Alternative Visions

Jack reviews the current condition of Japan’s economy, after 8 years of virtual perpetual recession despite record QE central bank injections, negative interest rates, and talk of helicopter money.  The Central Bank of Japan as harbinger of global capitalist central banks policy direction and innovation.  How central banks-bank of japan free money policies are not only no longer working, but are now having contrary negative effects on the global economy. Japan’s history of monetary policy first, plus austerity, since 1991 has doomed it to perpetual recessions—8 since 1991 and 5 since 2008. Japan as innovator of QE and negative rate policies. The results in creating trillions of non-performing bank loans (NPLs) and more than $13 trillion in negative bond rates since 2014 are reviewed. Growing NPLs and negative rates as indicators of failing capitalist monetary policies as investment slows, productivity declines, wages stagnate and real consumption falters worldwide. Why global economies are about to shift in 2017 to more fiscal infrastructure spending—but will do so ‘too little and too late’ to prevent recessions in 2017.

Jack Rasmus explains why all economic indicators for the US economy are ‘flashing red’ except for consumer spending, driven mostly by surging household debt again in credit cards, mortgages, auto loans and student loans. Meanwhile, 7 years of continued low interest rates created by the Federal Reserve (and other central banks) are creating a crisis in pensions, insurance, and sectors of banking.  Jack explains why global central banks continue the massive free money injections for investors and why it is now destabilizing the global economy.  The UK central bank’s just announced new QE2 program is described and critiqued, as the European Central Bank continues to expand its QE, and the Bank of Japan does the same. Why Global capitalists are beginning to rethink the reliance on free money via QEs and reconsider some form of fiscal stimulus, which Jack predicts is coming in 2017 as interest rates rise.  What form will the new fiscal stimulus take? One discussed is ‘helicopter money’—i.e. QE for Main St. Jack concludes with explaining helicopter money and his recent proposal to US Green party presidential candidate, Jill Stein, to use it to expunge most of the US $1.3 trillion student debt.

$2 trillion in Euro-wide NPLs.  How global central bank monetary policies of more and more QE, negative interest rates, and now talk of ‘helicopter money’ to follow are wrecking the global capitalist financial system. Bank earnings, pension funds, insurance companies, junk bond markets are all flashing ‘red’ in the wake of central bank zero and negative interest rates. Meanwhile oil prices have begun a new ‘leg down’ in price. China continues to struggle with its ‘rotating financial bubbles’ in stocks, wealth management and property markets. And Italian-Europe banks grow increasingly fragile. Given this scenario, Jack predicts a coming inverting of policy in 2017, as the US economy slips into recession, the UK and Italian banks pull Europe into recession, and Japan continues its contraction.  Interest rates will be raised by central banks to prevent a financial crisis. That means a further slowing in the real economy—requiring fiscal austerity policies to give way to fiscal stimulus to offset the effect of interest rate rises by the Fed and other central banks.

Jack examines in detail Trump’s acceptance speech and its non-traditional Republican themes criticizing Free Trade, US national debt, NAFTA, China, offshoring, taxes, military spending-NATO, and related topics. Trade issues are paramount but represent pandering to working class discontent over the loss of jobs, wage income decline, and chronic US economic insecurity since 2000.  Trump’s specific proposals for trade are dissected, including his claims to ‘tear up’ NAFTA, impose 35%-45% tariffs on Mexico and China, stop China currency manipulation, offshoring, anti-immigration wall, etc.—all of which represent pandering to working class discontent.  Trumponomics =  ‘Law and Order First’ economic recovery plan. How Trump is cleverly targeting disaffected working class voters in key swing states of Pennsylvania, Ohio, Michigan, Wisconsin, Virginia, North Carolina, and Florida as key to an electoral victory in November. Jack predicts the election outcome will depend on who, Trump or Clinton, is able to turn in those states the white working class, un- and under-employed 20-something youth, Hispanic, and independents voting blocs in those key states.  Who has the bigger base, and who (Trump or Hillary) can turn out more of that base in these key states will determine the outcome. Trump has the advantage currently in turnout, Jack concludes as Hispanics and disaffected youth may sit home during the election.  Trump could win. Much will depend on the TV debates.

A centerpiece of Trump’s campaign, that is gaining support for him among white working class voters in key swing states like Pennsylvania and Ohio, is his attack on free trade treaties from NAFTA to TPP. Today’s show examines the conditions behind the current stagnation of global trade the past 18 months, growing wage stagnation and income inequality in the US, and increasing US voters’ associating of their loss of quality jobs and declining wages with free trade.  Dr. Rasmus briefly reviews policies in China, Japan, Europe, and the slowing of world trade. How US economic elites—from the Business Roundtable and others— are becoming terrified of Trump’s successful manipulation of voter discontent with free trade. The elements of Trump’s position on trade are discussed, including ‘tearing up’ treaties, imposing tariffs on Mexico and China, charges of China as currency manipulator, tax policy incentives encouraging job offshoring, and US visa policies. Jack critiques Trump’s positions and concludes that Trump—like Obama before and Hillary now—is simply pandering to the discontent and will reverse his promises on trade if elected. Pandering to the trade issue, however, may just provide Trump enough votes to win key states’ electoral majorities.

Jack Rasmus takes an in-depth look at crashing financial assets in UK property funds and growing insolvent Italian banking system. Are these early signs of post-Brexit emerging financial instability? UK property funds are refusing investors their cash, Italian government is planning more ‘bail ins’ of depositors money to bail out its banks, now $400 billion in the red, UK and Euro currencies are falling, and financial asset prices are under growing pressure everywhere in Europe. Will (and how) might it spill over to the US economy? How political instability in Europe from ‘Brexit’ and spreading ‘Euroscepticism’ are being accelerated by growing financial and economic instability in the UK and Europe.  Jack concludes with another take and critique of just released US jobs reports, showing how the two US jobs reports show dramatic different picture, how private job creation is being offset by public job losses, and why it’s impossible that involuntary part time jobs declined last month by 587,000. US jobs stats are increasingly unreliable, he concludes.

As Jack Rasmus predicted last week, the initial scenario for the Brexit

vote is not an immediately global financial crash. The threat is more

intermediate than short term. The analogy is not Brexit as a ‘Lehman

Brothers’ event, the US bank collapse that ushered in the financial

crash of 2008-09, but more similar to a ‘Bear Sterns’ event, the US bank

that collapsed in the US early in 2008.  Brexit is a warning shot fired

across the bow of the global capitalist economy, not the precipitating

event for another crash.  Jack explains how global investors are waiting

to see what happens next before dropping the other shoe. Jack reviews

the likely intermediate effects of Brexit on global markets—currencies,

bond rates, stocks, real investment, deflation, productivity, bank

lending, consumption, and GDP.  The relative effects of Brexit on

economic regions are also covered: the UK, EU, US, China, EMEs.

Recession in the UK will occur first, Jack explains. Europe will

stagnate further. Japan’s recession will deepen, the US will enter

recession in 2017 soon after the elections.  China eventually will have

to devaluate its currency with severe global consequences—i.e. the

effects of Brexit on financial markets and real economies is just

beginning. Political instability in the UK, in both conservative and

labor parties is reviewed, with splits deepening in both. What Brexit

also means for growing political instability for France, Spain,

Netherlands, and Italy; how Brexit is penetrating the US election

campaigns, as US elites and corporate push back on both candidates. Jack

warns the weak spots of global capital today are Italy’s banks and

Japan, where the most likely next ‘Bear Stearns’ event will emerge.

Longer term, the UK currency and London as global financial center are

finished as global players.

 Jack discusses the consequences and likely developments from the historic vote yesterday for the UK to leave the European Union.  The deep origins of the Brexit vote are first discussed, including rising discontent with neoliberal policies of free trade by working classes, small businesses, and local producers everywhere, the overlay of fiscal austerity policies compressing incomes, and the almost total reliance in advanced economies on central bank monetary policies that boost financial asset incomes and corporate profits (and capital gains of investors and the rich) since 2009.  How UK prime minister Cameron struck a ‘Faustian’ bargain in 2015 to win the election and now had to repay the ‘devil’ with the Brexit vote he thought he could control, but did not.  The consequences of the vote for UK politics in the near term, and for forces—political and economic—behind the potential break up of the EU itself. Political party realignments underway everywhere, including EU and US. Implications for US November elections.  Jack concludes with an assessment and economic predictions for the UK and EU economies, for currency volatility worldwide, stock and bond markets, real estate prices, and global commodity prices.  Impact on the US dollar, interest rates, FED policies, and US recession for 2017. Severe results for emerging markets, especially Latin America (markets, capital flight, recessions) and for China’s Yuan eventual currency devaluation.  (Read Jack’s latest published article on the PRN website and at jackrasmus.com)

Jack reviews in detail the upcoming UK vote to leave the European Union.

Cameron’s ‘faustian’ bargain is coming. What will the ‘devil’ demand?

The origins of the vote and likely consequences of a Brexit are

considered, for the UK, for the EU and for the US and rest of the global

economy.  The likely effects on the real economy, as well as more

volatility for global currencies, more central bank money injections,

more negative interest rates, slowing real investment and declining

productivity.  Brexit as a proxy for discontent over the conditions in

the UK economy, immigration effects, cultural and sovereignty issues. Brexit as a reflection of discontent with supra-national free trade

agreements and cross-nation capitalist integration efforts by global

financial and economic elites. Jack compares Greece efforts to reform

the EU to current UK efforts to do the same and predicts UK will also

fail.  An alternative scenario post-Brexit: nothing happens for another

two years under Article 50 of the EU treaty.

Jack discusses the global bond market conditions today, many times the

size of the world’s stock markets and far more important.  Bond guru,

Bill Gross, this week forewarned of a ‘supernova’ explosion coming in

global bond markets as a consequence of the $10 trillion (and growing)

in government bond negative interest rates (not counting corporate

bonds).  Is there a ‘bubble’ in global bonds? Will it bust? When and

Where?  Jack agrees with Gross and explains why there is—located so far

in Europe and Japan but spreading to the US and taking off in corporate

bonds as well. How the bond bubble is the consequence of central banks’

(US, UK, Europe, Japan) monetary policies since 2008. How tens of

trillions of dollars in money injections by the central banks—in

quantitative easing and zero rate programs—have done little for

stimulating real investment, jobs, incomes and consumption—and instead

have pumped up global stock and other financial markets. The bond bubble

as the latest consequence. Jack predicts why central banks’ NIRP

policies fail to boost real investment and real growth, but are already

having negative consequences for retirees’ and workers’ wage incomes,

growing financial instability, and the slowing real economy.  Central

banks’ monetary policies have failed miserably. What’s next?  Talk of

‘helicopter money’, ‘guaranteed income’, and bank ‘bail ins’ after the

next bust.  Jack warns of likely major global stock market correction

coming soon—in the wake of likely Brexit, NIRP, global oil prices again

falling, and US economic slowdown and predicts a US recession for 2017.

NEXT WEEK: ‘Will There Be a BREXIT?’