Subscribe to EIR Online


Arrest of Strauss-Kahn
Marks Crucial Shift

May 24, 2011 (EIRNS)—The arrest of IMF chief Dominique Strauss-Kahn in New York on May 15 has brought the entire global financial bailout to a halt. The "clean job" that was pulled on Strauss-Kahn had been in preparation for some time, to the purpose of achieving exactly those effects it did achieve. "What the outcome of those effects will be, is uncertain, but the effects ... cannot be avoided," Lyndon LaRouche commented in a discussion with associates on May 21.

"The entire system is now going to crash in one of two ways. Either, by some unlikely prospect, the backers of Obama, Geithner, and Bernanke will survive this, in which case all Hell busts loose, or they won't survive it, and the situation becomes much more interesting. And what happened to Strauss-Kahn, is an absolutely crucial part of this turning point which has been reached in the past two weeks."

There are only two options, LaRouche stressed: either the international speculative system collapses, or the world economy does. Strauss-Kahn (aka DSK) was not only a key figure in the bailout of the euro and the whole transatlantic system, but was projected to become the "Emperor of the Mediterranean." His arrest has changed the game. The mad-man bailout faction, especially DSK's buddies Tim Geithner and Ben Bernanke, is now in disarray.

There are at least two factions in Europe, who rightly fear that new rounds of bailout packages would throw the world into an uncontrolled hyperinflationary wave. One, in Germany, is visibly acting through the German government's insistence on debt restructuring of Greece. A story now making the rounds on Internet is that, even before the first bailout plan went through, the head of the German banking bailout fund Bafin, Jochen Sanio, expressed his opposition to a Bundestag commission. Asked why, he replied: "Because the taxpayers would come and hang us!" The other faction is visibly emerging in Britain, through the discussion of the "too big to fail" issue and through the attack on the Blair-Royal Family nexus (see below).

In the U.S. as well, certain influential circles oppose the hyperinflationary casino-economy, a reflection of which is seen in the intervention of the New York justice system against Strauss-Kahn. In addition, New York Attorney General Eric Schneiderman has opened an investigation of five large Wall Street banks for fraud through activities on the secondary real estate market (MBS). Goldman Sachs, Morgan Stanley, Bank of America and others will be investigated under New York State's Martin Act of 1921, for crimes which have been exhaustively documented in the Angelides and Levin reports.

Meanwhile, the bailout process in the Eurozone has been frozen. Faced with DSK's empty chair, EU officials are unable to reach an agreement on a package for Greece. Strauss-Kahn had made sure that the IMF—which includes the U.S., Russia and developing countries—would be a key part of all the bailouts. Now, EU president Van Rompuy complained that "we are feeling the lack of leadership in solving the Greek crisis," and called for quickly finding a replacement for DSK. It would have to be a European in order to guarantee continuation of the bailout process. However, Mexico, Turkey, China, and other Asian nations have advanced their candidates, so it will not be easy to impose the EU once more.

In the meantime, the IMF-ECB-EU troika has suspended its mission in Athens, announcing that everything is suspended until the government takes concrete steps toward the privatization program, which the Greek population considers another rape, initiated by Strauss-Kahn. And if Athens cries, Dublin is not laughing. The sale of a EU5 billion bond by the European Financial Stabilization Facility was postponed because of the Irish refusal to accept the exorbitant credit conditions. In other words, the whole bailout mechanism has come to a halt, and through that, the entire speculative derivatives market is facing a chain-reaction collapse.

Back to top