Dr. Rasmus reviews the intensifying UK economic crisis that escalated this past week. Bond holders and investors provoked a crisis in Britain’s pension funds in response to the new Truss government’s proposals to cut taxes and enact price caps on the accelerating cost of energy for UK households and small businesses. Capitalist investors don’t want fiscal spending they fear will stimulate the economy and therefore demand and inflation, the latter now double digit and predicted to rise to 17%. They want higher interest rates from the UK bank of England to protect the value of their investments—from rising inflation as well as collapsing British currency, the pound, that has fallen 40%.Rasmus explains this represents growing contradictions between capitalist fiscal-monetary policies and splits within the UK capitalist class. The show further explains and critiques the EU’s latest proposals for sanctions on Russia by creating a G7/EU global oil price cartel, which is doomed to fail if it ever gets implemented. Latest events summarized also in Russia-Ukraine/NATO war.
Today’s show focuses on two ‘wars’, one military and one economic. Dr. Rasmus discusses the Fed’s latest 75 bps interest rate hike and its consequences, both for inflation, recession, and global currency markets’ instability. Fed chair, Powell’s, 3 justifications for raising rates are discussed. Rasmus explains Fed rate hikes address Demand side inflation, but not global supply chains or supply problems due to war and sanctions or general corporate price gouging by monopolistic US corps. Why latest US CPI numbers show a troubling deepening and worsening inflation picture. How Fed rate hikes cause the US dollar appreciation which, in turn, devalues other currencies, including Euro, Pound, Yen and Yuan. How the $ rise in effect exports US inflation and recession to other countries. Second half of show discusses the juncture the Ukraine war has now reached, why Russia’s SMO strategy had failed, and what the announcement by Putin to hold referenda in the four provinces and to mobilize 300,000 more Russian reserves forces for the war means for further escalation of the conflict. The US/NATO war strategy as a ‘Brezinski 2.0’ strategy.
Today’s show explains how the US dollar serves as the lynchpin of the US global economic empire. How it controls key commodities trade. How the SWIFT Int’l Payments system is integrated with the $, and roles of IMF, World Bank and US Fed use the $ to control economies. Dr. Rasmus explains how the US exports inflation and unemployment to other countries using the Fed, interest rates, and the $. And how it uses the dollar to punish countries that challenge the US global economic empire. The show then takes up again the topic of the Railway Workers negotiations raised last week and explains how domestically US capital controls key transport unions to prevent strikes using the National Labor Relations and Railway Labor Acts legislation. What’s the likelihood of a strike in rail next week? The show concludes with Dr. Rasmus’ view of events in Ukraine, especially military maneuverings up to the past few days and what’s different with the US-Ukraine current offensive.
Dr. Rasmus presents his annual labor day overview of the condition of American unions and working class. A description of the history of the rise and fall of union membership in the US from the 1920s to the present is given, followed by why overall union membership still remains stagnant despite 60-70% of workers saying in polls and surveys they want a union. Corporate-Govt causes of the decline vs. union top leadership failures are addressed. On the positive side, Dr. Rasmus reviews the past year’s positive union events including formation of unions at Amazon, Starbucks and other retail and the direct election of new top union leaders in the autoworkers and Teamsters unions. The state of current negotiations involving the ILWU (west coast dockworkers) and the Railway unions is covered, and the key strategic nature of these unions and negotiations are noted. On the negative side, the failure of the Biden administration to get the promised PRO Act passed and the White House’s token responses. An overview of the condition of the US working class over the past year concludes the show, including what’s really happening with jobs, the decline in real wages, other compensation losses for the working class in 2021-22 and why Biden’s recent legislation will have no benefit to workers in the short term.
Dr. Rasmus analyses the positives and negatives of Biden’s announcement canceling some student debt. The five main elements of the proposal are described. But more than 25 million students and former students will now have to resume payments and will pay even more starting 2023. Why the $10k debt forgiveness proposal will be offset in more debt in just a couple of years again. And why the second $10k won’t cover all eligible Pell grant recipients. Rasmus explains how the new rule of paying 5% of discretionary income will result in more unpaid debt interest, rising debt principal and total debt levels. The basic problems of the student loan system is not addressed by Biden: government interest rate charges higher than market rates; no inflation adjustment; no controls on college administration costs and fees, and a narrow definition of who qualifies for residual debt forgiveness after 10 years. Rasmus proposes his own solutions to the crisis. (for further analysis see Dr. Rasmus just published article, ‘Biden’s Bifurcated Student Debt Cancellation Plan’ at his blog, http://jackrasmus.com. The show concludes with a discussion of Fed chair Powell’s speech today at Jackson Hole, WY, and why it means further rate hikes for some time, more protracted recession, and stagflation in 2023. (Listen to next week’s Labor Day show on the state of the US working class and unions today)
Dr. Rasmus explains the tax and spending details contained in the just passed Inflation Reduction Act, the culmination of two and half years of fiscal spending & tax acts under Trump and Biden during Covid and after.
The composition of the Cares Act (March 2020), efforts to pass a follow on bill in summer 2020, the emergency Cash Act passed in December 2020, Biden’s March 2021 ‘Covid Relief Act, and the collapse of the Build Back Better Act in November 2021 are all explained and compared. Rasmus describes how Biden’s initial ‘Covid Relief’ and ‘Build Back Better’ proposals in 2021 were stripped out of their corporate measures, which subsequently were passed as the Infrastructure Act (November 2021), the ‘Semiconductor & Manufacturing Act’ (July 2022) and now the ‘Inflation Reduction Act’. The three pro-corporate Acts of 2022 replaced the Sanders-House Build Back Better bill. Rasmus describes in detail the just passed Inflation Reduction Act, argues its tax measures won’t produce the $740B revenue, why it won’t reduce inflation, and why most of the $370B spending on climate will go to corporations and businesses as well. Positive, albeit token, social spending measures mostly benefit Medicare households or keep the Obamacare subsidies going a few more years.
Dr. Rasmus discusses today’s Jobs report in detail, dedicating the entire show to an analysis of the report. Is the 528,000 reported ‘new’ jobs and only 3.5% unemployment rate accurate? Rasmus explains the various statistical operations on the actual raw jobs data that results by the Labor Dept. surveys in order to arrive at these numbers. How seasonality, new business formation, and other statistical manipulation on the ‘raw actual jobs data’ results in artificially robust monthly numbers and why there are important contradictions between the two jobs surveys employed by the government in the report. Also discussed is why the reported 4.5% gain in workers’ earnings are really a -4.6% decline in inflation adjusted earnings; why other government report stats like labor force participation rate and employment to population survey show no strong job growth trend; and why the reported 3.5% unemployment rate is really 7.2% even according to the report’s other tables. Also discussed is the significance of an increase of 800,000 in part time employment in just the past month and data in Table A-8 of the report showing a decline in total employment since May 2022—from 156,180,000 to 156,000,000—contradicting the reported 528,000 new jobs last month and the 372,000 in June before.
Dr. Rasmus discusses the US economy’s current critical juncture: Is recession already here after this past week’s 2nd Quarter US GDP report showing two consecutive quarters now of US GDP contraction? Why is there a debate going on that it’s not yet a recession (Biden, Yellen, Powell) despite two quarters of contraction? The two definitions of recession are described. Why those who say it’s not yet a recession are wrong. It is. Dr. Rasmus next discusses the Fed’s decision last Wednesday to raise interest rates another 75 pts. Why the US stock markets & investors welcomed it and surged. What did Fed chairman, Powell, say in announcing the rate hikes that signaled the Fed has lost control of the economy? How many more rate hikes will follow? Why Powell says ‘no recession’ yet and believes a ‘soft landing’ is possible? Why it is not. What’s response of other global central banks in Europe & Japan and why rate hikes to date won’t happen effect on reducing inflation much.
Dr. Rasmus reviews the latest data and economic indicators this past week which show a ‘technical’ recession is likely already here. ‘Technical’ refers to two consecutive quarter declines in US GDP. First quarter 2022 already declined at -1.6%. 2nd Quarter predictions by Fed show another -1.5% fall. Rasmus reviews other indicators: recent retail sales adjusted for inflation, consumer sentiment, business activity contraction in the important benchmark region of the mid-Atlantic states, and today the latest release of Purchasing Managers’ Indices for manufacturing and services, both of which now contracting, with forecasts in some regions worse to come. Rasmus notes the recent McKinsey Consultants report on ‘The Great Attrition’, contrasted to his own ‘Great Strike’ prediction of last fall. Important union negotiations and possible strikes in railroads, west coast ports, and Teamsters next year are discussed, in relation to the anti-union 1947 Taft-Hartley Act designed to enable US government to intervene and stop strikes. Global slowdown in China and Europe and Japan now sliding into recession as well. Rasmus predicts Fed ‘demand destruction’ rapid rate hikes will ensure even non-technical definition of recession before year end 2022. But destroying demand forces contributing to inflation won’t abate supply forces also contributing. Thus recession will take down half of current inflation rate but inflation will continue into the recession period.
Here’s the announcement for today’s Alternative Visions show:
Title: US Dollar & Empire in Rising Global Inflation & Recession
Copy: Dr. Rasmus takes up the theme of US global economic empire is in decline and examines that in relation to the role of the US dollar and other US dominated economic institutions like the IMF, SWIFT international payments system, and other institutions of empire. Both short run and long run trends for the dollar and empire are discussed, and likely moves toward more independence from the US empire by economies like the BRICS (and others now joining it) and what that means for the $ and the empire. The show then reviews recent US CPI and PPI inflation numbers of the past week and Fed rate hikes accelerating. US GDP and its components are considered, as well as GDP, inflation, Currency instability, and interest rate developments underway in China, Europe, Japan, and emerging markets. Show concludes with brief discussion of potential financial liquidity crises erupting as inflation and recessions deepen globally, and what markets this might appear
