In the first half hour of the show, Dr. Rasmus provides updates on the evolving status of topics in the global economy: Brexit and what happens next; China-US trade negotiations beginning in Washington, the slowing US economy and growing US financial fragility; China’s ‘whack-a-mole’ economic policy, Europe’s slowing economy, ECB policy, and growing problems at large banks like Deutschebank, BNP Paribas, Credit Suisse, UBS, and others; and India’s banks and shadow banks growing fragility. The second half of the show is dedicated to discussing how US financial imperial measures are being used to bring about regime change. How US policy works to destroy the Venezuelan currency in order to raise import costs and create shortages of key medicine, food and other commodities, how the US policy has been to deny Venezuela access to dollars by seizing assets (CITGO), requiring US corporations to expatriate dollars, prevent global banks lending to Venezuela, using sanctions to deny Venezuela access to markets to which to sell its oil, denying the country access to the international payments (SWIFT) network, driving defaults on loans by Venezuelan companies, getting companies (Citi), foreign central banks (bank of England) and governments to impound Venezuelan gold, indicting and seizing Venezuelan citizens and businesses assets, threatening sanctions on governments if they sell or buy goods from Venezuela, etc. (Check out Dr. Rasmus’s blog, jackrasmus.com, next week for a print version of how US financial imperialism is working to destroy the Venezuelan economy).
Dr. Rasmus reviews his prior prediction that Trump will declare a ‘National Emergency’ to get funds to build his wall. What it means for the US Constitution and the continuing drift toward the decline of US democracy. (How the Dems were complicit for decades enabling the declaration and what they won’t now do). Rasmus applauds New Yorkers for driving out Amazon. What big tech has done to San Francisco and the bay area in California. The danger of ‘OpenAI’ (Elon Musk’s company) and its machine learning-deep learning ‘fake news’ creation potential. Rasmus addresses the US retail sales recent numbers, a fall of -1.2%, the biggest since 2009 and what it means for the US economy in 2019. Also, the Fed now clearly has ‘thrown in the towel’ (as have other central banks) leaving monetary policy dead in the water for the next recession. Krugman now agrees with Rasmus re. recession. As recession looms, US Treasury faced with an additional $12 trillion in bonds it must sell (as China, Russia and others reduce purchases and buy gold). Recession now imminent in Eurozone, Germany, Italy, UK, and Japan. The latest Brexit vote, China trade negotiations, and US strategy in Venezuela.
As the main topic of the show, Dr. Rasmus discusses the letter to the US Treasury by the Treasury Bond Advisory Committee (TBAC) this past week, warning that $12 trillion more in US Treasury bond sales will be needed over the next decade in order to finance rising US government debt. The $12T more per the TBAC is about equal to the net increase in federal debt (from current $21T to $33T) that Rasmus has been predicting will occur by 2028 due to Trump tax cuts, rising defense spending, and the next recession around the corner—with Interest payments on that debt alone equaling $900 billion a year, per the CBO. In a related topic, Rasmus discusses the latest data that show that Fortune 500 corporations’ stock buybacks plus dividend payouts will reach $1.4 trillion for 2018—up from $1.1 trillion in 2017 and from $500 billion in 2009. How the two trends of escalating government debt and accelerating $trillion a year plus buybacks-dividends are connected. The latest on Trump-Powell confrontation over rate hikes and coming breakdown of Russia-Saudi agreement on oil production are also addressed.
Dr. Rasmus and guest, Alan Benjamin, discuss the latest efforts of Trump administration to engineer a regime change in Venezuela. Rasmus explains how the US employs financial imperialism to destabilize regimes, using the US dollar, sanctions, freezing of assets, cutting off access to trade and markets, denial of loans by US and world banks, and other measures as a prelude to creating an economic crisis in the target country to foster domestic political unrest and opposition forces to topple existing governments. Rasmus explains how this has been developing in Venezuela, and why it has recently intensified over the past six months. Guest Alan Benjamin describes recent political developments in Venezuela and the growing potential for military intervention there using US proxy governments, Brazil and Colombia. Efforts by Europe and Mexico to mediate. Possible responses by Russia and China. And solidarity movements emerging in the US to avoid a US proxy war against Venezuela. (go to jackrasmus.com blog for 2016 article: “How the US Destabilizes Argentina, Brazil, & Venezuela). For emerging US solidarity movements, check outwww.USlaboragainstwar.org)
As the Davos WEF gathering occurs this week, big capitalists (Ray Dalio, Tudor Jones, Seth Klarman), central bankers, IMF-World Bank, Bank research houses are increasing raising ‘red flags’ warning of the slowing global economy amidst growing financial market instabilities. Rasmus quotes some of their warnings. The show addresses as well what’s going on in Venezuela as the US raises its pressure on the Maduro regime and its favorite South American Trump admirer, Bolsonaro, president of Brazil declares he’s ready to send troops to Venezuela. What’s behind US escalation against Venezuela. Other topics include evidence of growing impact of US government shutdown on the economy, the latest efforts to scuttle the pending US-China trade talks for January 30, and predictions regarding Brexit and US-China trade. Why recession is increasingly likely in US and global economy by late 2019. (Next week: Updates on US policy re. Venezuela and the initial round of US-China trade negotiations in Washington).
Dr. Rasmus updates analysis of key economic developments of the past week: the latest events around the US-China trade negotiations and trade war, the estimated effects of the US government shutdown after four weeks with no end in sight, the questionable reliability of government wage statistics in Japan and the US; warnings rising about the stability of Europe banks and their non-performing bank loans; and the Fed’s last rate hike coming in March and how it compares to Fed rate levels that precipitated US recessions in 1990, 2001, 2007. Rasmus discusses at length the continuing internal fight among US factions on the US trade team as negotiations get serious with China over trade. How China has increased its offer just prior to high level meetings set for January 30 in Washington by offering to buy $1 trillion more US goods, allow 51% ownership in China, and pass legislation on January 29 to restrict tech transfer. How US Treasury Secretary, Minuchin, has countered with offers to remove all US tariffs. How China hawks in US will try to scuttle a deal again before March 1 deadlines. Why US and China will eventually come to an agreement, Rasmus predicts, due to rapidly slowing economies of both.
Dr. Rasmus continues discussion of last week’s topic of the causal relationships between debt and financial bubbles, financial asset crashes, and recessions. How defaults (i.e. failure to pay principal and interest on debt as prices and cash flow collapse) play an integrative role in the debt-deflation dynamic as well. Rasmus explains how, when financial markets start contracting, defaults begin to play a role—further exacerbating the downward spiral of all three: debt, deflation, and further defaults. Recapping the main points of last week’s show, emerging potential defaults in the system are reviewed: Sears, JC Penney, and now Macys in the retail sector; General Electric and Ford: UK retailers: EU banks (Deutsche, Commerz, Danske, Italian, Greek banks) and others. Weak points in the US and global real economy (housing, manufacturing, business inventory overbuild), and in the global economy (Germany, France, Italy PMIs), UK, Australia, China slowdown, commodity producing emerging markets, Japan, So. Korea. US stock market’s worst December since 1931. US Junk bond & BBB bonds, leveraged loans, hedge funds, EU banks nonperforming loans. Why central bank monetary policy subsidization of the system failed to generate sustained real growth 2010-16 and why fiscal policy (Trump tax cuts and defense spending) is now having a similar temporary and insufficient effect. The fiction of central bank independence.
Dr. Rasmus explains the role of debt in generating financial asset price bubbles in 21st century capitalism, and globally since 2008-09 last crisis. How debt may play a positive role in generating real investment or how credit and debt may divert into financial asset markets instead, creating bubbles and eventual financial asset markets deflation. The latter has been increasingly the case in 21st century global capitalism, creating a growing instability in the system. Where has the debt been going since 2008-09? Households, corporations, and governments. ‘Bad’ debt (fueling financial markets) now exceeds ‘good’ debt (financing real investment in making things, creating jobs, raising incomes). Rasmus explains why there’s an emerging global manufacturing recession underway, as well as declining construction, and how it’s spilling over to tech sector and later will as well to services, creating a recession by late 2019 or early 2020 in the US and globally. How debt acceleration has been responsible for the record levels of stock markets, bonds, foreign exchange speculation, oil and commodities speculation, property prices, etc. from 2010 to 2017. Why those financial asset markets are now all deflating. What will be the causal consequences for the global manufacturing and construction recessions emerging now as well.
Dr. Rasmus reviews the major economic developments of the past year, 2018, and offers his predictions for 2019. Major topics of 2018 review include: Trump tax cuts, Trump trade war, Fed rate hikes. Obamacare dismantling, US $trillion dollar annual deficits emerge, Emerging Market Economies’ currency crises and recessions, global oil price deflation, UK Brexit, European central bank and Bank of Japan policy shifts, the slowing global economy, and growing financial fragility (i.e. in US junk bonds & leveraged loans, EU banks, non-performing bank loans & stock markets worldwide, China WMPs & entrusted loans, etc.). Areas of potential political ‘tail risks’ that may impact the economy negatively in 2019 are noted. Rasmus then makes 10 economic predictions for 2019: US recession late 2019; US-China trade deal by mid-year; oil prices continue to fall to $30; Fed halts rate hikes; Europe and Japan central banks continue QE policies, UK Brexit talks drag on past deadline; 1st quarter US GDP and job numbers weaken dramatically; US stock markets continue to decline by at least 10% more; emerging market economies crisis abates as Fed rate hikes halt & dollar appreciation slows; and China’s GDP slows below 6%. Rasmus’ political predictions 2019: Trump fires Mueller; budget deficits > $1t lead to new attacks on social security, medicare, and education; US Supreme Court shoots down gerrymandering reform; Democrats’ Beto O’Rourke (the white Obama) runs for president along with Warren, Biden, and other newcomers; Pelosi uses House committees to go after Trump finances & Dems in US House do not initiate Trump impeachment.
Europe’s economy is stagnating again. Dr. Rasmus reviews the 3 key elements of its growth strategy: (1) free money from its central bank, (2) internal devaluations (aka labor market ‘reforms’) to drive down wage costs to make EU exports more competitive, and (3) fiscal austerity. Rasmus explains how all three are now breaking down as Europe’s GDP recently stagnates at 0.2% for 3rd quarter 2018 reveals and as economic and political problems promise to intensify in 2019 as the global economy slows: mass street protests in France, populist challenges to Euro austerity rules in Italy, nationalist and separatist movements multiplying, problems with Euro banks (Deutschebank, Italian banks, Credit Suisse, Greek banks, etc.), the European central bank’s just announced suspension of QE bond buying, and the ‘hard Brexit’ looming—all represent the unraveling of Europe’s economic recovery strategy, making it the ‘sick man’ of the global economy as the world (and US economy) slows heading in 2019. Before the discussion, Rasmus provides an update and review of topics of recent weeks, including the prospect of Fed rate hikes, US deficit and debt trends, global oil prices, and the latest developments in the US-China trade war occurring the past week.
