Jack Rasmus provides updates on the continuing negative effects of the Eurozone QE announced last month, the Greek Debt-Troika negotiations over the past week, and details on last week’s announced IMF-Ukraine bailout #2. In the first half hour, Jack describes how the Eurozone QE is intensifying currency wars and forcing other Euro countries into introducing negative interest rates, which will have major negative economic effects. Then an update on how the Greeks are succeeding to push the Troika closer to their (Greek) bargaining position, to provide them bridge loans and renegotiate the debt based on an ending of austerity. In the second half of the hour, Jack provides details on the 2nd IMF bailout deal for Ukraine also just announced this past week. How the bailout package has risen from $17.1 last April 2014 now to $40 billion—now approaching Jack’s forecast last April that Ukraine would need a minimum of $50 billion. Jack’s 2014 forecast of a collapse of Ukraine’s GDP of 10%, of its currency, and other indicators are now also realized. The second IMF bailout will not stop the decline of the Ukraine economy either, Jack argues. The show concludes with an analysis of the ‘Grand Strategies’ of the USA, Germany-France, and Russia with regard to the Ukraine, the conflict over which has always been a proxy for a larger strategic fight between the USA and Russia, over the future of Europe it self and which way Europe will orient economically in the decades ahead.
‘Jack Rasmus provides a recount of negotiations between Greece’s Syriza party and new government with northern Euro bankers, the ECB, and Euro Commission in Brussels during the past week. What’s at stake for the Troika (ECB, IMF, and European Commission) in the current negotiations and why they are playing ‘hard ball’ during the first week of negotations. Greek president, Tsipras and Greek finance minister, Yani Varoufakis’, tours of European capitals last week and the outcome of their meetings is discussed. Tsipras’ modest successes talking to France and Italy politicians, Renzi and Holland. Varoufakis’ less than productive meetings with European Central Bank chair, Mario Draghi, on Feb. 4, and German finance minister, Wolfgang Schauebel on Feb. 5. Draghi’s refusal to continue providing ECB loans to Greek banks as a punishment for Greek refusal to simply extend the bailout program as is with austerity past Feb. 28. Schaubel’s refusal to agree to any changes. Syriza’s strategy: lift austerity first and discuss debt over next several months; Troika strategy: continue austerity first, agree tp extend bailout, and then discuss changes—maybe. Potential for a run on Greek private banks if Greece’s central bank runs out of money to lend its banks. That will mean Greek exit, and unleash many unknowns for Greece, the Euro and Eurozone future. (Read Dr. Rasmus latest published article on the topic on the PRN website). Next week: the ‘Dud’ (part 3 of ‘The Bomb, the Fuse, and the Dud’ series). What’s the Dud? Tune in and find out on Feb. 14’s show.
Jack Rasmus continues the three part series (last week: the ECB’s QE ‘Bomb’), this week focusing on last week’s election of Greece’s Syriza party, which has promised the Euro ‘Troika’ (IMF, ECB, European Commission-SFSF Fund) forgive at least a third of Greece current 317 billion Euro debt. How is it that Greece ended up with 317b of debt? Why is 270b of that (85%) in hands of the public entities, i.e. the Troika, and only 15% held by private investors? How did Germany, Holland, and northern Euro banks benefit the most from creating the debt? And why have they been insisting on continued austerity, and therefore depression, in Greece? Jack explains how the origins of Greece’s debt lie in policies that followed the creation of the Euro currency union in 1999 and how that union specifically benefited the northern Europe economies at the expense of Greece and the rest of the Eurozone periphery. The arrangements, Jack explains, constitute Eurozone’s version of Neoliberalism, a now failing caricature of the USA created global neoliberal policy answer to the crisis of the 1970s. The USA’s ‘twin deficits’ and global money capital circular flow neoliberal solution after 1980 was replicated in Europe on a smaller scale after 1999, but Eurozone neoliberalism began to fail after 2010, as Germany and northern Europe abandoned providing capital to Greece and the Eurozone periphery in favor of focusing on China and emerging markets after 2010. The residue left is unsustainable debt levels in Greece and elsewhere and the prospect of never ending austerity that ensures decades more of a debt driven depression in Greece. The current negotiating positions of the northern Troika and banks vs. Greece’s new Syriza government are explained, and possible scenarios in coming weeks. Meanwhile the ‘fuse’ is lite in Greece for the Euro economy, as a 10 billion euro payment comes due in 90 days. Which side will ‘blink’? How will the standoff be resolved? Listen this week’s show for some possibilities to come. (Next week, part 3: ‘the Dud’)
Jack Rasmus discusses yesterday’s big announcement of a massive $1.5 trillion Quantitative Easing (QE) money injection program by the European Central Bank, and its consequences for the Eurozone and global economy. After nearly $9 trillion in total QEs by US, UK, Japan and now the Eurozone, the global economy continues to slowly drift into recession and deflation. Claims by central banks and politicians that QEs are about growing the economy, lowering unemployment or raising inflation to a stable 2% are debunked as empirically false. QEs are about bailing out financial institutions and the new finance capital elite and then ballooning their balance sheets well beyond bailout as well. Jack explains the several flaws and consequences of QE: it doesn’t result in lending for real investment, leads to financial speculation and bubbles, accelerates incomes of super wealthy (via stock buybacks, dividend payouts, etc.), raises global private debt by business, reduces incomes of middle classes, sets off competitive devaluations and currency wars, leads to real goods deflation and financial asset market inflation (stocks, junk bonds, forex, etc.), and accelerates global income inequality trends. Jack explains the connections between QE and fiscal austerity policies. And represents a growing desperation by financial capital elites and their institutions to ensure growing incomes for themselves by artificial means (free money) and at the direct expense of incomes of the rest of society. The linkage of QE and ‘labor market reforms’ (attacks on wages) are noted.
(Next week’s show: Part 2 ‘the fuse’, the coming elections in Greece and ascendancy of the left party, Syriza. Will it mean the beginning of the end of neoliberalism and a fight back against QE, free money, and austerity?)
Jack Rasmus surveys the most critical trends today in the global economy that continue to reveal a fragile condition, reflective in recessions in Europe, Japan, Russia-Ukraine, and a growing number of emerging market economies as of year-end 2014. A short list of trends discussed include a long run slowdown in the rate of growth of ‘real’ investment globally; a drift toward deflation in goods and services prices; a sharp rise in private sector debt—especially corporate debt and in particular corporate junk bond debt; the continued expansion of shadow banks and their ultra high net worth finance capital elite who keep financial asset bubbles brewing worldwide by diverting investment from real goods and services and therefore real jobs, wages, and consumer income growth; a shift toward a greater proportion of part time and temp workers as share of the total work force; wage stagnation and continued rise in income inequality worldwide, as capital incomes continue to accelerate while wages stagnate. Jack also gives a preliminary analysis of the USA’s 3rd quarter 2014 reported 5% GDP rise, explaining how the surge was due to temporary factors that have already begun to disappear in 2015, ensuring the USA’s return to its 5 year long ‘stop-go’ scenario.
Jack Rasmus discusses China’s efforts since 2010 to tame its foreign ‘shadow banks’ that have been playing a central role in creating financial bubbles in its residential housing, local infrastructure, and (Yuan) currency markets in recent years. Jack explains how China--unlike the USA, Europe and Japan—rapidly recovered from the 2008-09 global crash and recession by introducing a 15% of GDP fiscal stimulus focused on direct government investment. China’s GDP quickly surged in the 10-14% range 2010-13, while the USA, Europe and Japan relied primarily on monetary policies plus fiscal austerity and their recoveries lagged. However, China’s 2009 stimulus measures also included massive monetary injections, both by China’s central bank and even more via liquidity in-flows as China opened its doors to western banking, including shadow banks. Shadow bank liquidity in particular flowed in local housing, construction markets and China’s currency markets, creating financial asset bubbles in all three. To check the growing bubbles, and to try to tame the shadow banks, China shifted policies in early 2013 to reduce direct government spending and to have its central bank retract money supply. The result was a slowing of China’s real economy in 2013. China reversed and followed later in 2013 with a mini-fiscal and monetary stimulus to try to restore growth, that did little for real growth but stimulated shadow banks and bubbles further. Similar policies in early 2014 did little to stimulate the real economy, but did tame residential housing and currency bubbles somewhat. China continues today to struggle to tame its shadow banks and bubbles while experiencing slower real growth. Since 2010 shadow banks have pumped more than 20 trillion Yuan--$3.5 trillion--into China. China today experiences the slowest growth in 24 years, a virtually flat manufacturing sector and a probable less than 7% GDP growth in 2015. Jack explains how China’s struggle with shadow banks, its global capitalist speculators, and the financial asset bubbles they create represents a major contraction in global capitalism in the 21st century, and a continuation of other economies’ similar, even less successful, efforts to tame shadow bankers and their financial bubbles in the 1980s, 1990s, in southern Europe since 2010, and currently in Argentina, Venezuela, and Ukraine.
Jack Rasmus dissects key provisions in the Republican Congress’s recently passed ‘Omnibus’ Appropriations bill earlier this month, that provides numerous big benefits to US Corporations while cutting deferred wages and pensions for US workers. Jack focuses on five key provisions of the Omnibus bill: return to banking deregulation and bank derivatives trading, continued business tax cuts, the gutting of the EPA and deals for the Coal and Agribusiness industries, US Defense Corps and new spending in middle east and Ukraine, and even more corporate money for politicians as the big freebies for business. In contrast, the Omnibus cuts workers’ defined benefit pensions in multiemployer plans, marking the beginning of a new general offensive by business and politicians to phase out employer negotiated pensions in the USA altogether. The USA Congress’s Omnibus bill represents, Jack argues, new forms of austerity for workers, focusing on deferred wage rollbacks (i.e. pensions), while more goodies continue to flow to corporate America. Jack concludes with a look at two other recently formed governments’ initiatives to accelerate austerity in their economies as well: the Ukraine’s newly formed government this past December, which is about to accelerate its austerity programs’ implementation, and Japan’s new Liberal Democratic Party government also elected in December, which is about to move to impose restructuring and ‘labor market reforms’ in the coming year. 2015 will not be a good year, Jack suggests, for workers as similar ‘restructuring’ of labor markets are scheduled for Europe, India, and elsewhere—but a continuing great year for business and investor incomes.
Jack Rasmus reviews the continuing collapse of global oil prices and its effect on the emerging recession in Russia, continuing economic stagnation in Europe, and the deepening Depression in the Ukraine economy. Rasmus discusses how the global oil price collapse may be entering a second phase soon, further impacting not only the major oil commodity producers (Russia, Venezuela, Nigeria, Norway, Mexico, etc.), but now, increasingly, the economies of other non-oil commodity producers (Brazil, Indonesia, India, Turkey, and others). Additional pressures appear to be building as well on global financial asset markets, especially US and European corporate junk bonds. How this is related to last week’s US Federal Reserve decision to put off raising US interest rates another 2-3 months, and the subsequent latest surge in the US stock market, is explained. Jack then discusses developments in the Russian economy as it clearly enters recession; the feedback effects of Russia’s recession on Germany and other eastern European economies; and the further feedback effects of both in turn on the deepening Depression in the Ukraine. Jack concludes with a detailed review of the negative effects of the IMF bailout on Ukraine, the recent installation of US and EU citizens as economics and finance ministers in Ukraine’s new government, Poroshenko and Yatsenyuk’s pleading for more aid from the west, and latest hard nose demands by the IMF and G7 for Ukraine to impose even more austerity on its people if it wants more loans in 2015.
Dr. Jack Rasmus discusses the current global oil price deflation that began in earnest last June and is now accelerating, driving global oil from a prior 2014 high of $115/barrel to a recent low of $59. Jack explains how the net effect on the global economy will likely prove to b significantly negative overall, and that the price decline could fall as low as $40/barrel in coming months. The impact on Emerging Market Economies, already seriously slowing or in recession, will also prove significant—causing their currencies to collapse even further and in turn generating capital flight, declining credit availability, slowing investment, rising inflation, and inability of emerging market businesses and governments to finance previous incurred debt. Oil price deflation will almost certainly push Europe and Japan into general deflation and further recession, and toward more QE money injections that will further generate asset price bubbles. Rasmus predicts China’s current economic slowdown will continue in turn as Europe, Japan and Emerging markets slow their purchases of China exports. The contrary popular USA notion that lower oil prices mean lower gasoline prices and therefore more spending by USA consumers and businesses is challenged. In conclusion, Jack discusses how oil deflation globally could set off another round of financial instability worldwide, and how it will likely mean the ‘shale gas/oil fracking’ boom in the USA will now stall and could potentially set off a ‘junk bond market’ crisis in the USA similar to the subprime market real estate bust of 2007-09. Will the global oil glut and deflation lead to another ‘Asian Meltdown’, this time even more geographically dispersed; and, in the USA, will it lead to another ‘oil patch’ crash that occurred in the US southwest in the 1980s—this time affecting North Dakota-Wyoming, Alaska, and Pennsylvania as well as Texas and the southwest? (Read Dr. Rasmus recent posting on the PRN website, ‘The Economic Consequences of Global Oil Deflation’, for further analyses).