"We'll get by with a little help from our friends..."
On October 19,1987, the bubble burst. On that day the prices on the Dow Jones Index traded at the New York Stock Exchange collapsed more than in any single day in history, by 508 points. The bottom had fallen out of the Reagan "recovery."
But the strategy of the Thatcher-Bush wing of the Anglo-American establishment was still intact, and determined to insure that sufficient funds kept the bubble afloat until the new Bush presidency could impose the grand strategy for the century's end.
While many comments have since been made about how the October 1987 crash proved that a repeat of the 1930's depression was a thing of the past, it indeed signalled the beginning of the end of the deregulated financial speculation which had kept the Anglo-American Century afloat since the early 1970's.
George Bush, facing a presidential election campaign the following November 1988, enlisted the efforts of his former campaign manager and close friend, Treasury Secretary James Baker, along with a powerful faction of the American establishment, to guarantee that, despite the implications of the October 1987 crash, foreign capital would continue to flow into U.S. bond and stock markets to keep the illusion of a Reagan-Bush economic recovery alive in the minds of a sufficient number of voters.
Direct Washington appeals to the Japanese government of Prime Minister Nakasone, arguing that a Democratic Party president such as Gephardt would damage Japanese trade to the U.S., were successful. Nakasone pressed the Bank of Japan and the Ministry of Finance to be accommodating. After October 1987, Japanese interest rates declined, making U.S. stocks and bonds as well as real estate appear more attractive. Billions of dollars flowed out of
Tokyo into the United States. During 1988, the dollar remained strong, and Bush was able to secure his election against his Democratic opponent, Dukakis. To secure this support, Bush gave private assurances to senior Japanese figures that a Bush presidency would improve U.S.-Japanese relations.
The Bush presidency was intended to be the first direct rule by an insider of the monied East Coast establishment since Franklin D. Roosevelt in the early 1940's. Bush's task was to steer the American Century through its most dangerous waters since 1919. In his first weeks in office, he gave the appearance of decisiveness in tackling some of the nation's most urgent problems. Bush proposed a drastic reorganization of the nation's collapsing Savings & Loan system, and he used the popular outcry following a bizarre accident of the Exxon "Valdez" oil tanker to win approval for a radical series of punitive new laws which would make envi-ronmentalism a priority of the Presidency for the first time since Jimmy Carter. Both initiatives later turned out to be catastrophes, but the all-important appearance in the early months was that, unlike the aging Reagan, in George Bush, America finally had a president who was personally on top of world events.
The actual plan of the new Bush Administration was to direct pressures on select U.S. allies for increased "burden sharing" to manage the huge U.S. debt burdens. The argument was put forth that the Soviet Union was collapsing and that, as a result, only one superpower remained with overpowering military might and size—the United States. In this situation, the argument was offered that Germany, Japan and other major economic and military allies of America should increase their financial support to maintain this superpower. It was a thinly veiled rationale for blackmail.
It soon became clear that Bush's appeal for a "kinder and gentler America" was little more than rhetorical appeal to an aging voting population. The Bush who occupied the White House moved quickly to establish his "tough guy" policies, creating a major media pretext for a military invasion of a tiny Central American republic, Panama, during the Christmas days of his first year as President, in December 1989. According to eye-witness accounts, upwards of 6,000 Panamanians, mostly poor civilians, were killed when U.S. Special Forces and U.S. bombers invaded the small country on the pretext of arresting General Manuel No-reiga on charges of being a drug cartel kingpin.
Bush's Attorney General, Richard Thornburgh, who played such a controversial role as Governor of Pennsylvania during the events of the Three Mile Island nuclear incident, had formulated an incredible new U.S. doctrine. The Thornburgh Doctrine stipulated that the American FBI and Justice Department had authority to act on foreign territory, if deemed necessary, "in the course of extraterritorial law enforcement." Translated, this meant that the U.S. government, by executive fiat, by claiming the pretext of tracking international narcotics or terrorist criminals, had declared its unilateral right to come into Germany, France, Panama or any other place it claimed necessary, without concern for the laws of the sovereign country involved.
The invasion of Panama, as incredible as it was, produced a stony silence from the moral conscience of the civilized world. It was considered an American "affair."
By September 1989, CIA Director William Webster publicly unveiled a bold new intelligence mandate for U.S. intelligence services. Pointing to the increasing signs that Gorbachev's Soviet Union was eager to reach mutual disarmament agreement with NATO and especially the United States, Webster told an elite gathering of the Los Angeles World Affairs Council on September 19 that year, that his CIA was re-tooling itself for new tasks in the post-Cold War era. Webster told his audience, "economic issues I mentioned—trade imbalances and technological development— illustrate a point that is becoming increasingly clear: our political and military allies are also our economic competitors." The new mission of U.S. intelligence worldwide was economic espionage and other acts against key industrial "allied" nations, rather than hunting communist operations and subversion.
The fall of a wall panics some circles
Then, in November 1989, events in Eastern Europe took a most dramatic, and, to many in Washington and London, wholly unexpected turn. Mikhail Gorbachev met privately with the old-guard Honecker communist leadership in East Germany, and more or less ordered them to give way to the enormous popular movement for freedom sweeping East Germany since that spring. Within
weeks, the old order in the DDR was swept aside, in a genuine popular revolution. Moscow apparently realized that its efforts to maintain a costly and inefficient empire through force were doomed to backfire and cause its own destruction.
The collapse of the world oil price in 1986 was perhaps the final fatal blow to Moscow's illusions that reform within the rotted communist bureaucracy could work. Soviet export earnings from its oil sales to the West, the major source of its hard currency earnings since the early 1970's, collapsed after 1986, just when popular demand for change prompted Gorbachev to promise far more than he was able to deliver. The economic chaos which ensued was the major factor motivating the Moscow leadership to cut ties with its Eastern Europe satellites of the Warsaw pact. Moscow hoped that a united Germany, under the strong economic direction of West Germany, could provide a suitable partner to help rebuild the collapsing Soviet system.
While official Washington put on a face of public approval for the dramatic end to forty years of communist domination in Eastern Europe, privately, Bush, himself a former CIA director, whose view of world politics was shaped by the clandestine world of U.S. intelligence, was dead set against success of the revolution in Eastern Europe. In Britain, Margaret Thatcher's wing of the Tory party was equally alarmed at the prospect of what some there even called a "German Fourth Reich."
A well-placed British establishment voice, Peregrine Wors-thorne, editor of the influential London Sunday Telegraph, articulated the thoughts of the Thatcher fraction of conservative Tories towards the emerging new Germany. Worsthorne is the stepson of former Bank of England Governor Montagu Norman. Norman maintained personal ties with Hitler's Finance Minister, Hjalmar Schacht, during the war, and worked intimately with J.P. Morgan Bank in New York after 1919 to impose the Dawes reparations atrocities on defeated Germany.
In his lead editorial titled, " The Good German Problem" on July 22, 1990, Worsthorne cynically recalled Montagu Norman. "My stepfather, Montagu Norman, who as Governor of the Bank of England had done so much to help the German economy after the First World War, lived just long enough to see the earliest beginnings of the German economic miracle." Worsthorne recalled Norman's comment shortly before his death: "I always knew we
would beat the bad Germans; but I wish we could be so sure that we will do as well against the good Germans."
Then Worsthorne came to his point. "Let us assume that a united Germany is going to be a good giant, what then? Let us assume a united Germany teaches Russia to become a good giant, what then?...In truth, the threat could be more dangerous, rather than less. For how on earth can any effective defense be put up against a united Germany that intends to win by obeying the rules? Germany is going to be very powerful and, as Lord Acton taught us, power corrupts...Germany is marvellously well placed, at long last, to be the principle agent to bring Slavdom back into the community of nations."
It is worth noting that Worsthorne's Sunday Telegraph is owned by an Anglo-American holding, the Hollinger Corporation, on whose board are Dr. Henry Kissinger and former British Foreign Secretary Rupert Lord Carrington, also a business partner in Kissinger's New York consultancy firm, Kissinger Associates
Referencing controversial comparisons by Thatcher government Trade Minister Nicholas Ridley, who was forced to resign for publicly comparing the Kohl government to Hitler's Reich, Worsthorne concluded his telling diatribe against the implications of a reunified Germany: "Mr. Ridley was talking nonsense, but perhaps there was more method in his nonsense than is dreamt of...Perhaps Britain's role should be to preserve enough independence to be free, at the right moment, to make use of these grievances. In the course of doing good, Germany will make just as many enemies as ever it did in doing harm, and America may well be one of the enemies...Sooner or later it is going to be balance of power politics all over again. This could be an opportunity for Britain which, knows about the balance of power..."
That summer, according to London reports, the Thatcher government formed a new unit of British intelligence to significantly upgrade its activities in Germany. Moreover, the Bush Administration moved to improve its ability to control developments in Germany. In a select Washington meeting in the spring of 1990 of the Association of Former Intelligence Officers, former senior CIA official Theodore Shackley, the man previously involved in the de-stabilization of the Shah of Iran and the illegal Iran-Contra guns-for-drugs operations, told fellow American intelligence professionals they should begin to recruit from disaffected former East
German Stasi and related ranks and to build up U.S. intelligence assets in Berlin.
The long-term implications of the fall of the Berlin Wall and the potential to modernize the under-developed economic potentials of Eastern Europe and the Soviet Union around the emerging unified Germany were alarmingly clear for policy strategists in London and New York. In a weekly report to investor clients, as well as the general financial community, David Hale, a U.S. economist with reported close ties to the Bush Treasury Department, warned in January 1990 of the strategic "dangers" for the U.S. financial markets if German unity were to succeed: "One of the most extraordinary features of Wall Street economic research during recent weeks is its complacency about the potential consequences of eastern European economic developments for the global financial equilibrium which permitted America to borrow over a trillion dollars externally during the 1980's."
Hale then noted, "Indeed, when the financial history of the 1990's is written, analysts may look upon the fall of the Berlin Wall as a financial shock comparable to the long-feared Tokyo earthquake. The destruction of the Wall symbolized an upheaval which could ultimately divert hundreds of billions of dollars in capital towards a region which had only been a minor factor in the world credit markets for six decades. Nor," concluded Hale, in a message he was reportedly asked to circulate by influential Washington circles, "should Americans take comfort from the fact that Germany itself has been only a modest investor in the U.S. during recent years. The biggest investor in the U.S. since 1987 has been Britain (over $100 billion of takeover bids) and the British could not have undertaken such large investments without access to surplus German savings." u
On November 29,1989, days after the collapse of the Berlin Wall, highly professional assassins blew up the protected car of Deutsche Bank head Alfred Herrhausen, a key adviser of the Kohl government who had told the Wall Street Journal only days before of his plans for reconstruction of East Germany into Europe's most modern economic region within a decade.
The assassination of Herrhausen was seen by knowledgeable Germans as a direct echo of the assassination more than sixty years earlier of Walther Rathenau, architect of the Rapallo plan to industrialize Russia with German industrial technology. But the Bonn
government proceeded with plans to unify Germany, and with discussions to assist the economic rebuilding of the collapsing Soviet economy as part of the terms for Moscow's agreeing to German unification.
The German Chancellor addressed the nation that late November about his dream of constructing a modern rail link connecting Paris, Hanover, and Berlin, on to Warsaw and finally to Moscow, as the foundation for the infrastructure of the emerging new Europe. The old de Gaulle concept of a Europe economically cooperating from the "Atlantic to the Urals," was suddenly a real probability for the first time since 1948.
In this climate, observers in the City of London noted a dramatic increase of French and British informal contacts, on the level of senior business and diplomatic persons. British strategy was to play on latent French fears of a strong Germany. Mitterrand, the Socialist French President with a life-long personal anglophile inclination, was a ready listener. Britain began quietly to rebuild the old Dual Alliance of the pre-1914 era, and to set the stage for anew "Entente Cordiale" against the "German threat." But the actual strategic battle was waged far from Central Europe.
Sometime during 1989, the decision was made to make a bold offensive, using the Middle East and its vast oil reserves as the staging ground. Again, as during the 1970's, U.S. and British strategists determined that the serious threat of an economically expanding Continental Europe must be countered through using the Anglo-American "oil weapon." The form this would take was soon to astonish the entire world.