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).
Dr. Rasmus reviews the two major events of this past week: the Fed’s first rate cut since 2009 and Trump’s announcement of 10% more (maybe 25%) on remaining $300B of China imports to US. How the two announcements are related. The response of markets and investors to the Fed cut + the response of China to Trump’s latest trade tantrum. Why the Fed cut will have little to no effect on the real economy and investment and won’t stop the US economic slowdown. Why it also has had a negative effect on financial markets. Trump’s next moves vs. Powell and the Fed. The likely responses of China, as the US and China continue to slip from a tariff spat to a full blow economic war. No trade deal in 2019 but possible in 2020 as US and global economy slip toward recession. The bigger consequences: why fiscal and monetary policy were once tools used to stabilize the economy (per mainstream economics) but now have been neutralized after having been used since 2008 as means to redistribute income to corporations, investors and wealthy 1%. What are consequences for next recession around the corner?
Dr. Rasmus reviews today’s preliminary 2nd Quarter US GDP stats compared to 1st Quarter’s. Why Housing, manufacturing, investment are now all weakening & consumer spending increasingly dependent on credit. IMF’s latest global forecasts and why Draghi’s pre-announcement of Euro central bank returning in September to lower rates and more QE are doomed to fail. Brexit this fall, now a certainty, to push Europe into recession already approaching. IMF shows slowing economies in Middle East (0.6%-1% GDP), Latin America’s big three economies, So. Korea, Singapore, ANZ, with Japan slowing, and China growth more like 4% than its official 6.2%. Last 20 minutes of show analyzes Dem. Party leadership failures, revealed most recently with latest House testimony of Mueller. Chronic DP leader failures from Carter, Clinton, Obama, Hillary, now continuing under Pelosi-Shumer. Why Democracy in America is slipping away. Why Republican strategy from Gingrich (1994) to McConnell (2010-16) to Trump has been succeeding. Why 2020s America may look more like 1850s.
Dr. Rasmus reviews the imminent interest rate cuts coming next week by the US central bank, the Fed. Why it’s all about subsidizing financial markets, driving down the value of the US dollar, and protecting US multinational corporations’ offshore profits. Why other central banks are now following in step. The consequences in negative rates worldwide and their effect. How Fed policy is tied into Trump trade war with China. The latest on US-China trade negotiations and why no deal this year. Discussion shifts to the crisis created by US big pharma. Why 68,000 pharma caused deaths last year, 47,000 from prescribed opioids. Why Trump backed off from even tepid proposals last week. As deaths mount (a Vietnam War every year), big pharma continues to raise prices. Latest casualty: insulin and diabetics. How pharma raises prices. A proposed solution. Show concludes with brief comments on Amazon’s plan to pay for re-education of its warehouse workers and how Trump is proposing still more tax cuts for investors bypassing Congress.
Dr. Rasmus examines today’s US Jobs report and other reports suggesting US job creation may be mostly 2nd jobs, per Bankrate.com and Payscale.com surveys. How Labor’s share of income has declined -$1.5 trillion a year, while stock buybacks and dividend payouts have risen +$1.5 trillion. The crisis at Germany/Europe’s largest bank, Deutschebank, is discussed and its comparison to the 2008 crash of another investment bank, Lehman Brothers. Why Deutschebank’s current $45 trillion in derivatives contracts poses a major threat to contagion in the next crisis. The case of Europe’s weak banks, non-performing bank loans, and 65% in negative rates. The show concludes with discussion of last week’s Supreme Court decision to allow gerrymandering to continue, as the latest development undermining US democracy. How the Republican party’s ‘red states’ strategy of recent decades successfully captured the Senate, Courts, & states legislatures. Why the US House of Representatives has not added more seats since 1913, per the US Constitution requirement, further advantaging conservatives in the House. Why Democrat party strategy has failed.
Dr. Rasmus previews the G20 meeting and prospects for US-China deal. Review of deteriorating condition of both US and China real economies. US indicators weakening fast: housing, factory orders, consumer and business spending, inflation, jobs. What’s happening in India’s economy overview, as non-performing bank loans and shadow bank instability rises. Weak links in global economy: Europe, India, Argentina, Turkey, So. Africa, Brazil, So. Korea, as US & China economies also slow. US Billionaires (Soros, kids of Pritzgers, Disney, Berkshire Hathaway, etc.) call for 0.1% wealth tax hikes on billionaires like themselves. As Trump maneuvers another tax cut for them bypassing Congress. Rasmus compares wealth tax hikes to financial transactions taxation, Warren vs. Sanders’ proposals. Stock buybacks and dividend payouts to reach $1.5 trillion in 2019, as Fed allows banks to buyback-payout $200 billion or more for first time. The show concludes with critique of (other) billionaires (Rubinstein, Singer, etc.) launching media ideological offensive against emerging progressive proposals like Medicare for All, Modern Money Theory, Student Debt Relief, Green New Deal, and the general idea of ‘Socialism’.
Dr. Rasmus reviews the condition of the Europe and US economies, now rapidly slowing this past month, and recent announcements by central bank chairs, Powell and Draghi, to lower rates and inject more free money into the system. New bubble levels in stocks, bonds, gold, bitcoin responding. The question of reliability of stats for GDP (India) and US are revisited. Recent surveys by Bankrate and Payscale indicate significant rise in part time and 2nd jobs last year and that wages shrunk by -0.8%, not rose by 3.2%, this past year. (And have fallen by 9% since 2006). What’s behind Facebooks’ entry into the global payments market and shadow banking by its ‘Libra’ digital token. The regulatory reaction coming. Congress’s $983 billion spending bill. Why military spending is more than $1 trillion a year, and not just $733 billion for Pentagon. Latest on the Trump tax cuts for multinational corporations. How the F500 alone just saved $219b by repatriation of offshore profits. The show concludes with analysis of Fed chair, Powell’s, press conference this past week. (Next week: the G20 meeting and Trump-Xi on trade war continuing or not).
Dr. Rasmus challenges the mainstream economic theory that prices serve to stabilize the economy. How financial asset prices, oil prices, bonds, etc. are now driving price volatility that leads to more general economic instability and recessions. Prices for financial assets are the main driver of goods prices, wages (labor prices), interest rates (money prices), commodities, etc. How global oil deflation, now re-emerging after last year’s 40% decline, is a key factor in Trump neocons’ effort to provoke Iran and recent events in the strait of Hormuz. Rasmus concludes with latest figures on US deficit projections for 2019, now around $1.3 trillion, and US government and total debt trends and projections for government, corporate, farm, household, and related debt—now around $60 trillion and approaching $80 trillion by 2028. How deficits and debt do matter for the economy, when they cannot be financed (i.e. repaid) when prices slow or decline due to financial markets and recessions. (Next week: Europe as basketcase of the global capitalist economy).
New US job numbers show big decline to only 75,000 in May. Is the ‘Lagging’ indicator of jobs now catching up with rest of slowing US economy? What’s behind Trump’s threat of new tariffs on Mexico? (Not about trade but election 2020 and Trump raising money for his wall). Who pays? Consumers and workers. Why are global oil prices retreating again and the consequences? Dr. Rasmus takes a deep look at the Eurozone economy, now doomed to enter recession again soon. Japan also entering recession. China slowing, stocks declining, and bank defaults rising. Why central banks globally are rushing to lower interest rates in anticipation of US central bank, the Fed, about to do so as well. Will the current long term global bond rate bust spill over to US and other stock markets? The show concludes with comments about Democratic Party leaders’ in the House throwing in the towel to subpoena Barr, McGahn and others, as the US constitutional crisis continues to develop.
