Alternative Visions

This week Trump invited China to return to talk about trade, as he again threatened $200 billion more tariff implementation (and raised prospect of another $267 billion). The show discusses what’s behind the invitation to China. Growing pressure from big business and bankers to Trump imposing more tariffs and precipitating a true trade war with China. Is Trump’s move just to reduce the heat from business? Is he preparing the g round for actual further tariff implementation? Was the invitation made by Mnuchin, not Trump, who is now firmly behind the military-industrial-intelligence faction on China trade (Lighthizer-Navarro-Bolton). The show then discusses Turkey’s recent hike in interest rates to 24% and the growing crisis among emerging market economies as currencies continue to collapse. How contagion occurs across currencies, stock markets, bond markets. Rasmus revisits the Lehman Brothers collapse of Sept. 15, 2008 and the role of Treasury Secretary, Henry Paulson, in engineering the collapse to benefit his corporate alma mater, Goldman Sachs, that made billions off collecting CDS contracts it wrote betting Lehman would collapse. How bankers ‘eat their own’—and in 2008 with the help of the US government Fed and Treasury. What’s different 2018. Will there be a Trump ‘October Surprise’ general trade deal announced?

Lehman Brothers 2008 Crash & Emerging Markets 2018 Crises Compared Dr. Rasmus explains the financial crash of 2008, from the collapse of Bear Stearns investment bank to the Lehman Brothers collapse of September that set off the general financial crisis. Are we seeing something similar beginning in Emerging Market Economies like Argentina, Turkey, So. Africa, Brazil, Indonesia, India perhaps?  Rasmus explains the 2008 crisis was not simply a subprime mortgage crash, but was a contagion across credit markets enabled by financial derivatives securities created at the time.  How contagion was propagated and accelerated across financial markets and institutions in 2008 is explained; How a similar contagion effect may be emerging across economies like Argentina, Turkey and others in 2018. Rasmus explains contagion channels: currency to currency; currency to stock markets; stocks to stocks; stock to bond markets and how contagion processes work is poorly understood by mainstream economists today. Why understanding financial crises must distinguish between fundamental, enabling, and precipitating causes. How the Fed and the US Treasury politics also played a key role in allowing the 2008 crisis in bailing out Bear Stearns in March and then allowing Lehman to collapse in September. Who benefited from the 2008 bail out.

Argentina’s currency collapses by more than 50% and central bank raises domestic interest rates to 60%. Inflation raging more than 30%, GPD collapsing more than 6%. IMF lends most in history, $50 billion, to try to stem the crisis. Big austerity measures coming. Turkey LIRA currency falls another 5% (to 40-45%). Is this just isolated events, or harbingers of a growing and spreading global emerging markets crisis that will reverberate to Europe, US, and elsewhere? Rasmus explains how these events are ‘made in America’ and Trump fiscal and monetary policies. The potential contagion effects of global currency instability—and the relationship to Government and Corporate bond debt—are discussed.  Second half of the show reviews the US-Mexican trade deal (and Canada soon) and how it represents further Trump’s phony trade war with allies. Trump suspends trade war with Europe and quietly also exempts steel and aluminum tariffs worldwide. (Next week: Labor day 2018 and the truth about jobs & wages and ‘Indicators of America’s Broader Social Crisis’)

Dr. Rasmus joins the debate between progressive economist, Dean Baker, and his critique of NY Times columnist Cohan, on whether the US bond market is on the cusp of a ‘2007-like Mortgage’ bust. Rasmus agrees with Baker that bond debt magnitudes are not alone the issue. What matters as well is the ability to finance the debt (i.e. pay the principal and interest as it comes due). The level of debt by itself is not the issue. The ability to service it via cash flow and other terms and conditions involved in repayment are the key. Rasmus disagrees with Baker, however, with his narrow focus on non-financial corporate bond debt only—a small piece of the total corporate debt escalation since 2008—and Baker’s narrow view of the 2008-09 crash as a subprime mortgage crisis. It was a broader financial derivatives driven crisis primarily, set off by the subprimes. Rasmus provides a historical review of the crisis from Bear Stearns collapse through the Lehman brothers, AIG, and 2009 Fed bailout of the banks. Shady self-serving deals by JP Chase and Goldman Sachs also played a key role, he argues. Rasmus argues that Baker doesn’t understand the difference between a liquidity crisis and an insolvency crisis, and has no account of how capitalist financial systems are prone to contagion effects more than ever today. The show concludes with a brief update on Turkey and EMEs contagion, the central banks meeting at Jackson Hole, WY this week, and the farce that was this week’s US-China trade discussions.

 The first half of today’s show elaborates further on last week’s show topic: ‘What is ideology in Mainstream Economics’ and how it works.  Today the focus is on two examples of ideology and favorite theories of mainstream econ—Laffer curves and Phillips curves. Rasmus explains ideology as manipulation of language to misrepresent reality, facts, and original ideas. Ideology as conscious, purposeful, intentional Mis-representation, using language manipulation techniques like insertion, deletion, conversion, inversion, substitution, reversal of cause-effect, de-temporization, universalization, etc.  How these techniques are used with Laffer and Phillips curves to justify tax cutting for businesses and investors (Laffer) and central bank interest rate policy (Phillips) subsidizing bankers at the expense of household savers.  Today’s show concludes with quick updates on latest developments in the Turkey currency crisis and its contagion connections to Europe banks and other EMEs; the US-China trade discussions about to renew; Europe’s slowing growth; and the accelerating US budget deficits (now predicted to add $769 billion more to the US deficit in just the last six months of 2018 alone).

Rasmus describes what’s going on in Turkey this week, as its currency collapses threatening to drag down Italian Banks and other emerging market economies. How US Fed and Trump policy are behind the Turkish and emerging markets’ economic crises, now deepening. EME economies that loaded up on dollarized debt  globally are the ones collapsing fastest. How global speculators and Trump-US political objectives are involved. Rasmus reviews the equally rapid cooling off of the US housing market and rising rents driving US inflation. A review of the rising bankruptcies for US seniors, age 65-74, and the conditions behind the 200% increase in their bankruptcy filings since 2013.  Rasmus concludes with a discussion of  his view of Ideology in Mainstream economics and how language is manipulated to produce nonsense conclusions (like business tax cuts create jobs, free trade benefits everyone, income inequality is due to one’s lack of productivity, central banks are independent, markets are always efficient, and other false propositions). (For a verbatim print transcript of this show, and last week’s show on ‘Trump as Neoliberalism 2.0, got to Rasmus’s blog at jackrasmus.com).

Dr. Rasmus provides updates to Trump trade, tax, and Fed monetary interest rate policies, explaining how they are integrated responses designed to resurrect and restore neoliberal policy in a new more virulent, aggressive form after the failure of Obama to do so. How trillions of dollars in Trump’s tax cuts and war spending are producing annual trillion dollar budget deficits and adding $12 trillion more to the US national debt in the next decade. Trump’s recent announcement of more tax cuts coming before November plus another $85 billion to war spending will exacerbate deficits further. How Trump trade policy integrates with fiscal-monetary policies. Rasmus updates latest Trump trade actions illustrate a phony trade war with allies: trade war of words with Europe suspended, a deal with Mexico imminent, but positions hardening with US-China. Risks of China trade war morphing into a global currency war, and its consequences. Contradictions between Trump trade-fiscal-monetary policies emerging. Global central banks’ responses to Trump-Fed policies. (For a print analysis of how trade war with China may morph into a global currency war, see Dr. Rasmus’ blog, jackrasmus.com).

This week’s show addresses the past week’s ‘trade deal’ between Trump and the EU. Trump gets real EU concessions for merely suspending his threats to impose 25% auto tariffs on European parts imports to the US. Europe now will buy US soybeans and natural gas. Trump merely backs off threats in exchange. Rasmus then analyzes why US GDP for 2018 is above historical averages but will soon, in 2019, slow sharply and even retract after midyear 2019. Why rising prices are driving investment and consumer spending, not tax cuts plus how US revisions to household savings rates and corporate profits raise questions about US stats. Trump’s criticism of the Federal Reserve rate hikes. The mainstream economists debate Fed rate hikes. The show concludes with explanation how tariff wars may lead to currency devaluations and currency wars.

 Dr. Rasmus reviews the status of ‘Trump Trade Wars’ re. China, Europe, and NAFTA, noting tariffs have been actually implemented on only 2.3% of total US imports and exports. Rasmus predicts: deal with NAFTA within 6 months, possibly with China in early 2019, and with the EU only after its ‘Brexit’ issue is resolved. In the meantime, much Trump threats and bombast to appeal to his domestic political base for November elections. Rasmus next addresses the Federal Reserve chair, Powell’s, testimony to Congress this past week, indicating 2 more rate hikes in 2018 and more after. Rasmus reiterates his prediction that a Fed Funds rate hike above 2.5% (now 2%) will invert the yield curve and precipitate the next recession, likely in 2019.  Trump’s critique of Powell, as the Fed raises rates to finance Trump’s annual more than $1 trillion deficits and debt. Trump doesn’t want more hikes but created them with his multi-trillion dollar tax cuts and defense spending.  The show concludes with discussion of signs of slowing global trade and economy, and some financial instability indicators emerging in Asian junk bonds and China markets.

Dr Rasmus explains the relationship between trade wars, past and present, and neoliberal tax cutting and war spending policies: Trump 2018, Reagan 1985, Nixon 1971-73. What’s next after $34 billion in US tariffs on China this past week? Relative strengths and weaknesses of US and China in the pending trade war and potential tactics.  Rasmus reaffirms his prediction Trump is following a ‘two track’ trade war—one with US allies and another with China, and only China is potentially real. The role of domestic US politics in current trade disputes. A second topic of the show, i.e. accelerating global debt, is now $250 trillion and 3X global GDP, rising at$25-$32 trillion more a year. How global debt and US dollar exchange rates and central bank interest rates are related. The show concludes with review of recent data by the Institute of International Finance, confirming predictions by Rasmus that Trump January $5 trillion tax cuts for business and investors would result in lower US tax receipts, a diversion of tax savings to more stock buybacks, dividend payouts, and mergers & acquisitions—not investment, jobs, and wages. Projections of rapid slowing of US business investment and hoarding of Trump tax cuts.

Dr. Rasmus interviews Alan Benjamin, long time participant in Mexican and US labor politics, on the recent election of Andres Manuel Lopez-Obrador (aka AMLO) this past week. Benjamin provides an analysis of the election, and why AMLO won the election this time after having past elections he likely won in 2012 and 2006 stolen. Benjamin explains AMLO’s program evolution over 2018, the role of AMLO’s key business advisors, Urzua and Romo, selected to head, Mexico’s key cabinet positions of Secretary of Treasury and State, and AMLO’s latest views re. NAFTA and Trump.  While the US media focuses on corruption and violence, various real sources of the economic and political crises in Mexico behind the election are discussed—i.e. popular demands by Mexicans for jobs, for an end to privatizations of energy and water, for restoration of Mexico’s declining healthcare services, and for repeal of past neoliberal ‘reforms’ of education and energy. Benjamin then describes the current grass roots organizing and popular committees now being formed by workers, communities, and youth to keep the AMLO election from being co-opted by US and Mexican business interests.  How the AMLO election  represents an important progressive ‘opening’, but also reflects a potential way of control by capitalist interests, as the old PRI and PAN business parties in Mexico have virtually collapsed.  (For more information of original English translation of popular programs and events in Mexico, go to: www.socialistorganizer.com

Dr. Rasmus explains the yield curve as a predictor of the last 17 recessions (and the next in 2019). Why short term Fed rates are rising to finance trillion dollar annual deficits and debt and why investors and businesses aren’t convinced the Trump tax cuts will result in a growing US economy after 2018. Why the Yield Curve predicts recessions. Rasmus then discusses Wisconsin’s $4 billion tax and incentive package to lure Foxconn (the giant Taiwan corporation) to its state. Why Foxconn is not, per Trump’s quote, ‘the eighth wonder of the world’.  The meaning of this week’s primary victory by Ms. Ocasio-Cortez in New York, and the Democratic Party leadership’s response.  Interpreting the Kennedy Supreme Court retirement announcement. Why Trump is not a fascist, nor yet a dictator. But considers himself ‘above the law’—i.e. the definition of a Tyrant. Rasmus concludes with analysis of what the Supreme Court’s Janus decision this past week means for the intensifying attack on public employee unions now coming. (For more on Janus, listen to our March 2, 2018 Alternative Visions show and interview with SEIU union representatives).

Rasmus reveals plans by Trump-Congress to cut taxes still further on investors and businesses before the November elections. Also ongoing incremental tax cutting involving corporate pension fund contributions and dismantling of funding for Obamacare. The Fed’s latest bank stress tests, how they’re phony and why some US banks are still financial fragile. Rasmus also discusses the pending Teamster-UPS contract and how workers’ wage hikes will be eaten up by reductions of overtime pay and inflation. A new five year agreement will mean real pay cuts. The show concludes with latest updates on Europe, Italy’s debt, Greek debt, 3rd party critiques of the US Labor Dept.’s Alternative Work survey, and Trump’s phony trade war with Europe (and real one with China).

The past week’s momentous decisions by the US (Fed) and European Central Bank on interest rates is discussed. How last week’s Fed rate hike, and announcement of 4-5 more hikes to come in 2018-19, will destabilize Europe’s economy as well as Emerging Market economies. Discussion of new reports released this past week on precariate jobs in the US, US multinational corporations offshore tax havens, Corporate CEOs fivefold increase in insider stock sales as buybacks accelerate due to Trump tax cuts.  Also reviewed is study released by financial fraud whistle blower, John Griffin, showing that bitcoin price bubble of 2017 was largely manipulated by Asian cryptocurrency exchange, Bitfinex. Rasmus discusses Trump listing of $50b China tariffs today and internal Italian populist government maneuvering with Euro bankers, as Euro economy (and in particular German) economies show signs of further economic slowing of exports and GDP).

Jack Rasmus takes a look at why Austerity policies were introduced in 2008-09 and why they continue still today, evolving into new forms, despite their proven negative impact on economic recovery.  Jack challenges liberal economists like Paul Krugman who lament the continuation of such policies, explaining Liberals don’t understand the purpose and function of austerity policies, which are integral to capitalist  recovery strategies since 2008.  Austerity is the complement to a primary focus in advanced capitalist economies on monetary policy as the preferred strategy for economic recovery—i.e. central banks’ bailouts of private banks and investors via QE, zero rates, auctions and forward guidelines. While monetary policy is primary, austerity is a necessary complement, Jack explains, to bank bailouts which produce slow, intermittent, and 5-10 year or more economic recovery trajectories. Jack looks at how Austerity has functioned so far in Europe, USA, Japan and now Ukraine, why it has continued and why it will continue, morphing in to new forms.  Austerity policy is a class policy and integral to capitalists’ view of how recovery should be engineered, Jack explains. That’s why Krugman and others don’t understand why it continues.  (Next week’s show is  ‘Back to the Future’, a detailed look at the new Republican Congress’s 10 priorities for the next two years, that are just a rehash and resurrection of George W. Bush policies in new form going forward).