? A: I will speak to government leaders at the OECD in A: The bill will have hearings right after the congres­ Paris, the Ebert Foundation in Bonn and the Metale sional recess. I have called fo r the Federal Reserve to Gesellschaft in Frankfurt, before a group of industry, have an advisory role, serving as the economic staffing, government and labor leaders. I will discuss my propos­ for all the departments of government and to industry als and how it relates to Europe. and labor. The Federal Reserve has all these economists, real Q: How does it relate to Europe? estate, computers and they don't have enough to do. I A: Let me pass on that one.

32 Special Report EIR April 7-14, 1980 Iv. A NATO military buildup

A consensus has been reached at Washington's leading agreed itself to play a major security role (see below). centers for planning Anglo-American military strategy • An April I conference at CSIS on "The Future that the threat of an oil flow cut-off from the Persian Role of Naval and Marine Forces," chaired by CSIS Gulf must be used as a weapon to force Western Europe gulf expert Alvin Cottrell. A speaker at that conference, into agreeing to a massive military buildup over the next Jeffrey Record, fo rmerly of Brookings, remarked after few years. This line is now being pushed by the Atlantic the event that the U.S. should seek "to put the fear of Institute, the Brookings Institution, and the Georgetown God into the Europeans" if they refuse to "play a larger Center for Strategic and International Studies (CSIS). role in an accentuation of NATO." Record insisted that In a series of studies and interviews, Atlantic Institute gulf oil supplies were threatened by both "intra-Arab strategists have been most vociferous in insisting that conflict" and "religious fundamentalism a la Europe must be brought "into line" by the threat that Khomeini." the U.S. will pull units out of Central Europe if the Europeans don't agree to take "a greater share" in an expanded NATO organization. If they refuse to do so, the Atlantic Institute is warning, Europe would findits oil supplies jeopardized by an American refusal to secure McGEORGE BUNDY them. This line is hardly surprising given that the Atlantic 'Oil shortages hurt Institute directorship significantly interfaces the Club of Rome, the organization which has pioneered the modern Europe the most' "limits-to-growth" propaganda as a means of generating hysteria over resource scarcity and thereby increasing Following are excerptsfrom a speech whichformer Nation­ Anglo-American control over resource flows. Harlan al Security adviser McGeorge Bundy delivered at New Cleveland, a former U.S. ambassador to NATO, is a York Univesity on March 19. Vice-Chairman of the Atlantic Institute and a member of the U.S. Association of the Club of Rome. George "The authentic crisis I speak of is the crisis in foreign McGhee is also a former NATO ambassador, a member and defense policy that lies behind the headline stories of of the Club of Rome, and Director of the Atlantic hostages in Iran and Soviet invaders in Afghanistan. The Institute. root of this crisis is the inescapable dependence of the Another Atlantic Institute Director, Helmut Sonnen­ most important friends and allies of the U.S. on sustained feldt, also at Brookings, has participated in a Brookings supplies of oil from the region of the Persian Gulf. ... study, along with Brookings Middle East Director Wil­ This crisis was not created by the Soviet advanceon Kabul liam Quandt, profiling how Europe will be increasingly and still less by the kidnapping of American diplomats in vulnerable to instability in the Middle East, especially Teheran .... It is much larger; its roots go deeper; it will "inter-Arab warfare," and therefore would be forced to last till the end of the century. take a larger role in an expanded NATO structure. The nations of Western Europe and Japan are eco­ Variants on the same theme have surfaced in two key nomically dependent on Persian Gulf oil in a most cate­ policy fo rmulations: gorical and decisive way .... Where oil for us is less than • A March 19 speech at New York University by half our energy, for Europe it is about three fifths and for former National Security director and Ford Foundation Japan three quarters .... And for Europe and Japan it is head McGeorge Bundy. Bundy warned of the threat of a dependence quite unaccompanied by any power to "internal instability" in Gulf countries and proclaimed protect that Persian Gulf oil from outside threat. that the U.S. could not and would not be able to defend There have already been two relatively modest inter­ Europe's energy supples from this threat unless Europe ruptions of these supplies-an oil boycott in 1973 and a

EIR April 7-14, 1980 Special Report 33 cutback of Iranian oil in 1979. Each of them had brutal A: Well, yes, I do. And I must say that one of our consequences, though each was small compared to what working groups will try to come up with the best way of could easily happen in the future. Either by an expansion dealing with this problem. I don't agree that getting of Russian physical power-not the more likely case-or angry at our allies is the way to get them to act in a more by it major shutdown resulting from upheaval within this responsible fashion. We aren't too pleased with Carter's area, there could be a most dramatic threat to the whole handling of the situation either. We must emphasize to fabric of European and Japanese society. And it could them that they are far more dependent on energy imports come at any time .... from volatile areas than we are, and that they therefore The President also understands that the gravest dan­ have a stake in the question of our armed strength ger in the Persian Gulf is not a direct Soviet attack but outside the NATO area proper . . internal turmoil-and that while American power can and will almost surely hold the ring against invasion Q: Keegan brought up the question of Soviet E-beam

from the north, the V.S. cannot-as it should not-by capability at Congressional hearings a few weeks ago ... . itself protect the region from itself, or make it "safe" for A : Definitely. These questions will be addressed with rich consumers. Mr. Carter has said some of this and utmost seriousness, as will generating capital to permit a should say it all. Only the Americans can deter the defense catch-up. Russians, but the Americans alone can do almost nothing else .... Q: Back to the question of our allies: What makes you think that they will go along with what you recommend, given how upset they are with Carter's leadership? A: The feeling of our working group so far is how THE ATLANTIC COUNCIL tremendously important it is that our allies know what we're up to-we must have a greater degree of constancy, 'Gi.scardsh ouldn't do ' much more than Carter has provided. We must tell our allies in advance what steps we're going to take, for what he is doing' example, in response to a Soviet move into Afghanistan. The whole problem revolves around consultation. We Dr. Francis Wilcox. head of the Atlantic Council. granted must have closer consultation with our allies. As I said an interview on April 2 to EIR which we excerpt here. before, though, the Europeans are just going to have to realize how important NATO is in protecting their access Q: I understand the Atlantic Council has begun a study to raw materials in the Third World-not just NATO as of the NATO alliance. it exists, but an expanded NATO. A : The project just got under way . ... We don't really have our sights set completely at this point, but we do Q: What do you think of Giscard's trip to the Mideast? plan to cover the following areas: The extent to which Isn't it possible that the Europeans are working out their the V.S. and our allies are capable of dealing with own way of securing these raw materials? emergencies; the relationship between defense and de­ A: You have to expect the French to do unusual things­ tente; the military balance; the questions of readiness and not just unusual, but unreasonable as well. I must admit supply-especially vis-a-vis NATO's southern and I'm dismayed at what Giscard has been doing. . .. I northern flanks; the impact of NATO outside specifically don't like this arrangement with Iraq. That doesn't do defined NATO areas, especially the Middle East a.nd NATO any good .... Africa; resource constraints and dilemmas. Q: Well, aside from the consultation carrot, won't you Q: How about the economic and political aspects of be considering some sticks to use against Europe? NATO, for instance, the ramifications of the European A: Well, yes, sticks. They are necessary sometimes. These Monetary System and the question of the economic countries are pretty independent though, and you will underpinnings of a defense system? have to be a little careful of what sticks you use, or the A : Oh, absolutely. These are questions of the utmost whole thing will backfire . ... We will be looking at importance, and we will give in-depth attention to them. certain means of persuasion-trade relations, the Mans­ We'll take a close look at our allies and the divergence of field amendment might be worth reviving in some form views between us and them. [the perennial amendment offered by former Senator Mike Mansfield, now Ambassador to Japan, to withdraw Q: Do yo� findthe German-French attempt to carve out V.S. troops from Western Europe]-that would really an apparently independent strategy disturbing? create some domestic problems ....

34 Special Report EIR April 7-14, 1980 V. The war on Eltrope

House Banking Committee Chairman Henry Reuss (D­ about the intent of the Competitive Export Financing Wisc.) will be traveling to the West German capital of Act of 1980, which he and Senators Alan Cranston and Bonn on April 8 to announce the expected result of Jacob Javits are cosponsoring. "The purpose of the bill Federal Reserve Chairman Paul Adolph Volcker's high · is to bring Europe to the bargaining table" to negotiate interest rates on Europe. "The European Monetary Sys­ the cutbacks of their export financing, the aide said. tem could go down the tube," is what Reuss will say in Georgetown CSIS itself held a March 26 press con­ an April lO speech to the elite Friedrich Ebert Founda­ ference in Washington to announce publication of the tion, according to a top Reuss aide. first studies of its "V.S. Export Competitiveness Proj­ Reuss will be traveling to Bonn at the same time as ect," which supports the Heinz and related bills. Project fo rmer Secretary of State Henry Kissinger and an entire Chairman Robert Kilmarx told the press "we are living delegation of V.S. congressmen who were invited by the in a dream world with respect to our allies. They are self­ Konrad Adenauer Foundation. In a series of meetings, serving, nationalistic and jingoistic with respect to their they will propose to West Germany that Europe's only export subsidy policies" which must be halted. way out of international monetary crisis is to implement And Senator Bayh, in a speech to the Senate March "an entire international economic restructuring" based 20, said he plans legislation to declare a V.S. trade war on the V.S. "Economic Restructuring for the 1980s" against all "our allies and erstwhile friends" who do not plan Reuss submitted to Congress during March. adhere to the U.S. trade boycott against the Soviet Reuss' first stop in fact will be the Organization for Vnion. "If such cooperation is not forthcoming volun­ Economic Cooperation and Development in Paris on tarily, we must use our own economic weight" against April 5, where, according to Reuss in an exclusive inter­ Europe, he said. view with EIR "I will discuss my proposals for the V.S. economy and how they relate to Europe." The OECD is Toppling the the umbrella economic policy board for NATO which German government dictates economic policy to most NATO member gov­ This war on Europe dates back to last August when ernments. Reuss announced that he was intervening in the West The congressional delegation, which includes Sena­ German elections to try to topple Chancellor Helmut tor William Roth (D-Del.), fresh from the London Tri­ Schmidt, on whose policy rests the future of the Europe­ lateral Commission meeting, will visit the Konrad Ad­ an Monetary System. Reuss, a City of London spokes­ enauer Foundation from April 8 to II, where Reuss will man on Capitol Hill, wrote then to G.W. Miller that the join them. Reuss will stay at the Friedrich Ebert Foun­ Schmidt government must be "urged" by V.S. pressure dation, the correspondent of the New York Council on to cease it's progrowth policy and "fight inflation pri­ Foreign Relations, April 10-12 fo r private discussions, marily by fiscal policy." Reuss admitted to the German and then travel on to the city of Frankfurt, where the press that he was deliberately "intervening" in Ger­ congressman will give a speech to a meeting of govern­ many's election debate. ment, industry, and labor at the Metallgesellschaft Cor­ In November, Reuss's House Banking Committee poration. and the Joint Economic Committee, of which Reuss is a ranking member, issued a report titled "The European Trade war Monetary System: Problems and Prospects," which pre­ From Capitol Hill, Senators John Heinz (R-Pa.) and dicted the early collapse of the EMS based on "a rapidly Birch Bayh (D-Ind.) together with the Georgetown Cen­ depreciating dollar (which) can generate severe strains ter for Strategic and International Studies, have launched within the EMS," and said that other European countries a trade war against European exports of industrial devel­ would drop out of the EMS because of German " tyran­ opment to the Third World. Heinz's office was asked ny."

EIR April 7-14, 1980 Special Report 35 have been demanding we deflate, and now we have, and REUSS SPEECH�TER we're in recession, and they are going to have to give support to a program fo r long-term restructuring of the 'The EMS could U.S. economy. Germany will just have to support Reuss's Economic Restructuring for the 1980s, and de­ go down the tubes' mand that Carter implement it. That means in the short­ term wage/price controls and budget cuts, in the long­ An aide to Rep. Henry Reuss who drafted the congress­ term, total restructuring of major economic sectors. man's April 10 speech to the Friederich Ebert Foundation in Bonn said that Reuss was working on the fo llowing Th e aide then quoted a draft fr om Reuss's speech: background assumptions regarding the crisis in the inter­ Chancellor Helmut Schmidt must bring his personal national monetary system. weight to bear in international fo rums and institutions on Mr. Carter to see that the fundamental restructuring As soon as the Volcker policies really take effect here of the U.S. economy takes place, to urge programs of in the United States, the economy will go into deflation. fu ndamental reform rather than yet another macroecon­ This will push our interest rates down and weaken the omic ratcheting down ofthe U.S. economy .... dollar. But the Europeans will be very reluctant to inter­ I call fo r the endorsement of the work of the Brandt vene. If the dollar starts to go, it will have to go, because Commission. In a world situation in which we face a their intervening would be too inflationary for them world-wide restructuring of the financial obligations and now. The resulting dollar crisis could wreck the EMS. It the debts of the less-developed countries, industrial na­ could hurt the EMS a lot; they do not have a dollar tions must support and put into place institutions to deal policy.They have been lucky the dollar has been stable. with this such as the Brandt Commission's proposed The EMS could go down the tubes. .. The parities World Development Fund. . . [among EMS currencies] will get shoved to hell and they . On the basis of this fundamental economic reform, may just have to abandon them. If the pressures get too the industrial West will be in a position to cut a deal with intense on the non-German members of the EMS, they OPEC. We would be in a position to guarantee a real may just have to scrap it and say "The hell with it, we're price for the U.S. dollar and thus for oil, in exchange for not going to wreck our domestic economies just to oil availability and stable oil prices. maintain the parities." Therefore Reuss says our priority has got to besome Th e aide then commented that Reuss, in his off-the-record negotiations with the Germans. He'll tell them that they remarks, would demand that Germany and all Europe

short, our trading partners should fight inflation pri­ marily by fiscal policy rather than monetary policy. House �g challT.nan They are doingj ust the opposite. I respectfully suggest that you urge the leaders of Germany, Japan and demands intervention other countries to change their anti-inflation mix so as to rely less on monetary policy and more on fiscal Th e fo llowing exchange took place between Henry policy. Reuss and President Carter and his Treasury Secretary G. W. Miller in late August. Th e Congressman's inter­ Miller to Reuss, Aug. 30, 1979 vention into the West German electoral process contin­ ...There are continuing high-level discussions with ues to this day, according to his aide Jaimie Galbraith. authorities of Germany, Japan, and other countries, and these will. be used to discuss the issues you have Reuss to Carter, Aug. 1, 1979 raised. The free world is on precisely the wrong track. Ger­ many, Japan, and others similarly situated should Reuss to the West German papers Handlesblattand fight their domestic inflation in a way that will not Wirtschtiftswoche, September, 1979 endanger the world's currency, the U.S. dollar, into a Q: Your dramatic intervention for fiscal tightness depression that could sink the whole free world. In comes at a time in Germany when the election is

36 Special Report EIR April 7- 14, 1980 participate in "an entire international restructuring " mod­ eled on his Economic Restructuring fo r the 1980s in the BIRCH BAYH U. S. 'Europe boycotts US SR, It's a question of all of us doing what we're supposed to be doing. We cannot get our monetary cycles com­ or we boycott Europe ' _ pletely out of phase again ... he's going to press for a coordinated fight against inflation. We ought to put into Senator Birch Bayh (D-Ind. J, a member of the New York place steady monetary and budget policies, and wage Council on Foreign Relations, inserted a statement on price controls. The same kinds of policies are required "Deterring Soviet Adventurism " into the March 20 fo r West Germany, Japan, and the other countries. They Congressional Record. We excerpt fr om that statement. must keep their budgets down, reduce their monetary

aggregates, and implement wage/price controls . ...Of The importance of effective U.S. sanctions against course they won't implement it, but just because they the Soviets for their invasion of Afghanistan will require ignore him that never stops Reuss from telling them ... that our allies do not undermine our efforts . ... this is not a one way option ... we're talking about an If such cooperation [from America's European allies entire international restructuring. particularly] is not forthcoming voluntarily, we must us� Then Reuss will tell them we have to get serious about our own economic weight to encourage the cooperation �ating up on OPEC for beating up on the LOCs. He necessary to achieve the withdrawal of Soviet troops figures that one thing that has been noticeably absent is from Afghanistan and send a clear signal that no further any attempt to embarrass OPEC and point out that the military adventures should be undertaken. I will soon consequence of their policies is disaster in the LOCs. He introduce legislation which will permit the President, by wants the consuming nations to get together and attempt proclamation, to increase duties on goods from countries to embarrass OPEC, exposing them ...sa y that there are which do not cooperate with our efforts. This legislation bodies lying in the street dying in the LOCs because of would also exclude from U.S. Government procurement their policies. He'll demand they cut oil consumption and under the International Government Procurement Code go to alternative energy ....They've been moving ahead the products fr om such countries ... too much on nuclear. This doesn't seem to bother them, While this step might seem heavy handed to some the safety problems .... theoreticians of international trade and politics, it is a It's OPEC itself which is particularly anxious to useful signal which should be understood by those na­ divide us from Europe ...." tions who see America's response to the Russian threat to world peace as a splendid opportunity fo r them to make a fast buck. Put simply, if a country insists on undermining our efforts ...then that country's exporters drawing near and nobody is thinking of raising taxes, should face the likelihood of higher tariffs on their but everybody is discussing whether taxes should be products exported to the United States as the price of lowered in 1980 or 1981. Did you mean to inbervene their indifference to the presence of Soviet-manned tanks in this debate? in Afghanistan .... A: I simply point out that a moratorium on construc­ And our oil consuming allies must understand that tive election year dialogue would only result in perpet­ their economies and prosperity depend far more than our ual silence. In fa ct there is an alternative to German own upon secure lines of supply from the gulf. tax cutting-namely a less restrictive monetary policy. So what do we do? To be sure, the present situation Forswearing tax reduction should make it possible for requires a careful, balanced, and effectively directed the Bundesbank to avoid excessive interest rate in­ effort to enlist assistance of other countries ... Our con­ creases .. .1 would welcome German advise against a cern about stopping the spread of atomic weapons must vote-catching U.S. tax cut. ... continue, NATO should play a part . . . .1 do not suggest the German government is The time has come to make our position clear. The engaged in conscious dollar weakening, but there is a United States expects its allies, fo r whom it provides a definite risk that the monetary policies now being cl ar umbrella at great cost to our own taxpayers, to pursued in Germany will in fact weaken the dollar and ?� � JOIO defending the Persian Gulf region from Soviet fo rce countermeasures fr om the Federal Reserve that 10 takeover or domination, and we do not intend to disre­ willhave grave consequences fo r the worldeconomy. gard flagrant attempts to undermine our own efforts to sustain the reprisals we have undertaken ....

EIR April 7-14, 1980 Special Report 37 Italians and French join in crackdown on terrorists

by Paul Goldstein

A significant new development emerged in the European newspaper Le Figaro is speaking of the creation of a antiterrorist fight last week with unprecedented cooper­ "Euro-police" in effectiveoperation against terrorism. ation across national borders involving the Fren,ch, As Italian paramilitary police units moved in on a Spanish and Italian police in a massive roundup of top­ terrorist safehouse in Genoa, killing four leading mem­ flightterroris ts. bers of the notorious Red Brigades in a shootout last On April 7 of last year, the Italian magistracy and week, French police and special anti-terror units were military police (carabinieri) jointly initiated antiterrorist scooping up 30 terrorists in three French cities and operations at a level previously unknown when they capturing 1,000 kilograms of explosives and hundreds of temporarily slUIt down part of the University of Padua submachine guns. with the arrest of some of its most prestigious professors Four days prior to the French and Italian actions, charged with masterminding terrorist operations, in­ Spanish officials arrested 20 members of the Jesuit-con­ cluding the 1978 kidnapping and assassination of Chris­ trolled Basque terrorist group, the ETA. In addition, tian Democratic Party President Aldo Moro. Those and I talian authorities carried out a series of well-coordinated subsequent arrests placed evidence in the hands of the arrests of over 50 terrorists in six cities across Italy, Italian magistracy leading to two previously unaccepted bringing the total count of terrorists slain and captured conclusions: first, that terrorism is organized as a unified to approximately 110 over the last week in March. international phenomenon with a unified international control apparatus; second, that the "above-ground" Anniversary New Left radicals-which in the case of Italy includes the of Negri Arrest so-called Autonomi and organizations such as Lotta The raids were carried out exactly a year after the Continua that were created in conjunction with the arrest of Red Brigades controller Professor Toni Negri American Weathermen and others-are an intrinsic part of Padua University, charged with masterminding the of the terrorist networks. Evidence was in fact produced kidnap-murder of fo rmer Italian Prime Minister Aldo to show that in essence the membership of the "above­ Moro. The Negri case, laying open the connection be­ ground" organizations was generally interchangeable tween certain "noble fam ilies" of Europe, "respectable with the acknowledged terrorists. citizens above suspicion" including leading Italian So­ While Italian magistrates such as Judge Calogero, cialist politicians, the terrorist legal support networks, the individual behind the Padua arrests, said repeatedly and the terrori sts themselves, provided the first big break that France in particular was a crucial center of interna­ in the battle against international terrorism. tional terrorist deployment, it was not until last week Since the Negri arrest, European intelligence experts that direct action was taken in France. Now the French have informed EIR that anti-terror units have made two

38 International EIR April 7- 14, 1980 •

Minister Aldo Moro. Police are saying that these terror­ ist cells are a "free floating operation" that maneuvers from area to area. The breaking open of the French side of the terrorist international enabled Italian authorities to move in on the Italian Red Brigades units. Led by Carabinieri Gen­ eral Carlo Dalla Chiesa, 150 police were involved in carrying out the Italian end of the crackdown. Before the four members of the Red Brigades were killed in Genoa, Dalla Chiesa rounded up two prominent leaders in Turin and Genoa, Patricia Peci and Rocco Micaletto. Follow­ ing their arrest, officials issued a communique stating that these arrests are "only the beginning." Officials were quick to point out that their crackdown was part of a 19-month-Iong planning program concentrating on the Genoa and Piedmont areas. In Bologna, another major break developed when I talian police arrested three British subjects along with members of the Revolutionary Action group. The three British subj ects, Kenneth McBrugen, Mark Holten, and the daughter of a leading British oligarchic family named Helen Jean Weir, were integral to the terrorist opera­ tions. Through a cooperative effort between the Interior important advances. First, in recognition that the terror­ Ministry's special anti-terrorist unit and the DIGOS, the ists operate as part of one integrated international net­ national police, the Revolutionary Action organization work, police have upgraded their own cooperation and has been knocked out of commission. The former leader coordination across national boundaries. Second, they of the group, Gianfranco Faina, who was arrested last say, the authorities have recognized the connection be­ July, had links to a mysterious figure named Ronald tween terrorism and the international organized crime Stark. According to the newspaper La Repubblica. Stark entity known as Dope, Inc., which provides financing for has been identified as a "CIA agent" who worked closely the terrorists through the sale of illegal narcotics-and with Faina and supplied the terrorists not only with have broadened their investigations as a result. drugs, but with the financial support derived from drug According to Le Figaro. members of the arrested sales. Faina, a fo rmer professor fr om the University of group Direct Action in Toulon are known drug pushers Genoa, had been involved with Toni Negri in the "new with links to organized crime, and "even though they left" group Potere Operaio, the fo rerunner of the Red operate on different levels, they are part of the same Brigades. thing." The counterterror action was not limited to northern The arrested members of Direct Action have been Italy. Dalla Chiesa's forces carried out another far-rang­ tied to the assassination attempt against the French ing operation, arresting 14 members ofthe Red Brigades Minister of Cooperation and in the attempted assassina­ group. One leading member of this terrorist cell, Giov­ tion of French Labor Minister Boulin nearly six months anni Tilocca, is the son of the Commander of the prison ago. Subsequently, Boulin "committed suicide" -a story guards for the prison, Bade Carros. This jail is the French authorities privately disbelieve. maximum security prison where many of the leading The crackdown in France is most significant, accord­ terrorists are kept and where there has been a series of ing to European press accounts. The 30 arrested terror­ breakout attempts. Italian authorities are keeping quiet ists are connected to the Red Brig�de · organization in as to the full implications ofthe arrest. Italy. U sing parts of southern France and Paris as their The least publicized, important side of the counterter­ key coordinating centers, the terrorists carried out their ror operations is the full vindication of Italian Judge recent wave of assassinations in Italy and France. Le Vitalone's charges that members of the Italian magistra­ Figaro reports that Franco Pinna, Enrico Bianco, and cy who b�long to a group called the Democratic Magis­ Orsina Marchionni, arrested in Toulon, France, were all tracy have enabled terrorists to continue with their ac­ members of Italy's Red Brigades with ties into "Spanish tions as a result of their judicial decisions. About 20 clandestine groups." Moreover, each ofthem was want­ percent of Italian magistrates belong to the group, which ed in connection with the assassination of former Prime has now been officially charged with obstructing justice.

EIR April 7- 14, 1980 International 39 and political diplomacy abroad. Andreotti has applaud­ ed the Franco-German alliance behind the European Monetary System, and those nations' efforts to preserve East-West detente in the face of Anglo-American anti­ Soviet posturing. An Andreotti victory over Cossiga at the Christian Democratic congress in late February was only narrowly Italy averted when pro-Cossiga operations by the Roman black nobility's Jesuit intelligence service were suddenly A Carter phone call augmented by a sudden visit from U.S. Secretary Cyrus . Vance. Vance threatened key Andreotti supporters into to a Roman squillo shifting sides-he carried, according to Italian sources, "a suitcase full of dollars and a pistol." by Umberto Pascali Although a well-schooled politician, Andreotti's re­ sponse to defeat was to declare the issues too important James Earl Carter personally intervened into the internal for "business as usual," and absolutely refused to com­ affairs of Italy at the end of March by telephoning promise, preventing Cossiga from fo rming a govern­ "caretaker" premier Francesco Cossiga to "invite" him ment. Cossiga could not respond to Italian president to form a new government immediately. Carter's undi­ Pertini's pro fo rma request that he make the attempt, plomatic action, reported angrily in the March 29 edition when the Communists threatened an immediate no-con­ of La Notte, a Milan daily, was the culmination of a fidencevote . series of strongarm tactics by the British and American The U.S. and British governments mounted pressures governments to ensure that Italy's next government will on Italy dramatically when rumors began circulating be their tool, and not an ally of France and West·Ger­ that Cossiga would have to renounce his caretaker role many with policies of East-West detente and internation­ to permit Andreotti to form a coalition. On March 25, al monetary reform. the London Times published a front page interview with La Notte headlined its expose of the Carter phone British Foreign Minister Lord Carrington, conducted by call, "Govern 0 Squillo" (government by telephone), Italian Aurelio Levi, ajournalist in the employe of British capitalizing on the other meaning of the word squil/o­ intelligence's International Institute for Strategic Stud­ prostitute. Journalist Walter Semeraro speculated that ies. Carrington said he was no longer concerned about the U.S. president told Cossiga the U.S. planned a the evident willingness of France and West Germany to dramatic action in the Eastern Mediterranean-Iran, or expel Britain from the European Economic Community possibly Afghanistan-and demanded that he ally his over a budgetary-contributions dispute. A Cossiga-Craxi Christian Democratic fa ction with Italy's Socialist Party government in Italy, he said, "in two to fo ur weeks ... under Bettino Craxi to form a new government the will tour European capitals in search of a compromise." United States "can rely on." And in fact, Cossiga, as chairman of the EEC, post­ poned the scheduled March 29 summit at which the Treating Italy showdown feared by the British would have occurred. as a Banana Republic In short, commented La Notte, in case of an Ameri­ Secret U.S. Italian can military adventure, Italy will be treated as a "banana military maneuvers republic," most probably including provision of bases Even as the punctual telephoned order from the and other staging facilities to American forces. It appears President of the United States was delivered, reports that "big political shifts have always to be accomplished came in that Italian military forces were secretly con­ under pressure of events outside the democratic system ducting joint patrols or possible maneuvers with Ameri­ proper," concluded Semeraro. can forces in the Eastern Mediterranean or Indian Ocean The "Dear Francesco" call from the White House region. That exhibits the dangers of London's squil/o . exemplifiesthe significanceof the tug-of-war now under­ Cossiga continuing in power: With its deep culturiil �ies way over Italy. Barring such intervenion, the most likely and tradition as a "bridge" between Europe and the next government would be fo rmed by Giulio Andreotti, peoples of the Middle East, Italy could become a Trojan the former Christian Democratic premier, who pledges horse within the peace bloc formed by the European to bring the Communist Party, the nation's second larg­ Monetary System nations, to which French President est, into a new government to guarantee stability at home Giscard only recently won the leadership of the Arab and a base from which to conduct meaningful economic world.

40 International EIR April 7- 14, 1980 "The feeling in Argentina, generated by the country's defiance of the U.S. embargo, is one of euphoria," complains the Washington Post. "It can now demonstrate its independence from the United States, show the world the importance of a Third W orId power, enhance its own self-esteem and gain national soli darity, since almost every faction in the political spectrum seems to agree Latin America with the government's position on the embargo." Such a national triumph at the expense of Washington bolsters A turn to the East the sagging position of General Videla, whose Fried­ manite economic policies have just caused the collapse of in trade programs the fourth largest bank amid 123 percent inflation and labor discontent. Not since the 1978 W orId Cup soccer by Mark Sonnenblick victory has the dictator seen such unity. The Carter administration has tried to veto Argentine While Jimmy Carter's top antinuclear diplomat was left grain and nuclear decisions by sending down General cooling his heels in Buenos Aires on March 25, a West Andrew Jackson Goodpaster of West Point in January, German technical team in the same city completed ne­ Commerce Undersecretary Luther Hodges two weeks gotiations for the sale of a nuclear power station to ago, and "Special Ambassador for Non-Proliferation Argentina. Meanwhile, two top Argentine officials Matters" Gerald Smith this week. Argentine ,military toured Soviet nuclear centers and examined the nuclear men basked in the attention they were gett ing from technology being offe red by Argentina's leading trade Washington after years of ostracism. Goodpaster got partner, the Soviet Union. nowhere; Hodges' office said: "All I can tell you is that In only three years, the Carter administration's cru­ he went down and came back"; and Smith was wined and sade for "human rights" and its efforts to prevent the use dined while German negotiators approved Argentine of nuclear energy-and indeed, any industrial develop­ safeguards on K WU's sale of a nuclear power station to ment-in the least developed countries have lost for Argentina. American industry and agriculture one mar ket after another. Even the hoary rhetoric of anticommunism Brazil also turns to Europe trumpeted by military regimes is no longer an effective The Brazilians are also extremely attentive to the prophylactic against Soviet economic penetration of better deals coming from Europe-and from the Soviets America's erstwhile trade partners. Carter adviser Zbig­ in particular. They have been quite discreet but insistent, niew Brzezinski and a faction in the Pentagon are still in selling a couple million tons of corn to the Soviets at plotting the extension of NATO into the South Atlantic. $10 per ton above U.S. export prices. But the necessary mainstays ofany such operation, Brazil Similarly, the French aircraft industry is about to and Argentina, have made a mockery of Carter's "Soviet make an agreement potentially worth billions withBra zil grain embargo" by exporting millions of tons of addi­ on the basis of the kind of technology transfer abhorrent tional grain to the U.S.S.R. at premium prices. to Washington and to many short-sighted U.S. corpora­ tions. The French Air Force has agreed to buy 35 Xingu Argentina euphoric training planes from Brazil, instead of from Cessna or The liberal New York Times waxes hysterical in its Beechcraft. The French state-owned SNIAS will assem­ March 26 editorial, "Argentina's Silent Partner": "Ar­ ble helicopters in Brazil and use Brazil as a "showcase" gentina's anti-Communist junta is the toast of Moscow for marketing to all of Latin America. Brazilian airplanes for having increased grain sales to the Soviet Union in are considering buying the Airbus, instead of the 747, defiance of the American embargo. Thus do two nations and the Brazilian Air Force will buy 50 Mirage-50 fight­ ignore ideologies so sacrosanct. ... The Argentine gen­ er-bombers (the highest priced item), if austerity con­ erals, fo r all their pronouncements about defending straints can be breeched. And the Brazilian Army Chief Western civilization, have shown that their principles are of Staff will be off to West Germany in June to seek stuffed with straw." similar arrangements in sales and production rights of As the Times's feeling of deception certifies, General down-to-earth hardware. Videla's government seems to be making the supreme Meanwhile, Brazil is making peace with its historic sacrifice: giving up the hopes nurtured in repeated visits enemy Argentina; they are negotiating agreements on by Henry Kissinger of being made Southern Hemisphere shared communications satellites, joint aircraft produc­ members of the Trilateral Commission. tion, and even nuclear cooperation.

EIR April 7-14, 1980 International 41 Is Cuba fomenting revolution to get at Mexico's oil?

by Tim Rush

In the last week of March, the Carter Administration between Mexico and Washington's perceived economic deployed a battery of high officials to Congressional adversaries of France, West Germany and Japan, and to hearings with two charges: that Cuba has stepped up take control of Mexico's sizable oil deposits. direct intervention into the Caribbean and particularly Washington is especially concerned about President Central America, funneling arms to Salvadorean insur­ Lopez Portillo's upcoming trip to France and West gents through Honduras; and that the ultimate aim of Germany (see Dateline Mexico column this issue). Cuba and the Soviet Union is to create an "arc of crisis" targetting Mexico's southern oil fields,the strategic prize Is it true? of the entire region. How much truth is there to this perception? The The day after this testimony was leaked to the inter­ evidence is disquieting. national press, a choleric Mexican Foreign Minister • The administration does not seriously believe that Jorge Castaneda convened a special two-hour press con­ "Cuban intervention" is the guiding force of events now fe rence to refute the Carter Administration line. "It's unfolding, even less that "Mexican oil" is the ultimate pure idiocy to think that the Soviet Union and Cuba are Cuban objective. An informed source at the New York intervening in the problems of Latin America to take Council on Foreign Relations stated the new ballyhoo control of Mexican oil, as U.S. military strategists are was "nonsense," designed merely to "create a climate thinking," he responded. In an unusually direct criticism and enough back-up fo r a U.S. military intervention." of a high American official, he stated that he "disagreed This est�mate is widely echoed in even conservative think­ with Vance's view" that Cuba was "directly intervening" tank circles, who term the scenario "far-fetched." into Latin America. Secretary of State Cyrus Vance had Regardless, Administration spokesman continue to made the charge at Senate Foreign Relations hearings charge Cuba with responsibility for destabilizing the March 25. Two days later Mexican Defense Minister area, while simultaneously announcing stepped-up V.S. Felix Galvan Lopez arrived in Havana for a two day visit "vigilance." In early April, for instance, the V.S. de­ which was subsequently extended another day. ployed high-speed missile-bearing ships to patrol the Behind this exchange lies a spreading conviction in Caribbean and to contain Cuban "expansionism." Mexico, other areas of Latin America, and policy and • The possibility of unilateral V.S. moves to heat up business circles in the U.S. that Administration policy is the area is heightened by Carter's increasingly desperate not one of avoiding an "arc of crisis" right on our re-election bid. James Reston identified this desperation southern flank but of creating one. Recalling the roles of factor in a March 28 New York Times column: To Henry Kissinger and National Security Advisor Zbig­ "release the political tensions around the administra­ niew Brzezinsky in bringing Khomeini to power in Iran, tion ... Carter is under great temptation to take dramatic these circles argue that the goal of such crazed geopolit­ action and to raise the level of international crisis, for the ical gambling is to bring the combined Central America­ greater the threat abroad, the more likely he is to_ be Caribbean region to an Iran-style "chaos threshold val­ supported at home." The CFR source emphasized the ue" where major direct U.S. intervention would become same point: far from the election campaign dampening politically fe asible. A feature of this strategy is to desta­ the chances ofU .S. intervention, "it is now more realistic bilize Mexico through violence on its southern border. than ever before." From the viewpoint of Carter's advisors, the destabil­ • The Washington-spun scenarios of how Mexico ization of Mexico is essential both to prevent a link-up will get embroiled in the Central American vortex are

42 International EIR April 7- 14, 1980 reaching new heights of detail and sophistication, involv­ Documentation ing the Mexico-Guatemalan border areas, the Indian populations of the region, rural guerrillas, domino ef­ fe cts spun off events fu rther south in the "arc of crisis" etc. 'Mexico is susceptible • Perhaps most worrisome of all, there is ample to destabilization' evidence that the U.S. is deliberately fo menting the process of Iranization in the region. This process,inv olv­ The Council on Interamerican Security, a Washington ' ing a meshing of political destabilization with the most pressure group with connections to Georgetown University, backward of religious beliefs and practices, was propel­ has launched a propaganda campaign around the theme led giant steps fo rward with the assassination of Arch­ that Cuban involvement in Central America is aimed at bishop Romero in EI Salvador March 23 and the carnage acquiring Mexico's oil. Th e council, which has connections of the Palm Sunday memorial services a week later. to the Jesuit Georgetown University circles of Henry Kis­ Key in this regard is the record of what America's singer, carried out a similar strenuous lobbying effo rt one diplomatic staff is doing "on-the-scene" in EI Salvador. year ago fo r American intervention in Nicaragua to save First, U.S. ambassador Robert E. White, only in the since-ousted dictator Anastasio Somoza, country a few weeks, lashed into the Salvadorean busi­ Th e council argues that the United States is the rightfu l ness community for sponsoring "hit squad" killings of controller of Mexico's oil, and that the biggest obstacle to political opponents including Archbishop Romero, in a American control is Mexico's strong, nationalist traditions sp�ech to the San Salvador American Chamber of Com­ and political stability. merce. According to a Wall Street Journal report, a A CIS spokesman recently offe red the fo llowing scen­ leading businessman immediately charged that the White ario fo r events leading to an American military occupation statements "have made me a target for everyone." of Mexican oilfields. Four days later, after the Palm Sunday massacre, Ambassador White with equal surety charged the left Q: U.S. government officials charge that Cuba and the with responsibility fo r the new killings. These statements Soviet Union are heating up Central America into an drew the wrath of the Church and the left. "arc of crisis" with the strategic goal of controlling Here was the spectacle of the U.S. ambassador per­ Mexico's oil resources. Is this your own evaluation? sonally handing out public verdicts of blame in an incen­ A : That is in total conformity with our reading of the diary and confused situation within hours of events situation. Mexican oil has to be viewed as the strategic which rocked the entire region. objective in Central America ... I'm very pleased the

eulogizing the work of liberationist priest Romero, as part of a broad swing of the Church behind the previously minority liberationist faction. And in Mexico, where the Church is historically a highly conservative force, the events in EI Salvador A Palm Sunday massacre have resulted in a fa natical "Christian Marxist" re­ in EI Salvador alignment. On April 3, a procession to the most popular of Mexican cult shrines, the Basilica of Guad­ With the Pope's personal emissary in attendance, the alupe, was led by none other than the Mexican Com­ funeral of slain Archbishop Oscar Romero in EI Sal­ munist Party, a gaggle of Maoist gangs, and libera­ vador on Palm Sunday was turned into a massacre tionist priests! They chanted slogans: "Guadalupe, that will have the effect of bringing "theology of your people will be victorious," and "Romero, Rom­ liberation" psychosis into dominance throughout ero, you are here among us." Latin America. Professional snipers, like those who The "liberationists" are exploiting the martyrdom gunned down the archbishop a week earlier as he of priests to play on the underdevelopment and igno­ delivered communion in the church, fired into the rance of the peasant masses in Latin America to crowd from rooftop positions, setting off panic promote pseudoreligious mass psychosis. The conver­ among the over 100,000 gathered for the memorial sion of Romero himself, previously a conservative, to service. The toll: 50 dead, 200 wounded. the liberationist cause was triggered two years ago by The Pope has now sent two messages to the region the killing of one of his parish priests.

EIR April 7- 14, 1980 International 43 government agrees. This is a warning that we've been You know, if you wanted to be facetious about it, you making for a year. could think that the course of events leading to a threat to Mexico was planned in the United States. Q: How would U.S. counteraction actually work? It will be a different ball-game if we get Carter out. A: What you're talking about is this. You have a substan­ Then we can strengthen the sensible fo rces down there. tial Mayan Indian population in Chiapas [one of Mexi­ The situation is eminently reversible. co's oil-producing states, on its southern border-ed.]. You have ethnically the same people you have across the Mr. Sanjuan was asked if he saw a danger of Mr. Carter border in Guatemala. Historically, Guatemala laid claim undertaking a major fo reign policy adventure to improve to portions of what is now Chiapas and, I believe, his political fo rtunes at home. He replied: possibly also Yucatan. So one can very easily conceive of· a scenario whereby a communist government in Guate­ What I agree with is that if El Salvador gets to the mala would support a so-called national liberation strug­ point where it really embarra$Ses the U.S., then the gle inside Chiapas, and also Yucatan. We know that President could turn around and order some kind of Chiapas and Yucatan have some of the most serious incompetent and dangerous response. I've been telling rural guerrilla problems in Mexico. So this would be a the liberals, it's much better to do this kind ofthing with scenario that would be very susceptible to destabiliza­ a tough guy who's sure of himself, in a different admini­ tion. stration.

Q: And that goes right into the ... A: ... oilfields. So you have a situation there which reads · like this: The United States is isolated from Middle Eastern oH in a period of military hostility and we turn to Guatemalans seeking 'hot Mexico for additional supplies, and the terrorists make it quite clear to Pemex that if supplies are increased or even pursuit' into Mexico continued to the United States or to Europe as a replace­ ment for Middle Eastern oil, the oil goes up in flames. A senior U. S. military commander. recently retired. talked at length with Guatemalan military counterparts in a De­ Q: And then what do we do? Intervene? cember. 1979. visit to Guatemala Ciiy. His impressions: A: Exactly. I would say that the Guatemalans view the border situation [with Mexico] as serious. They fe el they are not getting fu ll cooperation fr om the Mexican government. The [Guatemalan] terrorists appear to be using Mexico as a sanctuary. The government hopes to get the Mexican government more concerned about it, because ultimately 'Carters response could this will affect Mexico as well as Guatemala. At the time be incompetent' the Guatemalan armed fo rces recognized they had a problem, there was talk about the possibility of using hot Among some Reagan advisers. there is concern that direct pursuit to go over the border. The Americans did it to U.S. intervention into Central America and the Caribbean. Pancho Villa. They hoped they'd be able to work out which they support. would be bungled by Carter. They want some agreement with the Mexican government where to wait until their man gets into the Wh ite House. Th e they'd get a cooperative military commander on the American Enterprise Institute's senior Latin American other side and would plan straight operations against the analyst. Pedro Sanjuan. delivered thefo llowing evaluation guerrillas. in conversation with EIR this week: Asked about the possibility of the Guatemalan military I'm not one who believes that the situation is going in threatening Mexico's oil fields in order toforce Mexico-to the direction it is primarily because of the Cubans. Now, back away fr om providing asylum to the guerrillas: it's of course alarming that the Cubans are in there, and even one pennyof Cuban aid would be excessive, but the Ah, well, we talked around that. It was the sense that basic problem is the bungling of the United States, of the the Guatemalans have their close interest in that Mexican Carter administration .... oil, because of the proximity, that they might go in there.

44 International EIR April 7- 14, 1980 mishandling African policy. Stirn's trip cut short that talk of crisis. Castro told Stirn that Cuba "had not and would not" intervene in the internal affairs of France (referring to the islands), and praised France's "independent" policy in the inter­ national arena, according to French daily Le Montie. More than that, Stirn and Fidel spoke of "systematic France-Cuba collaboration. " Perhaps the most important area where "collabora­ talks alarm tion" between France and Cuba could have a significant impact is Africa, where both countries play a prominent WasPington role. Fifteen new economic projects were outlined, includ­ The same week Carter Administration officials an­ ing granting French companies exploration rights for nounced that new high-speed missile-launching patrol gold, zinc, lead, and other metals, the ex tension of a boats would begin cruising the Caribbean in a revived $15.6 million credit for agricultural imports, construc­ version of "gun-boat diplomacy," France's Deputy For­ tion of a hydroelectric plant, and a French tourist center eign Minister Olivier Stirn held successful talks with on the famous Varadero Beach. The French state-owned Cuban President Fidel Castro at a special meeting in oil company, Elf Aquitaine was granted exploration and Havana. Significant economic deals and the "possibility exploitation rights for off-shore oil near Cuba. Four of systematic collaboration" between France and Cuba previously agreed-on projects, sitting on the back burner "on the questions of development, maintaining peace, due to Cuban financial difficulties, were reaffirmed­ and bilateral collaboration" were at the center of the from a specialty steel plant to a fertilizer complex. two-hour meeting, according to the final communique V.S. State Department officials expressed special issued March 2 7th. Africa, Pakistan and the Nonaligned concern over Stirn's visit to Cuba before he arrived, Movement were among the topics. "watching" fo r the French to offer major credits to Cuba The official reason for Stirn's visit was to head the which would relieve its severe currency shortage. En­ French delegation to the Fifth Annual Meeting of the couraged by Dijoud's statements, since it indicated trou­ French-Cuban Trade Commission, but most analysts ble was brewing between the two countries, they noted agree that Stirn was sent to cool-out growing tension they still did not know whether Dijoud represented offi­ between the two countries. cial policy . "We'll see what happens to French policy Spokesmen for the V .S. State Department, even prior when their domestic interests are threatened," comment­ to Stirn's arrival in Havana, had expressed concern that ed the official. What did he mean? he might succeed. The Vnited States government was According to denunciations made by a leading Gaull­ apparently very pleased by the development of tensions ist deputy earlier this year, it appears that American in relations between France and Cuba; at least one officials are actually fomenting trouble in the French French political figure made accusations that implied islands! RPR deputy Julia twice stood up in Parliament that the V.S. Carter administration was actually engaged to accuse the V.S. consul in Martinique, Harold T. in fo menting those tensions. Naturally, State Depart­ Robinson, of financing the independence movements on ment officials did not welcome the advent of talks to the islands, including a number of public fe stivals for resolve those problems. theseorgan izations! The focus of Franco-Cuban tensions were French The current V.S. policy of "surrounding" Cuba mil­ possessions in the Caribbean. Talk of Cuban support for itarily and economically while supporting every dissident "independence movements" in the French colonies of network on the island and publicly threatening a naval Martinique and Guadeloupe was highlighted in the blockade or even invasion (!) is designed to throw the press, spurred by a statement from the French Minister Cubans into frantic efforts to build up their "radical" for the Overseas Departments, Paul Dijoud, accusing allies! Cuba has shown before that it can be provoked into Cuba of exactly that several weeks ago. "radical" activity in the region. Havana domestic TV responded angrily to Dijoud's Ironically, the French offer of economic collabora­ statements, demanding Giscard clarify if this meant tion and regular channels of discussions may be the only France was joining Washington in its virulent anti-Cu­ thing heading offthe spread of "radicalism" throughout ban campaign. The program did note, however, that the Caribbean that the V.S. administration fears in pub­ Dijoud had been reprimanded by Giscard before for lic, and supports in private.

EIR April 7- 14, 1980 International 45 DatelineMexico by Josefina Menendez

More oil for Japan? taneously with his trip, the Direc­ One of the leading nations to agree to Mexico's proposals tor General for Latin America and that technology is a proper means of payment may soon have Caribbean Affairs in Japan's For­ eign Ministry, Mr. Tadashi Oht­ its energy problems alleviated. aka, told the Mexican daily Uni­ versal that "Japan will not invest with imperialist designs" in Mexi­ It is a busy spring diplomatically Mrs. Lopez Portillo and Mexico co, but is instead "respectful in in Mexico. With the government's City Mayor, Hank Gonzalez. every country. Besides," Ohtaka March 18 decision to raise its oil May 1: Japanese Prime Mini­ added, "it should be clear to all production levels by a minimum of iter Masayoshi Ohira will visit Mexicans that we will not even 10 percent, the long-standing in­ Mexico, after having stopped off indicate in which areas we will terest of a number of potential first in Washington, D.C. invest, but rather will submit to customers in lining up increased Late May: President Lopez what they suggest. That is, we will deliveries of Mexican crude has Portillo will tour France, West complement them where they need once again taken off. And the Germany, Sweden, and Canada. capital to develop." highlights of the Mexican diplo­ Who, if anybody, will receive But high-level Mexican offi­ matic agenda give a good idea of increased Mexican oil shipments? cials are expressing concern that, the scope of the negotiations. One well-informed Mexican despite these statements of good March 29: Julio Rodolfo Moc­ source noted that there are few intentions, Prime Minister Ohira is tezuma Cid, Mexico's Coordinator remaining question marks regard­ thinking on different lines. These of Special Development Projects, ing two of the three countries in­ officials expressed dismay to learn traveled to Paris to prepare Presi­ volved in the above diplomacy. that Mr. Ohira plans to travel to dent Lopez Portillo's forthcoming Mexico is known to be unrespon­ Washington, D.C. before setting trip there. sive to the American desire to, in fo ot in Mexico. March 30: Toshio Doko, the the words of a recent Department Mr. Ohira will also not ingra­ President of Japan's business fed­ of Energy memo, establish "a tiate himself with his Mexican eration Keidanren, arrived in Mex­ more permanent price relation­ hosts with his "Rim Pacific Proj­ ico City to discuss increased oil ship" regarding Mexican natural ect" proposal. A Japanese govern­ deliveries. gas. Mexico will not grant the V.S. ment official stationed in Mexico March 31: V.S. Energy Secre­ a guaranteed fixed price for fu ture told EIR that Ohira's idea is to' tary Charles Duncan came to Mex­ deliveries of gas, and will stick to pull Mexico and Canada into an ico to discuss energy matters, in its escalator clause in all contracts. alliance with other Pacific nations particular Mexican natural gas de­ And regarding France, Mexico is (such as Japan) on energy matters. liveries to the V.S. on record as being favorably dis­ It is likely that the Mexican gov­ April 1: V.S. Special Ambas­ posed toward Giscard d'Estaing's ernment will view this initiative as sador fo r Mexico Robert Krueger independent policy stance vis-a-vis a barely disguised modification of and Assistant Secretary of State Washington, and has already ini­ the hated Energy Common Market for Inter-American Affairs, Wil­ tiated a number of significantjoint proposal which the V.S. has con­ liam Bowdler, held a day's meeting ventures with that country. sistently tried to encourage Mexico in Mexico City with the Mexican But Japan remains a question to accept. President and two of his ministers. mark in Mexican thinking. Mr. On the record, President Lopez The subjects discussed were natu­ Doko did all the appropriate Portillo has told the press that '�we ral gas and the EI Salvador crisis. things during his Mexico stay, as­ would like this proposal to b� April 7: On approximately this suring his Mexican hosts that Ja­ made more precise" before com­ date Mexican Industry Minister pan wants to help Mexico develop, menting on it. Off the record, Andres De Oteyza will travel to while reiterating Japan's desire to Mexicans will be wondering if India and then Japan. receive more than the 100,000 bpd Ohira didn't pick the idea up along Mid April: Japan will receive of oil so far agreed to. And simul- the way in Washington.

46 International EIR April 7- 14, 1980 MiddleEast Report by Robert Dreyfuss

The Iran-Libya connection ordinate pressure on other OPEC A trip by Iran 's "blood judge" revealed that a new phase of countries to cut back oil produc­ tion. Both Libya and Iran threat­ cooperation between Mideast extremists has begun, with ened Saudi Arabia, which an­ European policy a target as much as Arab stability. nounced its intention to maintain high production through 1980. So the question remains: who stands to gain? The answer, it ap­ pears: the enemies of Giscard. T he visit to Libya this week of behind the behavior of the erratic That leads us in several direc­ Iran's Ayatollah Khalkhali signals Libyan Col. Muammar Qaddafi. tions. a new phase in the cooperation In recent weeks, Qaddafi has First, the key to Libya's Qad­ between Muslim extremists in the launched a crusade against France dafi reportedly is M. Roger Gar­ Arab world and those in Iran's in the Middle East and Africa. audy, a former member of the Islamic Republic. It bodes ill, in After sponsoring armed Muslim French Communist Party who was particular, for Saudi Arabia and fundainentalists insurrections in expelled years ago for advocating Iraq, virtually the only two OPEC Algeria and Tunisia earlier this a "Marxist-Christian dialogue." members still committed to in­ year when those two nations be­ Presently, Garaudy is a close ad­ creasing production and exports, gan to improve their ties to Paris, viser to Qaddafi, perhaps even who are threatened by terrorists Qaddafi then publicly threatened Qaddafi's controller. His links to backed by Iran and Libya. to kill French President Giscard Qaddafi were exposed in a recent Ayatollah Khalkhali, widely d'Estaing on the eve of his arrival issue of Jeune Afrique, a French­ known as the "blood judge" who in the Persian Gulf. Only weeks language magazine close to Tu­ was responsible fo r over 600 sum­ before, Giscard's confidante and nisian circles. mary executions since last year, is Africa policy adviser Rene de Garaudy is now the candidate the head of the Muslim Brother­ Journiac, was killed in a plane for president of France of the new hood in Iran, the Fedayeen-e Is­ crash in West Africa that was ecologist party, and is a bitter op­ lam. Though he holds no official blamed on Libyan intelligence. ponent of Giscard d'Estaing. In post, he wields enormous power by Now, Libya has intensified its France, he is associated with the controlling the inner leadership of activities in West Africa by fueling old French aristocratic circles led the Muslim Brothers. He is a sa­ civil war in Chad, a crisis that by the Society of Jesus. distic madman, once interned in a threatened to spread across all of Second, Garaudy and his asso­ psychiatric ward for killing cats by West Africa and severly set back ciates are supporters of two Italian torture, and a virulent homosexu­ French diplomacy there. based networks relevant to the Li­ al. Meanwhile, according to Iran­ bya-Iran connection: the Lelio His visit to Libya marks a ian sources, the Teheran regime Basso Foundation, which has sudden closening of relations be­ has launched a massive diplomatic sponsored both Libyan and Irani­ tween these two nations, after a and terrorist campaign against an Muslim fundamentalist projects year of estrangement. A kidnap­ France. In the Gulf, Iran is putting for years, and the Vatican's own ping of a Lebanese Shiite leader by pressure on the Arab oil-producing "M uslim-Christian dialogue." Libya's secret police in 1978 caused regimes, including by overt threats What is certain is that the Paris friction between Libya and Iran's to provoke insurgencies by pro­ circles associated with Garaudy are Shiite leaders, but during this Iranian fanatics. In North Africa, exactly the same circles that pro­ week's visit to Tripoli Khalkhali Iran is also lobbying against duced Bani-Sadr, Foreign Minister absolved the Libyans of all respon­ France-in direct coordination Ghotbzadeh, and other leading sibility for that kidnapping. with Libya. Iranian officials during their long To understand the significance For instance, Iran's Oil Minis­ period of exile in Paris, at the of Khalkhali's trip, it is first nec­ ter Moinfar paid a quick visit to Sorbonne and the National Center essary to understand the agency Libya in an effort designed to co- for Scientific Research in Paris.

EIR April 7-14, 1980 International 47 International Intelligence

than "the equivalent of some two weeks' expenditure on the Common Agricul­ EUROPE tural Policy," or about £230 million. Latin America The real disparity, as the British press Schmidt refuses quickly pointed out, is closer to £ 1,000 2nd In ternational concessions million. endorses terror to Great Britain Leading spokesmen for the Socialist In­ ternational have publicly voiced support West German Chancellor Helmut for terrorism in Central America, under Schmidt refused to "mediate" Great the guise that this is a legitimate and Britain's dispute with the rest of the Le Figaro assails "revolutionary" response to "institu­ European Economic Community (EEC) tional violence." in his talks with British Prime Minister Volckerpo licy While attending the Conference on Margaret Thatcher outside London Latin America and the Caribbean held March 27-28, Thatcher had hoped that In an April 2 editorial entitled "The in Santo Domingo this week,' Socialist Schmidt would deliver concessions to Dollar's Revenge," the French daily Le International Secretary General Bernt British demands for a reduced contri­ Figaro warned Federal Reserve chair­ Carlsson of Sweden stated that "it is bution to the EEC budget. man Paul Volcker "not to lose sight of false that the Socialist International is a Instead, the Chancellor made clear the global consequence" of sky-high pacifist organization ...when institution­ that West Germany's relations with U.S. interest rates which have drained al violence threatens to impose slavery, France are more important than any­ capital from European markets and then we will not permit it; rather we will thing Britain can otTer, and demanded pushed the dollar up sharply against the also encourage popular armed resist­ that Thatcher accept a "global arrange­ major European and Japanese curren­ ence." Joined by German ex-chancellor ment" for European cooperation if it cies. Le Figaro estimates that France Willy Brandt, and Mario Soares of Por­ expects concessions on the budget issue. must pay an additional ten billion francs tugal, Carlson praised the Jesuit-backed The London Times commented March this year for oil for each ten percent "revolutionary" movement of EI Salva­ 28, "Germany's real and close ties of jump of the dollar on foreign exchange dor which seeks to reproduce in Central friendship with France-more impor­ markets. America the horrors of the so-called tant to Bonn than its good relations "But the situation for the developing "Iranian Revolution." with Britain-are the main reason why sector countries is even more difficult the leader of the Community's richest and sometimes more dramatic. Not only country cannot come to the rescue in must most of them, like us, sustain the way that Britain, and perhaps he increases in their oil bills, but they are himself, would like." borrowing enormous masses of dollars Schmidt told Thatcher that a pack­ to cover their deficits. These loans are Colombia 's pro-drug age deal will have to be worked out that being made at floating rates, and the lobby to submit would include a joint Community ener­ increase of American rates from 5 per­ gy policy, devaluation of the pound cent two years ago to 20 percent today legalization bill sterling (which Schmidt sees as over­ creates serious problems in the servicing valued due to international speculation of their debts. According to the Colombia daily EI on Britain's North Sea Oil), and agree­ "And this is a problem which con­ Tiempo of March 27, a bill "to legalize ments on fisheries, lamb exports, and cerns the entirety of the Western world. the production of marijuana" sponsored other dispute issues. What would happen if the large debtors by Senate president Hector Echeverri The next round in the EEC talks is were to default? In New York, the ru­ Correa and promoted by the National expected to take place at the end of mor is going around that certain banks Association of Financial InsHtutions April, and Britain finds itself in a poor that have made long-term loans at low (ANDI), will shortly be submitted tQ.the bargaining position. European Com­ interest rates and are borrowing short­ Colombian Congress for approval and mission President Roy Jenkins tried to term at high interest rates are on the implementation. pave the way for a cosmetic compro­ verge of bankruptcy. Last Thursday, the The submission of the bill fo llows a mise, in a statement April 11. He leaders of one of these banks went to recent decision by Defense Minister Ca­ claimed that the gap between Britain's the Federal Reserve to complain about macho Leyva to withdraw thousands of demands and those of the rest of the their situation, and were treated to a special anti-drug troops that have been Common Market is quite small, no more deaf ear." stationed in the mafia-infested Guajira

48 International EIR April 7-14, 1980 Briefly

• FRANCESCO COSSIGA, the Italian caretaker head of state who is attempting to form a new government, submitted a list of Peninsula which has been one of the one of his closest associates, "will not prospective ministers to the ital­ major sources of marijuana production go unavenged." ian parliament Apr. 3 that gives and export into the U.S. The withdrawal According to the Indian press, Sad­ nine government posts to mem­ of the troops, purportedly to remove dam Hussein himself was the target of bers of the Italian Socialist Party. army personnel from a "dangerous an assassination attempt in late March EIR investigators have linked source of corruption," was hailed by when his plane was blown up minutes most of the individuals to drug­ ANDI president Ernesto Samper Pizano before he was due to leave on a visit to running, asassinations, and gen­ as "de facto legalization" and "the the Iraqi oil city of Kirkuk. erally to the Jesuit Order and smartest move the government has ever In Syria, heavy fighting, instigated "black nobility" of Rome led by made." Samper had previously declared by armed assaults by Brotherhood ad­ the Princess Pallavicini. Proposed that the decision to submit a legalization herents hostile to the Assad regime and defense minister Lagorio, for ex­ bill to Congress would rest on its being committed to the destruction of Syria's ample, is linked to the Permindex a guaranteed passage. national unity, is rocking the country, organization expelled from Switz­ Reached for comment on this latest threatening to topple Assad. The Broth­ erland in the 1960s for attempts pro-legalization initiative from Colom­ erhood opration to destroy Syria and on the life of Charles de Gaulle. bian circles, a spokeswoman for the Iraq is being underwritten by both Iran International Narcotics Division of the and Libya. • AMERICAN SCIENTISTS State Department warned that it was want a crash "Apollo style" pro­ necessary to look "below the surface at gram for the development of fu­ the motivations of these people ...some sion energy, is the message that may have their kids on drugs, others former French minister Michel may be making money off the sale of Asia Poniatowski brought back to Eu­ marijuana." rope from a trip here in mid­ Japanese to Carter: March. He visited many Ameri­ can research labs. Daniel Seguin, 'n o thanks ' who accompanied Poniatowsky, reports in Le Figaro that one U.S. The Japanese goverment has issued a scientist stated, 'To get the nec­ firm rebuffto Carter administration de­ Middle East essary funding it would take either mands for stepped up defense spending a war or a new president." The Muslim Brotherhood and other measures aimed at toughening ex-Minister, who is very close to the country's stance against the Soviet terror targets President Giscard, came back Union, according to reports in the daily from his trip convinced that more Yomiuri. Iraq, Sy ria than ever France must pursue its According to the Yomiuri, Japanese ambitious nuclear program. Muslim Brotherhood-sponsored viol­ foreign ministry officials responded to ence and terror continue to escalate Brzezinski's urgings for a tough line sharply in the Middle East, with Syria against the Soviets with the comment • LEONID BREZHNEV, the and Iraq the prime targets. "Japan has been watching West Eu­ Soviet President, warned on So­ Last week in Iraq, Prime Minister rope's actions toward the Soviet Union viet television that in light of in­ Tariq Aziz narrowly escaped death when and has been keeping pace.. ..The U.S. creasing international tensions, a member of Iran's Fedayeen-i Islam should show understanding for the spe­ the U.S.S.R. would have to "keep deployed by Muslim Brotherhood spon­ cial relations between Japan and the our powder dry." Addressing sor Ayatollah Khalkhali (known in Iran Soviet Union." The Japanese govern­ high-ranking Soviet officials as the "Blood Judge" for sentencing ment of Prime Minister Ohira had pre­ March 31 after receiving the len­ thousands to death) threw a grenade at viously been considered one of the most in prize for his memoirs, Brezhnev him while he was speaking at a public loyal allies of the Carter administration. said: "The existing international meeting at a Baghdad university. The Yomiuri article concludes with situation, particularly the facts of' Iraq has bitterly denounced the M us­ a call for Japan not to implement large­ recent times, prompt us to keep lim Brotherhood attack as coming from scale defense spending, to step ·up ec�­ our powder dry, to be determined the "backward and rotten enemies of nomic ties with the Middle East inde­ and consistent in upholding the mankind." pendent of the U.S. and to follow a cause of peace." Iraqi President Saddam Hussein per­ European line on relations with the So­ sonally vowed that the plot against Aziz, viet Union.

ElK April 7-14, 1980 International 49 �ITillNational

New York transit strike: 'Ordered from on high'

by L. Wolfe

As we go to press, New York City is convulsed with a last week, let it be known to a small circle of people that crippling transit strike that has shut down subway and the city administration of Edward Koch should "take a bus service to over 5 million riders. For two days last strike." Volcker reportedly said that New York is an week, the Long Island Railroad, carrying more than ideal place to set a "national example," demonstrating 200,000 people a day into the city, was also on strike. "a will to resist municipal unionism and a will to live Bridge and tunnel collectors are threatening job actions within our means ... It would be good for the rest of the which could paralyze already heavily congested auto­ economy." mobile traffic,makin g a bad situation absolutely chaotic. Good? The best available estimates say that a city New York's news media have blamed the unions. But transit strike means approximately $200 million per day in fact, the strike was ordered from a level higher than in lost revenues, plus an additional figurein that rangein the White House, for example, Trilateral Commission disrupted activity on New York's financial markets. A spokesman David Rockefeller, with the directive to "take 12-day strike in 1966 cost the city $1.76 billion in lost a strike" coming down to Mayor Koch from none other revenues alone. than Paul Volker, the advocate of "controlled disintegra­ In short, a New York transit strike will take a huge tion" heading the Federal Reserve. What is now happen­ chunk out of total daily economic activity in the United ing in New York is part of a national economic plan. States. If it continues long enough-under present eco­ The New York Times, New York Post and other nomic conditions-it could trigger a national rececssion, media, who are well aware of this, treat their readers to a point made last week by veteran labor mediator Theo­ accusations against the 31,000 member Transport Work­ dore Kheel. ers Union and smaller Amalgamated Tranist Workers, But David Rockefeller, outgoing chairman of Chase calling them "overpaid," "inefficient" and incapable of Manhattan Bank, said last week that he feels a recession "understanding the city's financial plight." The unions would be good for the country. Rockefeller relieved are "blackmailers," says the Times, who backed the himself while attending the Trilateral Commission meet­ Metropolitan Transportation Authority into a corner ing in London. He came back to New York on the eve of and then went on strike. "Take to the transit barricades" the April 1 contract expiration, and told the New York against labor, they urge city residents. Chamber of Commerce that the city should "take a strike." 'Take a strike' The transit system is New York's lifeline. Felix Ro­ What's the truth? Sources in Washington report that hatyn now talks of a "new reality" demanding massive Federal Reserve chairman Paul Volcker, before the strike cuts in the system . Not only a 75-cent fare-a token now

50 National EIR April 7- 14, 1980 costs 50 cents-but there is talk of "getting around to to count on any more money from Congress if it "knuc­ eliminating all night service," and closing subway sta­ kled under" to the trade unions. Felix Rohatyn, Lazard tions selectively to "kill" certain areas of the city. One Freres partner heading the City's Municipal Assistance source doubts that anyone will be able to get in or out of Corporation (MAC) and controlling city fiscalpolic y for the South Bronx in the near future. its creditors, gave the same advice publicly and privately. Mayor Koch recently spent time behind the bamboo These gentlemen actually dominated the city transit ne­ curtain. He firmly believes New York should "become gotiations fr om boardrooms and conference halls in New more"like Peking." There should be less of everything­ York and London. They dictated the "get tough policy" except bicycles. Admittedly in a city with a growing of Koch and New York Gov. Hugh Carey. population of homosexuals and perverse entertainments, It is agreed by city political insiders that it was Koch is a bit stranger than your average mayor. But the technically possible for the city, state and MTA to come "China model" is more than his whim. up with a contract package that would have been accept­ The side of the Chinese peasantry Rep. Henry Reuss able to the unions prior to the strike. These sources has in mind right now is the docility and amoral accept­ confirmthat it was a political decision to fo rce a strike. ance of destruction and death. "The country needs an "No doubt about it," said a veteran city political insider. example of sacrifice, what Felix Rohatyn calls the 'pain "This strike was ordered from on high." and agony'," said one of Reuss's aides at the House The negotiations, which broke down in the wee hours Banking Committee. "New York, like the country, is on of April 1, centered on the MTA's adamant refusal to the razor's edge. A major crisis is needed to get the agree to a 12 percent wage boost for each year of a two population ready to accept the next level of austerity. It year contract, and demands fo r "give backs" from the would have to be a universal crisis,,, one that effects unions. The union was seeking 30 percent over two years. ' everybody. It must demonstrate once"and for all time Koch and Carey instructed the MTA that any wage that the city can't survive the way it is. That it will have increase will be funded by a commensurate increase in to shrink. A transit strike fits this. It is what the city and the transit fare and in service cuts. This posture defines the country needs." all future city labor negotiations, said a source. Most city British intelligence protege Rupert Murdoch, pub­ workers contracts expire by June 1. The transite strike lisher of the New York Post, hired psychiatrists to roam could be only the firstof many lock-outs. the streets and monitor the progress of psychological deterioration. The psychiatrists reported back that, in­ The real policy deed, New Yorkers are being acclimatized to "disasters." Two year ago, the Economist, magazine of City of One even reported that residents "could handle them­ London banking interests, published a survey on New selves well in a nuclear war"; they would "die with York that proposed that the city go "the way of Lon­ dignity." don," that is, cutback drastically on services in order to Washington is only watching the city's plight for shrink from seven to less than five million people. New now, but the Federal Emergency Management Agency, York should discourage every kind of industry except sources say, may decide the entire city should be declared low-wage, labor-intensive light manufacturing, and res­ a disaster area. At their cue, President Carter would tructure itself as a service-oriented home for a new elite. declare it so, and they could move in to the city martial­ What New York needs is "gentrification," a population law fashion. But first,the plan is to "let the chaos build." largely restricted to "a new gentry." "I know that this whole thing couid be settled if we Only last week, a spokesman for the Economist said, could get down to real bargaining," a transit union "New York is being remade ...it is going to be shrunk, source said. "But right now, someone big is gumming millions of people, mostly poor, will be forced out. This things up." is what happened in London. There were strikes and Said Rockefeller: "The transit strike would have chaos, but such things accompany change. They help it serious consequences for the city, including business and along." particularly retail establishments. However, the long This policy even has a code name: "Planned Shrink­ range damage of an un affordable labor settlement could age." The mayor denies it publicly. But you can find be even greater than the painful shortrange consequences dozens of city officials willing to confide that that is of the strike." Koch administration policy. It is only the urban compo­ Rockefeller is lying. But he announced he had the nent of the "controlled disintegration" proposals of the assurance of key members of the banking community New York Council on Foreign Relations (chairman, and city business community to back Koch and the MTA David Rockefeller). Paul Volcker lives and breathes this against the unions' "unreasonable demands." Also last policy. This policy and the New York transit lock-out are week, Senator William Proxmire (D-Wi) told the city not the same policy.

EIR April 7-14, 1980 National 51 Conferences and classes on "death education," especially fo r impressionable youth are planned by the Club of Rome to build Kubler-Ross death-cultism: A bove, Minneapolis students are placed in a coffi n one by one.

Club of Rome death cults Killingthe American dream

by Mark Burdman

Most Americans, had they attended the March 16-18 employed by ruling oligarchies since the time of the conference of the U.S, Association for the Club of Rome pharoahs. They intend to spread cults, in religious, satan­ in Bethesda, Maryland, would have come away from the ic, environmentalist and death-worshipping varieties, proceedings in stunned disbelief. In line with the global endowing the population with "the means to cope" with zero-growth efforts of the parent organization (the Club the miseries and social chaos that will fo llow an impend­ of Rome International), the fo cus of conference discus­ ing American economic catastrophe. sion was a campaign over the next fe w years to compel The conference therefore went substantially beyond Americans to ideologically "adapt" to the "death of the the limits-to-growth propaganda for which the Club of American dream of material and technological prog­ Rome organization is already internationally notorious. ress." Accordingly, it was only the fi rst in a series of such Organized around the theme, "The Human Side of the conventions scheduled for the United States in coming Energy Transition," speakers and participants were months and years. drawn from a broad spectrum of Episcopalian and Jesuit In Club of Rome parlance, this is "The Great Tran­ theologians, solar energy advocates, environmentalist sition." Club of Rome methods, outlined in horrific collectives, consumer-action types, radical women's detail throughout the proceedings, are the same ones groups, political pollsters expert in American suscepti-

52 National EIR April 7- 14, 1980 bilities, and self-professed specialists in "death and dying ." The latter were the featured participants. The most pronounced and persistent reference point of the gather­ Elizabeth Kubler-Ross ing was the death-cult idea of Elizabeth Kubler-Ross, in praise of child murder leader of the "Death with Dignity" and Hospice move­ ments, who reports without a blink that she spends a A key focus of the Club of Rome's Bethesda, growing percentage of her time having illicit relations Maryland conference was the promotion of death­ with the spirits of dead people at her Place-to-Die-in­ cults of the sort pioneered by Elizabeth Kubler­ Dignity Hospice in Escondido, California. The applica­ Ross . Two days after the conclusion of the confer­ tion to Americans, en masse, of Kubler-Ross's prescrip­ ence, Kubler-Ross herself appeared in Washington tions for helping individuals cope with the grief of dying, to keynote the Fifth Annual Conference on Death was the Club of Rome's specific interest. and Dying, sponsored by the St. Frances Center, Speaker Larry Kagan of the prestigious Yankelovich, headed by Episcopal priest, William Wendt. Skelly and White polling agency put it this way: At one point in her address, the bizarre lady declared that it is altogether possible for a young There is social bereavement associated with the end child to enjoy being murdered. "When you have a of decades of booming industrial growth, the end violent, brutal kind of death, human beings have of the days of America being the steelmaker and the ability to shed the physical body, temporarily automaker of the world. As we move out of the most of the time, but permanently when the body is industrial phase of society and into the information killed. When a child is murdered or raped, they phase, the hope is that we can help people adapt to instantly have an out-of-body experience so that this new reality, just as Kubler-Ross helps people they watch the scene of the crime from a distance cope with dying. without pain or anxiety." Kubler-Ross was given a sensational promo­ What is the Club of Rome? tional write-up in the March 22 Washington Post. What is this agency, now deployed into the United The newspaper noted that she is a faithful believer States to brainwash a population that still has the most in "afterlife, out-of-body experiences, reincarna­ ingrained conviction about the necessity of progress of tion and an assortment of other bizarre, but essen­ any people in the world? tially benign pronouncements," including the be­ The Club of Rome is a jointly managed thinktank of lief that "her knowledge comes from spiritual the European "black nobility" and the British aristocra­ guides whom she met in material form." cy . It was created in the early 1960s, convening 100 In an interview after the conference, Rev. financiers and others under the chairmanship of Italian Wendt declared flatly, "Death is in. There is a banker Aurelio Peccei. Its purpose is to promote the doom boom in the United States. We are restoring ideas of the 18th century hoaxster Parson Thomas Mal­ the ownership over death to the American popula­ thus of the British East India Company, who proposed tion ...There will be a national conference on death that the human race inevitably produces more people and dying to expand the death-education process than the earth produces food, that nonfood-producing all over the country." industry is unproductive, and that genocide and other measures facilitating population-reduction ought to be the central policy of governments. The Club of Rome organization currently plays a central role in a network of Malthusian organizations controlled by the same medievalist families, and engaged in a global cult-build­ ing campaign like that now outlined for the U.S.A. Exemplary of this interface is the fact that current Club of Rome activities are centered around the forth­ coming "Third Development Decade" conference of the United Nations Organization. The agenda and policy­ papers for this "development" conference were all pro­ duced through the "Project on Futures" of the United Nations Institute for Training and Research (UNITAR), whose director is Irvin Laszlo, a Club of Rome policy-

EIR April 7-14, 1980 National 53 maker since its inception. Laszlo's VNITAR, in turn, provided the principal policy input into the "Project 1980s" studies of the New York Council on Foreign Relations. The outcome of that series of studies was the 'Women's liberation' in proposal to realize Club of Rome-VNITAR goals of "a Club of Rome style new world order based on environmentalism" by effect­ ing the "controlled disintegration" of the V.S. and other One panel of the Club of Rome's Bethesda confer­ industrial economies, and the subordination of the V.S. ence on cult-building was entitled "The Distinctive and other nation-states to the rule of "one world," Contribution of Women in a Time of Transition," supranational institutions. Of course, it is to the conse­ with themes that included "Psychic Flexibility and quences of this policy that the Club of Rome now pro­ Women," and "Women as Lead Figures in Tran­ poses to help Americans "adapt" through cults. sition." As panel leaders emphasized, the point of Among the principal institutions collaborating with Club of Rome efforts around "women's liberation" the Club of Rome at the March 16-18 conference was the must be the exploitation of the women's sense of Interreligious Peace Colloquium, (IRPC), a project of intellectual inferiority to men, the celebration of the Jesuits with Episcopalian participation. The Jesuits female "feelings" against male "reason." or Societas Jesu are the Hapsburg-centered "black" The model for the effort is the Babylonian nobility's intelligence service, while the Episcopalians are priesthood's Egyptian Cult of Isis and Osiris, the the American branch of the Church of England, and the mother-cow goddess who castrated the bull god. center of British intelligence influence in America. The The perverse, cultish nature of the effort is IRPC was fo unded at a 1975 conference in Bellagio, revealed in a book written by Elizabeth Dodson Italy, one of whose sponsors was current V.S. Secretary Gray, the wife of Episcopalian priest David Dod­ of State Cyrus Vance. Vance, at the time, was serving as son Gray, both of whom were conference speakers. a coordinator of the CFR "Project 1980s" studies, and The book "Why the Green Nigger: Re-Mything , together with the Club of Rome's Daniel Yankelovich, ' Genesis," contains one chapter under the heading, the pollster, was establishing "The Publican Agenda "Women as Bearer of a Different Consciousness." Foundation" whose objective is to promote VNITAR­ That chapter's subtitles include "A Biologically CFR-Club of Rome "definitions of the issues facing Conditioned Consciousness," "Anatomy-as-Des­ Americans." tiny Frightens Vs All," and "Woman, the Other A cursory glance at the membership roster of any of Giver of Symbols." The emphasis throughout is these organizations will additionally uncover a heavy that women's non rational approach to problems is personnel overlap with the Trilateral Commission, a not only a product of their biological nature­ CFR spin-off: the Bilderberg Society, an elite organiza­ women are inferior-but this must be promoted to tion of the British and European medievalist families undermine the scientific and technological prog­ with selected American members; and British intelli-' ress associated with "men." gence's V.S. based Aspen Institute. Hence, Elizabeth Dodson Gray's subtitle: Re­ My thing Genesis. Th e Book o/ Genesis bid mankind Club of Rome goals to establish "dominion over nature" through sci­ Club of Rome chairman Aurelio Peccei is not subtle entific and technological progress. "Women's lib­ about the organization's aims. At a press conference eration" must destroy "the illusion of dominion." during the late 1970s, he lauded the cannibalism to which Before attending the Bethesda Club of Rome stranded mountain-climbers resorted-an example to be conference, Elizabeth Dodson Gray attended a fo llowed by whole populations in the face of scarce conference on "Land and Culture" in South Da­ resources, he stated. Similarly, in the early 1970s, the kota. In her speech, she praised "The American Club of Rome sponsored the "Limits to Growth" com­ Indian attitude" toward land as a welcome alterna­ puter-applications project of MIT professors Dennis tive to the American System attitude toward devel­ Meadows and Jay Forrester, whose method was t!J pro­ opment of agriculture through industry (compare gram a "zero growth" axiom into their model, andtben Malthusian population theory). She described conclude that zero growth was necessary as a circular Americans' commitment to progress as "a combi­ consequence of the axiom. Asked at a press conference if nation of the Judeo-Christian ethic of man having he was just a "neo-Malthusian" fraud, Meadows retort­ dominion over nature with the American macho." ed, "I'm not a neo-Malthusian. I'm a Malthusian!" In the mid-1 970s, using the vehicle of lrvin Laszlo's VNITAR, in particular, the Club of Rome extended its

54 National EIR April 7-14, 1980 efforts to the developing sector and even Eastern Europe, where Laszlo's "systems analysis" methods temporarily won adherents. Two relevants reports were produced, one the 1976 Reshaping the International Order. since known as the club's Rio Report. and Laszlo's 1977 Goals 'A Khomeini type of fo r Mankind. The substance of both was an emphasis on Christian fundamentalism' "appropriate technologies" (like sticks and cowdung) in the Third World nations and supranational control of On the eve of its Bethesda conference, the Club of economic policymaking and advanced technologies. Rome's office in Washington received best wishes Through conferences based on these reports in Al­ from one Jeremy Rifkinunable to attend. Rifkinis giers and elsewhere, Peccei sought with some success to a fe llow at the Washington, D.C. Institute for twist Third World aspirations for economic development Policy Studies. into "demands" for "more equal distribution" of already Extensive investigations by EIR over the past existing wealth, undermining growth in the advanced three years have established that, among other sector and ensuring no-growth in the developing sector. unsavory fe atures of the Institute for Policy Stud­ The attempt to coopt Third World policy planners ies, it has served as the "mother" institution for a led to a change in the Club of Rome's verbiage. Drop­ variety of "radical" organizations in the United ping "zero growth," which any backward nations' lead­ States and abroad, including many that constitute ers immediately recognize as insane, the Club, UNITAR the backbone of the so-called "international terror­ and' allied agencies like the Aspen Institute introduced ism" movement. the terms "sustainable growth," "limited growth," IPS was spun-out of the U.S. National Security "managed growth," "organic growth," and others. Council by New York and London financier fami­ Whatever term is employed, the meaning is still "zero lies to be a spawning ground for terrorists and growth." other vehicles of selective international political Similarly, the Club of Rome recently announced it destabilization. would place more emphasis on the "informational as­ Rifkinrecen tly authored a book, "The Emerg­ pect" or the "learning aspect" as opposed to the "eco­ ing Order: God in an Age of Scarcity." His thesis: nomic aspect" of its program. Whatever term is em­ A Khomeini-style "fundamentalist" revolt can be ployed, the meaning is the sort of mass-brainwashing, created in the United States to undermine scientific cult-building project outlined for the U.S.A. in the progress. March 16-18 conference in Bethesda. In an interview this week, Rifkin revealed that The Club of Rome established its "U .S. Association" he has recently been factionalizing among leading in the 1976-77 period, with the cooperation of a handful American evangelical groups, with a total member­ of institutions like the Woodlands Conference in Hous­ ship reaching to 60 million people, to end the ton, Texas, an Aspen Institute spin-off whose sponsors hegemony of the "old-line Bible-belt conserva­ are oil-man George P. Mitchell and the Mitchell Energy tives" and to bring to the fore "younger types who and Development Corporation, which is currently fund­ want man to be more humble in respect to nature." ing research efforts into the best methods fo r selling Club "There is a process developing here similar to of Rome cults and ideas to Americans. Highly elaborate what Khomeini did in Iran," he said. "The only profilingof American attitudes have been undertaken to difference is that Islamic fundamentalism is a reac­ locate those susceptibilities which will allow them to put tion against the introduction of science and modern­ the country through "The Great Transition." The basic ization, while the emerging American fundament­ tenet of the recent conference, in fact, was that the past alism is a response to the end of science." decade's battering of the U.S. population by inflation, Rifkin said that he is "particularly interested in oil supply scares, drugs and the rock-and-roll counter­ the charismatic movement. They are to American culture has already weakened Americans' commitment Roman Catholics what the liberation theology peo­ to the idea of progress. Americans, reported the profilers, ple (Jesuits-ed.) are to Latin American Roman have come a certain distance, and are now in a "transi­ Catholics .... We are transforming the way people tion" to "new values." understand the Book of Genesis's injunction for man to have dominion over nature. From now on, The cults man can only have stewardship over nature-to be The targetting strategies outlined by the conference a part of it, not rule over it." to complete "The Great Transition" can be broken down as follows:

EIR April 7-14, 1980 National 55 Death-cultism. Elizabeth Kubler-Ross's celebration of Rome's ideas on a mass scale. He sees in this movement death must be adapted to broader social issues, with the a way of allying environmentalists with workers by capi­ goal of compelling Americans now enraged at economic talizing on workers' growing fe ars of industrially-caused breakdown to tum those feelings inward toward a stoic disease and death." acceptance of "fate" and increasing fascination and obs­ He proposed that a green death cult be created, merg­ ession with dying and themes of death . To this end, ing Kubler-Ross with environmentalism. "Many union national conferences are to be held on death and dying, people are now aware that the work-place is very hazard­ and a "death-education process'! is to be launched in ous for them, not just by bone-crushing accidents, but by schools, churches and other institutions nationally. long-term exposure in the work-place to chemicals or to ordinary materials like asbestos or vinyl flouride. Out of Women's "Liberation" Cultism. In the official conference this awareness is being built a coalition between labor perspectus, one theme identified was that of "new oppor­ and environmental people over those issues that involve tunities for participation and leadership by women ... the health of the work environment. Workers feel that drawing on the theory that, from a psychological and disease and death should not be among the occupational emotional viewpoint, women's perceptions and abilities hazards, and an alliance with them is being built out of are particularly well suited to coping with an age of the antinuclear movement. The nuclear issue is being transition in which there will be few neat, simple, or used by the environmental activists to reach out into immediate solutions." Several conference pan�ls fo cused working neighborhoods, and a new phenomenon is de­ on how women's sense of intellectual infe riority-sci­ veloping." ence, technology and development are associated with "men"-can be exploited. Said one conference organiz­ Documentation er, "women's groups, in particular as these merge into consumer action groups, will be a principal institution through which we will seek to concretize the Club of Rome's ideas in this society." The overtone of lesbian Goodbye more, hello less cultism was everpresent, as at least one speaker empha­ sized that women have a "biologically conditioned con­ sciousness." Women can serve as a "giver of symbols" to the zero-growth society. 'Life after growth': an

Fundamentalist cultism. "Church institutions will be vital Ep iscopalian sermon in communicating the Club of Rome's ideas," say con­ fe rence spokesmen . What must be undermined is the The fo llowing article entitled, "Goodbye More-Hello Book-of-Genesis injunction to mankind-"dominion Less, " was written by David Dodson Gray of the Bolton over nature." The Judeo-Christian ethic "of man having Institute fo r a Sustainable Fu ture and was presented as an dominion over nature is wrong," said one participant. offi cial document at the Club of Rome's Bethesda confe r­ Another speaker, Roy Anderson of All-State Insurance, ence. Gray and his wife Elizabeth Dodson Gray, who is a a funder the U.S. Club of Rome organization, delivered "vice-chairp erson" of the U. S. Association, were both a bitter attack on doctors for being "overly concerned trained at the Yale Divinity School and are both associated with curing people," and then warmly praised "the reli­ with MITs Sloane School of Management. Th ey were gion of the American Indians" as an alternative to the trained there by L. Carroll Wilson, an MIT "alternative "notion of dominion in the Judeo-Christian heritage." energy " expert with long-standing involvement in the An­ The Club of Rome objective is to pit religious fu ndamen­ glo-A merican intelligence community who is now a member . talist cults against Americans' reverence for the power of of the Trilateral Commission. science. It is the purpose of David Dodson Gray and the Club of Rome to direct that rage of the American people inward Environmentalist cultism. Episcopalian priest David against themselves. As he writes, the task is to assault Dodson Gray, whose wife Elizabeth Dodson Gray also Americans' belief in their right to make the human condi­ . addressed the conference (see box: "The Club of Rome's . tion better, to progress, by convincing them that hellish 'Female Liberation' ") told conference participants: conditions of zero-growth and economic collapse are inevi­ "Peccei is a man with great vision. He thinks that table. But more, Americans must be convinced that death now is the time to bring the Club of Rome into the and ruin are to be celebrated-that themes of catastrophe, institutions and pores of American society. He thinks the death and dy ing are the very meaning of life. Th e very antinuclear movement will help implement the Club of essence of the cult-ridden society America must become, in

56 National EIR April 7- 14, 1980 What's the u.s. Club of Rome

The U.S. Association for the Club of Rome, based in Germany, Turkey; member, Trilateral Commis­ Washington, D.C., was created as the official U.S. sion. arm of the Club of Rome in 1976-1977. Its director, Claiborne Pell. U.S. Senator. Donald Lesh, was a fo rmer staffer on the U.S. Nation­ Russell Peterson. former Chairman, Council on Envi­ al Security Council under Henry Kissinger's aide Hel­ ronmental Quality; �oard member, USACR. mut Sonnenfeldt and William Hyland. In 1972, after Chairman, Audubon Society. leaving the NSC, Lesh joined up the Washington­ Carroll Wilson. MIT Workshop on Alternative Ener- based Potomac Associates, a thinktank which helped gy Strategies; member, Trilateral Commission. circulate the findings ofthe 1972 Club of Rome "Lim­ Dennis Meadows. coauthor, "Limits to Growth. its to Growth" study. Jay Forrester. coauthor, "Limits to Growth." The U.S. club restricts itself to approximately 150 Th omas Berry. Riverdale Center for Religious Re- members, who are drawn from leading thinktanks, search; Chairman, U.S. branch of the Teilhard de environmental-ecology groups, community activist Chardin Society. organizations, and religious institutions associated Elizabeth and David Dodson Gray. co-directors of the largely with the Episcopalians and Jesuits. Bolon Institute for a Sustainable Future. (Eliza­ In approach and in activity, it is kindred to the beth is USACR vice-chairperson and heads the Aspen Institute for Humanistic Studies. Four of As­ Theological Opportunities Center, Harvard Di­ pen's leading lights-Joseph Slater, Robert O. Ander­ vinity School).

son (head of Atlantic Richfield), Harlan Cleveland, Philip Land. S.J.• advisor, Washington-based Center and Walter Orr Roberts-are members. Aspen is the of Concern. controlling influence over an allied feeder-institution, William Ryan. S.J .. Provincial Superior English-Ca­ the Houston, Texas Woodlands Conference. nadian Jesuits, Toronto, Canda. The membership roster of the U.S. Association of John Th omas Wa lker. Episcopal Bishop, Diocese of the Club of Rome includes: Washington; Dean, National Cathedral. John J. Weaver. Episcopal Archdeacon for the Future Philip Abelson. Editor, Science magazine; President, of the Diocese of California; Dean Emeritus, St. Carnegie Institute Paul's Cathedral, Detroit. Gerald C. Barney. Chairman, Environmental Agenda Barbara Blum. Deputy Director, Environmental Pro­ Task Force; fo rmer Director, National Programs, tection Agency. Rockefeller Brothers Fund. Anne W. Cheatham. Director, Congressional Clear­ Norman Cousins. Publisher, Saturday Review. inghouse fo r the Future. Richard Fa lk. Princeton University Professor oflnter­ Robert W. Crosby. Program Manager, Office of Sys­ national Law; Director, Institute for World Order; tems Engineering, U.S. Department of Transpor­ advisor, Planetary Citizens; participant, Council tation. on Foreign Relations' "Project 1980s." Walter A. Hahn. Congressional Research Service Sen­ James P. Grant. Executive-Director, UNICEF. ior Specialist on Science, Technology, and Futures John A. Harris. IV. President, Zero Population Research. Growth; Chairman, National Alliance for Opti­ Frank M. Potter. Staff Director and Counsel, House mal Parenthood; Chairman, USACR. Subcommitteeon Energy and Power. Frances F. Korten. Program Office, International Di- Douglas Ross. Senior Economist, Joint Economic vision, Ford Foundation. Committee's Special Study on Economic Change, Ervin Laszlo. Director, UNITAR. U.S. Congress. Wa lter J. Levy. Council on Foreign Relations. Michaela · Walsh. Project Director, Technology for Amory Lovins. Friends of the Earth. Local Development, U.S. Congressional Office of George McGhee. former U.S. ambassador to NATO, Technology Assessment.

EIR April 7-14, 1980 National 57 Gray 's view, is that its members will believe " there is life Documentation aft er growth. " Slowing growth invokes emotions of loss and impo­ tence-impotence because we feel powerless to prevent TheAs pen Instituteon the loss from taking place. We might find parallels between public morale now and what Dr. Elizabeth 'The Great Transition' Kubler-Ross, in her recent book On Death and Dying, Th e ideology of the Club of Rome's "Great Transition" observed in individuals who were coping with loss of plan fo r A merica was presented by Harlan Cleveland of the loved ones or with loss of their own lives. We in the Aspen Institute, aformer U.S. ambassador to NA TO, in a United States in the 1970s were a people beginning to go speech before the Houston Rotary Club, in July, 1979: through a similar process as we experienced the loss of our earlier rates of economic growth and all of the At the Tokyo summit the last week of June, President cultural values that growth provided .... Carter agreed on your behalf and mine to hold U.S. oil We are shifting the center of meaning in our lives imports to 8.5 million barrels a day for the next couple of away fr om a past which is being lost and toward an years and maybe until 1985 ... , In the firstweek of July, unknown future. In the transition from unsustainable that outcome was described by Robert O. Anderson, a patterns of economic growth, our lives will have to center business executive with a sense of history, as the most on satisfactions that have been secondary, or peripheral, important international decision since Bretton Woods­ or perhaps not even part of our experience .... the conference which established the postwar monetary We have not thought much about going down (not system a generation ago .... up�, having less (not more), going slower (not faster), But to make the Tokyo promise stick, all 220 million agmg (not growing up), being (not achieving). In the of us-except those who are too young to reach the past, transition has been something individuals went thermostat or too old to drive-are going to do it reluc­ through alone, but a look back at the recent decade tells tantly, grudgingly, with conflictand violence, or whether us that already our symbols and fantasies were turning we will manage the transition willingly, with a sense of to transition themes. The striking series of disaster films joy in cooperation and commitment. ... (The Poseidon Adventure, Earthquake, To wering Inferno, The hardest adjustment will be for each of us-in our Airport, etc.) constituted a cultural anticipation of loss. officesan d in our homes-to swallow and digest the idea Gerontology was a lively new field of study ... Grief that "better" needn't any longer mean "more." seminars and seminars on death and dying were on the That's the bad news. The good news is that "better" agendas of church conferences and popular courses in can still mean "better." Once we get past the quantity of colleges. Meditation movements abounded. life as the touchstone of affluence, we can get to work Transition carries one to acceptance and we can seriously on the quality of life .... prepare ourselves for it through symbols and fantasies This seismic shift in values-broadly fr om quantity which help .... to quality-has led to a widespread search for new ways In the transition, what is central is what happens to to express personal and corporate and agency purposes, the morale of individuals, of institutions, and of our and measure "progress" toward them, in terms that place culture as a whole. Kubler-Ross writes of the importance human beings (rather than averages or institutions) in of respecting and preserving "a thread of hope" through­ the center of the picture .... out the grieving process. We need hope to find our way President Carter ... was beginning to march to the out of the maze, to pull ourselves through difficult same drummer: "owning things and consuming things," tunnel-like transitions. We need hope to sustain us until he said on television, "is no substitute for meaning." we can again more clearly see our meaning and our way. We soothed social conflict, in our growth phase, with In his October Woodlands address in Houston, Texas the expectation that more growth would mean more for entitled "The Management of Sustainable Growth," all. That hope no longer is plausible in the transition. Cleveland identified two crucial components of the Club of Anew hope, a new expectation, must be shaped apart Rome's assault against economic development. ' from the opiate of growth .... - Within the Church, pastors must attempt to locate The worm has turned on science and technology. The public moods and behaviors upon the landscape of the idea used to be that if we could think it up, we should human spirit and point out the potential for coping with surely manufacture and deploy it. aut this "inner logic" loss. Our goals and values matter even more now as we of technological change is being shoved aside by the begin to think the heretofore unthinkable-about life notion that the future directions and purposes of tech­ after growth. nology are matters for social determination ....

58 National EIR April 7- 14, 1980 Campaign1980 by Kathleen Murphy

tensive conversations about the The admiration is mutual. substance of fo reign policy. And 1 Reuss recently endorsed Kenne­ was impressed with my meetings dy's presidential bid on the with him." grounds that the Massachusetts Kissinger told a rather skepti­ Senator is the only man capable of cal audience that he was not seek­ leading the nation through the cur­ ing a position. rent economic crisis. According to an aide, Reuss is particularly im­ pressed with Kennedy's "willing­ Kennedy : "a national ness to take advice from outside consensus for experts." economic controls" Convention bombshell Ted Kennedy wants to build "a national consensus for econom­ The Kennedy campaign has ic controls ... a national unity dropped a bombshell into the movement built around the ques­ Democratic presidential race. Cap­ tion," said aide Hank Banta. Banta italizing on the Massachusetts Sen­ told an interviewer that Kennedy's ator's unexpected defeat of Presi­ Kissinger offers private thinktank-which includes dent Carter in the March 25 Con­ economists Barry Bosworth of necticut and New York primaries, services to Reagan Brookings, Felix Rohatyn of La­ Kennedy's chief political strategist, Fresh from his aborted attempt zard Freres and New York City's Paul Kirk, has announced that the to propel Gerry Ford into the Re­ Big MAC, Henry Kaufman of Sal­ candidate may wage a rules fight publican presidential race, Henry omon Brothers, Bruce McLaury of on the floor of the Democratic Kissinger has turned to greener B rookings, and John Kenneth nominating convention this Au­ pastures: Ronald Reagan. Galbraith-an avowed enthusiast gust. The target: getting rid of the Kissinger-whose undisguised of E. F. "Small is Beautiful" Schu­ rule that binds delegates to a par­ desire to become secretary of state macher-is preparing a compre­ ticular candidate on the firstballot, again has even Washington's jaded hensive "anti-inflation package" a rule which favors the candidate political community scandalized­ which he will introduce into the who has accumulated the most del­ is putting out the word that he is Congress in the near future. The egates. perfectly willing to run Ronald package will include the following Claiming that any rule could Reagan's foreign policy should he items: a full freeze on prices, wages be overthrown at the convention, be elected. Kissinger made his gen­ and interest rates for six months; Kirk told reporters that "the con­ erous offer at a March 29 speech mandatory gas rationing aimed at 'vention is the final authority on at Baltimore's Jesuit Loyola Col­ reducing consumption by 25 per­ what they're going to do in the lege. Humble Henry told his 1,000- cent over two years; and certain rules process." Kirk pledged a sim­ plus audience that "I have made it structural reforms in government ilar fight over the party platform. a policy not to refuse Presidents. economic policymaking and im­ While the Kennedy forces are 1 think if one is asked to serve as plementation. According to Banta, clearly aiming at giving their man secretary of state, one has an ob­ these "structural reforms, while a chance fo r the nomination, even ligation to the President to take not yet fully worked out, would be with a small minority of delegates, that very seriously." similar to those now being pushed overthrowing the first-ballot rule Kissinger also said that he had by Wisconsin Congressman Henry could open up the convention to been advising Reagan on foreign Reuss. These would establish the other dark horse candidates. With policy matters for some time. "I Federal Reserve Board as a Big Carter's popularity falling precip­ have not consulted with his cam­ Brother over nearly every aspect of itously, and Kennedy gaining sup­ paign," he said, "but 1 met on U.S. economic policy. Banta said port purely on the basis of the seven or eight occasions before the that Kennedy is "fullysuppor tive" population's disgust with Carter, primaries started with Governor of Reuss's Omnib-us Banking an open convention could provide Reagan, and have had rather ex- Bill. some very startling surprises.

EIR April 7-14, 1980 National 59 Congressional calendar by Barbara Dreyfuss and Susan Kokinda

O mnibus Shipping Bill up the Secretary of Commerce to deny bargaining table. Our tactic is to for a vote subsidy contracts to employers who say to them that if they don't stop On March 20 Congressmen negotiate contracts that employ this export subsidizing, then the Murphy (D-N.Y .), Snyder (R-Ky.), more workers than 'necessary for U.S. will do it too." Hearings on and McCloskey (R-Ca) introduced efficient levels.' '' The legislation this legislation, the Competitive a revised version of the omnibus would also give the go-ahead for Export Financing Act, will be held maritime bill, a bill that has far­ the Commerce Secretary to review in the Senate Banking Committee reaching ramifications for all U.S. collective bargaining agreements to April 15 and 16. shipping as well as many labor determine if they allow for the "ef­ unions. The Congressmen plan is ficient economic use of vessels by to send the bill to the floor of the management and labor." House by April 4. The Senate is also working on a Hearings on Iran requested The legislation is an extensive bill dealing with shipping regula­ Two radically different overhaul of U.S. shipping policy. tions, but the legislation, being congressional approaches to the One of the most important aspects drafted by Senator Inouye (D-Ha), Iran crisis surfaced during the last is a provision eliminating the essen­ does not have the broad sweep of week in March from two Idaho tial trade routes that have been es­ the House bill. The Senate bill deals elected officials- Sen. Frank tablished since 1936. The bill would largely with regulatory control over Church and Rep. George Hansen. allow for renegotiation of the the shipping industry and in some Senate Foreign Relations Commit­ routes by the shipping conferences. aspects strengthens it. The Senate tee chairman Frank Church, work­ "This will allow them to rational­ bill will be ready for flooract ion by ing behind the scenes with the ad­ ize service," said one staff aide mid-April, Senator Inouye hopes. ministration and the Department working on the bill. "There is a of State, has called for an investi­ strong possibility too that existing gation of U.S. relations with Iran ports will be affected since the up to the point of the shah's over­ changes in the routes will affect Senator proposes throw. The proposal came at a which ports are important in ship­ blackmail against Europe committee hearing where Secretary ping." Senator Birch Bayh (D-Ind.) of State Cyrus Vance testified. A spokesman for the National will introduce a proposal shortly Vance gave encouragement to the Maritime Council warned that this that will call fo r increasing by 50 idea, while several Republican Sen­ provision would have a very nega­ percent tariffs on imports from Eu­ ators on the committee charged tive effect on shipping, creating ropean countries that do not adhere that they knew nothing about the chaos in the industry and destroy­ to U.S. policy regarding Soviet proposal until Church and Vance ing many shippers. "It will be open troops in Afghanistan. exchanged views on it-giving rise season on the shippers. The policy The Bayh proposal parallels to the suspicion that it had been of stable trade routes has helped legislation that was sponsored by carefully orchestrated beforehand. exports and imports very much." Senators Heinz (R-Pa.), Cranston State Department spokesman The legislation would also ad­ (D-Ca.), Javits (R-N.Y.), and Ste­ Hodding Carter fueled that suspi­ versely affect U.S. shipbuilders, be­ venson (D-III.) to increase funding cion by delicately noting that such cause it provides subsidies for ves­ for the Export-Import Bank, osten­ an investigation might prove bene­ sels built abroad. At the same time sibly so that the U.S. could compete ficial in easing relations with Iran. the bill opens up labor contracts for with European subsidized exports. By ending such an investigation at review by the U.S. government. However, an aide to Senator Heinz the point of the Khomeini takeover, "The labor unions are concerned made clear that the intent was to the Church committee could both because they perceive several pro­ use the threat of trade warfare to coverup the role of the administra­ visions that are antilabor," de­ force Europe to stop subsidizing its tion in bringing the Khomeini gov­ clared the Council representative. own exports. "The purpose of this ernment to power and in allowing "Specifically the bill would allow bill is to bring Europe back to the the taking of the hostages.

60 National EIR April 7-14, 1980 Rep. George Hansen (R-Id), billion over ten years. The provi­ spokesman for Frank Thompson who has been charging administra­ sion to exempt from taxation the said that it would probably take tion complicity in the Iran crisis first 1,000 barrels of oil produced people several years to "get over since his trip to Teheran immedi­ was deleted in the final version. the notion that this is socialism in­ ately after that embassy takeover, Many independents fe ar bank­ carnate. We see introduction of a held a press conference on March ruptcy because of the severe taxa­ discussion draft as important, but it 31 and introduced a congressional tion rates. President Carter signed is not a high legislative priority this resolution calling for a full investi­ the tax legislation on April 2. year ." gation of U.S. relations with Iran, including administration relations with Khomeini and their handling of the crisis. Hansen has been out­ Corporate Democracy spoken in his charge that the Iran Act planned Committee votes up crisis may have been the result of a At some point prior to Big Busi­ shipbuilding conspiracy by international finan­ ness Day on April 17, Reps. Benja­ The House Armed Services cial and oil interests and their min Rosenthal (D-N.Y.) and Frank Committee voted on March 26 to spokesmen such as Henry Kissin­ Thompson (D-N.J.) will introduce increase the Navy shipbuilding ger, to subvert American foreign the Corporate Democracy Act, a budget by $2.2 billion dollars, while policy to their own ends. bill whose goal is to increase "pub­ rejecting administration pleas for lic accountability" of major corpo­ $80 million to begin work on a new rations. The bill, drafted in large cargo plane that would be an inte­ part by Ralph Nader's Congress gral part of the administration's B ank deregulation bill Watch organizations has the ulti­ "rapid deployment" program. signed by President mate aim of placing corporate the $2.2 billion increase over The President signed into law management under much more the administration request came on March 31 the Depository Insti­ control "by the people"-in this after extensive hearings in the com­ tutions Deregulatory Act, the om­ case, the people being environmen­ mittee and public concern ex­ nibus banking bill that was spear­ talists. The legislation would place pressed by committee members, headed through Congress by Sena­ the "public" on boards ofdire ctors, that the U.S. Navy, critical to U.S. tor Proxmire (D-Wisc.) and Con­ prevent interlocking directorships, warfighting posture, is being re­ gressman Reuss (D-Wisc.). The bill and increase disclosure require­ duced to obsolescence. The in­ puts under the authority ofthe Fed­ ments and penalties for safety and creased authorization, supported eral Reserve System virtually every other violations. A little noticed by a vote of 35 to 6, would go bank in the nation, and provides portion of the bill would incorpo­ toward the construction of20 ships, fo r a phase-out of Regulation Q, rate H.R. 5040, legislation to deal two nuclear powered attack sub­ allowing the savings and loan Insti­ with plant closings. H.R. 5040, marines, two frigates, and take the tutions to extend slightly higher in­ pushed over four years ago by Wal­ aircraft carrier Oriskany and the terest rates than commercial banks, ter Mondale and widely recognized battleship New Jersey out of moth­ and allowing states to establish as a reason for his decision not to balls. usury laws. The bill passed the run for President because of the Research and Development House of Representatives March 27 adverse reaction to the bill, con­ subcommittee chairman Richard and the Senate March 28. tains a provision which would es­ Ichord (D-Mo) led the attack On March 27 the windfall prof­ tablish compulsory worker reloca­ against the cargo aircraft, arguing its tax on the oil industry also tion programs. that the plane would eventually cost passed the Senate by a vote of 66 to H.R. 5040 and the Corporate $12 billion and would drain away 31 following House passage a week Democracy Act are only being any money for other necessary pro­ and a half before. The tax would floated now to create a promotional grams, such as improvements in take out of the economy over $227 climate toward later enactment. A sealift capability.

EIR April 7-14, 1980 National 61 NationalNews

Volcker. Last November the sentiment against V olcker was already so strong that the Illinois State Legislature passed Administration pressures a resolution demanding that Congress Congressional resolution Europe on Indian either reverse Paul Volker's policies or against Federal Reserve demand his removal from office. In the Ocean build up wake of the Federal Reserve chairman's policy introduced latest announcement that credit policy Under Secretary of Defense Robert Ko­ On March 26 Senators Warren Mag­ will be tightened, a number of other mer, who ran Operation Phoenix in nusen (D-Wash.) and Jim Sasser (D­ legislatures have moved in the direction Vietnam, appeared before the House Tenn.) introduced a resolution, S.392, of the Illinois legislature. Foreign Affairs Committee on Wednes­ demanding that the Federal Reserve day to announce that American troops Legislation addressed to the U.S. take immediate steps to lower interest will soon be stationed in Oman, Kenya Congress calling for an immediate re­ rates, because high interest rates are and Somalia. Forts in those three coun­ versal of the high interest rate policy causing sever inflation, unemployment tries have been selected as base facilities caused a heated battle in the Pennsyl­ and a crisis for industry. In introducing for U.S. combat forces deployable to vania state legislature this week when it the resolution, Senator Magnusen de­ the Persian Gulf region. The major came up for a vote. The bill, House clared, "The Federal Reserve's high in­ function of the hearings was their func­ Resolution 154, was introduced by terest rate policy is a travesty and should tion as a forum for escalating U.S. pres­ Democratic State Rep. Joseph Zeller, be abandoned. Leftunchecked , the Fed­ sure on Western European NATO mem­ cosponsored by six Republican and eral Reserve high interest policy will bers to join Harold Brown's proposed Democratic representatives, was moved make inflation worse now and later. At "Rapid Deployment Force," or have onto the floor when 25 legislators from the same time it will bring on recession Europe "take up the slack" in the Eu­ both parties signed an emergency mo­ and higher unemployment. ...How will ropean theater itself through a NATO tion to speed its passage. Despite strong business, particularly small business, be build up that would free U.S. forces pressure from particularly Pennsylvania able to afford to borrow funds to invest stationed in Europe for deployment to auto dealers and homebuilders, who in the new equipment, technology, and the Indian Ocean. have vowed to fight for the bill's pas­ research they will need if productivity is Rep. Paul Findley (R-Ill.) widely sage, it has been deferred by the legis­ to be increased?" known as a Hill spokesman fo r NATO, lature. The Resolution itself demands that questioned Komer: "There would be In Maryland, Senate Joint Resolu­ "the Board of Governors of the Federal enormous public resistance to the tion 58, introduced by Baltimore legis­ Reserve System should immediately take United States getting involved all by lator Clarence Mitchell III, chairman of steps to reduce interest rates." The res­ itself to meet a Soviet threat in the the National Conference of Black leg­ olution calls for this action because "the Persian Gulf." Findley thus echoed the islators, also attacking the credit crunch Board of Governors of the Federal Re­ recently stated policy of former NSC is now penoing action. In an unusual serve System has taken succesive steps director, McGeorge Bundy; "If Europe move, black commmunity leaders from to repeatedly raise interest rates which wants its oil, it will have to send its own Washington, D.C. have become in­ have repeatedly raised the consumer troops." volved in the political fight around the price index; whereas higher interest rates Findley then continued; "It would Mitchell resolution in Maryland. Jonas have not reduced inflation but do reduce be a serious error for the U.S. to fail to Milton, former chairman of the Wash­ productivity and prolong national de­ obtain allied support from the first mo­ ington, D.C. Steering Committee of pendence on fo reign oil." However the ment." PUSH, and Reverend John Shaw, resolution says that the Federal Reserve In a frank admission of the black­ Grand Master of the Washington, D.C. could use its powers to control credit mail pressure being applied to Europe, chapter of the International Masons, supply through selective credit controls Komer replied; "We're actively working sent a special statement to Mitchell, if necessary. on that problem." urging swift passage of the bill. In California, the state Democratic Council is now debating legislation against the Federal Reserve policy, sub­ mitted by 125 member-delegates, includ­ Schultze for Reagan, Anger spreads against ing members ofthe council's Black Cau­ cus. The gathering of California liberal and against gold Volcker's credit policy Democrats is expected to endorse some George Schultze, a director of the Be­ Anger is spreading throughout the form of anti-usury motion which will chtel Corporation in San Francisco and country against the monetary policies of then be forwarded for Congressional an adviser to Ronald Reagan, is throw­ Federal Reserve Board chairman Paul action. ing his weight into that tendency in the

62 National EIR April 7-14, 1980 Briefly

Reagan · camp which is adamantly pendence on foreign aid by balkanizing against the use of gold as the fo undation China, by having no city dependent on • CARTER BUDGET CUTS will gut the Coast Guard's drug of the world monetary system. the rest of the nation, by having all patrols in three or four of its 12 "I am against the use of gold as the regions self-sufficient. We can draw a districts, sources say. Drug inter­ base for the monetary system; the price great many lessons from Mao. Balkan­ cepting cutters are already docked fluctuates too wildly. I share Milton izing is the way the U.S. has to go." because of lack of funds to pay Freidman's views on this," Schultze The pro-Chinese Christian Science for their fuel. Carter's budget stated this week. Monitor, in an editorial April 3, gave a message contains $37 million in This statement should disabuse those good idea what this is all about. "New cuts for the Coast Guard. The circles in West Germany who were re­ Yorkers are happy when they are miser­ Coast Guard has been forced to sponsible recently for planting an article able," the Monitor stated. halt drug-running patrols in 2 in the newspaper Handlesblatt which Northeastern districts embracing linked Schultze's involvement in the Re­ agan advisory camp to reports that Re­ much of the key New England agan · would support a greater use for Will the Eximbank coastline, and also Alaska. If gold in world trade and finance. Congress does not soon approve go broke? an emergency $13.5 million fuel cost appropriation, the suspension Sources from the Senate budget com­ of patrols will extend to several mittee this week confirmed that the Ex­ other districts covering a much port-Import bank may be forced to greater portion of the nation's New York : in imitation . cease lending come June 1 for lack of coast. of Peking funds. The bank at present only has $600 leader Using the current transit strike, New million remaining out of a total fe deral • CITIZENS PARTY Harriet Barlow of the Institute for York's Mayor Koch apparently intends government appropriation of $3.75 bil­ Self-Reliance was in private dis­ to alter the character of New York on lion. Whether the bank will remain open · cussions this week with Anderson- the model of the zero-growth city of past June I is contingent on resolving a for-President staffers in Washing­ Peking, which Koch just visited for two dispute between the White House, the ton to try to win Anderson's weeks, and whose population is noted Senate and the House over how much agreement to become presidential for its docility, its ability to suffer and the bank will be allocated for 1981. standard-bearer on the Citizen, to accept death and ruin. Congressional sources involved in Party ticket. "The chances are As the New York and national me­ working out the future government ap­ only 1 in 100 now that he'll do dia has fe atured New Yorkers "accli­ propriation for the bank indicate that it," Barlow remarked. "But I have mating" to the strike-including one there is little likelihood of a resolution a fa ntasy that he can be won over. New York Post quote from a psychiatrist to the dispute before June t. These same He's as committed as we are to that "New Yorkers would react greatly sources indicate that the bank was seeing the values he's running for in a nuclear war"-Koch himself ex­ promised by the White House late last made a key fo cus of the presiden­ claimed April 2: "This is wonderful. year approval to increase its current tial campaign." Look at all the bicycles, look at all the lending ceiling from $3.75 billion to $5.8 people walking. This is the spirit I saw billion. Confident that such an increase A signed into law by in Peking." would occur the bank escalated its lend­ • BILL Carter on Friday, grants the Gov­ After Koch made this statement, a ing rate. Then came Federal Reserve ernment Accounting Office New York political insider remarked, Chairman Paul Volcker's tight credit (GAO) complete authority to au­ "Koch currently has the same self-iden­ policies which prompted Senator Mu­ dit the books of federal govern­ tity as Chairman Mao, forcing sacrifice skie to close the budget window on the ment contractors. Under the new in the face of adversity. He is imposing bank, meaning that it went into 1980 law, the GAO can go directly to self-sacrifice and self-descipline. This is with no new government funds. federal court to obtain subpoenas truly the Chinese spirit." "With the tight budget fever in gaining access to books without Along the same lines, several poli­ Washington," said a Washington requiring Congressional approv­ cymakers for the Aspen Institute and source, "there is even the possibility that al, and can obtain court orders to the Club of Rome have been stressing when the dust clears the Eximbank will acquire additional information re­ that China's zero growth society is the find itself with even less funds than last quested by GAO auditors, with­ model for the U.S. Stated one Club of year." According to an Eximbank out approval by the Department Rome member in an interview this week: source, the demand for low interest rate of Justice. "More people should read Chairman Exim loans has never been greater than Mao. He was brilliant. He reduced de- at present.

'EIR April 7:- 14, 1980 National 63 EnergyInsider by William Engdahl

How to decree a gas shortage our White House planners encoun­ A new set of fe deral regulations have a very simple purpose, tered. The fee reimposes a 2-tier discourage refining of oil into gasoline. pricing structure. So, in a stroke of genius, the White House and DOE have proposed a new entitlements program.! This where the next gas short­ age may well come from. Under the new program, refi­ A fter several hours plowing Let's look a little more closely ners would have to obtain entitle­ through a maze of the latest reg­ at this latest presidential move. ments to refine gasoline. The pro­ ulations issued by the Department Carter administration economists, ceeds would go to reimburse im­ of Energy, I thought it worth your in the ir finite wisdom, have de­ porters of oil for the $4.62 Treas­ time to review the trend line of creed that the price of gasoline ury fee. Thus, we won't discourage some of these remarkable rulings must rise dramatically, to force oil­ imports of oil. Instead, with the coming out of the Administration, hungry consumers to use less gas­ tax falling on refiners of gasoline, particularly in the wake of the dis­ oline. In his recent "anti-inflation" refiners will have a "disincentive," astrous so-c alled Windfall Profits address, Carter announced the im­ discouraging production of gaso­ Tax legislation. That tax is de­ mediate $4.60 import fee. Now, line. Refinerswill merely be forced signed to lower domestic oil pro­ recall that last summer, when the to shift as much as possible over duction. The new regulations are name of the game was ostensibly to diesel and other products. The designed to ensure that less oil is increased domestic oil production, less competitive will go under. refined into gasoline. If we find Carter announced phased price de­ What a beautiful strategy for forc­ ourselves this summer in long gas­ control. ing an artificial gasoline shortage, oline lines, the new regulations ex­ Part of the rationale fo r decon­ regardless of the supply of crude plain why. trol was to end the cumbersome oil. Currently, the United States government "entitlements" pro­ Meanwhile, the London Petro­ and the world has a relative glut gram. Under that policy, set up leum Group-Royal Dutch Shell, of crude oil. W orId oil production, around the time of the 0 PEC 1974 British Petroleum and their Amer­ exclusive of the Soviet and Chinese oil embargo, the cost for refiners ican-based policy-followers at production, fo r the fi rst two of more costly imported oil vs. Exxon, Texaco, et al.-will come months of this year is fully 3 per­ cheaper cost domestic crude was out unscathed, much as they did cent greater than a year ago. Rot­ offset by an "entitlement" paid by under the windfall tax. Domestic­ terdam spot prices are soft and refiners of the cheaper crude to based producers and refiners will actually declining fo r gasoline and refiners of the more costly import­ be forced out of the picture, and fuel oil. Stocks are at record highs, ed variety. This amounted to a the political "embarrassment" of with gasoline in the U.S. a whop­ subsidy by domestic producers to a group of producers who actually ping 13.4 percent about last March major oil companies which import try to produce oil will be eliminat­ 14. from the Middle East (and do so ed. Official Presidential doubles­ in order to receive such govern­ Of course, all of Carter's eco­ peak on the subject these days goes ment incentives). Wh y do you nomic planners have convinced something like this: This country think OPEC imports rose so dra­ him that higher prices of gasoline has a dangerous dependence on matically after 1974, while domes­ have no economic impact. In fact, OPEC oil. We must reduce this. tic production stagnated? one school even lauds the energy We must impose a $4.60 surtax on The impact of the oil import reduction in the economy, claim­ every barrel of imported barrel, fee will be on gasoline consump­ ing it increases employment-less which is now approximately I of tion, by far the largest refinery energy means more jobs-if you every two we consume. product. But, there is a problem don't mind stoop labor.

64 National EIR April 7- 14, 1980