Alternative Visions

Alternative Visions - US &Global Stock Markets Plunge—What’s Next?

Today’s show focuses on the past week’s turmoil and decline in US and global stocks (Japan, EME, China, Europe), as Fed rate hikes and the ‘wall of money’ tsunami provided to investors by the Fed and Congress since 2008 now begins to recede. Dr. Rasmus explains why US stock and financial markets accelerated to record levels between 2009-2018 (i.e. Fed $5T plus QE free money, 6  years of near zero interest rates, $1T year in corporate bond issuance, another $1T a year in corporate stock buybacks and dividend payouts, a tripling of corporate profits, $15T in tax cuts for businesses and investors from Bush to Trump—have all converged driving up stock prices. Now investors realize, except for Trump tax cut subsidy to profits (20% this year), all the other ‘drivers’ of stock prices will decline in 2019 and after. Rasmus explains further how structural changes in stock markets (ETFs, passive investing, dark pools, algo trading, etc.) have exacerbated the US stock run-up, but will now accelerate the stock declines as well. Other related discussion in the show focuses on the IMF bailouts of Argentina, Pakistan and IMF’s coming funding crisis, Italy’s new government’s break from EU austerity rules, and latest developments in Trump’s US-China trade war.

Alternative Visions - Global Economic Instability Rising + Trump’s NAFTA 2.o

 With the US Fed rate hikes accelerating, and US and global bond selloff accelerating this past week, Dr. Rasmus looks at signs of growing financial instability in the US and abroad. Bond interest rates accelerating and more Fed rate hikes coming. The impact intensifying again on emerging market economies. Stock markets and recessions deepening. Italian bonds and banks (+ Euro, Greek, Turkey, India banks). Signs of corporate default problems rising (India’s IL&FS, GE, Deutsche bank, etc.). US hedge funds closing shop. Junk bond ‘zombie’ companies’ problems rolling over debt as rates rise. Pension funds. Corporate ETFs, Argentina and IMF, US deficits and debt (including $900 billion in interest on US debt prediction by CBO). Global financial asset prices beginning to turn and decline. Rasmus next discusses the phony trade agreements with Mexico and Canada. The coming intensifying trade war with China. The mysterious China ‘microchip’ affair (the new ‘yellow cake’?) as pretext for conflict with China. And while preoccupied with Kavanaugh affair, US NATO ambassador threatens to send US missiles to ‘take out’ Russian missile bases, while US threatens to attack Russian air bases in Syria. (For more on topics, go to jackrasmus.com blog).

Alternative Visions - China-US Trade War: Two Steps Forward, One Step Back

Dr. Rasmus analyzes in depth the past week’s further trade tariffs announced by Trump against China ($200b) and China’s response in kind ($60b). Big  retreats in both cases in terms of tariff rates and composition (tariff exemptions)  show that real trade war not yet begun but getting closer. US investors and stock markets agree, and surge. Trump objective in latest moves: bring China back to bargaining table before US elections. Trump reduces tariff rate, from prior 25% to 10%; China also reduces, from 25% to 10% and 5%. Plus both sides exempt key products: US cuts 300 from prior list, including Apple, tech and car industries; China exempts or reduces rate on US agriculture and consumer goods (toys) for upcoming holidays. Some interesting facts re. China imports to US: 90% of $529 billion from US and foreign corporations’ and foreign-Chinese joint ventures producing in China and importing to US. (Apple and mobile phones = $40billion of the $529b. All US tech corps= $90 billion. US car makers and minerals tens of billions more).  Updates on Turkey, Argentina and other emerging markets, and financial markets that are growing more fragile. Global weak spots: Emerging markets, Italy, China stocks, and, in 2019 the UK if ‘hard Brexit’, now appearing more likely. Rasmus describes the ‘wall of money’ now driving US stock markets to historical highs, including $1.5 trillion in 2018 stock buybacks and dividend payouts.

Alternative Visions - What’s Behind Trump’s Invitation to China to Renew Trade Talks

This week Trump invited China to return to talk about trade, as he again threatened $200 billion more tariff implementation (and raised prospect of another $267 billion). The show discusses what’s behind the invitation to China. Growing pressure from big business and bankers to Trump imposing more tariffs and precipitating a true trade war with China. Is Trump’s move just to reduce the heat from business? Is he preparing the g round for actual further tariff implementation? Was the invitation made by Mnuchin, not Trump, who is now firmly behind the military-industrial-intelligence faction on China trade (Lighthizer-Navarro-Bolton). The show then discusses Turkey’s recent hike in interest rates to 24% and the growing crisis among emerging market economies as currencies continue to collapse. How contagion occurs across currencies, stock markets, bond markets. Rasmus revisits the Lehman Brothers collapse of Sept. 15, 2008 and the role of Treasury Secretary, Henry Paulson, in engineering the collapse to benefit his corporate alma mater, Goldman Sachs, that made billions off collecting CDS contracts it wrote betting Lehman would collapse. How bankers ‘eat their own’—and in 2008 with the help of the US government Fed and Treasury. What’s different 2018. Will there be a Trump ‘October Surprise’ general trade deal announced?

Alternative Visions - Lehman Brothers 2008 Crash & Emerging Markets 2018 Crises Compared

Lehman Brothers 2008 Crash & Emerging Markets 2018 Crises Compared

Dr. Rasmus explains the financial crash of 2008, from the collapse of Bear Stearns investment bank to the Lehman Brothers collapse of September that set off the general financial crisis. Are we seeing something similar beginning in Emerging Market Economies like Argentina, Turkey, So. Africa, Brazil, Indonesia, India perhaps?  Rasmus explains the 2008 crisis was not simply a subprime mortgage crash, but was a contagion across credit markets enabled by financial derivatives securities created at the time.  How contagion was propagated and accelerated across financial markets and institutions in 2008 is explained; How a similar contagion effect may be emerging across economies like Argentina, Turkey and others in 2018. Rasmus explains contagion channels: currency to currency; currency to stock markets; stocks to stocks; stock to bond markets and how contagion processes work is poorly understood by mainstream economists today. Why understanding financial crises must distinguish between fundamental, enabling, and precipitating causes. How the Fed and the US Treasury politics also played a key role in allowing the 2008 crisis in bailing out Bear Stearns in March and then allowing Lehman to collapse in September. Who benefited from the 2008 bail out.

Alternative Visions - Argentina Crises Deepens + US-Mexico Phony Trade Deal - 08.31.18

Argentina’s currency collapses by more than 50% and central bank raises domestic interest rates to 60%. Inflation raging more than 30%, GPD collapsing more than 6%. IMF lends most in history, $50 billion, to try to stem the crisis. Big austerity measures coming. Turkey LIRA currency falls another 5% (to 40-45%). Is this just isolated events, or harbingers of a growing and spreading global emerging markets crisis that will reverberate to Europe, US, and elsewhere? Rasmus explains how these events are ‘made in America’ and Trump fiscal and monetary policies. The potential contagion effects of global currency instability—and the relationship to Government and Corporate bond debt—are discussed.  Second half of the show reviews the US-Mexican trade deal (and Canada soon) and how it represents further Trump’s phony trade war with allies. Trump suspends trade war with Europe and quietly also exempts steel and aluminum tariffs worldwide. (Next week: Labor day 2018 and the truth about jobs & wages and ‘Indicators of America’s Broader Social Crisis’)

Alternative Visions - Is Another Financial Crisis Imminent—Debating Baker & the New York Times - 08.24.18

Dr. Rasmus joins the debate between progressive economist, Dean Baker, and his critique of NY Times columnist Cohan, on whether the US bond market is on the cusp of a ‘2007-like Mortgage’ bust. Rasmus agrees with Baker that bond debt magnitudes are not alone the issue. What matters as well is the ability to finance the debt (i.e. pay the principal and interest as it comes due). The level of debt by itself is not the issue. The ability to service it via cash flow and other terms and conditions involved in repayment are the key. Rasmus disagrees with Baker, however, with his narrow focus on non-financial corporate bond debt only—a small piece of the total corporate debt escalation since 2008—and Baker’s narrow view of the 2008-09 crash as a subprime mortgage crisis. It was a broader financial derivatives driven crisis primarily, set off by the subprimes. Rasmus provides a historical review of the crisis from Bear Stearns collapse through the Lehman brothers, AIG, and 2009 Fed bailout of the banks. Shady self-serving deals by JP Chase and Goldman Sachs also played a key role, he argues. Rasmus argues that Baker doesn’t understand the difference between a liquidity crisis and an insolvency crisis, and has no account of how capitalist financial systems are prone to contagion effects more than ever today. The show concludes with a brief update on Turkey and EMEs contagion, the central banks meeting at Jackson Hole, WY this week, and the farce that was this week’s US-China trade discussions.

Alternative Visions - Ideology in Economics II + Updates on Turkey Crisis & US-China Trade Negotiations

 The first half of today’s show elaborates further on last week’s show topic: ‘What is ideology in Mainstream Economics’ and how it works.  Today the focus is on two examples of ideology and favorite theories of mainstream econ—Laffer curves and Phillips curves. Rasmus explains ideology as manipulation of language to misrepresent reality, facts, and original ideas. Ideology as conscious, purposeful, intentional Mis-representation, using language manipulation techniques like insertion, deletion, conversion, inversion, substitution, reversal of cause-effect, de-temporization, universalization, etc.  How these techniques are used with Laffer and Phillips curves to justify tax cutting for businesses and investors (Laffer) and central bank interest rate policy (Phillips) subsidizing bankers at the expense of household savers.  Today’s show concludes with quick updates on latest developments in the Turkey currency crisis and its contagion connections to Europe banks and other EMEs; the US-China trade discussions about to renew; Europe’s slowing growth; and the accelerating US budget deficits (now predicted to add $769 billion more to the US deficit in just the last six months of 2018 alone).

Alternative Visions - Turkey’s Currency Crisis + Ideology in Mainstream Economics-How It Works - 08.10.18

Rasmus describes what’s going on in Turkey this week, as its currency collapses threatening to drag down Italian Banks and other emerging market economies. How US Fed and Trump policy are behind the Turkish and emerging markets’ economic crises, now deepening. EME economies that loaded up on dollarized debt  globally are the ones collapsing fastest. How global speculators and Trump-US political objectives are involved. Rasmus reviews the equally rapid cooling off of the US housing market and rising rents driving US inflation. A review of the rising bankruptcies for US seniors, age 65-74, and the conditions behind the 200% increase in their bankruptcy filings since 2013.  Rasmus concludes with a discussion of  his view of Ideology in Mainstream economics and how language is manipulated to produce nonsense conclusions (like business tax cuts create jobs, free trade benefits everyone, income inequality is due to one’s lack of productivity, central banks are independent, markets are always efficient, and other false propositions). (For a verbatim print transcript of this show, and last week’s show on ‘Trump as Neoliberalism 2.0, got to Rasmus’s blog at jackrasmus.com).

Alternative Visions - Trump’s High Risk Neoliberal 2.0 Restoration - 08.03.18

Dr. Rasmus provides updates to Trump trade, tax, and Fed monetary interest rate policies, explaining how they are integrated responses designed to resurrect and restore neoliberal policy in a new more virulent, aggressive form after the failure of Obama to do so. How trillions of dollars in Trump’s tax cuts and war spending are producing annual trillion dollar budget deficits and adding $12 trillion more to the US national debt in the next decade. Trump’s recent announcement of more tax cuts coming before November plus another $85 billion to war spending will exacerbate deficits further. How Trump trade policy integrates with fiscal-monetary policies. Rasmus updates latest Trump trade actions illustrate a phony trade war with allies: trade war of words with Europe suspended, a deal with Mexico imminent, but positions hardening with US-China. Risks of China trade war morphing into a global currency war, and its consequences. Contradictions between Trump trade-fiscal-monetary policies emerging. Global central banks’ responses to Trump-Fed policies. (For a print analysis of how trade war with China may morph into a global currency war, see Dr. Rasmus’ blog, jackrasmus.com).