LaRouche: 'We've Got to Help Germany—Without Sustaining a Stable German System, We Cannot Prevent War'

July 11, 2016
CC-SA Photo credit: Mohamed Yahya

The trans-Atlantic financial system is at an imminent blowout point, and what's happened just in the last day, Italian Prime Minister Renzi had made a statement during a joint press conference with the Swedish Prime Minister, saying that, while Italy's banks are in big trouble and need a bail-out, this is very minor compared to the major European banks that are facing a massive derivatives blowout.  He was referring very specifically to Deutsche Bank which has $75 trillion in derivatives exposure and is being universally described as the biggest single source for a new systemic blowout.

Renzi was putting pressure on Merkel and especially German Finance Minister Schäuble to back down and allow Italy to abandon the bail-in requirements that have been enforced in Europe since January 1st, to do a bail-out of Monte dei Paschi and other Italian banks.

What actually has happened since then, is that Deutsche Bank has publicly come out calling for a massive European bank bail-out, obviously starting with themselves, and that basically they are calling precisely for a cancellation, temporarily at least, of the bail-in rule.  This is a statement that was made by Deutsche Bank's chief economist David Folkerts-Landau in Welt am Sonntag on Sunday.  He says, the banks need a EU150 billion bail-out to recapitalize, and it has to be done without bailing in the bondholders and depositors.

In response to these dramatic developments, American political economist Lyndon LaRouche issued a dramatic call for action:

“Exactly what we have to do is support, the fact of a temporary reorganization of the economy of those banks, and we have to secure that in order to stop the bleeding.  In other words, the point is, stop the bleeding and integrate and bring in conditions which will enable us to sustain that kind of operation.

“In other words, you've got to create, because the whole German economy is a crucial thing.  It's a mess.  We all know it's a mess.  It's been a mess; it became a mess — Schäuble and so forth have made it a mess!  We know that.  But we're not going to shut down the German economy on the basis of the fact we got a bunch of crooks or suspected crooks who might be in certain departments.  What we're going to do is, we're going solve this thing; we're going to fix it and we're going to back it up, for a one-time backup.

“Clean the whole thing out, set up a program which will secure the banking system of Germany to function. Once that has happened, now you can work from there!”

Such a one-time move would necessarily involve cancelling out this $75 trillion in derivatives and going in a direction a bank separation and the sorts of things that would allow for credit to the real economy.

LaRouche elaborated:  “You've got to qualify the thing further, saying we are doing it as a one-time operation, for the sake of saving the economy.  That's it.

“This is a rescue of the economy, despite all the mistakes made, we're going to take it one time, because we're going to try to save the economy of Germany.  And that's what's at risk. And Schäuble is not a useful person, nor is Merkel.

“We've got to help Germany, because without sustaining a stable German system, we cannot prevent war!

“What we need is a program which gives credit to the German economy, a one-time German economy credit. And you have to present it that way, and put it to people that way for giving them confidence in what they're doing, and telling them 'don't do what you did before.'  That's the point.

“You have to say to the Germany economy, 'Look, you've made mistakes, serious mistakes.  Now, we're going to bail you out, but you're going to have to obey yourself; you're going to have to get on the job and do what you should do, and don't try to cheat any more.'

“I'm saying, Germany is an emergency case.  We have to organize the thing in such a way that Germany can escape from this problem.  Assuming that the organizations of the German economy are going to operate, in such a way as to win the battle.

“And Schäuble is not really high on my level on that, you know.... But concentrate essentially on the provisions which must be made, which enable this thing to go.  You've got to have some system, which will secure the system of the German economy, the financial economy, and you've got to do that; and you've got to make it work. If you don't, you're going to go into chaos.”

LaRouche referred to the period of 1989, when the Berlin Wall came down and Germany was moving towards reunification, and the Helmut Kohl government was looking to revive economic and political ties to Eastern Europe and what would soon be post-Soviet Russia:

“We had a case at that time of a great leader, of the economy of Germany, who was assassinated by the French—Deutsche Bank President Alfred Herrhausen. So we don't want another Herrhausen abuse.  Let the Germans be free, and let the others go into the pen.  I mean, because that's what happened.  Because you had a point here, you had a leading figure for the leading office of German policy, and you shut that down, and you moved the thing out to a different way, you destroyed the beginnings of the German economy!

“So we have to tell some of the people in that area that they made a big mistake and they should be a little bit more generous in their matters of dealing with this thing.”



Deutsche Banks's London Operations Can Blow Out the Entire System

Italian Prime Minister Matteo Renzi told reporters during a recent joint press conference with Swedish Prime Minister Stefan Lofven that, no matter how serious Italy's banking problems are, they are dwarfed, by comparison, with Deutsche Bank.  “If this non-performing loan problem is worth one, the question of derivatives at other banks, at big banks, is worth one hundred.”  Renzi's remarks were described by Alex Christoforou as a not-so-subtle pressure move by Renzi against German Chancellor Angela Merkel and German Finance Minister Wolfgang Schäuble, over their refusal to bend the rules to allow Italy to bail out Banca Monte dei Paschi di Siena without invoking the EU's bail-in policy, in force since Jan. 1.  The “derivatives at big banks” referenced by Renzi was directed at Deutsche Bank, which has been widely described in recent weeks as the most volatile bank in the entire trans-Atlantic system, with a derivatives exposure of $75 trillion, 20 times bigger than the GDP of Germany, and a 40:1 leverage rate, far beyond the Lehman Brothers case in 2008.

Zero Hedge on Saturday further detailed the Deutsche Bank disaster under the headline “Charting the Epic Collapse of the World's Most Systemically Dangerous Bank.”  Tyler Durden wrote “If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.”  But according to a time-line of recent events, Deutsche Bank is now on the edge of blowout, with massive implications for the entire London-Wall Street centered system of trans-Atlantic finance.  On June 2, two former Deutsche Bank employees were charged in the ongoing U.S. Justice Department probe of the Libor rigging scandal.  A total of 29 Deutsche Bank officials are still under investigation in that probe.  Following the Brexit vote, Deutsche Bank, the largest European bank operation in London, has been further reeling.  On June 29, the IMF issued a warning that “DB appears to be the most important net contributor to systematic risks.”  The next day, the Fed announced that DB had failed the stress test as the result of “poor risk management and financial planning.”

Deutsche Bank shares are now selling at 8% of the peak price in May 2007, with 9,000 employees having been recently laid off, and the bank shutting down operations in 10 countries.  However, the real problem is Deutsche Bank's enormous derivatives exposure, the largest of any bank in the world.  Zero Hedge warned:  “Now that Deutsche Bank's dirty laundry has been exposed for all to see, Renzi's gambit is clear: If Merkel does not relent on bailing out Italian banks, the collapse of Italian banks will assure the failure of Deutsche Bank in kind.  And since in a fallout scenario of that magnitude DB's derivatives would not net out, there will be no change to save the German banking giant, bail out, in or sideways.”

Deutsche Bank Officer Says 'Europe Is Extremely Sick,' Demands Bailout Poison

Now not only Société Générale, but the British-German monster Deutsche Bank is demanding that the European Union suspend its "bail-in" rules and conduct a "European TARP" bank bailout to avert looming bank failures.

Deutsche Bank chief economist David Folkerts-Landau, interviewed by Welt am Sonntag, demanded a EU150 billion (roughly $165 billion) Europe-wide bailout to "recapitalize" banks, specifically without "bailing in" bank bondholders or depositors. Folkerts-Landau called his demand a TARP for Europe, but apparently thought it would be reassuring that he was recommending only $165 billion and not $700 billion. One might anticipate checking back with the distinguished bank economist on that figure in a week or two.

Immediately, the statement knocks the props out from under German Finance Minister Wolfgang Schäuble's opposition to allowing Italy to conduct such a "no bail-in bank bailout." Schäuble has said that he is ready to "stand by" Deutsche Bank in its difficulties, while claiming they were not serious. Folkerts-Landau evidently knows better; but he particularly called a bailout for Italian banks "urgent," and said that "to stick so strictly to the [bail-in] rules would cause greater destruction than setting them aside."

He obviously was asking for Deutsche Bank and other London-centered giants as well. "Europe is extremely sick, and must attack the existing problems extremely quickly, otherwise we are threatened with an accident," he told the Sunday edition of Die Welt. These illnesses, with bank stock collapses as their symptoms only, included "a fatal combination of weak growth, high government debt and the approach of dangerous deflation."

Folkerts-Landau is an investment banker who heads both the research division of Deutsche Bank's investment bank, and the "think-tank" of the bank holding company. This was rightly called dangerous when he took over the jobs in 2012; but since Deutsche Bank is essentially not a bank but a giant broker-dealer/hedge fund, it was not surprising.