EIR LEAD EDITORIAL FOR MONDAY MARCH 20, 2023
Strategic Showdown: Banking Blowout Or Work With China
March 19, 2023, 2022 (EIRNS)—To put it mildly, banking hours the last two weekends have been extended. The “Everything Bubble” is now everywhere. The deadly fear amongst the central bankers is that on Monday morning in Tokyo, the Asian markets will no longer be drinking the Kool-Aid that the parties on both sides of the $2 quadrillion notional worth of derivative contracts will show up. So, from the close of markets on Friday afternoon, March 17, a marathon of intense negotiations set in these days. This weekend the show was how to stop an implosion at Credit Suisse from spreading, triggering a collapse of the intricate web of derivative bets from unraveling, as fast as a nuclear chain reaction.
By March 19, early Sunday evening in Zurich, the Bank of England, the Federal Reserve, the financial overseers and supposed regulators of the U.K. and the U.S., had arranged with the Swiss National Bank on the latest stopgap. Last week, an historic $54 billion was thrown at Credit Suisse. Today, it pales in consideration of the new $225.6 billion signed onto by Switzerland’s government, in the arrangement to have UBS absorb Credit Suisse.
By early Sunday evening in Washington, the Federal Reserve quietly announced that they and five other major central banks of the world were plunging, on Monday morning, into a new deluge of dollar emissions—a re-run of the “swaps” agreements of March 7, 2020, with no chance that what was then a breathtaking, historic level of hot air emissions, can buy much of any time anymore. The Federal Reserve is to provide “new standing U.S. dollar swap lines” for 7-day loans of dollars to the central banks of the U.K., Japan, Switzerland, the European Central Bank and Canada. The fantasy-ridden attempt to dry out inflation with the mechanism of constant interest rate increases has run smack dab into the systemic weaknesses from the previous 2008 “drunken binge” bailouts, weaknesses hidden over the years with free money, more and more exotic financial instruments, and less and less regulation. Everybody is to pretend that a day of reckoning of actual assets could be endlessly kicked down the road—and the infamous coyote in the “Roadrunner” cartoon could be trained to never look down.
Just prior to Zurich’s $225.6 billion announcement, Helga Zepp-LaRouche and EIR economic strategist Dennis Small gave an efficient, hour-long prescient analysis of the mess and the road out in a dialogue over Twitterspace. The developments for the rest of the day only underlined the accuracy of the overview they presented.
On the eve of the March 20 arrival of China’s President Xi Jinping in Moscow for three days of collaborative deliberations with Russian President Vladimir Putin, Xinhua made crystal clear that Xi’s Belt and Road package of large-scale infrastructure projects has been the basis for the growing strategic relationship with Russia. Further, such “win-win” physical-economic approaches not only actually prevent cancerous financial bubbles, but also allow for diplomatic arrangements, such as China’s surprising success with a rapprochement between bitter enemies, Saudi Arabia and Iran. In fact, today, the Saudi King Salman invited Iran’s President Ebrahim Raisi to come to Riyadh to work out their joint future. Salman referred to their two countries as “brothers.” It is the degraded, imperial “dog-eat-dog” view of humans that locks the present West into these financial impossibilities and, just as surely, military impossibilities.
The Biden administration’s National Security Council spokesman John Kirby warned the Xi and Putin that if they had the nasty idea of arranging for a ceasefire proposal in Ukraine, the U.S. rejects it sight unseen. The same type of fear of the next level of China-Russia strategic developments, and the same type of pathetic whining is presently being thrown at Putin by the so-called International Court of Justice—though having no legal application to Russia, the U.S., China, India or many other countries. Their public relations stunt of issuing an “arrest warrant” against Putin—for saving the orphans in the Donbass, children whose parents were killed by the Kiev regime itself!—just prior to the Xi-Putin summit is not just water off of a duck’s back to Putin, but yet another sign to the Global South and the world that the “Emperor is naked.”