A review of latest data on US economy, now showing retail sales and consumer joining the contractions in manufacturing, industrial production, business investment and construction. Why the Repo Market instability and problem is not going away, as bankers refuse to sell Treasuries back to the Fed (who’s trying to buy them in order to pump more cash needed into the market)—i.e. the Fed’s strategy to pump $400b more into Repos (QE Lite?) may not work. Then what? A third show topic is an assessment of the just announced ‘deal’ between the UAW and GM and why it may not be approved by the autoworkers themselves in their now scheduled contract ratification vote. How management ‘moves the money around’ in last minute negotiations. How it can manipulate the temp workers offer. How it will reduce its contract offer by not reopening plants in the US and increasing jobs in Mexico. Why lump sum payments actually reduce costs for the company and take home pay for the workers. The politics behind union contract ratification voting. The show concludes with Dr. Rasmus outlining his forthcoming book (next week), ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, October 2019. Why ‘neoliberalism’ is not really liberalism at all, and not really about free markets but an idea created by conservative economists to obfuscate policies designed to restore hegemony for US capitalists at home and abroad.
Business and mainstream media today talking up a likely ‘mini’ deal on US-China trade. What’s behind it and what’s likely to be covered. China’s call for a ‘fair’ deal means a mini deal, minus any agreement on the nextgen tech issue. Trump’s ‘big deal’ will mean no tech issue resolution. So why is Trump now willing to take what’s on the table (same as last May 2019) and forego his ‘big deal’? Rasmus discusses the various economic reasons Trump may settle for less today, and continue attacking tech issue by other means. Is the ‘mini’ deal pending with China another ‘softball’ deal per So. Korea, Japan, USMCA, EU trade agts? Trump’s trade war a dismal failure, as US trade deficit hits record $55b in August. The second half of show revisits the Repo Market instability topic once again, provides updates on Fed’s $400 billion money injection, discusses whether it’s ‘QE’ again, and reviews just released BIS and FSB studies showing role of shadow banks in the Repo market may be part of the problem. The show closes with comments on 7m US auto loan defaults, and the chronic problem of a rising US dollar. (Next week: Neoliberalism as ‘Idea’ of academics and intellectuals vs. Neoliberalism in ‘Practice’)
This past week California proposed the creation of a public bank. What are the pros and cons of a public bank? Why a public bank would benefit Californians. Why public banks aren’t panacea solutions to a US chronic slow growth economy approaching recession once again. The limits of monetary policy, whether QE, MMT, or public banking. Why advocates of monetary solutions always over-estimate the role of money supply, interest rates, and bank lending. What really drives capitalist investment and economy. Why money is necessary but not sufficient. Public banking (and MMT) as QE turned on its head. Rasmus introduces show with discussion of latest US purchasing managers index for services and manufacturing now slowing and contracting, and why job numbers are becoming weaker and will soon follow by year end or sooner, as US economy slowly joins the global economic slowdown. Why Trump may strike a deal with China—i.e. take the money and run and leave the tech issue for another day. (Next week: Ukrainegate, Trump, and the Decline of American Democracy)
Dr. Rasmus dissects this past week’s spike in Repo (Repurchase Agreement) bank to bank lending market and what it means for growing financial instability in the US and globally. Candidate for financial market instability in US and worldwide are reviewed (junk bonds, BBB, leveraged loans, CDOs, etc., as well as India-Europe banks, China markets, Argentina, etc.). further slowdown of world real economy and trade underlying and interacting with growing financial market instability. Competitive devaluations via central bank interest rate and currency wars. Trump’s narrow view of tariffs and Fed rate cuts. Why the Fed was divided on last rate cut this week. In the midst of all this, the US Repo market rates spike to 10%. Official short term explanations not acceptable. Longer term more fundamental causes: Fed pulling money out of bank reserves via bond operations and balance sheet sell off in order to finance US $1 trillion plus budget deficits. Banks now addicted to more excess reserves after QE, financial structure changes since 2008, etc. Fed will now restart ‘QE Lite’ via Repo market injections (4 times this week). More Negative Rates worldwide and balance sheet ballooning again inevitable now. Fed and central banks policies no longer as economic stabilization tools but as main conduit of capital market incomes subsidization tools. Fed and central banks now secretely planning even more radical innovations next year.
Today’s show focuses on the recent decision by the European Central Bank to re-introduce QE and drive Europe’s more than $7 trillion in interest rates further into negative territory. Another $22b per month in QE and rate reduction to -0.5% when, over the past 5 yrs QE and negative rates have not stimulated the European economy. Reasons why QE and neg rates have little effect. How $17 trillion in negative rates worldwide is a growing problem and won’t stimulate the Euro economy. Lower rates as exchange rate currency/ trade move. Why Trump is now calling for US negative rates. Why central banks (including Fed) now secretly discussing new tools and tactics for the next recession, including ‘bail ins’ and calls are growing by high level capitalists for the Fed and central banks to expand their authority into fiscal policy areas (as predicted in my 2017 book, ‘Central Bankers at the End of Their Ropes’). Consequences of such for US Constitution and fiction of ‘central bank independence’. Rasmus discusses US deficit now officially projected to exceed $1 trillion a yr. The Democrat Party latest debate and opposition to Medicare for All. And what’s behind the recent ‘softening’ of US & China trade war (and why a deal may now be closer with ‘decoupling’ of technology issue). Rasmus introduces the show with brief outline of his forthcoming book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, October 2019, and shares its main themes. (Review of chapters coming in following weeks of this show).
Dr. Rasmus explains why US stocks gyrate on every public announcement concerning US-China trade. Why US financial institutions and markets no longer focus on economic fundamentals. What’s behind the Trump plan to privatize the quasi-government mortgage companies, Fannie Mae and Freddie Mac. Why hedge funds and speculations will reap big windfalls and how the home buyer rates on 30 yr. mortgages will rise and pay the price. Rasmus observes the class politics behind the ‘hard Brexit’ vs. no Brexit factions in the UK. The show concludes with analysis of the latest US labor dept. jobs numbers and why the jobs ‘lagging indicator’ is now beginning to show the US drift to recession, following down the indicators for US manufacturing, housing & construction, and business equipment investment. (For more analysis in print version, check out the just posted articles on unemployment, jobs and wages on his blog, at www.jackrasmus.com).
What’s the condition of Labor this Labor Day 2019? The official Trump estimate of 3.1% increase in wages this past year is really between -0.8% and 1.1% according to independent bank and other research companies. 3.1% is unadjusted for inflation, is an ‘average’ skewed by big gains for professionals and managers, and refers to only full time workers—leaving out the 60m plus ‘contingent’ part time/temp/gig workers. Independent surveys by Bankrate, Payscale, McKinsey Research, and EPI paint a different picture: 60% of labor force say they got no pay increase at all last year. 45% say they are working 2nd and 3rd jobs to make ends meet. Rasmus debunks with data the Neoliberal lie that business-investor tax cuts create jobs. Trump’s tax cut correlated with big investment collapse. 1.1 million jobs not due to tax cuts last year. US Labor Dept. just announces adjustment of 500,000 fewer jobs last year than previously reported. Monthly job creation no different 2018 than 2017 after tax cuts. Rasmus describes the continuing attack on unions, especially public sector. (Check out Dr. Rasmus’ blog for article on ‘Myths of Wages and Jobs Under Trump’ at jackrasmus.com)
Trump brags about the ‘Wall of Money’ coming into the US from abroad. But what it represents is a global economy deteriorating fast and offshore investors sending their money to US safe haven of Treasuries. How the ‘wall’ is driving up the $US, negating Trump’s tariffs, and negating any trade deal with China. Trump turns up the ‘blame game’ for economy weakening: tantrums against China’s new tariffs, the Fed’s Powell foot dragging on lowering interest rates, and Dems refusing to give more tax cuts to investors. Why Fed rate cuts won’t stimulate the economy. Why Trump’s new proposed tax cuts won’t either. Trump’s next desperate moves to manipulate currencies (US and China’s) that will intensify the emerging currency war. Other topics of the show: debunking Trump’s payroll tax cut idea, why US steel companies are laying off workers in Michigan, and what’s behind the Japan-So. Korea ‘pissing match’ (yup, it’s trade).
As more and more independent research arms of banks, big investors, and even economists are now predicting recession is coming (as I have been for the past year), what we hear increasingly from the Trump administration and its apologists is that ‘the US economy is strong and doing fine’. Or, other sources less optimistic are increasing saying recession is coming, ‘but it will be mild this time’. There’s no housing bubble (2007), or tech dotcom bust imminent (2000), or no junk bond crisis (1989), so the coming recession will be mild. In today’s show we examine and discuss both themes—‘the US economy is strong’ and ‘the next recession will be mild, providing contrary evidence and arguments to both. New market sector candidates, contagion channels and transmission mechanisms for the next financial crisis are noted, the much weaker US and global economies as start points of recession are explained, and, how it is argued that monetary and fiscal policies will prove far less effective this time in trying to slow a contracting economy or stimulate recovery. A detailed explanation of what happened in Argentina earlier this past week, and its potential contagion, is addressed. (see my blog, jackrasmus.com, for an in depth analysis of Argentina’s financial asset implosion and what it means in the context of falling financial asset prices now globally).
Dr. Rasmus reviews events associated with the US-China trade war, from the Shanghai meeting of early August to today’s announcement by Trump that he expects no deal with China. Why China is not manipulating currency but the opposite. Why there’ll now be no further Trump tariff hikes. Why the trade war is really a war over nextgen technology between US and China and only part of a growing economic war between the two countries. Rasmus discusses global central banks’ now cutting rates in a ‘race to the bottom’ anticipating further Fed, ECB and BOJ rate cuts coming. The global manufacturing recession now as transmission mechanism to global recession. Europe’s growing economic problems: Recessions in Germany, Italy and UK now. Brexit will exacerbate. Italy will break EU fiscal rules after elections. Rasmus refocuses on the growing problems in India, soon the world’s 5thlargest economy: bank problems, looming defaults, currency decline. Modi’s current distraction from problems with nationalist offensive in Kashmir. (Check out Dr. Rasmus’ latest update on the US-China trade-tech war at jackrasmus.com blog).
