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).
Dr. Rasmus critiques in detail the US Labor Dept., Bureau of Labor Statistics, just released report on Contingent-Alternative Jobs, or what’s called the ‘precariate’ workforce. How the BLS under-estimates and lowballs the number and growth rate of precarious work in the US today. How narrow definitions, exclusions of groups of workers, and BLS survey methodology makes it appear the rise of precarious jobs are not a problem—contrary to many independent private studies. (For a print version, see Dr. Rasmus’s blog, jackrasmus.com, on the topic). In the second half of the show, the upcoming June 10 referendum vote in Switzerland on what is called ‘Vollgeld’ is addressed. The proposal for what is called ‘sovereign money’ creation, represented by the referendum, is explained in the broader context of the increasing failure of central banks in the advanced economies to stabilize the capitalist economy. How the central bank solution to the 2008-09 crash—via QE and zero rates for 8 years—will be insufficient in the next crisis. Hence, the new experiments like Vollgeld on how to bail out the economy are being explored. Vollgeld-sovereign money as a new way to permanently bail out the private banks by having central banks assume all their debt perpetually.
Dr. Rasmus on Trump’s lifting exemptions on US tariffs on NAFTA-Europe steel & aluminum. The oft-ignored role of US domestic politics in Trump trade actions. Trump negotiating strategy and tactics. Why there’ll be no trade war with Mexico-Canada or Europe, but may yet be with China. NAFTA and Europe partners’ tepid responses to Trump announcement (Mexico $4b, Canada $16b, Europe $7.5b counter-tariffs compared to US $2.4 trillion total annual exports). Three-way splits in US-China trade negotiating team. The US ‘dual track’ trade negotiations strategy. In the second half hour, Rasmus addresses the emerging Italian Debt crisis and its similarities to the 2012-15 Greek debt crisis. Italy’s insolvent private banking system, $500b in nonperforming bank loans, and government debt of 130% of GDP. Contagion potential to French banks. 5-Star populist party-Greek Syriza party compared. Italy as Greek debt crisis writ large. How financial imperialism works in the Eurozone.
Dr. Rasmus provides the latest, 1st quarter 2018, updates on accelerating S&P 500 US corporate stock buybacks, dividend payouts, and spending on corporate mergers and acquisitions. Latest data show $178b in buybacks and $113b in dividends and $840b in M&A spending estimates for 2018—i.e. a combined $2.01 trillion for just the S&P 500 largest corporations for the coming year alone. 2nd quarter estimates of buybacks for all US corporations now running at $6.1b per day and thus even higher. How the Trump-Congress $5 trillion tax cuts are the impetus for the more than $2 trillion boost in capital incomes for 2018-19. The Congressional Budget Office (CBO) estimate this week the Trump budget deficit will be $9.5 trillion, and $2.3 trillion greater than Trump-Ryan claim. (Dr. Rasmus estimate: $12.4 trillion and higher if recession occurs within next decade). Consequences for the US and global economy of the massive deficit-debt are discussed. The show concludes with explanation of last week’s US Supreme Court’s ‘Epic Systems Corp. vs. Lewis’ decision, denying workers the right to engage in mutual, collective action to defend their working conditions and forcing them to individually arbitrate their disputes with their company. A threshold SCOTUS decision that will overturn the 1935 Wagner Act giving workers the right to unionize for the first time in the US. SCOTUS decision the latest in intense legal attack on workers rights now underway, driven by Koch brothers and other anti-worker, anti-union groups. Rasmus briefly reviews the history of how courts and laws were used to prevent worker-union rights. US now returning to pre-1935 period in US labor history with Epic Systems decision.
Dr. Rasmus looks at the effects of steadily rising US interest rates, and the US dollar, on key South American economies—Argentina, Brazil, Venezuela—as well as other important emerging market economies like Turkey. How policies of business elites governing Argentina and Brazil wrecking their economies are about to worsen further, due to US monetary and Dollar policies. Argentina and Brazil currencies are now in freefall, provoking capital flight, domestic inflation, and the latest ‘Made in USA’ recession. Meanwhile, Japan now enters another recession with GDP contracting -0.6% in first quarter and Europe-Germany now slowing dramatically as well (mere 0.3% growth rates latest quarter), as rising oil prices will push the US economy further toward recession in 2019 (as they did in 2008). Rasmus reviews the latest in US trade events re. China, NAFTA, Europe. How US bankers have taken control US trade negotiations with China, not Trump. Why NAFTA deal will be another Korean-like ‘softball’ deal. And how the US may ‘redefine away’ the trade deficit to make it appear something has changed with US trade deficit, when it hasn’t.
The show leads with updates on latest evidence of stock buybacks in the US, which will exceed $800b in 2018, with another $500b in dividend payouts. Discussion then follows on the growing share of junk and near junk (triple BBB rated) US corporate bonds issued in the US. How BBB bonds may play a role in the collapse of retail stores like Sears, JC Penneys, etc. in the next recession (in 2019). Rasmus then discusses the latest on the state of US trade negotiations with NAFTA and China. (Read Dr. Rasmus’ latest article, ‘Is the US-China Trade War for Real?’, on his blog, or PRN website, Counterpunch, Znet, Global Research and other public blogs for the real reasons behind the US-China trade conflict). What’s happening in Argentina and EM economies in general is the focus of the rest of the show. How US interest rate hikes and a rising US dollar are now precipitating another crisis in Argentina and emerging market economies in general. How Argentina’s current descent into deep recession, following Brazil’s, is the direct consequence of US interest rate and US dollar policies and the runup in dollarized debt issued by those economies in recent years. How the three largest economies of South America—Brazil, Argentina, Venezuela—are being wrecked by US policies, causing the collapse of their domestic currencies, capital flight, rate hikes, import inflation, and rapid contraction of their domestic economies.
Jack Rasmus comments on today’s Jobs Report, explaining why little wage growth is occurring, and on the Federal Reserve Bank’s plans for interest rate hikes in 2018-19. The Fed is raising rates not because of a 2% inflation target, but to finance $1 trillion annual budget deficits for the next decade and a total Federal debt of more than $33 trillion by 2027 due largely to Trump’s $5t tax cuts. Early evidence of where the tax windfall for business and investors is going is discussed: stock buybacks-dividend payouts now exceeding last year’s $1 total by as much as 50% for 2018. Apple’s record $100 billion buyback plan. Also, tax windfall funneling into Mergers & Acquisitions activity, now running at $1.7 trillion and double the pace of 2016-17. Third, US investors’ tax windfall being diverted to Japan and Europe stock markets, projected at $1.2 trillion now compared to $350 billion a year earlier. Another report discussed is Deutsche Bank’s warning that US government debt levels have doubled the probability of a US debt crisis. And a final report that foreign investors are slowing new purchases of their US Treasury $6.3 trillion debt significantly: Foreign held US debt has fallen from 55% in 2008 to 43% in 2017, and foreign buyers of current accelerating Fed auctions of Treasuries now constitute only 16% to the total.
The show debunks 1st quarter US GDP and official forecasts the US GDP will accelerate in rest of 2018. Rasmus explains how 1Q2018 capital spending is really flat, consumer spending is growing at a mere 1.1%, how autos and housing will continue to weaken in 2018, as will consumer spending in general as oil prices, healthcare costs, and rent inflation take an ever-bigger bite out of real consumption throughout 2018. Rasmus then critiques central banks—US, UK, and Europe—current interest rate policies: US Fed rate hikes aren’t justified by US core PCE inflation rate of 1.5%. Thus the Fed’s 2% price target is phony and rate hikes are driven by the Fed’s need to finance annual $1 trillion US deficits and debt due to Trump tax cuts and defense spending acceleration. The UK and EU economies are now slowing rapidly, and their banks will not hike rates. Rasmus explains how US rates and dollar will soon lead to a new crisis in emerging market economies as well, especially Latin America. The show concludes with the latest on the Trump phony ‘dual track’ trade war with allies, and a prediction of a settlement in the current US-China trade dispute before it becomes real ‘trade war’. How US domestic politics are what’s really behind the US-China trade skirmish. (For a detailed analysis of the US-China trade dispute, check out Rasmus’s blog posting, on April 29, of his soon to be published in Beijing article, “Trump’s DejaVu China Trade War”. Go to jackrasmus.com).
Dr. Rasmus discusses emerging evidence of how the Trump tax cuts are being spent by investors and businesses. As predicted, the 10%-31% bottom line profits windfall from the tax cuts are going to stock buybacks, dividend payouts and mergers & acquisitions. Buybacks and dividends are projected to reach $1.3 trillion in 2018, higher than the previous 7 yr. average of $1 trillion a year. M&A activity will increase from $1.2 trillion in 2017 to $2.0 trillion. Evidence that the much-hyped global synchronous recovery last year is also now dissipating is discussed. Forecasts by JPM and Citi banks are a slowing growth in the global economy in 2018 compared to 2017. Europe, Asian, and commodities data confirm. Weak spots in US economy—retail sales, auto sales, jobs, Fed rate hikes, yield curve, and US household debt ($2.5 trillion rise in 3 yrs) and wages—are considered as well. The IMF recent report that the global economy debt pile is $164 trillion, and 225% of global GDP, now concentrated in nonfinancial corporations and governments. Rasmus explains how the ‘dual track’ Trump trade war (real for China and phony for US allies) will further impact US deficits, debt, and the economy.
Dr. Rasmus discusses House Speaker, Paul Ryan’s, announcement this past week to resign and what’s behind it. It’s not about spending more time with his kids or giving up on Trump. What it means for conservative plans to attach social security, medicare, education and other social programs to pay for the annual $1 trillion budget deficits for the next ten years that are baked into the US budget now due to $5 trillion tax cuts and $100 billion a year increases in US war spending. What’s behind Trump’s retreats this past week on trade: signaling US intent to rejoin the TPP (Trans Pacific Partnership free trade treaty), going slow on NAFTA revisions, and raising the stakes with China. Trump’s phony trade war with everyone except China. Why tariffs and goods trade deficit is not the US real objective in a trade war with China. The domestic politics basis of Trump’s phony trade war is discussed
