[The following was the lead story in the March 31, 2001 issue of FTW for paid subscribers only. In accordance with our reprint policy we are posting it here for free, just ahead of our 30 day embargo. This is also to honor our commitment to Nexus Magazine, www.nexusmagazine.com who had purchased advance rights to the story. For reprint permission please visit the Home Page at www.copvcia.com. - FTW]

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MOSCOW ECONOMIC CONFERENCE DRAWS 200 FROM RUSSIA, GERMANY, MID EAST AND ASIA

* TOP RUSSIAN POLITICIANS, BANKERS, ECONOMISTS ATTEND TWO DAY MEET ON U.S. ECONOMY

MOSCOW - A two-day conference on March 6-7, sponsored by an Agency of the Russian government and focusing entirely on the U.S. economy, attracted more than 200 investment bankers, scholars, diplomats, economists and members of the Russian Parliament. Inspired by developing weakness in the US economy, the conference overcame initial reservations that its intent was simply to promote investment in Russia. It quickly established itself as an invaluable forum for fresh perspectives on the single most dominant factor in the world economy today - the United States of America. The two dominant psychological themes of the many presentations were: "If the US economy crashes how does the rest of the world keep from crashing too?" and, "Given the ever more obvious weaknesses in the US economy what can Europe and the industrialized world do proactively to achieve a measure of independence?" A general consensus emerged at the end of the conference - reflecting trends that are already emerging - that a healthy Euro currency and a strong, self-reliant and cohesive European economy are obvious answers to both questions.

Prior to the conference it was difficult for this writer to grasp how much globalization is dominated by the United States and how closely the rest of the world watches and analyzes - with striking originality - every aspect of US economic activity. The participants at The World Finance Congress on the Globalization Process and Hidden Menace of the Crisis of World Currency Reserves, unburdened by the spin of American media, offered some amazing insights. As noted by Congress Chairman Igor Tolstoshein of The Federal Foundation of Appraisal, "From an expert's point of view a very important factor that led to small and medium investor losses is the withholding of information by [American] news agencies as many of them are directly involved in manipulations of the stock markets and depend upon their fluctuations. Therefore the [American] policy of constant good news doesn't prove itself in the growing weakness of the markets... The real numbers behind the US economy... are below forecasting data by 1.5 - 2 times."

There is much to be learned by seeing how the rest of the world sees the US. Because of space limitations FTW will limit our coverage to a summarization of the major points made by the main presenters. As a wise man once said, "It's not what you don't know that will kill you. It's what you don't know that you don't know."
 

DR. JONATHAN TENNENBAUM - Scientific Advisor to the Schiller Institute and the Executive Intelligence Review (EIR), Wiesbaden, Germany.
Dr. Tennenbaum opened the conference with a detailed history of the US economy from the 1930s forward. He described a major shift in the US economy when, in 1971, the United States abandoned the post war Bretton Woods agreement linking the dollar to gold and other direct measures of real productivity. Incorporating the "artificially manufactured" oil crisis of 1973, floating-rate currency accords in the 70s and financial deregulation of the 70s and 80s, he described in precise detail how the US has systematically destroyed its own manufacturing base.

In discussing the current US economic bubble Tennenbaum revealed that that the US financial "derivatives" market has a volume of $300 trillion dollars. [Derivatives are any financial instrument or commodity derived from a real source of wealth such as stocks, land or gold. For example, a gold "future" is a derivative. Stock options and margins are derivatives.] Derivatives have no connection to real productivity or value. The price of gold has been suppressed to disguise inflationary pressures and speculation in leveraged gold nearly destroyed the world economy in 1998. [see FTW, 9/00] This resulted in the exposure to public view of the so-called Plunge Protection Team in the US, consisting of the Treasury Secretary, the Fed Chairman and the former head of Goldman Sachs, Robert Rubin. At this point it became apparent that US markets are no longer operating under free market principles of performance and fairness. US markets are rigged and controlled at the expense of other nations and/or of small and medium sized US investors.

Like everyone who spoke at the conference, Tennenbaum agreed that a major global crisis is imminent. "This is not simply a U.S. crisis, but rather a chaotic collapse of the entire postwar economic and monetary order. There is no way the system can survive in its present form. It is totally rotten, and any attempts to make "adjustments" will only make the situation worse." Tennenbaum advocated a plan devised by EIR founder American economist Lyndon LaRouche. The reactions of many of the Russians at the Congress to LaRouche were not unlike reactions I have seen in America. I share a near universal respect of the La Rouche organization's detailed and precise research. I have not, however, always agreed with EIR conclusions. (La Rouche is a staunch drug warrior while FTW favors decriminalization.) I chuckled when a Russian banker leaned over during the presentation and quipped, "Oh no, not the Queen again." This referred to a perception that LaRouche believes that the British royal family is the root of all economic evil. However, Tennenbaum held complete attention when he spoke. He drew some audible "Ahas!" by explaining that the Y2K non-event was, in reality, a faked crisis permitting the Federal Reserve to transfer massive amounts of cash into the banking system without raising suspicion. [I am grateful for his translations on the second day of the conference.]

Five aspects of the LaRouche plan made obvious good sense. First, the plan calls for a return to a Bretton Woods format for monetary policy. The plan also includes the objective of restoring the concepts of "common good" and national sovereignty to policy making, re-regulation of financial markets, freezing and/or cancellation of claims connected with speculative debt and the writing off of a major portion of international debt "in accordance with common benefit and moral considerations."
 

DR. MIKHAIL KHAZIN - Director of Business Development, CBT Consulting.
Khazin, an economist, has previously worked in various Russian government positions in the Yeltsin Administration. His 2000 article entitled "The Crash of 2000" has been frequently referenced in FTW . Khazin is also the author of a new Russian book entitled The Collapse of the Dollar. Khazin's refreshing analyses of the US economy continued as he discussed the disequilibrium between the so-called "New" computer economy and the "Old" manufacturing economy. He observed that, historically, new technologies were absorbed into larger economic spheres making the whole more productive. But, with the speculative nature of technology stocks, the newer technologies have become a distinct economy. This separate economy has not significantly contributed to the productivity of the whole. He observed that the over-capitalization of the dot com economy with its "virtual value" has expanded to the point of instability that now threatens everything.

Khazin predicts a "destruction of stereotypes." This will happen with the elimination of $7-15 trillion of stock market values, prompting massive bankruptcies of banks and financial institutions worldwide, followed by an outbreak of inflation. This will trigger a shift back to tangible value items such as precious metals and diamonds, which is already occurring. He predicts a total collapse of the World Trade Organization (WTO) and a return to nationalistic protectionist measures. Although Khazin predicts that the dollar will ultimately fail as a world currency he adds that the Euro will not take its place in the short term. His overall analysis and predictions were strikingly similar to the situation at the start of the Great Depression in 1929. Massive social unrest and dislocation will result from the collapse and no portion of the globe will be exempt as total world demand for goods and services contracts by 1.5 - 3 times over the course of the crisis. Of the three major regions, Europe was best prepared to survive the collapse but Asia and Japan would be particularly hard hit.
 

VLADIMIR ZHIRINOVSKY - leader of the Liberal Democratic Party (LDP), vice-speaker of the Russian Parliament (Duma).
Zhirinovsky is widely perceived as an ultra-nationalist. A charismatic speaker, he rarely elicits a neutral reaction. He is a lightning rod, capable of galvanizing popular sentiment though not generally regarded as a political threat to President Vladimir Putin. In his presentation entitled Financial Economic Drug Addiction he divided the world into a "Golden Billion" of rich nations, a "Third World" of traditional poor nations and a second world comprised of Russia and Eastern Europe. He likened "reserve currencies, especially the dollar, to a drug that the nations have become dependent upon. "They will sell their territory, their people, anything to get their share of the dollar pie." He suggested alternatives like a Golden Yuan from China or a Golden Ruble as alternatives.

I was introduced to Zhirinovsky at the break. I found this man, who represents many views of ordinary Russians, quick and friendly. I made the point that the world economy is also hooked on drug money, a pattern which the CIA understands very well. He had no trouble understanding me at all. Drug money is as universal language.
 

DR. JOERG STEPHAN - Official representative of the German Central Bank (Bundesbank), stationed at the German Embassy, Moscow.In very diplomatic and mild remarks Stephan dealt with the ongoing, step-by-step process for the introduction of the Euro which is already in bookkeeping use and will replace all Western European national currencies in January of next year. At that time the Euro will also be monetized for the first time with the debut of currency and coin. Although Stephan was reluctant to juxtapose the dollar and the Euro he made it clear from the German perspective that there was a future for the Euro in context beyond that of the European Union. He cited Europe's declining dependence on imported oil, low inflation, increasing productivity and cooperation from European trade unions as grounds for optimism about the future of the Euro. [We wonder what effect Mad Cow and Hoof and Mouth are having on these rosy economic forecasts - FTW]
 

ALEXANDER ANISIMOV - Researcher at the Central Economic-Mathematics Institute of the Russian Academy of Sciences (Specializing in Chinese issues).
Anisimov is co-author of the book Crash of the Dollar. Anisimov's basic perspective is that the Chinese Yuan is a possible rival to the dollar in the event of a US economic collapse. He pointed out that in certain areas of production the Chinese economy had met or surpassed the US and that the well-regulated Chinese economic system is geared to serving the needs of rapid economic growth. Pointing to Chinese efficiency he recalled how the Chinese government crushed speculators and hedge funds making a run at the Hong Kong dollar during the Asian financial crisis. Many at the conference disagreed, however, with his assertion that a collapse of the US economy, with its resultant drop in demand for imports would have little effect on China.
 

PROFESSOR RABBI ABRAHAM SMULEVICH - Bar-Ilan University, Israel.
An ad hoc approach to understanding the crisis does not work. This needs to be viewed from a spiritual and historical viewpoint like the fall of Rome 1500 years ago. The world's economic "center" has moved from Rome to Constantinople to Eurasia under the Mongols back to Europe and then to the US. Taking this point of view a US collapse is natural. However, civilization will change as a result of US decline but those with something to lose will try very hard to prevent the collapse. The Arab world is too closely linked to the United States to separate itself and Europe is the only viable alternative for economic leadership. Islamic fundamentalism is threatening European unity as it remains a source of conflict in Kosovo, Albania and Macedonia.
 

PROFESSOR ANDREI KOBYAKOFF - University Lecturer; Editor, Expert Magazine.
Economic crashes usually occur inward from the periphery as globalization progresses. This crash will be worse because it originates in the economic center, the US. The only previous economic situation similar to the current picture is that of 1929. The overcapitalization of the US market is unprecedented, now at about twice Gross Domestic Product (GDP). This is a reference to the Price to Earnings ratio so often discussed by Catherine Austin Fitts and known on Wall Street as "The Pop."

NASDAQ is even gloomier. With the capitalization of February 2001 it will take 250 years for the NASDAQ Index to reach profitability. With accumulated debt approaching $30 trillion US markets have a huge potential for further collapse. The only reason that there has been no inflation is because credit is being pumped up artificially. Kobyakoff likened this paradigm to a pyramid scheme stating, "It all depends upon the inflow of liquidity and the continued greed of the participants." To illustrate how devastating the coming crash would be to average Americans Kobyakoff pointed out that in 1975 only 15% of all stock ownership in the US was by households. By 2000 American households owned 75% of all stock shares in circulation. "If this is going to be a soft landing," he said, "I will eat my parachute!"
 

M.G. DELYAGIN - Director of the Institute of Globalization, member of the Industrial committee of the State Duma of the Russian Federation.
This was easily one of the most compelling presentations of the Congress. The US has four basic problems. There is huge internal differentiation along racial, economic and geographic lines. The US is not a monolith and Bush will only make the strains worse. The US governmental system is not adapted to world leadership. It has a "Let them eat Big Macs" attitude. The dollar is being challenged by the Euro and the Yuan and the US will respond in defense. The Republican Party under George Bush will disrupt a domestic and world system that offered a degree of stability.

National Missile Defense is being opposed successfully by the rest of the world. It is a threat to peace but intended to ensure US technological superiority for a long period. The US represents 30% of the world economy, 51% of the world's capitalized property and 80% of the world's technological assets. The US plans strategically and globally - long term. It has temporarily shifted its economic crisis to Japan. An emerging Macedonian War threatens the European economy and its unity and there is a possibility that Russia will be turned into a Yugoslavia.
 

MR. GAVITSKY - Member of the State Policy Committee on Economics of the Duma.
Good money creates a good economy. Bad money creates a bad economy. The main worldwide fear around the dollar is that it is not legitimate. This at the same time that the world depends upon the dollar. The US behaves in the world without caring about other countries. There should be a world currency but no one can decide how to do it.

If something replaced the dollar as the world's leading reserve currency then all of the dollars would go home to the US. That would cause hyperinflation in the United States. Only Russia is capable of opposing US manipulation of world politics and economic forces. Russia should help create a legitimate world currency, a basket of currencies that benefits all nations. Since all crime is connected to cash, the solution to crime is to eliminate cash.
 

DAY TWO, MARCH 7

- Attendance on the second day, which lasted until approximately 2 PM was limited to around 70 people including the presenters from Day One and representatives from various agencies of the Russian government including the Foreign Ministry and the Ministry of Defense. No translators were available. When he wasn't speaking, Dr. Tennenbaum acted as a translator for me. The session was conducted in a large 3rd floor conference room previously favored for small gatherings by Boris Yeltsin, the man who once called Russia a "mafiocracy." Several pictures of Yeltsin were prominently displayed on the walls. At the center of the room was a large circular round table that accommodated approximately 30 of the participants. I was asked to sit at the table.

More details of Russian research on the US economy emerged. Exchanges between an analyst Kirill V. Tremasov of Zerich Capital Management supporting the Bush economic philosophy, and Khazin, arguing the Realpolitik of recession disclosed a great deal. The next US investment bubble will be Biotech stocks. Khazin disagrees that T-Bills are a good investment. The customary seesaw relationship between T-Bills and securities has changed. Both are falling at the same time. As Tremasov predicts stability in US bond markets Khazin notes that diamond prices are rising rapidly. Khazin keeps drawing the discussion back to human elements while Tremasov resists, pointing to his calculations. Tremasov and Khazin agree that the Asian economy is in real jeopardy. Tremasov argues for loosened credit in Europe.

The conference was closed by an insightful dissertation by Malaysian Ambassador Datuk Baba on Malaysia's mostly successful battle against currency speculators like George Soros during the Asian crash. Baba acknowledged the role of covert operations in the world economic sphere. Recognizing a trend toward regionalization of economic interests Baba reinforced arguments suggested elsewhere that economic nationalism and world stability are not mutually exclusive concepts. He walked a fine line on the edge of the diplomatic sword acknowledging that Malaysia was seeking expanded economic relations with Russia in perilous times but acknowledged the fact that the US was his country's single largest trading partner. It was a dilemma that everyone instantly understood.

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MALAYSIAN AMBASSADOR TO MOSCOW CLOSES ECONOMIC CONFERENCE WITH WISDOM AND A PROFOUND COMPLIMENT

Ambassador Datuk Yahya Baba attended both days of the Russian economic conference. His presentation to the open Congress on March 6 was a clear-cut presentation of Malaysia's experience and interests as a strong economic partner of both the United States and Russia. However on the second day of the conference, when participation was limited to around 70 people, Ambassador Baba revealed a keen understanding of how politics and economics merge. His description of Malaysia's struggle for independence from the IMF and the World Bank revealed his country's real-world experience in a quest for economic autonomy.

Baba described Malaysia's dismay, in the mid 1990s, to find that it's currency, the ringgit, was being traded on Wall Street without care for the impact in Malaysia. "Money has become a commodity to be traded upon," said Baba. He described how his country had fought off speculators like George Soros by instituting bottom-up economic reform with simple requirements such as a mandate that those who invest in Malaysia must leave their money in the country for a year. As a result of strong self-protective measures the exchange rate for the ringgit was fixed in 1998 at 3.8:1 (US) and has held to this day.

I had made my analysis of covert operations focusing on money laundering approximately one hour earlier. I remain totally humbled by the Ambassador's final words closing the conference, ever doubtful that we can be worthy of the praise which he gave to FTW:

"There is a good deal of non-transparency in the global financial situation. There are a great many undercurrents behind the current situations. We all need a greater appreciation of these undercurrents. We will have to wait for 'From The Wilderness' to come from California to tell us what is happening. We cannot match your expertise."