Source: teleSUR English

Japan’s economic and policy trajectory since the economic crash of 2008-09 has been similar to the Eurozone’s, prompting commentaries in the global business press about the growing similarities between the European and Japanese economies in recent years.

Both Europe and Japan have experienced repeated short and shallow recoveries since 2009, followed by similar repeated descents into recessions as well. With the latest bout of Eurozone decline, some commentators have begun to ask if Europe is succumbing to the “Japanese malaise” of repeated recessions and weak, halting recoveries.

But Japan’s economic performance since 2009 has been worse than even Europe’s and its second quarter 2014 collapse much worse than the Eurozone’s.

Like the Eurozone, data last week suggest Japan may have also entered another recession in the 2nd quarter 2014. Last week economic data revealed Japan’s roughly $6 trillion annual GDP contracted by a huge -6.8% in the 2nd quarter 2014. Should Japan also now slip into recession, it would represent its 4th such economic contraction since 2008. After collapsing by more than 15% in 2008-09, Japan experienced a second recession in 2010-11, followed by a third in 2012. 2014-15 may represent its fourth.

Like Europe, Japan has attempted to recover from its three prior recessions since 2008 by means of a massive money injection by its central bank, the Bank of Japan. In early 2013 its central bank began injecting $530 billion a year into its private banking system—a policy nearly identical to that followed by the US central bank, the Federal Reserve, which since 2009 has provided more than $4 trillion of QE and another $10 trillion in near zero rate loans to US banks and shadow banks. Also like the US Federal Reserve, Japan’s massive money injection has also been driven primarily by a direct bond buying QE program.

Today a year after introducing its version of QE, the economic effects have been no different from similar monetary policies followed by the European Central Bank’s $1.5 trillion LTRO and the US Federal Reserve’s $4 trillion QE: Japan’s QE has stimulated financial asset markets but has done little for the real economy.

Japan’s real economy is about the same size today as it was a year ago, when the Bank of Japan’s money injection began to hit the economy. On the other hand, its QE led money injection has resulted in a nearly 100% rise in Japan’s stock markets and a consequent escalation of corporate profits and investor incomes—just as had US central bank policies since 2009 and just as will a Eurozone QE when it most likely comes later this year or in early 2015.

The massive money injection by Japan’s central bank has produced the same effect as the massive liquidity injections by the US, UK and ECB central banks: despite the central bank money, Japan’s private banks in 2013 continued to lend only to large Japanese transnational companies, mostly for investment offshore, and not to the general economy. As a result, Japan’s level of domestic investment, wages, and consumer spending have not recovered despite the Bank of Japan’s policy. In the 2nd quarter consumer spending fell off a cliff, declining by an unprecedented nearly 20%.

Japan’s longer term consumption slowdown can be traced—as a similar consumption slowdown can be in the USA and in Europe—to a continuing decline in Japanese workers’ real wages and earnings over the last decade. Japan workers’ wages have declined every year except one since 2004. And that decline has accelerated every year since 2010, falling 3% in 2013 and a projected more than 4% further fall for 2014.

While some argue Japan’s second quarter 2014 GDP decline of -6.8% was due to a 3% increase in sales taxes introduced in the quarter, Japan’s household consumption rates were already declining to nearly zero by end of year 2013. The April sales tax hike just pushed consumption spending over the cliff. A similar scenario has occurred with Japan’s domestic business investment, with business inventories actually contracting in 2013 despite the massive money injection.

Both the core economies of the Eurozone and Japan’s economy are therefore poised on the precipice of a potential major contraction. Together that’s $15 to $20 trillion of global GDP that may potentially contract even further than 2nd quarter data already indicate.

That kind of magnitude and contraction cannot but significantly impact the rest of the global economy in a serious way. Most affected will no doubt be other emerging markets, already slowing in many cases to less than 1% GDP growth rates, that are dependent on money capital flows from Europe and Japan and on exports sales to those economies. Nor will the other two major nodes of the global economy—China and the USA—remain unaffected.

Dr. Jack Rasmus, August 18, 2014


Source: teleSUR

Last week, initial government released data for the 2nd Quarter 2014 showed the Eurozone economy coming to a complete halt. Germany’s economy—which represents a third of the Eurozone’s total GDP—declined by 0.2%, the first such contraction since 2012. So did Italy’s, while France recorded no growth at all for a second consecutive quarter.

The zero growth for the combined 17 Eurozone economies follows a near stagnation 0.2% growth in January-March. The January-June trend therefore strongly suggests a recession is now emerging in the core European economies—the third such in the past five years.

Europe’s first recession occurred in 2008-09 as it collapsed with the rest of the global economy. It then experienced a historically weak 0.5% economic recovery in 2009-10, only to fall back into another second recession in the subsequent 18 months that wiped out the prior meager 0.5% gains. 2013-14 thereafter saw an even weaker recovery of only 0.2%, and for an even shorter period, which is now being reversed once again.
The Eurozone arguably has never really recovered from the recession of 2008-09. The short, shallow recoveries of 0.5% and 0.2%, which have become progressively shorter and weaker, do not represent a true recovery. Europe has simply been “bouncing along the bottom” economically now for five years—stagnant at best and slipping in and out of recession.

An important new trend in the Eurozone’s now emerging 3rd recession is that the economic contraction is driven by the Eurozone’s key economic engines—Germany, France, and Italy—and not just its weaker economies on its southern and eastern periphery, as was the case in Europe’s second recession of 2010-12.

Together the three economies—Germany, France, Japan—represent approximately $8.8 trillion in GDP terms. That’s at least the size of China’s economy and much bigger than Japan’s. The three core economies of the Eurozone are thus key to growth and recovery of the global economy in general, as well as to emerging markets in particular since 56% of Germany’s nearly $4 trillion economy is derived from exports. So go German exports, goes Germany; and so goes Germany, goes the Eurozone and, in turn, many of its emerging market trading partners. And Germany’s export driven economy is facing significant further headwinds in the near term.

The USA engineered coup in the Ukraine earlier this past February, and the subsequent USA driven sanctions on Russia ever since, have already begun to have a significant additional impact on Germany’s exports, as well as other Eurozone and EU economies like Italy, Finland, Austria, and East Europe.

With little to lose economically itself from imposing more severe sanctions on Russia, in contrast the Eurozone and EU economies which have much to lose, the USA has continued to push hard for more Russia sanctions from Europe, the effects of which are now beginning to take a toll on the already weak Eurozone economy. The impact of those sanctions on the Eurozone, and Germany-Italy in particular, will no doubt continue to grow in the coming months, thus further ensuring that Europe slides into its 3rd recession.

The impact of sanctions on the Eurozone economy is measurable not just in terms of quantifiable goods (exports-imports) and money capital flows between Europe and Russia, but also in the more difficult to quantify psychological effects on investment as a result of the continuing crisis in the Ukraine and sanctions.

Political crises have economic effects, even though difficult to trace directly to GDP and economic growth. But psychological forces in business and consumer confidence trends are a factor nonetheless, and are now also playing a role pushing the Eurozone into recession.
Apart from the trade and psychological effects of sanctions, demands on Europe in the near future to provide further bailouts for the Ukraine’s now collapsing economy will contribute still further to the recessionary slide of the big three Eurozone economies.

The Ukraine’s currency has fallen 60% in 2014 and much of the IMF and EU $18 billion deal last May has already been earmarked for $6 billion payments to Euro banks for previous bailouts. More of that $18 billion will be used by Ukraine’s central bank to finance exports and to offset its currency decline. Little therefore remains of the IMF’s initial $18 billion bailout package to stimulate Ukraine’s real economy. As this writer predicted last March, the Ukraine economy will contract 10-15% in 2014 and will need an eventual $50 billion in bailout funding from the west. But with the IMF not likely to provide a further bailout anytime soon, and the USA providing only token financial assistance, the Europeans will be faced with providing further Ukraine bailouts.

The continuing Ukraine crisis and the burden of providing still more bailout will further depress economic sentiment in the Eurozone’s core economies.
In addition to the preceding negative forces, there’s the Eurozone’s own more fundamental problems which are deep and remain still unresolved: i.e. little or no improvement in the region’s record level of unemployment; the lack of real wage growth to stimulate consumption; private banks continuing to hoard money and not lend; and business investment and confidence drying up.

On the policy front the Eurozone still appears committed, nevertheless, to a monetary policy that has not only failed in Europe, but in the USA and Japan as well: i.e. still more liquidity injections by the European Central Bank (ECB) into the private banking system, accompanied by a policy of austerity on the fiscal side that has been modified only slightly less severe in recent years.

The ECB’s monetary policy to date has been to inject more than $1.5 trillion of liquidity into Euro banks, primarily by means of its LTRO program—a program in some ways similar to quantitative easing (QE) by central banks in the UK, USA, and Japan. This primary reliance on monetary policy as the road to recovery thus echoes the USA Federal Reserve, Bank of England, and Bank of Japan’s similar policies since 2009. All the central banks of the advanced economies (AEs) have introduced near zero interest rates, while implementing additional ‘quantitative easing’ (QE) direct central bank purchases of investors’ bad assets at subsidized prices.

But in all cases, none of the AE central bank monetary injections have had much positive effect on AE real economies. The banks have mostly hoarded the injections, not lent investment capital in any substantial amounts to businesses that would produce jobs, and instead have redirected the liquidity to financial speculation that has fed new financial asset bubbles worldwide. In other words, whether QE-LTRO or zero rates, the effect has been the same: financial asset inflation on the one hand, and, on the other, tepid or stagnant real growth, a drift toward deflation in real goods and services, little or no job creation, and repeated bouts of real economic stagnation and/or recessions .

More liquidity injections by the ECB in whatever form, including a Euro-QE, will therefore not halt the Eurozone’s slide toward its third recession, nor its steady drift toward price deflation in the real economy. At the same time, the real and psychological effects of sanctions and the Ukraine crisis, the problems in bank lending, weak job creation and wage growth, and flattening business and consumer confidence, will continue to deepen the Eurozone’s economic contraction and drift toward deflation in 2014.

Dr. Jack Rasmus
copyright 2014

Economic reports of the past week show Europe, including Germany, descending again into recession; Japan’s GDP collapsing by 6.7% in the 2nd quarter; and China adding a 3rd stimulus in as many years to prevent slowdown.

Nonetheless, the hype in US press continues that US ‘recovery’ is happening.

For an explanation why not, and why the US economy will remain on its stop-go economic trajectory and barely grow 1% in 2014, listen to Dr. Jack Rasmus’s radio show of August 9 below.


Dissecting the US 2nd Quarter 2014 GDP – 08/09/14

Dr. Jack Rasmus takes a detailed look behind the numbers for the advance release last week of the US 2nd Quarter GDP. Is the economy really growing at a 4% annual rate, after having fallen -2.9% in the first quarter 2014? How much of the US GDP numbers are due to statistical redefinitions and revisions converging this summer? And how much is due to ‘real’ trends? Why is the US GDP now becoming so volatile, with big swings quarter to quarter—which nonetheless average out to a subpar historical 1.8% or so growth rate long term?

Dr. Rasmus looks at the main determining categories of US GDP over the past 12 months, in addition to the most recent 2nd quarter 2014. He concludes big swings in business inventories, consumer credit based spending (especially for auto securitized subprime loans) and volatile ups and downs in government spending and net exports lay behind the continuing ‘stop-go’ of the US economy. Big swings in business inventory investment, in anticipation of consumer spending recovery that proves quickly unsustainable, accounts for much of the GDP volatility over the past year—not the weather. Explanations why inventory investment, US exports, household durable goods consumption, and local government spending that occurred in the 2nd quarter will not be sustained going forward are offered.



News this past week has revealed the Eurozone’s economy has descended officially once again into recession, the third recession since 2008, and this time with former northern europe economies, Germany-France-Italy, at the forefront of the decline.

While last May 2014 the official hype was that Europe had definitively recovered from recession, Dr. Jack Rasmus presented a contrarian view that it in fact hadn’t and was headed for a further slowdown.

Listen to Dr. Rasmus’s hour radio show of this past June 24 on the Europe economy, and his predictions at that time of the region’s imminent economic 3rd recession, which is now become apparent.

Access the June 24 radio show on Europe at:


Tune in to Dr. Rasmus’s upcoming Alternative Visions show on Saturday, August 23, at 1pm eastern time, as he reviews his economic predictions issued last summer, 2013, and provides provides new predictions for 2014-15.

Over the past year I have been interviewing union veterans on my Alternative Visions radio show—all of whom have decades of union experience going back to the 1970s and before. These veterans have seen the transformation of union power in the USA, from a time when it existed to its recent rapid decline.

Yours truly is also, to some extent, of their generation and experience. And like the union veterans I’ve been interviewing, I have been thinking intensely the past decade about why the deterioration of union influence in the USA since the 1970s has occurred and what might be done to stop and reverse it.

To sum up their—and my own—views on the subject, I have written a series of extended articles for the new Latin American media outlet, teleSUR, which has just launched an English language edition of its blog. Attached here to this email are the first two of a projected 4-part articles series on the topic ‘Are American Unions at a Strategic Impasse?’

Parts 1 and 2 of the series attached are subtitled ‘Dimensions of the Crisis’ and ‘Three Contemporary Examples’. Part 3 to soon follow on the teleSUR blog is subtitled ‘American Union Veterans Speak Out’. It will summarize verbatim some of the more important comments of union guests I’ve interviewed on my weekly radio show, Alternative Visions, over the past year since last November 2013. (for archives of the interviews, go to http://prn.fm/shows/alternative-visions/ , starting with the September 19, 2013 show with union veterans, Steve Early of the CWA and Carl Finamore of the Machinists, and our discussion of last year’s AFL-CIO union convention. Show archives are also available on http://www.podbean.alternativevisions.com )

In Part 4, the final piece in the series, I will share with you my own views, developing over the past decade, of what changes Union Labor in the USA needs to undertake in order to stem the current tide of declining union membership, effectiveness, and some ideas of what might be needed for US unions to restore their once significant level of economic and political influence in the US.

I certainly don’t have all the answers to the critical issue of the decline in Union power in the USA today. But it is hoped the series and comments by myself and others will start a much needed discussion among unionists AT THE LOCAL UNION LEVEL about what needs to change in union strategies (organizing, bargaining, industrial action, political action), if union labor in America is to avoid a virtual total destruction in the coming decade, which I fear is a not impossible outcome.

The first two parts of this extended essay are now available at the author’s website at:


For two recent articles, written for the new teleSUR English publication in South America, on the growing negative impacts on real economic growth and financial instability in Emerging Markets economies, read my latest entries on my website entitled:

‘Is the Center for the Global Economic Crisis Shifting to Emerging Market Economies?’ and ‘The U.S. Federal Reserve vs. Emerging Market Economies’.

Access the articles at:


Is the chronically stagnant US economic recovery since 2009 (predicted in my 2010 book, ‘Epic Recession: Prelude to Global Depression’), the result of insufficient income growth for most households—that is then necessary to stimulate consumption demand that, in turn would result in real investment that would create jobs? Or has the escalation of financial asset prices since 2009—itself the consequence of $10-$15 trillion of Fed and central bank liquidity injections— resulted in lower real investment in the US and thus the failure of job and income growth?

To restate more simply: does the lack of wage and income growth determine real asset investment; or are the expanding opportunities for more profitable financial asset speculative profits globally driving the decline of US real asset investment (and thus jobs, wages, and income growth)?

Which is the more primary causal relationship? If one believes lack of income is the primary cause of declining real investment today in the USA, then the solution is simply to raise wages and income of households that typically spend by whatever means—tax cuts, subsidies, etc. The problem is simply an insufficient level of income.

But what if, alternatively, it is not income that determines real investment, but rather the addiction of investors to financial asset speculation and investing that is the main determinant of slowing real asset investment?

If the latter is primary, then simply raising wages and incomes alone will not necessarily ensure real investment returning to historical levels in the US economy. That is, the determinants of real asset investment lay just not with inadequate income growth in the US, but with the expanding and more profitable financial investment opportunities in a 21st century finance capital world in which investors are increasingly addicted to financial asset speculation forms of investment.

This is a critical distinction that mainstream economists fail to understand (and some ‘left’ economists only partly understand). It is important because merely boosting wages and incomes of median and below households will not, by itself, generate sustained real investment and recovery in the US economy. That’s a Krugman-Reich-Stiglitz notion. It is also a classical ‘underconsumptionist’ argument that those who follow Marx should know Marx himself rejected unequivocally.

Sustained recovery requires direct investment, not just a rise in consumption income that hopefully might convince capitalists to again reinvest in the US (or not convince). So the problem is not merely a lack of income growth to stimulate investment. US capitalists are investing–just not in real asset investment and not in the US. They are investing in emerging markets, and even more so in financial asset markets globally (which are now more numerous, liquid, and available than ever before due to the creation of an unregulated global shadow banking system). That’s where the Fed’s $15 trillion money injection is going (some of which is also just being hoarded on balance sheets, of course).

The more fundamental problem is that finance capital has changed. Raising incomes of workers and middle class Americans will help recovery somewhat, but not all that much. It will not result in sustained economic recovery any longer. It is therefore not the main solution to the long term economic stagnation that the US has been experiencing since 2009. Capitalist profit opportunities are simply greater offshore in EMs, and in financial asset markets, than they are from making goods and services in the US, even if US workers were able to buy those real goods and services if they had more income.

Neither mainstream liberal economists, nor even many US Marxist economists, understand the differences, or the important mutual causal relationships between financial asset investment and real asset investment, which is key to understanding today’s long run global economic stagnation trends in the US, Europe, and Japan ‘heartland’ of the global capitalist economy.

To argue simply for wage and income growth as the solution to a chronic stagnant US economic recovery—as Krugman and colleagues do for example—is to assume that capitalist enterprise will redirect itself from more lucrative profit opportunities from financial speculation and in offshore markets, back to less profitable real production of goods and services in the US. They won’t to any significant extent, since rates of return in the latter are significantly less than in the former.

The only real solution to a sustained US recovery is for massive public government investment, that then subsequently creates income. Investment precedes income creation, it does not necessarily follow it any longer in a world of 2st century global finance capital. Just calling for income growth (via minimum wage hikes, more low pay contingent job creation, tax cuts, or whatever) will not necessarily result in a rise in US-based investment if Capitalists continue to shift to more profitable financial speculation offshore; public investment on a major scale must therefore occur prior to income growth in order to generate a sustained recovery.

Krugman and his neo-Keynesian colleagues don’t understand this essential error in their analysis. They simply believe all forms of consumer demand stimulation are the same. Only the aggregate amount matters. (which, by the way, Keynes himself did not maintain, so they aren’t even really Keynesians at all).

Neo-Marxists should beware of this idea that ‘simply raising wages and incomes is the solution to economic recovery’. They should understand that the financial bubbles being created again around the world are not a consequence of declining real asset investment but are a cause of it. They should beware of slipping into an argument of promoting dead-end underconsumptionism in its many variant forms.

In today’s world of 21st Century Global Finance Capital, don’t expect capitalists to invest in real production and thus jobs and income in the US economy as they did decades ago. They are too busy making greater profits offshore and in financial asset speculation, leveraging the trillions of dollars of free money and credit created for them by the Federal Reserve. If real investment in the US economy is ever to return, it will have to come via major public investment initiatives. And if not, expect chronic real economic stagnation to continue, as has been the case since 2010.

Dr. Jack Rasmus
Green Shadow Cabinet Federal Reserve Chair
July 26, 2014


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