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ON AUGUST 29, DR. JACK RASMUS WAS INTERVIEWED BY THE MEDIA SOURCE, ‘VESTNIK KAVKAZA’, ON THE TOPIC OF SANCTIONS ON RUSSIA BY THE WEST AND RUSSIA’S COUNTER-SANCTIONS IN RESPONSE. THE FOLLOWING IS A TRANSCRIPT OF THE INTERVIEW.

Dr. Jack Rasmus, Professor of Political Economy at St. Marys College, Moraga, CA, told Vestnik Kavkaza how the Western sanctions affect Russia and Russian counter-sanctions affect the West.

The President of the U.S. and the Chancellor of Germany believe that the U.S. and the EU should consider the possibility of launching additional sanctions against Russia due to the situation in Ukraine, according to the press service of the White House. Dr. Jack Rasmus, Professor of Political Economy at St. Marys College, Moraga, CA, told Vestnik Kavkaza how the Western sanctions affect Russia and Russian counter-sanctions affect the West.

Question- Do you believe that sanctions against Russia are successful?

Rasmus- I would not say against Russia, not the entire Russian economy. They have been very focused in the West on select companies: Russian state banks, military technology and so forth. Although they, EU and US, have announced the possibility of focusing Western sanctions on select industries, that is not really been implemented yet. And, even if they do, it will take some time to determine whether even industry-wide sanctions have been successful or not. If a deal, of course, occurs on Ukraine before the winter, which I believe it will, between the West, Western Europe and Russia, then the sanctions to date will have had very little effect. If you look at Russia’s stock market, sanctions on Russia so far have not had that much of an impact. So, clearly, if the stock market is an indicator, the effect has not been that great. And to the extent that Russia’s GDP and currency have softened in recent months, that weakness has not been any more than other emerging markets economies and their currencies and GDPs weakening due to effects of other events that have been occurring globally. So, in general I would say that the sanctions have not been that successful to date, because they are not really designed in the first place to create too big of an impact. Further sanctions will have little long term effect, if a deal is concluded on the Ukraine crisis. In the meantime, certain key sectors of the Russian economy, like oil and energy, where Exxon is pushing ahead in Russia with investments and so forth, have not been targeted or affected at all. In other words, I don’t see any real negative long term impact of sanctions on the Russian economy.

Question- Could they be counter effective? What the United States and the European Union risk confronting Russia economically in such way?

Rasmus- I think Western Europe has far more significant risks than the US from sanctions. The US economic relationships with Russia are not that significant given the size of the US economy, but, I think, Europe has some very big risk, particularly Eastern EU economies, central Europe and Germany. They have a big risk, because what we see now, obviously, is that the economy in the Eurozone is flat to negative, and, I think, they might have entered the third recession in as many years. The sanctions have played some role in this European economic decline. I would not say it is the whole cause the EU and Eurozone weakening, but the West’s sanctions have played some role in Europe’s current economic slide. Estimates are that German exports to Russia have declined by about 15 to 20 percent, and that is not counting German exports to Ukraine that have also collapsed. And, I think, for the year we probably are going to look at a decline in German exports to Russia in excess of 30 percent. Even though Germany’s exports to Russia account to only 3 percent of its total exports, it is still a significant impact on German exports and the German economy at a time when the German economy is already weakening significantly, as is France, Italy and other economies. I think, the negative impact on Western Europe has been and will be far more than on the US. The impact of sanctions is measurable not just in terms of quantitative export-import actual flows, but in money flows, investment opportunities, and in the psychological effect on investment in East Europe and Germany, which is more difficult to measure but is real nonetheless. The crisis in the Ukraine and the sanctions has also had a psychological effect on German and the East European business, which has to be considered in this total picture of the total impact of sanctions. So, Western Europe is really beginning to feel the bite from sanctions, and that is why, I believe, there will be a settlement in the Ukraine crisis before winter, when gas prices from Russian imports rise and the impact becomes even more severe.

Question- What are counter measures or leverages that Russia can use to apply pressure on the European Union or even the US?

Rasmus- The ability to put pressure on the European Union, of course, is reflected in the counter sanctions that Russia has introduced, which are still mostly agricultural and therefore still limited as well. Russia is going slow on expanding its counter sanctions just as Europeans are going slow on sanctions on Russia. The US wants to step it up, the US wants to put even more pressure, but the Europeans, especially Germany and Merkel, are trying to walk a tightrope between resisting pressure for more sanctions and yet acknowledging the US pressure and agreeing to some sanctions, but the Europeans so far have been very cleverly minimizing the sanctions. So, what can Russia do and what is Russia doing in turn is mostly focusing on relatively minor sanctions, targeting the Western European agricultural area, which is, by the way, probably having more impact on the Eastern European countries than it is on Germany and Western Europe. And then, of course, there is the potential targeting of Western banks by Russia counter sanctions. Eurozone banks are still kind of fragile; particularly those banks exposed to Ukraine and Russia, most of which are Austrian, in the Netherlands and in Italy. Russia can put more pressure on the banking side, perhaps, just as sanctions by the West have been imposed on selective Russian banks. Other Russian counter sanctions could be forthcoming in areas of autos, shipbuilding, airline overflights, aerospace joint projects with the US and the West. So, Russia still has some sanctions it can impose just as the Europeans have, but they both want to hold their fire so far, to see what kind of an outcome can be arranged in the Ukraine, which is also a disaster for Western Europe. As I have predicted earlier this year, last March, the Ukrainian economy was going to pretty much collapse this year, which it has. At least 50 billion [dollar] bailout will be needed for the Ukraine economy, not the 18 billion offered by the IMF so far. The IMF is not going to come up with more money and the US will not. The burden therefore is going to be on the Western Europe to continue to bailout the Ukraine, and they cannot afford it right now with their own economies in trouble. So, I think there will be a settlement by winter (I have always predicted that) on the Ukraine crisis, which will pretty much eliminate sanctions on both sides, and you will see the sanctions disappear quickly, and the pressure on the Russian economy will be even less longer term, even though it is not that significant now.

Question- Do you think that the sanctions can have a positive effect on the Russian economy? Maybe the Russians will buy more Russian made products, invest more into their own economy, develop closer ties with the former Soviet republics? For example, Azerbaijan has already said it is ready to provide the necessary agricultural produce to Russian markets.

Rasmus- Yes, I think, it has already begun to happen. Obviously, the huge energy deal with China is one example. I think that Russia has already begun to diversify its economy and its economic relations from dependency to the extent it is now on Western Europe. And you will see more of an effort to establish deeper free trade, common market kind of relationships with the countries to its south and east, and to China. Sanctions will also force Russia to trade more with BRICS and emerging markets, and even borrow more from those markets. It will stimulate Russian industry and technology, as Russia reorients its defense sector out of the Ukraine; and, of course, we have the BRICS bank that has just been developed, which will assist Russian economic diversification. I think, you are going to see more trading, as well, with the Yuan and other currencies by Russia. So, all of that are examples of how Russia will turn and is turning already to develop economic relationships with the rest of the world more, and reducing its dependency on Europe. The US policy in the long-term is very short-sighted economically. The US, obviously, exacerbated the situation in the Ukraine early last year for political reasons. I think, there is going to be longer term economic costs to the Europeans, and some to the US, as a result of that short-sighted political strategy. I think you will see Russia diversify more, and develop more common market, and more trade relations with other areas, more banking relationships, more currency relationships. In the long-term it is probably good for the Russian economy – any diversification is always good.

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Alternative Visions Radio Show– Union Veterans Speak On What To Do About ‘Labor’s Strategic Impasse’ – 08/30/14

This archived hour long roundtable interview is available for download at either:

http://alternativevisions.podbean.com

http://prn.fm/alternative-visions-union-veterans-speak-labors-strategic-impasse-083014/

SHOW ANNOUNCEMENT:
Jack Rasmus invites back union veteran guests he has interviewed over the past year for a roundtable discussion of ‘what can be done’ by union labor to break out of its strategic impasse of organizing-membership decline, collective bargaining, and political action. Jack provides a brief recap of Unions’ decline in membership, bargaining ineffectiveness, and political results in recent decades, and then turns the discussion over to union veterans to share their views’ on specifics on what should be done to reverse the strategic dead end for union labor today. Jack welcomes union veterans, with more than four decades of experience each: Steve Early, of the Communications Workers of America, Greg Shotwell of the United Autoworkers, and Jerry Gordon, of the United Food & Commercial Workers. They join together in a lively discussion of how union labor might resurrect itself, starting at the grass roots, by engaging in new ways of organizing, of bargaining, and new initiatives in independent political action.

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Access and download this 57 minute presentation at:

http://www.kyklosproductions.com/talks.html

SHOW ANNOUNCEMENT:

Dr. Jack Rasmus reviews his predictions for the US and global economy made June 2013 in Z magazine, and makes new predictions for the US and global economy for the coming 12 months. Review of 2013-14 include forecasts for global economic crisis recessions, US Federal Reserve policy, US tax legislation, housing recovery, manufacturing, jobs and wages, Europe’s bank and debt crises, China GDP, global trade, Japan’s Abenomics policy introduction, the convergence of capitalist policy worldwide, and the Ukraine economy (made in early 2013). For the coming year: Federal Reserve interest rates, US tax cuts, US stock and junk bond markets, Europe’s Central Bank and QE, Euro banking instability, wage compression and austerity policy in Europe, China stimulus, currency and challenges to the USA, the future of Japan’s Abenomics and instability in Emerging Market economies

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Japan’s 4th Recession?

THE FOLLOWING IS AN EXCERPT FROM DR. JACK RASMUS’S JUST PUBLISHED ARTICLE, ”On the Edge of Another Global Recession”

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

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THE FOLLOWING IS AN EXCERPT FROM DR. RASMUS’S JUST PUBLISHED ARTICLE in teleSUR, ‘On the Edge of Another Global Recession?’

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

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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.

SHOW ANNOUNCEMENT:

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.

LISTEN TO THE ARCHIVED SHOW at:

http://prn.fm/alternative-visions-dissecting-us-2nd-quarter-2014-gdp-080914/

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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:

http://prn.fm/alternative-visions-europes-continuing-epic-recession-052414/

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.

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