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Whereas my feature articles and public presentations provide a view of my longer term economic analysis, and my blog entries intermediate term, those interested in my very short term reflections on the US and global economy may find my twitter account remarks of interest. The following are my twitter entries for the month of March, 2014 (join me on twitter for future remarks, available on this blog’s sidebar).

MY TWEETS FOR MARCH 2014:

#China So goes German economy, so goes Europe! But so goes China economy, so goes Germany. Will China slowdown mean Eurozone stagnation?

#QE As US ‘tapers’, is global QE dead? No. QE2 in Japan inevitable + new Eurozone banking union & deflation=coming to Europe as well-in 2015

#Germany While Obama-US worry re. German-Russia trade now at $100 bil., China visits Berlin to expand German-China trade already at $200bil.

#Ukraine Read my analysis of details of IMF-Ukraine package terms at my blog at http://jackrasmus.com

#Ukraine Is Obama-Putin deal in the making? No NATO in Ukraine(yet); no invasion of eastern Ukraine(for now); keep fascists out of new Govt

For my analysis of today’s 3-27 IMF Deal on the Ukraine read my ‘Ukraine’s IMF Deal Means Greece-Like Depression’ at http://jackrasmus.com

US housing starts (investment) falls 3rd consecutive month + new home sales flat or falling for five months =more US real investment decline

US capital investment spending drops -1.3%, vs. consensus forecast of 0.5%, more indication of slowing global investment and future growth.

Eurozone QE is now inevitable, as German Central Banker, Wiedmann, signals OK if drift toward deflation continues (also inevitable).

Rumor of China new stimulus-more infrastructure spending & money injection. Same larger package didn’t work ’13, why should it work in 2014?

Emerging markets betting on yet another China stimulus to offset its slowing economy. Will it come? 60-40 says ‘no’.

China manufacturing declines again, for sixth consecutive month. Eurozone continues to choke on Ukraine crisis. Emerging markets churning.

#Ukraine. My ‘Alternative Visions’ radio shows of 3-22 and 3-15 on Ukraine economy are archived for download at http://www.alternativevisions.podbean.com

#Ukraine. For more on analysis of Ukraine economic crisis, listen to my weekly ‘Alternative Visions’ radio show at PRN.FM
#Ukraine economy.

For my in-depth analyses of Ukraine economic crisis, see my ‘Who Benefits, Who Pays?’ at website http://www.kyklosproductions.com

History will show Obama biggest foreign policy blunder:let US Neocons drive US policy & US lend support to proto-fascist led coup in Ukraine

Growing possibility that Ukraine crisis, if continues, will push Eurozone into its ‘third dip’ recession by late 2014. Odds = 50-50.

Euro to rise as money flows into currency from China’s central bank,from emerging market capital flight, & EU businesses move to sidelines

Eurozone negatives growing–Ukraine crisis worsening, Euro rising, Draghi refusing to intro QE, and China, Germany’s biggest export, slowing

Is US heading for faster ‘disinflation’ (or deflation later?). Producer prices fall 0.2% in Feb. and rise only 0.9% for year.

#ChinaEconomy. Global markets plummeting today on China econ news. Want to know why I predicted it weeks ago? Go to http://www.alternativevisions.podbean.com .

#Ukraine Big Italian Bank, Unicredit, posts record losses and lays off thousands. Unicredit among biggest EU banks with exposure toUkraine

Breaking news: CIA charged by Senate with spying on Congress and secretely deleting 800 pp. of Congressional documents from Senate computers

#ukraine. Deep causes behind Ukraine crisis-USA nervous Germany/EU growing gas/oil ties to Russia. USA wants to export its gas to EU instead

#Ukraine crisis will turn violent, stopping fragile EU recovery in its tracks. ECB (aka German central bankers) won’t intro QE
US ’13 GDP growth based on false inventory surge now waning.

Credit based US consumption not sustainable. Rising gas/food prices=further hit
Latest Japan GDP growth comes in below forecasts by government and experts.

More evidence of slowing global economy.
Confirming my prediction China’s slowing economy: Feb. -18% record fall in China exports. See my 3-1-14 radio show http://alternativevisions.podbean.com/

Re US Economy, when economists have no real explanation (and politicians want to hide the truth), they always turn to ‘Weather Metaphors’

As Japan real economic growth slows (now 1%), watch for second round of QE2 (deja vu the Fed circa 2010-11 anyone?)

As Eurozone drift to deflation continues (assured with coming Ukraine bailout and Russia sanctions), the ECB will introduce version of QE

US business press now raising idea of a China ‘Bear Stearns’ moment, as defaults loom in wake of debt and asset bubbles

Ukraine foreign exchange reserves being depleted $4b per week. Only $12b left. Will EU and US ‘backfill’, or will currency collapse before

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ALTERNATIVE VISIONS RADIO SHOW, April 5, 2014
Progressive Radio Network, NY

“Alternative Visions Radio Show host, Dr. Jack Rasmus, and guest discuss the buildup toward a coup being prepared by US and its business-right wing friends in Venezuela today. Jack’s guest is longtime union activist, Alan Benjamin, who works in the International Labor Office in Geneva, Switzerland, with access to information globally on the Venezuela situation. Benjamin provides an eye-witness view of contemporary events in Venezuela, based on his frequent direct contact with unionists on the ground in Venezuela in recent weeks and days. Jack and Alan discuss the current relationship of political forces today in Venezuela, including the various alignments of classes there, political parties, union organizations, students, US sponsored and funded NGOs, small business v. large businesses, small farmers and peasants, and splits within the military. Benjamin explains the history of US coup attempts in Venezuela and Latin America in recent decades and parallels with recent events in the Ukraine coup. Who is behind the recent killings in the streets? What are the splits within the anti government right wing forces, as well as within the government itself? What are some of the USA’s current various plans (‘A, B, and C’) to destabilize Venezuela along multiple fronts? These and other related topics are addressed—in this ‘fact-based’ exploration of what’s happening in Venezuela today.

Alan Benjamin is a long time member of the Office & Professional Employees Union in the U.S. and its delegate for a number of years to the San Francisco Central Labor Council, AFLCIO. He is a member of the coordinating committee of the ‘Labor Fightback Network’ in the USA, and has been involved in numerous undocumented US workers’ organizations defending US immigrant workers rights, as well as active in organizations defending US students from government education spending cutbacks.”

This show is available at:

http://prn.fm/category/archives/alternative-visions/

and at:

http://www.alternativevisions.podbean.com

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Alternative Visions – US Health Care Costs Again Rising–Not Slowing – 3/29/14

This hour-long interview and show is accessible at:

http://prn.fm/category/archives/alternative-visions/

SHOW ANNOUNCEMENT:

“Dr Jack Rasmus welcomes as his guest, Tom Moore, a nationally known expert on health care costs with 30 years experience in medical cost analysis in government and as a consultant, to discuss rising health insurance premiums and costs today in the US. Jack and Tom discuss why health care premiums and deductibles are again on the rise, and projected to escalate at double digit annual rates further in 2015 under Obamacare. Dr. Rasmus notes the sharp contradiction between national consumer polls and surveys that show health care insurance premiums and deductibles rising again at double digit levels vs. government and Obama administration reports that claim total healthcare spending in the US is slowing. So what is it? Are personal out of pocket costs rising and about to escalate even more—or are the government reports of total healthcare spending slowing correct? Are health insurance companies, that have become big finance companies expanding worldwide, about to rip off the US public again with double digit further premium and deductible hikes once Obamacare is implemented? What can you expect in coming months. Jack and Tom discuss the details and the real data.’”

Guest Tom Moore, Jr. is the co-founder of Community Campaigns for Quality Care and serves as its Board Chair and Chief Financial Officer. He brings over 30 years’ experience in health policy and program management, having held major federal and state government positions including the Director of California Department of Social Welfare, Director of the Office of Legislation for the U.S. Public Health Service, and Deputy Director of the California Department of Health Services for the Prepaid Health Plan program in Medi-Cal. Tom was also a Senior Health Policy and Program Consultant to the California Health Care Coalition, where he represented CHCC members on the board of the California Hospital Assessment and Reporting Task Force (CHART), recognized as a national model for health care quality measurement and reporting. He has consulted with the International Longshore and Warehouse Union and the California State Council of the Service Employees International Union on health benefits, including serving as SEIU’s liaison to CalPERS. Working with his CCQC partner, Sally Covington, he has participated in development of projects to identify and improve questionable variations in utilization of clinical services in Montana, Oregon, and California and currently supports delivery system improvement projects with IBEW L1245 (Northern California).

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Today, March 27, 2014, the IMF released the broad outlines of its terms and conditions for loans and other measures for the Ukrainian economy. What those terms and conditions mean is less a rescue of the Ukrainian economy than the onset of a Greece-like economic depression for the Ukrainian populace.

Ukraine’s economy had clearly entered a recession, its third since 2008, sometime in the latter half of 2013. Some recent estimates of the likely contraction of the economy in 2014-15 have ranged from 5%-15% in GDP decline.

The ‘IMF Standby Agreement with Ukraine’ text released March 27, acknowledges the current severe economic instability of the Ukrainian economy. What it fails to acknowledge, however, is how the IMF package will further adversely impact that economy.

The IMF deal calls for $14-$18 billion in IMF financial support provided over the next two years, 2014-15. Another potential $9 billion reportedly will come from other countries, although in yet unspecified form. The European Bank for Reconstruction & Development apparently will provide $2 billion of that $9 billion.

Presumably the US aid package of around $1-$2 billion now currently working its way through the US Congress represents another element of the $9 billion. The remaining $5 of the $9 billion non-IMF funding is yet unidentified.

The $27 billion total is well in excess of the $15 billion that was being talked about in prior weeks by the public press and more than the $20 billion Ukraine had asked the IMF for at the end of 2013—an indication that the economy has been deteriorating more rapidly than reported since the beginning of 2014.

In previous articles on the Ukraine economic situation a few weeks ago, this writer estimated that at least $50 billion would be needed to stabilize the Ukraine’s economy over the next two years. That figure may even rise by 2015.

The IMF Statement of March 27 addresses what it considers the most important economic weaknesses of the Ukrainian economy that require immediate and focused attention. Those weaknesses include the Ukraine’s current trade deficit, its rapidly declining international currency reserves, its fiscal budget deficit, and the budget deficit of its state-owned national gas company, Naftogaz.

The IMF estimates that the Ukraine’s trade deficit (exports minus imports) at around 9% of GDP ($17 billion a year) is due to Ukraine’s stagnating exports. What the IMF proposes in order to resolve this is to allow Ukraine’s currency to continue to ‘float more freely’. The Ukraine currency so far in 2014 has already fallen 26% to the dollar. So the idea is to allow the currency to decline still further. In theory, that will make Ukrainian exports more competitive and in turn reduce the trade deficit. The problem is it will also result in a sharp rise in the cost of imports and therefore inflation for Ukrainian households. The IMF policy of promoting further currency decline, in other words, will mean even more domestic inflation, primarily impacting households, and therefore less spending by households on other goods and services.

Allowing the currency to decline further also suggests that IMF policy is for the Ukrainian central bank not to intervene aggressively in coming months to prop up the currency in global markets. That releases more of the IMF funds to service debt payments to western banks for the current and past loans. As the IMF statement indicates, “large foreign debt repayments loom in 2014-15.” The amount of debt payments due is estimated at $6.2 billion. So Ukrainian households will in part pay for the debt payments to western banks by having to adjust to higher inflation and reduce their real spending.

Given that $6.2 billion of the $27 billion IMF total package will go to servicing debt payments to the west, it also means that only around potentially $21 billion of the IMF total bailout remains to stimulate the Ukrainian economy. But the key word here is ‘potentially’, since much less than the $21 billion will actually go into the economy—and will be offset by far more ‘taken out’ per the IMF deal.

A $21 billion net IMF injection is an economic illusion. Here’s why.
First, the Ukraine’s economy will decline as a result of the IMF package because IMF measures require major changes in Ukraine’s monetary and fiscal policies that will in net terms slow, not stimulate, the Ukrainian economy.

For example, the IMF statement calls for monetary policy that targets “domestic price stability while maintaining a flexible exchange rate”. What that means is that the central bank, the National Bank of Ukraine (NBU), will be required by the IMF to reduce the Ukraine’s money supply and thus raise domestic interest rates, as part of “an inflation targeting framework over the next twelve months to firmly anchor inflation expectations.” Minus the economic jargon, what that means is that the NBU and IMF policy raising interest rates will slow the economy in order to offset expected inflationary pressures from imports that will occur from a further currency decline. That interest rate hike policy designed to offset expected import inflation will further slow the real economy. And that translates into a further loss of jobs as businesses cut back production due to rising interest costs.

But that’s not the half of it. IMF measures will not only result in rising import inflation, but will produce even greater inflationary pressures as a result of IMF-dictated terms related to Ukraine’s natural gas.

Estimates are that natural gas prices will increase by 79% as a result of the IMF-dictated 50% increase in gas prices. Simultaneously, as gas prices escalate gas subsidies to households will be totally phased out over the next two years, according to the IMF deal.

It has been reported that gas subsidies to households are equivalent to 7.5% of Ukraine’s GDP. So eliminating gas subsidies means a reduction in consumption of $6.5 billion a year, as households will have to reduce other consumption to pay now for the gas price hikes and the total phase out of gas subsidies.

That phase out of gas subsidies and 79% increase in gas prices means a $13 billion cut in real consumption over two years, 2014-15. That $13 billion reduces the remaining $21 billion of the IMF package still further, leaving only $8 billion in potential net remaining stimulus for the real economy from the IMF deal. However, that’s still not the entire picture of the IMF deal negative impact on the Ukrainian economy.

The IMF deal also calls for ‘Fiscal Policy’ reforms, or what it calls the need to “implement deeper fiscal adjustment” that will “reduce the fiscal deficit to around 2.5% of GDP by 2016.” That 2.5% budget cut represents another $4.5 billion in combined annual Ukrainian government spending cuts (and/or tax hikes), presumably in each of the next two years.

The spending cuts will no doubt come out of government job reductions and wage cuts for remaining government workers. It will also undoubtedly include deep cuts to the pension system affecting all retirees, which some estimate will mean cuts in pensions by up to 50% by 2016. It is possible that the $4.5 to $9 billion in government deficit reduction over the next 1 to 2 years will mean sales tax hikes for consumer households as taxes are cut for businesses, since the IMF statement of March 27 also calls for “measures to facilitate VAT (value added tax) refunds to businesses”.

In its March 27 statement the IMF has not spelled out the required job, wage, and pension cuts specifically. It is clearly waiting for the Ukrainian interim government to inflict those economic wounds on itself and the Ukrainian people, following which the IMF Management and Executive Board will approve the offered deal.

To summarize, the IMF deal of March 27 calls for paying western banks and lenders $6.5 billion over the next two years in debt servicing payments. It additionally requires the reduction of household gas subsidies by another $13 billion plus the total phase out of gas subsidies. And it indirectly calls for the Ukrainian government to cut spending by at least $8 billion (2.5% of GDP) over the next two years—in the form of cuts in government jobs, wage cuts for government workers, and pension payment reductions of a likely 50% for retirees in general.

Add all that up, and not surprisingly it’s around $27 billion. That’s $27 billion of economic spending and stimulus taken out of the Ukrainian real economy per the IMF deal. In other words, just about the $27 billion that the IMF purportedly will provide to the GDP per the March 27 announcement. Which means Ukrainian households will pay for the IMF’s $27 billion package with higher gas prices, elimination of gas subsidies, government job and wage cuts, and big pension payment reductions.

But $27 billion is not really an ‘even trade off’. It’s really a net negative stimulus for Ukraine due to the composition of the IMF deal. Keep in mind, the $6.2 billion in debt servicing payments outflow to the west will have absolutely no positive impact on Ukraine’s GDP. So, first of all, it’s really only the IMF net $21 billion ‘’in” vs. the Ukrainian $27 billion taken “out” of the economy per IMF requirements. But even $21 billion ‘in’ vs. $27 billion ‘out’ is not the true net estimate.

The $27 billion taken out reflects a household consumer spending ‘multiplier effect’ that is much larger than the $21 billion net domestic Ukraine injection by the IMF. If one assumes a conservative 1.5 multiplier effect, the amount taken out of the Ukrainian economy is more like $40 billion over the next two years—a massive sum given that the Ukraine’s GDP in 2012 was no more than $175 and was flat to stagnant in 2013. Of course, the $40 billion ‘out’ is adjusted by the $21 billion ‘in’ and its multiplier effect. But while the $40 billion ‘out’ will definitely occur, there is no guarantee the full $21 billion IMF injection “in” will actually happen in turn.

Some of that $21 billion will no doubt be ‘put aside’ by the Ukrainian central bank to replenish its foreign currency reserves, today at around only $10 billion or less. Some of it will be used to assist Ukrainian businesses to purchase European imports of intermediate goods, projected to rise in cost significantly as Ukraine’s currency continues to decline. And some of it will go to loans from the NBU to Ukrainian businesses that will hoard the cash and not use it to expand production. All this means that probably no more than half the $21 billion IMF net injection will actually affect the real Ukrainian economy. Given these ‘leakages’, the multiplier effects of the IMF injections will no doubt prove to be negative. It is not unreasonable to assume no more than a net $10 billion of the IMF’s $21 billion will get into the Ukraine’s real economy as a stimulus.

That leaves no more than a $10 billion net stimulus over the next two years, offset by a ‘multiplier’ of $40 billion reduction in the real economy over the next two years. A net reduction in Ukraine’s GDP of $30 billion in the next two years, or about $15 billion a year, represents a cumulative decline in GDP of at least 18%. And that’s a Greece-like Depression.

By absorbing the Ukrainian economy into the Eurozone, the latter is in effect taking under its economic wing yet another ‘Greece’ and ‘Spain’. And as in the case of those latter economies, those who will pay will not be the bankers and multinational businessmen, but the Ukrainian people. But that is the essential and repeated history and legacy of IMF deals globally for the last three decades.

Dr. Jack Rasmus
March 27, 2014

Dr. Rasmus is author of the 2010 and 2012 books, “Epic Recession: Prelude to Global Depression” and “Obama’s Economy: Recovery for the Few”, Pluto Presss, 2010 and 2012. He hosts the weekly radio show, ‘Alternative Visions’, on the Progressive Radio Network in the USA. His website is http://www.kyklosproductions.com and his blog is jackrasmus.com. His twitter handle is @drjackrasmus.

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(The following is an excerpt from the just published in depth article, ‘Who Benefits from the Ukraine Economic Crisis’. For the full 5k Word Article, go to the website, http://www.kyklosproductions.com/articles.html, for a discussion of the outcomes of the crisis for Russia, Europe, and US interests, as well as the Ukraine)

“Today, Sunday March 16, 2014, 83% of the Crimea’s eligible voters have voted by 97% to secede from Ukraine and join Russia. Simultaneously, negotiations between the European Union and IMF with the interim government in the Ukraine, brought to power by a Coup D’etat on February 22, continue toward a conclusion set tentatively for March 21. Extreme political uncertainty thus promises to continue for weeks and perhaps months given these events, while economic conditions consequently continue to deteriorate in the Ukraine from an already extremely precarious state.

Most accounts of the situation in the Ukraine and Crimea have focused to date on political events and conditions. Little has been said in the press about the economic consequences of the Coup and subsequent events, or likely scenarios for the future.

What interests—in the Ukraine and global (i.e. western Europe, USA, Russia)—stand to benefit economically from recent and future events in the Ukraine? Who stands to lose? There’s a well-worn saying, if you want to find out ‘who benefits’, then “follow the money trail”. That trail will also lead to the inverse, ‘Who Pays’.

1. The IMF Deal of March 2014: Who Benefits, Who Pays

While the final version of the latest IMF package for the Ukraine is still in development, past relations and deals between the IMF and Ukraine indicate some likely characteristics of ‘Deal #2’ due on March 21. (Deal #1 was the agreement reached on February 21 between the IMF and the pre-Coup government of President Yanukovich. While that former deal was agreed to on the 21st, it was upset within 12 hours by the violent street actions of proto-fascist forces and the still unidentified sniper killings of more than 100 protestors and police forces in Kiev).

Former agreements and proposals between the IMF and Ukraine since the ‘Orange Revolution’ of 2004 resulted in IMF loans to the Ukraine as follows:

2005 IMF deal terms: $16.6 billion in loans to Ukraine

2010 IMF deal terms: $15.1 billion in loans to Ukraine

December 2013: Ukraine requests another $20 billion from IMF

The Orange Revolution of 2004 resulted in severing much (but not all) of the Ukrainian economy from Russia. That caused significant economic contraction for the Ukrainian economy for several years after. Think of the similar effects of the severance as if the west coast economy of the US—California, Oregon, Washington—were stripped from the USA and joined Canada. While the rest of the world economy, including Russia, enjoyed a moderate real economic recovery from 2004-07, Ukraine did not benefit much due to the economic severance from Russia that followed 2004 and the Orange Revolution. Ukrainian GDP declined or stagnated. In other words, the IMF deal of 2005 did little for the Ukrainian economy.

Then came the global economic collapse of 2008-09, generated largely by US, UK and western banks’ over-speculation in financial securities. The Ukrainian economy and GDP, like many economies, collapsed by more than -15% during those two years. That led to the second IMF deal of 2010. Ukraine believed the second deal would open its exports to western Europe and that would generate recovery. However, the European economy (EU) itself slipped into a second, ‘double dip’ recession in 2011-13, and demand for Ukrainian exports did not follow as anticipated. Ukrainian GDP again stagnated after a short, modest recovery, and then slipped into a recession again in the second half of 2013. In short, the 2010 IMF deal did little for Ukraine as well.

In fact, the 2010 IMF probably slowed economic recovery, as it required a 50% increase in household gas prices and corresponding cuts in subsidies for the same. That significantly reduced aggregate consumption demand by Ukrainian households and slowed the economy. So did corresponding IMF demands for reductions in government spending, which were a precondition for the $15.1 billion 2010 IMF package.

One of the reasons no doubt that the Yanukovich government last December 2013 decided to forego another IMF deal was the reported requirement by the IMF that household subsidies for gas be reduced by 50% more once again. Other onerous IMF requirements included cuts to pensions, government employment, and the privatization (read: let western corporations purchase) of government assets and property. It is therefore likely that the most recent IMF deal currently in negotiation, and due out March 21, 2014, will include once again major reductions in gas subsidies, cuts in pensions, immediate government job cuts, as well as other reductions in social spending programs in the Ukraine.

This possibility does not seem to bother current interim prime minister, Arseny Yatsenyuk, who has publicly commented by the cuts, saying that “we have no other choice but to accept the IMF offer”. In fact, Yatsenyuk and his post-Coup government even stated before negotiations with the IMF began this past week that they would accept whatever offer the IMF and the EU made.

Early leaks of the forthcoming March 21 IMF/EU bailout deal appear that the EU/IMF will provide a $2 billion immediate grant and subsequent $11 billion in loans. The European Investment Bank will provide a couple billion more. For a total package of around $15 billion. But there is no reason to believe that the coming $15 billion will prove any more economically stimulative to the Ukraine than did the 2010 deal of $15.1 billion. The Ukraine, European, and world economy is even weaker today than it was in 2010 when a brief, modest economic recovery globally was in progress. Today the trend is economic stagnation in Europe, significant slowing growth in China, and collapsing emerging markets. Western Europe in general, and Germany in particular, will focus on subsidizing and expanding its own exports first, and will be little interested in encouraging Ukrainian exports to Europe at the expense of its own industries. Thus, as was the case with the post-2010 IMF deal, western Europe in 2014-15 will not represent a major source of export demand to stimulate Ukraine’s economy. More bailouts from the EU/IMF and the USA will quickly be required.

The $15 billion promised represents less than the $20 billion the Ukraine said it needed last December—i.e. before its currency fell 20% and its foreign exchange reserves fell to less than $10 billion. And less than the $35 billion the new interim prime minister, Yatsenyuk, admitted is needed. This writer in an earlier article has forecasted more than $50 billion will be required, given the projected 5%-15% GDP decline expected for the Ukraine over the next two years.

Even if one assumes all the IMF’s $15 billion will actually go into the Ukrainian economy directly the concurrent cuts to gas subsidies, pensions, government jobs and government spending demanded by the IMF/EU deal will almost certainly offset much, if not all, of the IMF/EU $15 billion.

Considering just the question of gas subsidies to households:

The latest Ukrainian GDP (2012) figures show its GDP was equivalent to $176 billion in nominal terms (and $335 billion if adjusted to global prices, or in ‘PPP’, purchasing power parity, terms). Household gas subsidies reportedly amounted to 7.5% of GDP in 2012. That’s about $13 billion in nominal terms. So if the IMF deal pending reportedly requires a cut of gas subsidies of 50%, that’s about -$7.5 billion taken out of the Ukrainian economy. So the $15 billion IMF results in only half that in terms of real stimulus effects. The $15 billion becomes only a net $7.5 billion to the Ukrainian economy.

Cutting gas subsidies will not only result in removal of income for household spending who lose the subsidies, it will also result in sharp increases in gas prices that will reduce spending by nearly all households.

Then there’s the likely IMF demand for pension cuts. Particularly hard hit by the IMF deal will be elderly women households, who receive the majority of the pensions and which are spent to support children and grandchildren.

The cuts to gas subsidies and pensions, and rising gas prices, will reduce consumption immediately (and therefore GDP immediately) easily by more than $10 billion.

IMF-demanded cuts in other government spending will further offset the nominal IMF/EU $15 billion stimulus. Ukrainian government spending today represents 46% of GDP. The IMF will almost certainly therefore also demand a significant reduction in that 46%. That will mean in the short term even further GDP decline. That leaves a net real economic effect on the Ukrainian economy of well less than $5 billion.

But there may not even be the $5 billion to begin with.

The lion’s share of the $15 billion IMF loan will go to western banks (especially in Austria and Italy who are seriously exposed) to pay principle and interest on previous loans to the IMF and western banks (about $2 billion this year), will be used to finance future exports from the Ukraine (now running a $20 billion a year trade deficit), or will be used by the Ukrainian central bank to prop up the Ukrainian currency (now falling 20%). How much of the $15 billion in the IMF/EU package will be initially diverted to cover bank loan interest, finance trade deficits, and for Ukraine’s central bank efforts to slow the collapse of its currency remains to be seen. It past IMF deals are an indicator, much of that $15 billion will be used as a first priority for the preceding purposes. What’s left, if any, will go directly to the Ukraine economy. What’s left will no doubt amount to far less going into the real economy, than that which will ‘taken out’ of the Ukraine economy as a result of cutting gas subsidies, government spending, and pensions.

Add in rising inflation from ending of gas subsidies and inevitable rising unemployment from cuts in government spending, it is not difficult to estimate that the latest IMF deal will have no more positive impact on the Ukrainian economy than did the prior 2010 and 2005 IMF deals. Indeed, it will most likely have an even greater negative impact on the economy in general, and the average Ukrainian in particular.

To briefly summarize in terms of just the net impacts of the EU/IMF deal, ‘Who Benefits’ include: western European banks who will continue to receive principal and interest payments from the IMF that would had defaulted; global currency speculators who will be able to sell Ukrainian currency to the Ukrainian central bank at a subsidized price, Ukrainian companies that will be given export credits to continue selling to western Europe and the western Europe companies that import the Ukrainian exports at a more attractive price.

Those ‘Who Pay’ and who lose include :majority of Ukrainian households that will have their real income reduced as they pay higher prices for gas, Ukrainian elderly who will have their pensions cut, Ukrainian government workers who will lose their jobs, and all Ukrainian households who will lose other government services.

But all the foregoing only refers to the negative net economic impacts from the pending March 2014 IMF deal. What about the general economy, apart from the IMF deal, which is predicted to contract by 5%-15% over the next two years even assuming no worse development in political instability?

Who gains longer term from the Ukraine being more completely integrated into the western economy? Who loses longer term?

(For parts 2 through 7 of this article, go to the website, http://www.kyklosproductions.com/articles.html.)

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Alternative Visions – The Ukraine Crisis: Political & Economic Dimensions Update – 03/15/14
Mar 15th, 2014 by progressiveradionetwork

ACCESS THE ARCHIVE OF THE SHOW AT: http://www.alternativevisions.podbean.com

“Dr. Jack Rasmus and guest, Steve Lendman, revisit the latest in the Ukrainian crisis, discussing its political and economic dimensions. In the first half hour, Dr. Rasmus raises ’10 Unanswered Questions’ about the political coup of February 22: Who were the snipers, why is no investigation underway, what is the composition of the neo-fascist parties on the street (Svoboda, Right Sector, UPA, etc.), what official positions have they assumed in the new interim Ukrainian government, why did US undersecretary of State, Virginia Nuland, admit to $5 billion spent by the US on Ukrainian politics, what are Nuland’s ‘Neocon’ credentials, and is there a ‘deep government’ in the US driving US foreign policy? Dr. Rasmus also raises the question of what are the ‘crony capitalist’ connections in the Ukraine with US business sectors? Rasmus identifies the key neo-fascist and crony capitalists and their current roles. Steve Lendman then gives his view of the Crimea referendum and perspective on the Ukrainian crisis, which he calls the worst and most dangerous since the 1962 Berlin crisis. In the second half of the show, Dr. Rasmus discusses economic issues, focusing on “who benefits” and “who pays” from the current economic crisis, including western Europe, the USA, Russia and the Ukraine itself. (Listeners more interested in the latter topic should go directly to the ‘station break’ at the 30 minute point of the show, and listen to the second half of the h our that discusses economic crises in the Ukraine and other regions affected by it. Rasmus warns the Ukrainian crisis may be the critical development that sends the European economy into its third ‘dip’ recession in 2014-15).

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Interested in the ‘bad’ economic news coming out of China? Or why emerging market economies are rapidly declining? Listen to my recent ‘Alternative Visions’ radio shows where the events now unfolding today were predicted weeks ago. Both shows of 2-19-14 and 3-1-14 are available at either of the following:

http://alternativevisions.podbean.com/

http://prn.fm/category/archives/alternative-visions/

1. Alternative Visions – China’s Slowing Economy and Rising Financial Instability – 3/1/14

Mar 1st, 2014
“Dr. Rasmus takes a deep look into China’s economy, asking if it is heading for a ‘hard landing’? Will its growing financial bubbles soon burst? Rasmus discusses reasons why China’s economy is slowing, and its potential impacts on emerging markets, Europe, and the rest of the global economy. China’s growing financial instability is also explored, including the role of global shadow banks and the 200,000 richest ‘Ultra High Net Worth Individuals’ (aka biggest global finance capitalists and their primary financial institutions) stoking the financial bubbles and instability in China. How are they together driving China’s currency and real estate bubbles? What’s China trying to do to slow speculation in its currency, local housing, and local investment markets? Why is China total debt is now well above crisis levels? Are they driving China toward a ‘Lehman Moment’ financial crisis? Rasmus concludes with discussion of China’s recent shift to lower the value of its Yuan to ‘reign in’ the shadow banks and global speculators, and what that could mean if it loses control not only for China’s economic hard landing but for the world economy as well”.

2. Alternative Visions – An Emerging Global Economic ‘Perfect Storm’? – 02/19/14

Feb 19th, 2014
Dr. Jack Rasmus explains why the global economic crisis that emerged in 2007-08 may now be entering a ‘3rd Phase’. Dr. Rasmus discusses what’s happening now with the economies in China, Japan, Emerging Markets (India, Indonesia, Brazil, Turkey, So. Africa and others), and Europe. Why is China on a long term growth slowdown path? Why is Japan’s USA-like central bank QE money injection policy failing to stimulate Japan’s real economy and leading to Japan’s ‘fourth dip’ recession since 2008? Why is Europe drifting toward deflation and its recovery stagnating, with France now the ‘bad boy’ economy of Europe? Why are the emerging market economies locked into a growing crisis, with massive capital flight flowing back to the west, falling currency values, and inevitable slowing economies? What are the possible ‘contagion effects’ between the three ‘stormfronts’—China, Emerging Markets, Eurozone—and how are ‘mutually amplifying’ feedbacks about to exacerbate problems in each—creating a three front global economic ‘perfect storm’? Finally, what might this ‘Emerging Economic Perfect Storm’ mean for the USA economy, once again slowing in 2014 after its latest ‘false start’ last summer? (For more on this topic, read Dr. Rasmus’s forthcoming March 2014 ‘Z’ magazine article, ‘The Emerging Perfect Storm’, his last October 2013 ‘Z’ article, ‘The Slowing Global Economy’, and shorter entries on his blog, jackrasmus.com, since January. The ‘Z’ articles are also available on Jack Rasmus website, at http:www.kyklosproductions.com/articles.html ).

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Special NOTE: For an update to the events discussed in the article that follows, join me on my radio show, Alternative Visions, on the Progressive Radio Network online, this coming Saturday, March 8, at 1pm eastern US time, for a future discussion and update of the events in the Ukraine, at http://prn.fm/#axzz26hkFIP6s

“The Ukraine economy is a basket case—one of the weakest in the world. That was true before the events of February 20, 2014 and the collapse of the Yanukovich regime. It is increasingly true since, and will continue to deteriorate even more rapidly in the weeks to come.

What are the dimensions of the current economic crisis in the Ukraine? And its origins in the preceding decade?

From 2000 to the ‘Orange Revolution’ of 2004 Ukrainian per capita GDP actually rose compared to the GDP of its t hen CIS neighbors, from 61% to 68%. From 2004 forward, however, it declined precipitously, from the 68% to a low of 57% in 2013. In 2013 the Ukraine economy was in recession. That recession is about to accelerate in 2014, with some reports predicting the Ukrainian economy will experience a 5%-10% drop in GDP terms in the coming year. That’s not a recession. That’s a ‘Greece-like’, bonafide depression.

The immediate crisis is not only associated with declining real GDP and falling average incomes. The crisis is most evident short term in the rapid collapse of the Ukrainian currency and the even more rapid depletion of its foreign currency reserves that are critical to financing its trade, to paying its already significantly high foreign debt load, and for its central bank to intervene to stem the collapse of its currency. If currency collapses and there are little foreign exchange reserves available, the crisis escalates rapidly. And the Ukraine is desperately close to that point at present.

Since the beginning of the year that currency value has fallen by 20% in relation to the dollar. That means rising inflation for imported goods of all kinds, less consumption spending by Ukrainians, less investment by businesses in Ukraine, and consequent further slower economic growth.

Currency collapse means the Ukrainian central bank will also have to raise domestic interest rates, which will slow the economy another notch, as domestic consumption and investment decline still further. Rising rates also translate into a slowing of foreign direct investment into the Ukraine, with similar effects.

The current collapse of the currency is exacerbated by the economy’s accelerating loss of foreign currency reserves. Foreign exchange is required to make payments on debts (bonds) to foreign investors. No payments mean default. Default means no further loans, production cutbacks and more job loss. Loss of foreign exchange reserves also means no money to finance imports of critical production goods and consumption goods. And foreign exchange (currency) is disappearing rapidly in the Ukraine. First, in the form of capital flight as Ukrainian consumers, investors and businesses convert the national currency to foreign exchange and send it out of the country to protect their investment. Secondly, in the form of the Ukrainian central bank, which uses the foreign exchange to prop up the Ukrainian currency from further collapse.

It is estimated that the Ukraine had about $20 billion in foreign currency exchange at the start of the 2014 calendar year. As of March 1, western estimates are it now has about $12 billion. The further depletion of reserves will mean an even faster collapse of its currency, even more rapid capital flight from the country, and a good part of the economy coming to a virtual halt.

Recent estimates are currency reserves are depleting at around $4 billion a week. Should the worst case scenario materialize, and defaults begin on debt payments to western bondholders and lenders (who are heavily concentrated in Austrian and Italian banks) then a run on banks in the Ukraine are a real possibility and the risk of contagion to Europe via Austria-Italy becomes increasingly likely.

There has been a lot of talk about how much of a ‘rescue package’ Ukraine will need from the west—i.e. from Europe, the IMF, and the USA. Ukraine’s new finance ministers and central bankers are saying $35 billion over the next two years. That is a gross underestimation, however. Should the currency collapse continue, which is almost a certainty given political events now unfolding, that currency decline actually raises the amount of debt that needs to be paid. A $20 billion rescue package by the west may be required well before May 1, 2014 instead of by year end.

Ukraine’s total debt is now estimated around $80 billion. That will escalate rapidly as well by this summer to over $100 billion, with still more in the year beyond.

Will western European capitalist interests, and US capitalists ‘backstopping’ the Europeans financially, provide that kind of immediate short term ($20 billion) rescue and an open-ended further increase beyond to cover the $100 billion from default? Very unlikely.

The IMF has initially indicated it would provide $27 billion, but that would be doled out over 7 years in delivery. As in typical IMF deals, most of that $27 billion would go to cover payments to western bankers first, to ensure they’re protected and covered. Little would be left to stimulate the Ukrainian economy or to relieve the average Ukrainian household. Moreover, the ‘terms’ of the IMF deal (as any IMF deal has shown) would prove disastrous to the real economy. Already IMF officials are making it clear the rescue package would be available only with the proviso that the Ukraine cut government spending and jobs, pensions, and especially the large subsidies now provided to Ukrainian families to offset the high gas and oil costs to households.

Apart from the IMF, the EU has said nothing as yet about financial aid. Apparently Poland and the USA are cooking up something. But the USA has only indicated so far it would provide an emergency loan of $1 billion, although Secretary of State, John Kerry, and Senate hawk, John McCain (who personally went to Maidan Square to stir up the street) are huddling in back rooms to discuss other possibilities. But it is hard to imagine Obama and the USA would provide much substantially to Ukraine in a US election year coming this November 2014.

In a revealing editorial in the British Financial Times newspaper recently, one academic mouthpiece well connected to western banks and think tanks, and a former adviser to the Ukrainian government, Anders Aslund, downplayed the amount needed to bail out the Ukraine, but put the cost to Ukrainians of the bailout more bluntly—saying the rescue would require a western-type ‘austerity’ program for average Ukrainians to pay for the bailout. That included Ukrainians accepting fewer jobs, inflation, and loss of the generous gas subsidies to households. The Ukraine in an IMF bailout would almost certain replicate the still continuing Austerity crisis in Greece.

Another theme appearing repeatedly of late in the western press and media is that the economic collapse in the Ukraine today is totally the result of the corruption and ineptness of the Yanukovich regime. But this view ignores the bigger picture, and is more a political, and even ideological, analysis of the Ukraine’s economy than an economic one.

Economic trends do not occur overnight, or even in terms of weeks or months. It is a fact that Ukraine’s GDP per capita was rising steadily until the ‘Orange Revolution’ of 2004. After that it began to fall sharply in relation to its neighbors. That is because the Ukrainian economy had been until 2004 tightly integrated with the Russian Federation’s. Attempting to break that integration after 2004 would understandably lead to an adjustment period of slower growth, as the Ukraine attempted to orient to the west in its exports and financial dealings. Its economy understandably weakened therefore as part of the immediate post-2004 transition.

A second major negative impact on the Ukraine, also in some ways a consequence of its break with the Russian Federation post-2004, was energy prices. With few oil and gas reserves of its own, when the global oil markets and inflation hit between 2006-08, driven largely by western oil cartels and global speculators, the Ukraine’s GDP took another major economic ‘hit’. That was followed by a third impact, in late 2008-2010 in the form of the global economic downturn and the near standstill in global trade, which had a particularly serious effect on the Ukraine, dependent as it is on exports for GDP growth.
In 2010 the Ukraine tried further to orient its exports and trade to western Europe. However Europe fell into a second ‘double dip’ recession starting late 2010 that continued into 2013.

Western Europe economies, banks and businesses could not increase their demand for Ukrainian exports, nor send capital for investment into the Ukraine in any great degree. Europe itself was mired in a second recession and deeply preoccupied with bailing out governments and banks in its own ‘periphery’ (Greece, Italy, Spain, Portugal, Ireland, Baltics, Hungary, etc.) Real investment internally in Europe was already weak and bank lending even within the EU was declining. Providing loans and more direct investment to the Ukraine was not high on the EU agenda. It was economically and politically not possible from the European Union’s own interests.

Notwithstanding the public statements by western European governments and bankers to provide financial aid to the Ukraine now, post-February 20, the reality is that the EU still cannot afford to deliver on promises of significant financial aid. Nor will the USA, which is quietly trying in the background to convince western European governments it will ‘backstop’ (restore) financial aid Europe may commit to the Ukraine. Obama will not risk a Ukraine aid package of any significant dimensions in a US election year.

Like the post-2004 attempt to restructure the Ukrainian economy, like the global oil speculation bubble of 2006-08, and like the EU’s double dip recession of 2008-09 and 2011-13, the current collapse of emerging markets and their currencies that has been underway since last summer 2013 has added yet a fourth major negative impact to the Ukrainian economy.

The current emerging markets’ currency crisis, which is producing massive capital flight back to the west and a corresponding slowing of their real economies, has embroiled the Ukrainian economy as well. If economies like Brazil, South Africa, and others—once booming and now declining or stagnating—have been devastated the past year by the major monetary policy shift that has come out of central banks in the US, Europe and Japan, then it is understandable the Ukrainian economy has been no less negatively impacted over the past year. If the US central bank, the Federal Reserve, and other central banks’ reversal of the money injection policies in effect since 2008 are generating the massive economic disruption in emerging market economies today, then the Ukrainian economy is no doubt suffering from the same: i.e. collapsing currency values, capital flight, declining foreign exchange, and slowing real economy. Ukraine has it even worse than other emerging markets, as recent political events have further exacerbated the emerging market effect.

In addition, it should be noted the Ukraine, unlike Brazil and others, did not benefit from the western central banks’ massive flooding of the global economy with liquidity after 2008 to save their banks and financial institutions. That flood of cheap money boosted the emerging markets for a time; that is, until the past year. Now that the money is being ‘pulled back’ to the west as result of another monetary policy shift. Thus the Ukrainian economy since last year has been experiencing, like other emerging markets, the severe negative effects of a global central banks policy shift, while never having experienced the benefits of other emerging markets during the 2008-13 ‘free’ money period that flooded emerging markets.

In short, the Ukraine has been the unfortunate victim of several long term negative economic trends that were set in motion by political decisions in 2004 long before Yanukovich came into office. It has been the victim, like many other economies, of the oil price bubble of 2006-08. And it has never received the export and foreign direct investment support from Western Europe it has anticipated due to the collapse of the global economy and trade in 2008 and the EU’s double dip recession of 2011-13. On top of all that, now the Ukraine is being especially hard hit by the emerging market crisis, which has its roots and origins in the policy shifts of the US central bank.

What this means is that the current Ukrainian economic crisis cannot be laid exclusively at the doorstep of Yanukovich. The corruption and policy ineptness of his regime may well be included among the various causes of the Ukraine’s current economic problems, but nonetheless broader historical economic causes are involved as well. The abrupt severance of the Ukrainian economy from the Russian Federation after 2004 and global western capitalist mismanagement of the past decade (i.e. oil price shocks, financial crash of 2008, inability of western economies to generate a robust sustained recovery since 2008, emerging markets crisis today) also are critical to understanding the economic plight of the Ukraine’s average citizen.

The preceding analysis is not an apology for the economic mal-performance of the Yanukovich regime. Rather it is an effort to look behind the obvious ideological and political motives of those who argue in the west today that the protestors on Maidan Square are there because of the corruption of the regime; or that they are there because of the ineptness or personal thievery of the Ukraine’s Treasury by Yanukovich. That is a political analysis wrapped in ideological trappings of a bad economic analysis.

Clearly the Ukraine’s economic problems are deeper, much deeper. And if current economic problems have been caused longer term by western capitalism’s economic crash of 2008 and subsequent policy shifts, one should perhaps think twice whether any long term (let alone short term) solution to Ukraine’s economic crisis will result from the same source, the western economies.

For the economic crisis in the west is itself not ‘over’. The EU economy remains stagnant at best, Germany continues to slowly grow but at the expense of its exports to the EU periphery and China demand that is slowing. The UK economy is desperately soliciting super-wealthy investors around the globe to buy up London property, creating its own bubble, while courting China to bring in capital to rebuild the UK’s crumbling infrastructure. Meanwhile, Japan has embarked upon a ‘US Federal Reserve-like’ monetary stimulus that is stimulating only financial asset prices while its real economy slows again. Not least, since the middle of 2013 the west is trying to keep its sputtering economic engine going by throwing the emerging markets ‘under the bus’, as they say. Europe and even the US are in no condition to bail out the Ukrainian economy to the tune of $30-$50 billion over the next year that will likely be required.

If one may speculate, perhaps one reason Yanukovich chose the Russian $15 billion offer over Europe’s lesser offer is that the EU deal was less and with more IMF austerity strings attached. Moreover, the possibility of energy relief from the Russian Federation may have appeared a better deal than the EU’s energy deprived, high energy cost, economic partnership. That’s not an apology for Yanukovich, but he has been as much an economic thorn in the side of Russian interests as he has been for the EU, trying to play both against the other. He has also been a desperate politician, especially dependent on oligarch money and support in the Ukraine. He has been attempting since 2010 to walk the tightrope and has now fallen off.

As for the USA, like the EU, it too can be counted on to deliver little in the way of real aid apart from promises that, like the EU and IMF promises, are designed primarily to influence the Ukrainian elections in the short run in May.

Both the EU and USA want reliable (and pliable) capitalist politicians in Parliament and the Ukrainian government. That means politicians who will follow their economic policies and integrate the Ukraine into the western economic orbit. In other words, politicians that respond correctly when threats to freeze their personal assets in Switzerland and Luxembourg are raised, as has been the case in the days immediately preceding February 20.

The west’s gamble is their hope they can exclude the radical, ultranationalist and proto-fascist forces on the ground that served as the battering ram to bust down the door of the Yanukovich regime; or at least minimize their influence in the government. But that task that will not prove so easy, they may find. What the west wants is to have the Yanukovich ‘crony capitalists’ in the Parliament and government to grow up, come in ‘out of the cold’, stop relying on cronyism and learn to become one of the respected capitalists of the west in a new partnership.

A final note on the politics of the situation: The current foreign policy of the Obama regime is essentially the same as George W. Bush’s foreign policy. It is the policy of the Neocons in the US, who have remained entrenched in US government throughout the Obama regime. It is no accident that the USA’s ‘point person’ in the Ukraine during all the recent events has been Virginia Nuland. Nuland has always been a Neocon, and was for several years a direct personal advisor to the ‘King-Neocon’ in the USA, former Vice-President, Dick Cheney, during the Bush period.

US policy is not to deliver the amount of hard cash that Ukraine needs to restore its economy. Nor will multinational corporations step up their foreign direct investment into the Ukraine for the foreseeable future. What multinational businesses want is not the agricultural products and small industries of the western Ukraine; they want is the industrial base of the eastern Ukraine. They want to buy up, ‘downsize’ and convert the east Ukraine’s industrial base, in dire need of re-investment, to their own global corporate plans. But so long as the political crisis continues, there will be little multinational corporate foreign investment into the Ukraine.

So where is the economic bailout from the west to come from, if neither from the Europe, USA, or multinational corporations? That answer is easy. It won’t come—beyond superficial promises and token aid injections in the short run to influence upcoming Ukrainian elections in May.

Looking longer term, should the USA and the west prevail politically somehow in the coming contest for the Ukraine, the Ukrainian economy will be in shambles far worse than it is even today. Ukraine’s currency will be near-worthless. Inflation rampant. Government subsidies stripped from households. And economic hardship severe, as a ‘Greek-Style’ austerity is imposed. But western banks and multinational corporations will have a field day, as they say, buying up industries and companies on the cheap in the east and restructuring them to fit their global economic plans.

It appears many Ukrainians do not yet understand the fundamental economic and political dynamics at play in the Ukraine. On the one hand, they don’t want Yanukovich ‘crony capitalist’ regimes that do little for them and much for themselves. But the crony capitalists still remain in Kiev, in Parliament and government, even though Yanukovich himself is gone; they have only switched sides to protect their personal interests (and of course their western bank accounts and investments when threats were made to freeze them). The Ukrainians are therefore about to trade one set of economic vultures (e.g. Oligarchs) for another in Kiev: The formerly homegrown Oligarch who is now in the process of remaking himself with new, closer western ties.

On the other hand, perhaps many average Ukrainians do understand. As one was quoted in an interview in Kiev on the street, “’We need new people who can say no to the oligarchs, not just the old faces’, referring to the billionaires who control blocks of votes in Parliament”. (New York Times, February 25, 2014).

Unfortunately, the average Ukrainian is not driving the current situation. The proto-fascist street parties are dominating and directing the ‘outside’ strategy, while the ‘crony capitalists’ on the ‘inside’ in Parliament are being played like a violin by western interests. The EU and USA may be in the process of consolidating their inside strategy with upcoming elections, but they may find controlling the radical, ultra-right elements, and denying those elements a real role in government, may prove more difficult than they think. The historical analogy of Weimar Germany capitalists in the early 1930s thinking they could control the Nazis in the street is not totally inappropriate here. Nor is the concern that the latter street elements could drive the situation toward a military confrontation.

Indeed, perhaps the greatest concern at the moment is that the radical street elements may retain influence the situation sufficient to push the new Ukrainian government into a direct military confrontation with Russia before the May elections—and before the EU and USA can effectively neutralize their influence.

Dr. Jack Rasmus, March 2, 2014

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Readers interested in my deeper analysis of the economy and financial situation in China are encouraged to access and listen to my Feb. 26 radio show on that topic. Following is the introduction to the show, outlining topics addressed. Links to the show on the Progressive Radio Network follow.

Show Announcement:

“Dr. Rasmus takes a deep look into China’s economy, asking if it is heading for a ‘hard landing’? Will its growing financial bubbles soon burst? Rasmus discusses reasons why China’s economy is slowing, and its potential impacts on emerging markets, Europe, and the rest of the global economy. China’s growing financial instability is also explored, including the role of global shadow banks and the 200,000 richest ‘Ultra High Net Worth Individuals’ (aka biggest global finance capitalists and their primary financial institutions) stoking the financial bubbles and instability in China. How are they together driving China’s currency and real estate bubbles? What’s China trying to do to slow speculation in its currency, local housing, and local investment markets? Why is China total debt is now well above crisis levels? Are they driving China toward a ‘Lehman Moment’ financial crisis? Rasmus concludes with discussion of China’s recent shift to lower the value of its Yuan to ‘reign in’ the shadow banks and global speculators, and what that could mean if it loses control not only for China’s economic hard landing but for the world economy as well.”

The show is accessible for listening and download at:

http://prn.fm/category/archives/alternative-visions/

It is also available at: http://www.alternativevisions.podbean.com

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For Readers interested in my day-to-day takes on developments in the US and global economy, my commentary on my twitter account may be of some interest. Here’s my latest two months of comments. (For longer analyses, see my blog, jackrasmus.com, entries. And for feature length published articles, see my website, http://www.kyklosproductions.com, where articles, radio-tv interviews, and public presentations are available.

Follow me on twitter at: @drjackrasmus

Concluding February 28, 2014:

Big China currency drop to continue–will Yuan link to derivatives play similar role that subprimes + derivatives (CDS) did in US in 2008?

Eurozone drift to deflation at 0.8%–statistically insignificant from last 3 months–and before Ukraine crisis his Euro bank lending in 2014

Listen to my radio show, Alternative Visions, every saturday 1pm, eastern time. This March 1: more on China, at http://prn.fm/#axzz26hkFIP6s

Ukraine currency in freefall. Contagion effects on emerging markets Watch out for Austrian banks. EU/US will promise aid, but deliver little

China’s currency decline catching attention. US says it’s manipulating. China denies. Neither mention role of shadow banks playing the Yuan

For my view how emerging markets crisis, China’s economic slowdown, and Euro deflation may converge, go to my blog, http://jackrasmus.com

Recovery Eurozone? No. EZ 0.3% GDP growth not recovery, but stagnation. Drift to deflation, France new ‘bad boy’, German mixed indicators

Japan ‘Abenomics’ QE-liquidity strategy a (mimic of US Fed) not producing real growth recovery, mostly asset inflation & speculator profits

US consumer credit 4Q13 rises at unsustainable near $1 trillion annual rate. No real income growth for most means consumption lag in 1Q14

Holland meets with Obama. What’s it about? New joint push on Transatlantic Free Trade deal, now that TPP is tabled by Sen. Reid until Nov.

Stocks say Hooray to Yellen. No change from Bernanke, slow retreat from QE, and may reverse if real conditions get worse, which they are.

Conclusions my two prior tweets: China turning ‘back to the future’ to export driven and capital inflow driven growth, as 2014 economy slow.

China trade surplus 2013+$188b. Hot money inflow=$242b. Latter going into shadow banks & local mkts=housing & debt bubbles rising

Emerging Mkt capital flight, not just to ‘west’ but to China. Money capital flows into China in 2013=$242B, compared to $16b in 2012.

US jobs low for 2nd month in row. See my predictions of that last Dec. & Oct., in my ‘False Positives’ articles, at http://jackrasmus.com

US auto sales, manuf. & new orders, construction spending all plummeting today. see my prior analyses at http://jackrasmus.com

3rd phase global econ crisis now underway as USA exports crisis to emerging mkts, EZ slides toward deflation, China shadow banks get worse.

Read my contrarian analysis of Bernanke Fed’s performance, ‘Bernanke’s Bank: An Assessment’ at http://www.kyklosproductions.com/articles.html

Fed tapers another $10b. Emerging mkts retreat again. Capital flight to UK-US-EU grows. US durable goods and housing further weaken.

For contrarian view of Obama speech and income inequality see my blog, http://jackrasmus.com

China manuf contracts in latest rept, as global slowdown continues shift to Asia & EmrgMkts, from US and EU, as capital flows back east-west

Official US retail sales rise Dec: 0.2%. Ex-gasoline, less than 0.1%. Retail sales’ bumpy ride 2013: near flat-declines Jan, Mar, Sept,Dec.

Will 2014 see triple dip in US housing? Starts&Permits:1st=2006-08(-40%), 2nd=2010(-18%), 2012-13 decline from 40%to less than 5%

Big question #3 for global recovery ’14: Can China tame its shadow banks and prevent property bubble bust without slowing rest of economy?

Big question #2 for global recovery ’14: will Eurozone ‘epic’ recession (epic=short shallow recoveries followed by relapses) continue?

Big question for global recovery ’14: will goods disinflation in US, EU, and key emerging markts lead to deflation, as Japan prices stalls?

For my contrarian analysis of US jobs market, see my blog, http://jackrasmus.com , ‘False Positives Revisited: Dec. US Jobs Report’, 1-15-14

Real news on Dec.retail sales today=auto sales in big retreat. Rest of retail rise due to deep discounting. Both likely to weaken in Jan-Feb

US stock volatility coming: US jobs market retreat again+EU deflation+France economy sags+China property debt rises+Japan QE effect fades

US Dec jobs plummet, as I predicted. Prior gains based on record business inventory buildup 3rdQtr, followed by low holiday sales=layoffs

China shadow banks have run up debt as % GDP there higher than in US in ’07 and Japan in ’90 CHina rate measures so far have little effect

Eurozone deflation trend continues. 0.8% rate in December, after similar Oct-Nov. Watch for ECB to lower rates again–to no effect.

Last week Boeing Union workers were forced into massive concessions demanded by the company. Listen to their story at http://prn.fm/category/archives/alternative-visions/

On my theme global economy is in long-run slowdown, note today’s 4 China purchasing mgrs reports–all 4 in decline nearing 50.0 stagnation

For a 10mTV interview on the 100th anniversary of the Fed’s history of bank bailouts, go to http://www.kyklosproductions.com/videos.html

Starting January 2, 2014

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