Jack Rasmus discusses yesterday’s big announcement of a massive $1.5 trillion Quantitative Easing (QE) money injection program by the European Central Bank, and its consequences for the Eurozone and global economy. After nearly $9 trillion in total QEs by US, UK, Japan and now the Eurozone, the global economy continues to slowly drift into recession and deflation. Claims by central banks and politicians that QEs are about growing the economy, lowering unemployment or raising inflation to a stable 2% are debunked as empirically false. QEs are about bailing out financial institutions and the new finance capital elite and then ballooning their balance sheets well beyond bailout as well. Jack explains the several flaws and consequences of QE: it doesn’t result in lending for real investment, leads to financial speculation and bubbles, accelerates incomes of super wealthy (via stock buybacks, dividend payouts, etc.), raises global private debt by business, reduces incomes of middle classes, sets off competitive devaluations and currency wars, leads to real goods deflation and financial asset market inflation (stocks, junk bonds, forex, etc.), and accelerates global income inequality trends. Jack explains the connections between QE and fiscal austerity policies. And represents a growing desperation by financial capital elites and their institutions to ensure growing incomes for themselves by artificial means (free money) and at the direct expense of incomes of the rest of society. The linkage of QE and ‘labor market reforms’ (attacks on wages) are noted.
(Next week’s show: Part 2 ‘the fuse’, the coming elections in Greece and ascendancy of the left party, Syriza. Will it mean the beginning of the end of neoliberalism and a fight back against QE, free money, and austerity?)
Jack Rasmus surveys the most critical trends today in the global economy that continue to reveal a fragile condition, reflective in recessions in Europe, Japan, Russia-Ukraine, and a growing number of emerging market economies as of year-end 2014. A short list of trends discussed include a long run slowdown in the rate of growth of ‘real’ investment globally; a drift toward deflation in goods and services prices; a sharp rise in private sector debt—especially corporate debt and in particular corporate junk bond debt; the continued expansion of shadow banks and their ultra high net worth finance capital elite who keep financial asset bubbles brewing worldwide by diverting investment from real goods and services and therefore real jobs, wages, and consumer income growth; a shift toward a greater proportion of part time and temp workers as share of the total work force; wage stagnation and continued rise in income inequality worldwide, as capital incomes continue to accelerate while wages stagnate. Jack also gives a preliminary analysis of the USA’s 3rd quarter 2014 reported 5% GDP rise, explaining how the surge was due to temporary factors that have already begun to disappear in 2015, ensuring the USA’s return to its 5 year long ‘stop-go’ scenario.
Jack Rasmus discusses China’s efforts since 2010 to tame its foreign ‘shadow banks’ that have been playing a central role in creating financial bubbles in its residential housing, local infrastructure, and (Yuan) currency markets in recent years. Jack explains how China--unlike the USA, Europe and Japan—rapidly recovered from the 2008-09 global crash and recession by introducing a 15% of GDP fiscal stimulus focused on direct government investment. China’s GDP quickly surged in the 10-14% range 2010-13, while the USA, Europe and Japan relied primarily on monetary policies plus fiscal austerity and their recoveries lagged. However, China’s 2009 stimulus measures also included massive monetary injections, both by China’s central bank and even more via liquidity in-flows as China opened its doors to western banking, including shadow banks. Shadow bank liquidity in particular flowed in local housing, construction markets and China’s currency markets, creating financial asset bubbles in all three. To check the growing bubbles, and to try to tame the shadow banks, China shifted policies in early 2013 to reduce direct government spending and to have its central bank retract money supply. The result was a slowing of China’s real economy in 2013. China reversed and followed later in 2013 with a mini-fiscal and monetary stimulus to try to restore growth, that did little for real growth but stimulated shadow banks and bubbles further. Similar policies in early 2014 did little to stimulate the real economy, but did tame residential housing and currency bubbles somewhat. China continues today to struggle to tame its shadow banks and bubbles while experiencing slower real growth. Since 2010 shadow banks have pumped more than 20 trillion Yuan--$3.5 trillion--into China. China today experiences the slowest growth in 24 years, a virtually flat manufacturing sector and a probable less than 7% GDP growth in 2015. Jack explains how China’s struggle with shadow banks, its global capitalist speculators, and the financial asset bubbles they create represents a major contraction in global capitalism in the 21st century, and a continuation of other economies’ similar, even less successful, efforts to tame shadow bankers and their financial bubbles in the 1980s, 1990s, in southern Europe since 2010, and currently in Argentina, Venezuela, and Ukraine.
Jack Rasmus dissects key provisions in the Republican Congress’s recently passed ‘Omnibus’ Appropriations bill earlier this month, that provides numerous big benefits to US Corporations while cutting deferred wages and pensions for US workers. Jack focuses on five key provisions of the Omnibus bill: return to banking deregulation and bank derivatives trading, continued business tax cuts, the gutting of the EPA and deals for the Coal and Agribusiness industries, US Defense Corps and new spending in middle east and Ukraine, and even more corporate money for politicians as the big freebies for business. In contrast, the Omnibus cuts workers’ defined benefit pensions in multiemployer plans, marking the beginning of a new general offensive by business and politicians to phase out employer negotiated pensions in the USA altogether. The USA Congress’s Omnibus bill represents, Jack argues, new forms of austerity for workers, focusing on deferred wage rollbacks (i.e. pensions), while more goodies continue to flow to corporate America. Jack concludes with a look at two other recently formed governments’ initiatives to accelerate austerity in their economies as well: the Ukraine’s newly formed government this past December, which is about to accelerate its austerity programs’ implementation, and Japan’s new Liberal Democratic Party government also elected in December, which is about to move to impose restructuring and ‘labor market reforms’ in the coming year. 2015 will not be a good year, Jack suggests, for workers as similar ‘restructuring’ of labor markets are scheduled for Europe, India, and elsewhere—but a continuing great year for business and investor incomes.
Jack Rasmus reviews the continuing collapse of global oil prices and its effect on the emerging recession in Russia, continuing economic stagnation in Europe, and the deepening Depression in the Ukraine economy. Rasmus discusses how the global oil price collapse may be entering a second phase soon, further impacting not only the major oil commodity producers (Russia, Venezuela, Nigeria, Norway, Mexico, etc.), but now, increasingly, the economies of other non-oil commodity producers (Brazil, Indonesia, India, Turkey, and others). Additional pressures appear to be building as well on global financial asset markets, especially US and European corporate junk bonds. How this is related to last week’s US Federal Reserve decision to put off raising US interest rates another 2-3 months, and the subsequent latest surge in the US stock market, is explained. Jack then discusses developments in the Russian economy as it clearly enters recession; the feedback effects of Russia’s recession on Germany and other eastern European economies; and the further feedback effects of both in turn on the deepening Depression in the Ukraine. Jack concludes with a detailed review of the negative effects of the IMF bailout on Ukraine, the recent installation of US and EU citizens as economics and finance ministers in Ukraine’s new government, Poroshenko and Yatsenyuk’s pleading for more aid from the west, and latest hard nose demands by the IMF and G7 for Ukraine to impose even more austerity on its people if it wants more loans in 2015.
Dr. Jack Rasmus discusses the current global oil price deflation that began in earnest last June and is now accelerating, driving global oil from a prior 2014 high of $115/barrel to a recent low of $59. Jack explains how the net effect on the global economy will likely prove to b significantly negative overall, and that the price decline could fall as low as $40/barrel in coming months. The impact on Emerging Market Economies, already seriously slowing or in recession, will also prove significant—causing their currencies to collapse even further and in turn generating capital flight, declining credit availability, slowing investment, rising inflation, and inability of emerging market businesses and governments to finance previous incurred debt. Oil price deflation will almost certainly push Europe and Japan into general deflation and further recession, and toward more QE money injections that will further generate asset price bubbles. Rasmus predicts China’s current economic slowdown will continue in turn as Europe, Japan and Emerging markets slow their purchases of China exports. The contrary popular USA notion that lower oil prices mean lower gasoline prices and therefore more spending by USA consumers and businesses is challenged. In conclusion, Jack discusses how oil deflation globally could set off another round of financial instability worldwide, and how it will likely mean the ‘shale gas/oil fracking’ boom in the USA will now stall and could potentially set off a ‘junk bond market’ crisis in the USA similar to the subprime market real estate bust of 2007-09. Will the global oil glut and deflation lead to another ‘Asian Meltdown’, this time even more geographically dispersed; and, in the USA, will it lead to another ‘oil patch’ crash that occurred in the US southwest in the 1980s—this time affecting North Dakota-Wyoming, Alaska, and Pennsylvania as well as Texas and the southwest? (Read Dr. Rasmus recent posting on the PRN website, ‘The Economic Consequences of Global Oil Deflation’, for further analyses).
Dr. Jack Rasmus interviews contingent faculty professors at several colleges in California, who are part of a growing wave in the USA of higher education professionals organizing themselves into unions in order to bargain collectively to change their current ‘second class’ employment citizenship as contingents. With talk of insufficient wage growth in the USA having become a common public topic of discussion in the USA in recent months, Dr. Rasmus focuses on one of the major causes: the explosive growth of contingent (i.e. part time, temporary) professional employment in US colleges and universities. Once only 22% of the entire professorial faculty at colleges, today contingent faculty constitute 70-75% of all professors teaching in higher education. With lower pay than tenured faculty, often with no benefits, and always no job security, contingent professors are beginning to organize themselves into unions to improve their working conditions. Dr. Rasmus interviews three contingent professors at California colleges that have just organized, or are organizing, into unions as part of the Service Employees International Union: at St. Marys College, Mills College, and California College of the Arts. The professors discuss why they and their colleagues chose to unionize, what the process was like, and what they are now doing as they prepare for bargaining with their respective administrations. Guests interviewed include Lain Hart from St. Marys College, Ben Browne from Mills College, and Hugh Behm-Steinberg at California College of the Arts all located in the San Francisco Bay area.
Hugh Behm-Steinberg is a Senior Adjunct Professor at California College of the Arts, where he teaches in the MFA Writing and Undergraduate Writing and Literature Programs. A recipient of Wallace Stegner and NEA creative writing fellowships, and the author of multiple books of poetry, he has taught as an adjunct at CCA for fifteen years. He is a member of the SEIU-CCA contract bargaining team.
Dr. R. Ben Brown has a PhD in History from the University of Michigan and a JD from Vanderbilt University. He teaches U.S. Legal and Constitutional history in the Legal Studies Department at UC Berkeley, where he has a continuing appointment protected by Union contract. He teaches in the History and Public Policy Departments at Mills college where he is a member of the interim bargaining team.
Lain Hart teaches in the Composition Department of Saint Mary's College of California and is the author of several academic publications, and lives in Oakland, California
Dr. Jack Rasmus describes Japan’s latest 2014 recession as yet another example of growing global Capitalist economic contradictions. With its stock markets booming, exports rising, unemployment at a 16 year low, interest rates at zero and massive money injections by its central bank—how is it that Japan’s economy has plunged again the last six months into a severe recession once again? Is it that it has introduced QE monetary policies too ‘late’, as one wing of mainstream economists argue (i.e. ‘retro classicalists’)? Or is it because it has not introduced fiscal stimulus government spending, as another wing of economists argue (i.e. ‘hybrid keynesians’)? Jack challenges both explanations. Real wages and real household income continues to decline, and consumption falter in turn, Jack argues, because job growth has been largely ‘contingent’(part time/temp), because Japan QE/monetary policy has depressed its currency by 35% and raise the cost of consumer imports that reduces real wages still further, and because Japan fiscal policy raised consumer taxes and reduced household income still further in turn. Jack argues Japan is yet another ‘model’ and example of how capitalist monetary policies driving the world economy today bail out wealthy investors, bankers, and multinational companies first and quickly, but result in a failure to boost real investment, jobs and average consumer incomes as well in the process. With little household demand for real goods and services, businesses cut labor costs (wages) instead to boost profit margins and then hoard their cash, or invest it offshore, or divert it to financial asset speculation globally. Capitalist monetary policies bail out the rich, but simultaneously cause the rest of the global economy to gradually grind to a halt—Japan being but the latest, and most extreme, example of the growing contradictions of global capital today.
In the wake of the recent midterm elections, Dr. Rasmus describes how the new Republican controlled Congress is about to develop new policies on behalf of Corporate America, many of which represent a resurrection of past policies of the Bush administration—i.e. old wine in new bottles. Rasmus identifies and explains the likely emerging new policy initiatives in the weeks and months immediately ahead: more corporate tax cuts, accelerated push for free trade for pacific rim countries and europe, immigration reform defined as more policing and fences, rollbacks of environmental protection initiatives (Xl pipeline, industrial plant emissions, public lands fracking, EPA funding, international CO2 limits), Affordable Care Act revisions (more business exemptions, cost shifting to consumers, limits on Medicaid), limits on financial regulation under the Dodd-Frank Act, more aggressive foreign policy action (green light for conflicts and funding of proxies in Syria, US troops to Iraq again, Ukraine (US advisers, special ops, money), NATO push into east Europe (Ukraine, Moldova, Georgia), more freedom of action for NSA spying on US citizens and limits on free speech and assembly. Jack explains how the new emerging policy offensive fits in the four decade long current pro-corporate offensive in America by US government and institutions. Jack provides an historical context for it all and how resistance represents the latest effort in a centuries long struggle by American people to expand and defend their democratic, civil and economic rights since the American revolution period of 1776-1787.
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).