For my updated view on growing financial asset market bubbles in the US, specifically US Stock Markets, corporate Junk bonds, Covenant-Lite Loans, Pension Funds, and Bitcoin-Crypto Currency markets, listen to my Alternative Visions radio show of friday, November 17, 2017.






Dr. Rasmus reviews conditions in the three financial markets approaching or at bubble levels. Causes of excess demand driving prices in US equity markets are discussed—including Fed near zero interest rate policies since 2008; record corporate profits and $1 trillion annual stock buybacks and dividend payouts; multi-trillion $ corporate bond issuance; shift to ETFs and passive investing in stock markets; foreign money capital inflows to US; record margin debt issues in stocks; and Trump policies of multi-trillion dollar corporate/investor tax cuts, business deregulation, low US$ exchange rate policy, and expectations of infrastructure spending and free trade deal renegotiations. Trump policies as new subsidization of capital incomes via fiscal-trade policy, as central bank (Fed) reduces its subsidization of capital monetary policies. Warnings of financial instability growing by Bank of America and hedge fund multi-billionaire, Paul Singer. Rasmus looks at other candidates for financial instability as well—pension funds’ hike risk investing practices, trend toward ‘covenant-lite’ lending, emerging junk bond selloff underway in Telecom sector and in China, and Bitcoin and crypto currencies extreme price bubbles. (Next week: The US Senate’s Trump Tax Cuts).


Signs are beginning to multiply that financial markets are beginning to peak, both in the US and worldwide, many having reached bubble proportions. On this blog, on my website (http://kyklosproductions.com) and on my weekly radio show, Alternative Visions, I have been focusing more on this topic of emerging financial instability. (see forthcoming friday, November 17, Alternative Visions radio show, where I take up this theme once again of emerging financial instability, 2pm eastern time at http://prn.fm/?s=Alternative+Visions, live and podcast afterward.)

My views on the subject of growing financial bubbles and instability–and its threat to the real economy–originate from and were summarized in my early 2016 book, ‘Systemic Fragility in the Global Economy’, Clarity Press. (see this blog for access to the book). ‘Systemic Fragility’ book is a theoretical foundation for my subsequent publications, ‘Looting Greece‘ (how financial markets and finance capitalists are developing a new form of financial imperialism) and ‘Central Bankers at the End of Their Ropes’ (how central banks have been largely responsible for providing the liquidity for the acceleration of leveraged debt that fuels financial bubbles worldwide). See reviews of the latter two books on this blog as well.

In the coming weeks I will be sharing with readers the concluding chapter of the Systemic Fragility book, entitled ‘A Theory of Systemic Fragility’.

In the interim, the following is a review of the 2016 book by Dr. Jan Pieterse at UC Santa Barbara, which appeared earlier this year, 2017, in the Journal of Post Keynesian Economics. Readers may find Pieterse’s review a useful introduction to my subsequent serialized publication here (and on my website) of the summary chapter of the book where I explain my theory of financial instability in greater detail.

2017, VOL. 40, NO. 2, 272–277


Dr. Jan Pieterse, ‘From Economic Stagnation to Systemic Fragility?’

Review of: Dr. Jack Rasmus, Systemic Fragility in the Global Economy
(Atlanta, GA: Clarity Press, 2016), ISBN: 978- 0-986769-4-7, 490 pp., $29.95

Advanced economies are in a rut of slow growth. Growth in emerging economies has also slowed. Explanations are meager and policies have not worked or have made problems worse. The Trump administration of hard-line billionaires will likely exacerbate problems. Jack Rasmus’s book Systemic Fragility in the Global Economy offers a penetrating analysis of economic stagnation in advanced economies by providing a sustained and systemic focus on the role of finance, an analysis that probes further than mainstream economic analysis. Rasmus has made a signal contribution to contemporary economics and provided a vitally important X-ray of the political economy of stagnation.

“Advanced economies are in a rut of slow growth, the new normal (El-Erian), or is it the end of normal (Galbraith, 2014)? Growth was slim before the 2008 crisis and recovery after the crisis has been sluggish as well, with growth around 2 percent in the United States (2.2 percent in 2017, by International Monetary Fund estimates), 1.5 percent in the European Union (EU) (2017), 0.9 percent in Japan (2017). An ordinary period headline is, “U.S. in weakest recovery since ‘49” (Morath, 2016).

Emerging economies and developing countries face a “middle-income trap” and “premature deindustrialization”; energy exporters see oil prices collapse from above $100 per barrel to below $50 (2014) and advanced economies are in a “stagnation trap.”

Explanations of the conundrum are perplexingly meager. Many accounts
are merely descriptive, such as secular stagnation (Summers, 2013) and the “new mediocre” (IMF, Harding, 2016) —noted, but why? (Secular stagnation derives from Alvin Hansen’s 1938 adaptation of Marx’s tendency of the rate of profit to decline, hence real interest rates decline, therefore policy interest must decline, notes Sinn [2016].)Or, uncertainty—which is odd because policies have not changed for years. Or, corporate hoarding—corporations, particularly in the United States, are sitting on mounds of cash, buy back their own stock, buy other companies and reshuffle, but are not investing—noted, but why? Or, a general account is that advanced economies are on a technological plateau, broadly since the 1970s (Cowen, 2011; Gordon, 2016). With the rise of the knowledge economy and the digital economy (along with the gig economy as in Uber, Airbnb, and freelance telework), contributions of Silicon Valley (Apple, Google, etc.), innovations in pharma and military industries, also in emerging economies, and the “fourth industrial revolution,” innovations abound. However, as Martin Wolf (2016) notes, “today’s innovations are narrower in effect than those of the past.” Besides, the shift to services in postindustrial societies means a shift toward sectors (such as health care, education, and personal care) where it is hard to raise productivity. If we consider policies, the picture gets worse because (a) implemented year after year, they clearly do not work, and (b) indications are that they make things worse.

Fiscal policy is generally ruled out because of fear of deficits. The policy instrument that remains is monetary—low interest rates and quantitative easing (QE), implemented in the United States, United Kingdom (UK), (EU), and Japan. Other standard policies are, in the EU, austerity—which may cut deficits but obviously does not generate growth (and, by depressing tax revenues over time, worsens deficits)—and structural reform. Besides privatization, the main component of reform is labor market flexibilization, in other words depressing wages and incomes. This has been implemented in the United States since the 1970s and 1980s, in the UK in the 1990s, in Germany and South Korea in the 2000s, and is now on the scaffolds in Japan, France, and Spain (and possibly Italy). The objective is to boost international competitiveness by depressing wages and benefits, which (a) ceases to have an effect when every country is doing the same, (b) assumes the key problem is cheap supply, whereas supply is actually abundant and what is lacking is demand, and (c) by depressing wage incomes, it further reduces domestic demand. No wonder these policies make matters worse. Thus, explanations of slow growth fall short and policies have been counterproductive. This is where Jack Rasmus’s book comes in. It offers the most pertinent analysis of the stagnation trap I have seen.

There are many steps to the analysis but it boils down to his theory of systemic fragility. I review the main points of his approach, for brevity’s sake in bullet form.

• Taking finance seriously, not just as an intermediary between stations of the “real economy” (as in most mainstream economics) but with feedback loops and transmission mechanisms that affect the real economy of goods directly and indirectly.

• A three-price analysis—beyond the single price of neoclassical economics (the price of goods), the two-price theory of Keynes and Minsky (goods prices and capital assets prices), Rasmus adds financial assets and securities prices.

• The long-term, secular slowdown of investment in the real economy (chapter 7) and the shift to investment in financial assets (chapter 11). This has been occurring because financial asset prices rise faster than the prices of goods; their production cost is lower; their supply can be increased at will; the markets are highly liquid so entry and exit are rapid; new institutional and agent structures are available; financial securities are taxed lower than goods; in sum, they yield easier and higher profits. Financial asset investment has been on the increase for decades, has expanded rapidly since 2000, and “from less than $100 trillion in 2007 to more than $200 in just the past 8 years” (p. 212).

• In government policy there has been a shift from fiscal policy to monetary policy. “Central banks in the advanced economies have kept interest rates at near zero for more than five years, providing tens of trillions of dollars to traditional banks almost cost free” (p. 220). Low interest rates and zero interest rate policies (ZIRP) benefit governments (by lowering their debt and interest payments) and banks (by affording easy money) while they lower household income (by lowering return on savings and lower value of pensions), so in effect households subsidize banks (p. 471).

• Quantitative easing policies, massive injections of money capital by the US ($4 trillion), UK ($1 trillion), EU ($1.4 trillion), and Japan ($1.7 trillion) since 2008, or “about $9 trillion in just five years” (pp. 185, 262). Add China ($1–4 trillion) and add government bank bailouts over time and, according to Rasmus, the total global liquidity injected by states and central banks is on the order of $25 trillion (p. 263). The injections of liquidity into the system allegedly aim to stimulate investment in the real economy (by raising stock and bond prices), which raises several problems: a) Investment in the real economy is not determined by liquidity but by expectations of profit. b) Funds that are invested in the goods economy leak overseas via multinational corporations (MNCs) investing in economically more developed countries (EMDC), where returns are higher (and more volatile). c) Most additional liquidity goes into financial assets, boosting commodities, stocks, and real estate, and leading to price bubbles (p. 177). “The sea of liquid capital awash in the global economy sloshes around from one highly liquid financial market to another, driving up asset prices as a tsunami of investor demand rushes in, taking profit as the price surge is about to ebb, leaving a field of economic destruction of the real economy in its wake” (p. 473).

• The post-crisis attempts at bank regulation overlook the shadow banks, even though the 2007–8 crisis originated in the shadow banks rather than the banks. (Shadow banks include hedge funds, private equity firms, investment banks, broker-dealers, pension funds, insurance companies, mortgage companies, venture capitalists, mutual funds, sovereign wealth funds, peer-to-peer lending groups, the financial departments of corporations, and so on; a typology is on p. 224.) The integration of commercial and shadow banks is a further variable. Shadow banks control on the order of $100 trillion in liquid or near liquid investible assets (2016, p. 446).

• Add up these trends and policies and they contribute to several forms of fragility, which is the culmination of Rasmus’s argument. Rasmus distinguishes fundamental, enabling, and precipitating trends that contribute to fragility (p. 457).

• The explosion of excess liquidity goes back to the 1970s and has taken many forms since then. QE policies amplify this liquidity and have led to financial sector fragility, which has been passed on to government balance sheet fragility (via bank bailouts, low interest rates, and QE), which have been passed on to household debt and fragility (via austerity policies). “Austerity tax policy amounts to a transfer of debt/income and fragility from banks and nonbanks to households and consumers, through the medium of government” (p. 472). This in turn leads to growing overall system fragility.

While Rasmus aims to provide a theory of system fragility, in the process
his analysis gives an incisive account of the stagnation trap. Many elements are not new. Note work on austerity and finance (Blyth, 2013, Goetzmann, 2016) and note, for instance: “The world has turned into Japan,” according to the head of a Hong Kong-based hedge fund.“When rates are this low, returns are low. There is too much money and too few opportunities” (Sender, 2016). However, by providing an organized and systemic focus on finance and liquidity, Rasmus makes clear that the policies that aim to remedy stagnation (low interest rates, QE, competitive devaluation, and bank bailouts) and provide stability are destabilizing, act as a break on growth, and worsen the problem. According to Karl Kraus, psychoanalysis is a symptom of the diseasethat it claims to be the remedy for, and the same holds for the central bank policies of crisis management.

This does not mean that the usual arguments for stimulating growth (spend on infrastructure, green innovation, etc.) are wrong, but they look in the wrong direction. For one thing, the money is not there. Courtesy of central banks, the money has gone by billions and trillions to banks, shadow banks, and thus to financial elites and the 1 percent. Surprise at corporations not investing is also beside the point when government policies at the same time are undercutting household income and consumer demand, reproducing an environment of low expectations. Criticism of QE has been mounting, even in bank circles (“it’s the real economy, stupid”). Yet the role of finance remains generally underestimated. Rasmus’s analysis of central bank policies overlaps with that of El-Erian (2016), but his critique of economics is more fundamental and his theory of fragility and its policy implications are more radical. A turnaround would require fundamentally different policies and, in turn, different economic analytics.

Let me note some reservations about Rasmus’s approach. One concerns the unit of analysis—the global economy. His analysis overlooks or underestimates the extent to which East Asian countries stand apart from general financial fragility. Asian countries have been less dependent on western finance than Latin America and Africa and having learned from the Asian crisis of 1997, have built buffer funds against financial turbulence, stand apart from general financial fragility, and tend to ring-fence their economies from Wall Street operations. Of course, this remains work in progress.

Second, Rasmus adds China’s stimulus spending to the liquidity injections of western central banks. However, the bulk of China’s stimulus funding has been invested in the real economy of infrastructure, productive assets, and urbanization, which has led to overinvestment, but has next led to major initiatives of externalizing investment-led growth in new Silk Road projects in Asia and far beyond (One Belt, One Road, Maritime Silk Road, Asian Infrastructure Investment Bank, Silk Road Fund, etc.; Nederveen Pieterse, 2017). Even so, China also faces a huge debt overhang (Pettis, 2013, 2014).

It may be appropriate to add notes about the trend break of the Trump administration. First, a general ongoing shift from monetary to fiscal policies and the shift toward protectionism in advanced economies have been in motion regardless of the election of Trump. In the case of the United States, this includes rejection of the Trans-Pacific Partnership (TPP) as well as the Transatlantic Trade and Investment Partnership (TTIP). The Trump administration represents “a bonfire of certainties,” yet in macroeconomic policy in many respects the likely scenario is back to the old normal of supply-side economics and trickle down, the Reagan-era package. Deregulation now goes into overdrive. What institutional buffers there are to rein in banks, shadow banks, and corporations will shrink further. Those who advocate dismantling government agencies are appointed to head the agencies (such as labor, education, energy, environment, housing, and justice) to better implement deregulation from the inside. Corporate tax cuts come with attempts to bring back funds from overseas. American corporations are hoarding cash already and corporate tax cuts adding more will boost stock buybacks and chief executive officer stock options, but investment? The American middle class is shrinking, malls are closing, and department stores are downsizing. The Trump cabinet of billionaires, a return to the Gilded Age with generals for muscle, is an entrepreneurial state, not in an ordinary sense but the entrepreneurialism of plutocracy, the state apparatus placed in the service of capitalism with a big C. A no-pretense version of the anti-government ethos adopted since the Reagan administration (“get government off our backs”), anti-government government, gloves off. Pundits have sternly criticized emerging economies for disrupting the liberal international order, but now an American government changes the rules by sliding to transactional deal making. If the old problem was double standards, the new problem is no standards.

This is part of a slow deterioration of institutions that has been in motion since the Reagan era. A cover headline of the Economist is “The debasing of American politics” (2016), but it is the debasing of institutions that matters more. If market incentives lead and everything is for profit—health care, utilities, prisons, media, education, and warfare—institutions gradually decline, such is the logic of liberal market economies bereft of countervailing powers. Corporate media are a major factor in the decline of the public sphere. Part of the profile of emerging economies and developing countries is rickety institutions. Investigations and trials for corruption in several emerging economies indicate that norms and standards have been rising during recent years, while in the United States, the reverse is happening and the country may be slipping to emerging economy status. Several emerging economies no longer tolerate Big Boss behavior (e.g., South Korea, South Africa) while in the United States it becomes the new normal. Meanwhile, Rasmus has made a signal contribution to contemporary economics and provided a vitally important X-ray of the political economy of stagnation.


Blyth, M. Austerity: The History of a Dangerous Idea. New York, NY: Oxford University Press, 2013.

Cowen, T. The Great Stagnation. New York, NY: Dutton, 2011.

The Economist. “The Debasing of American Politics.” October 15–21, 2016.

El-Erian, M.A. The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse. New York, NY: Random House, 2016.

Galbraith, J.K. The End of Normal. New York, NY: Simon and Schuster, 2014.

Goetzmann, W.N. Money Changes Everything. Princeton, NJ: Princeton University Press, 2016.

Gordon, Robert J. 2016 The rise and fall of American growth. Princeton University Press

Harding, R. “Lagarde warns of ‘new mediocre’ era.” Financial Times, October 2, 2014.

Morath, E. “U.S. in Weakest Recovery Since ‘49.” Wall Street Journal, July 30–31, 2016.

Nederveen Pieterse, J.
Multipolar Globalization: Emerging Economies and Development. London, UK: Routledge, 2017.

Pettis, M. Avoiding the Fall: China’s Economic Restructuring. Washington, DC: Carnegie Endowment for International Peace, 2013.

———. The Great Rebalancing. Princeton, NJ: Princeton University Press, 2014.

Sender, H. “Short-term Relief for Hedge Funds Belies Tough Search for Yield.”
Financial Times, July 12, 2016.

Sinn, H.-W. “Secular Stagnation or Self-inflicted Malaise?.” Project Syndicate, September 27, 2016.

Summers, L. “Why Stagnation Might Prove to Be the New Normal.”
Financial Times, December 15, 2013.

Wolf, M. “An End to Facile Optimism About the Future.”
Financial Times, July 13, 2016.

Jan Nederveen Pieterse
University of California, Santa Barbara, Global Studies

Here’s my in depth analysis of the latest iteration of the Trump tax plan as it was defined in the US House of Representatives version this past week. (listen to my Alternative Visions radio show tomorrow, friday, Nov. 10, at 2pm eastern time, for my initial take on the emerging US Senate version and changes, at http://prn.fm/?s=Alternative+Visions)

The Trump-US House of Representatives $4.6 Trillion Tax Cut–Who Pays?
by Dr. Jack Rasmus, copyright 2017

“Last month Trump and released his initial proposals for cutting taxes on the rich. The proposals were developed behind closed doors by his key economic policy makers, Steve Mnuchin, Treasury Secretary, and Gary Cohn, director of the Trump Economic Council—both former senior managers of the Goldman Sachs investment bank. (see my prior article this blog, ‘The Trump-Goldman Sachs Tax Cut for the Rich’).

The initial Trump-Goldman Sachs proposal defined only the broad outlines of the Trump tax plan, but still clearly benefiting the wealthy and their businesses. But the proposal said little how the multi-trillion dollar handout would be paid for. This past week the tax plan was further revised and clarified by the Republican run US House of Representatives.

The Trump-Goldman Sachs-Paul Ryan Tax Plan

The Trump-Goldman Sachs proposals have been melded with tax cuts proposed by US House speaker, Paul Ryan, who has led the effort for years to use the tax system to transfer wealth to the rich and their corporations. This past week’s Trump-Ryan proposals now clarify further ‘who pays’—i.e. mostly the middle class and especially working class households earning less than $50,000 annual income.

How exactly are they paying, in this latest iteration of the tax cuts and income transfer for the rich that’s been going on since Reagan in the 1980s, accelerating under both George W. Bush and Barack Obama?

The Trump-Republican latest iteration of the tax handouts will cost about $1.5 trillion, according to the Trump administration. That’s what they say it will cost the federal government budget deficit and thus will add to the federal debt. But the total tax cuts are actually around $4.5 trillion. The $1.5 trillion number is only the estimated final impact of the cuts on federal budget deficits. By Congressional rules, if the Trump-Ryan version can keep the budget impact to $1.5 trillion, it needs only 50% votes (plus one) in Congress to pass; but if the hit to the deficit is more than $1.5 trillion, it takes 60%.

The $2.6 Trillion Corporate-Business Tax Cuts

It’s estimated the corporate tax cut measure in the Trump-Ryan bill alone—cutting the nominal tax rate from current 35% to 20% and the corporate Alternate Minimum Tax–will together reduce tax revenue and raise deficits by $1.5 trillion, according to the Congress Joint Committee on Taxation. But that’s only the beginning of the total tax cuts to businesses. That’s just for corporate businesses, and just one of the several big corporate tax cut windfalls in the plan.

There are tax reductions for non-corporate businesses as well. By reducing the nominal tax rate for non-corporate businesses from 39.6% to 25% (affecting what’s called ‘pass through business income’) the result, according to the Joint Committee on Taxation, is an additional $448 billion tax reduction for businesses that are proprietorships, partnerships, S corporations, and other non-traditional corporations. And this cut goes to the wealthiest, high end of non-corporate companies. Small businesses (mom and pop businesses) whose owners earn less than $260,000 a year would see nothing of this proposed ‘pass through’ reduction. Half of all ‘pass through’ business income is earned by the wealthiest 1% non-corporate businesses.

Back to the corporate tax cutting, then there’s the daddy of all big corporate tax cuts for US multinational corporations. Trump, Ryan and other business interests claim that US multinationals—i.e. Apple, Google, big Pharma companies, global banks, oil companies and their ilk—pay the highest corporate taxes in the world and therefore cannot compete with their offshore counterparts in Europe, Asia and elsewhere. But that’s a lie. Studies have shown that US MNCs pay an effective tax rate (i.e. actual and not just ‘on paper’ nominal rate) of only 12.5%. Add to that 12.5% a mere 2-4% additional tax they pay in offshore countries, and another 2% or so they pay to US States with corporate income tax laws, and the true, total global tax rate is around 17%–not 35%.

US MNC’s currently hoard at least $2.4 trillion in their offshore subsidiaries (what they publicly admit to) that they have been refusing pay taxes on for years. Apple Corp., one of the worst tax avoiders, currently has $268 billion in cash; 95% of that $268 billion is stashed away in its offshore subsidiaries in order to avoid paying US corporate taxes. That’s just the legally admitted number. No one knows how much Apple, other MNCs, and wealthy individual investors sock away in offshore tax havens and shelters in order to avoid even reporting, let alone paying, taxes on.

The Trump-Ryan plan for this $2.4 trillion tax avoided money hoard is to cut the tax rate for cash held offshore from 35% to 12%. But that 12% is really 5%, since the 12% applies only to cash offshore; other forms of corporate ‘liquid’ assets are taxed at only 5%. That means it will be easy for corporations like Apple to ‘game’ the system by temporarily converting cash to liquid assets and then back again after the lower 5% rate is paid. They’ll pay 5%, not the 10%. Another measure calls for a 10% tax on future profits earned, but only on ‘excess offshore profits’ held by subsidiaries. If it’s not ‘excess profits’, then the tax rate is 0%. Just the latter measure, referred to as the ‘territorial tax’, is estimated to reduce MNC’s taxes by $207 billion.

A variation of this very same tax shell game was played previously, in 2005. Under George W. Bush, US multinational corporations were hoarding about $700 billion offshore by 2005. They were given a special ‘one time’ deal of a 5.25% tax rate if they brought the money back to the US and reinvested it in jobs. They brought about half of the $700 billion back—but didn’t reinvest in production. Instead they used it to buy back stock and pay more dividends that didn’t produce any jobs, and finance mergers and acquisitions of their competitors which actually reduced jobs. US MNCs got away with a 35% to 5.25% tax cut in 2005, so they began repeating the practice of shifting US profits to their offshore subsidiaries immediately after once again in order to avoid paying taxes. Now Congress is cutting them a similar deal—i.e. for a second time while calling it once again, as in 2005, a ‘one time’ deal. This so-called ‘repatriation tax’ measure results in is an incentive to shift even more production and operations to offshore subsidiaries, which reduces jobs in the US even further.

All this amounts to a total tax cut windfall for US multinational corporations of at least $500 billion, and likely even hundreds of billions of dollars more over the coming decade.

And there’s still more, however, for corporations in the Trump-Ryan plan. The tax plan’s ‘depreciation’ provision, which is another name for tax cuts for investment, are also liberalized to the tune of $41 billion new tax cuts. Companies can deduct from their tax bill the cost of all the new equipment they buy in the same year. And they can do that for the next five years. As that paragon advocate of economic justice, Larry Summers, former champion of bank deregulation, recently admitted recently in the business daily, Financial Times: “Effective tax rates on new investment is reduced to zero or less, before even considering the corporate rate reduction.” And there’s another roughly $50 billion in miscellaneous business tax cuts involving limits on business expensing and other provisions.

How Trump Personally Benefits

The commercial real estate industry—i.e. where Trump made his billions and continues to do so—gets a particularly sweet deal. It is exempt from any cap the Trump plan places on its deduction of business expenses. Commercial real estate companies are also allowed to continue deferring taxes when they exchange properties. And the industry’s numerous tax loopholes remain unchanged in the Trump-Ryan bill. Yet Trump himself says he will not benefit personally from the tax proposals—even though the tax returns he released for one year back before 2005 show his company realized billions in tax relief from the special loopholes enjoyed by the commercial real estate industry. And Trump himself paid $35 million in the corporate AMT, which is now projected to go away as well.

In summary, there’s at least $2.6 trillion in total corporate-business tax cuts in the Trump-Ryan plan. That’s well above the $1.5 trillion limit mandated by Congressional rules, however. And the $2.6 trillion does not include personal income tax reduction for wealthy households and investors. The corporate-business tax cuts alone amount to almost twice the $1.5 trillion allowed by Congressional rules. But the personal income tax cuts for the wealthy will cost another minimum $2 trillion, just for changes in top personal income tax rates and for limiting, then ending, the Alternative Minimum Tax and the Inheritance Tax. That’s $4.6 trillion and three times the $1.5 trillion!

The Personal Income Tax Cuts for the Wealthy

While personal income taxes will rise for the middle and working classes to cover the tax cuts for business, the hikes will also have to cover simultaneous tax cuts for wealthy individuals, 1% households, and investors. There are three big ways wealthy individuals and investors get tax cuts in their personal income tax in the Trump-Ryan bill: (1) reducing of personal tax brackets and lowering of rates; (2) reducing and then eliminating altogether the Alternative Minimum Tax (AMT); and (3) exempting and then ending the Inheritance (Estate) tax.

The top personal tax rate is currently 39.6%. The cutoff occurs for those earning $466,000 a year or more. They pay the 39.6%. But many more now will not under the bill. The Trump-Ryan bill raises the threshold at which they pay the 39.6% to $1 million. Those now earning between $466,000 and $1 million will now pay a lower rate of 33%. Those previously paying 33% are now reduced to 25%. Those at 25%–i.e. the middle class—stay at 25% and thus get no cut. So the personal tax rate on the middle class rate is not reduced, but the higher income levels are significantly reduced. The total tax cut from lower tax brackets for the wealthy has been estimated at $1.1 trillion, according to the Congress’s Joint Committee on Taxation.

The Inheritance, or Estate, tax is paid by only 0.2% of households. Nonetheless, the exemption will double from the first $5.5 million value of the estate to $11 million per person. And it will be completely repealed by 2024. The gift tax, through which the wealthy pass on much of their estates before dying, will also enjoy a $10 million exemption. That all amounts to a $172 billion tax cut for the 1% wealthiest households.

The other ‘biggie’ tax cut for the rich is the reduction and subsequent elimination of the Alternative Minimum Tax, AMT. This was designed to get the rich to pay something in taxes, after they exploited all their available tax loopholes and/or stashed their money offshore in tax shelters and havens, both legally and illegally. (Note: the just released so-called ‘Paradise Papers’, show how much and where they hide their wealth offshore to avoid taxes—from Queen Elizabeth of Britain to entertainment celebrities like Madonna, Bono, and a long list). 60% of the AMT is paid by individuals earning more than $500,000 a year, and another 20% by those earning adjusted income of more than $200,000. The AMT measures in the Trump-Ryan bill will amount to a $696 billion tax cut for the wealthy, according to estimates by the Joint Committee of Congress last week. And that’s not even counting the changes to the AMT paid by businesses as well.

Just the ‘big 3’ personal income tax cuts amount to nearly $2 trillion in total reductions. Add to that the estimated additional $2.5 trillion in corporate-business tax cuts and the total is $4.5 trillion—not the $1.5 or even $1.75 trillion currently referred to in the business and mainstream media.

How the Middle and Working Classes Pay for it All

Personal Exemptions and Standard Deductions

The personal exemption for a family of four current reduces taxable income by $16,600 a year. This is ended under Trump-Ryan and replaced with an increase in the Standard Deduction, from current $13,000 a year to $24,400. So the Standard Deduction rises by $11,400 but is less than $16,600. So the net result is an increase in $5,200 in taxable income for a family of four.

The increase is even greater for a family of four that itemizes its deductions. For total itemization of $15,000, they will find their taxable income increasing by $7,200 a year. These gaps will also rise over the 10 year period and result in even higher taxes over time.

Repeal and changes to the Personal exemption and Standard deductions amount to a $1.6 trillion tax hike.

Elimination of Itemized Deductions

Nearly half of all tax filers with annual income between $50,000 and $75,000—i.e. the core of the middle and working classes—currently itemize deductions to reduce their total taxable income and taxes paid. So it’s not true that only the rich itemize. And here is where the Trump-Ryan tax proposals take their biggest whack at the middle class.

-All State and Local income tax deductions are ended under the Trump plan. That’s a roughly $186 billion tax hike—a measure that will mostly hit ‘blue’ Democratic states where state income taxes exist. Contrary to Trump-Ryan propaganda, only 27% of state-local tax deduction is claimed by the wealthiest 1% households. The majority of the deduction is by the middle class.

-Limits on the property tax deduction will result in a further tens of $billions of tax hikes. Limits on this deduction will also reduce property values and thus have a negative wealth effect on middle class homeowners—especially in the ‘blue’ coastal states where home prices are highest.

-Deductible interest on first mortgages are reduced by half. This will reduce new home construction, and result in an indirect effect of escalating apartment rental costs, reducing middle and working class real incomes.

-Ending the extraordinary medical expenses deduction will hike taxes by $182 billion. These expenses are incurred by families with extraordinary medical expenses, as health insurance coverage pays less and less of such coverage. Previously they could deduct up to 10% of their income. This is now ended.
Expenses formerly deducted for personal casualty losses, un-reimbursed employment expenses for teachers, alimony, moving to a new job expenses, equity home loans interest, are all totally eliminated under the Trump-Ryan plan.

Limits and elimination of deductions are estimated at a tax hike of another $1.3 trillion, according to the Joint Committee on Taxation.

That’s $2.9 trillion to offset the $4.6 trillion in tax cuts for corporations, businesses, and the wealthiest households!

In addition are further miscellaneous tax hikes on the Middle Class in the following ways:

• Alternative Energy Credits

Current credits for installing solar and other alternative energy end, raising taxes by $12.3 billion.

• Adoption Credits

Credits for families adopting children end, raising taxes of $3.8 billion

• Flexible Health Savings Accounts and Elderly Dependents Expenses

Currently, workers may reduce taxes from gross wages by setting aside some income in a flexible health savings account. Business also enjoy a tax deduction for payments they make into health insurance plans and pensions. The total amounts to $540 billion a year. Businesses can continue their tax deduction for health payments, but workers will not. Nor may they deduct expenses for elderly dependents’ care. Their costs also tens of billions of dollars.

• Education Credits

Students and colleges take a big hit under the Trump-Ryan plan. Several education credit programs are ended, leaving one education credit. The result is a cut and tax hike of $17 billion. Student loan interest deductions are also ended, costing $13 billion. Companies that assisted higher education programs for employees with $5,250 tax free tuition aid for employee and company are ended; now they are taxable. May companies will now reduce their tuition assistance programs. Education tuition costs deductions for low income households are ended. So are tax free interest higher education savings bonds and savings accounts. It’s a total tax hike of $65 to $95 billion over the decade.

• New Price Index and Reduced EITC

The Trump-Ryan bill brags that it reduces taxes for the near and working poor who now pay an income tax rate of 15% and 10%, by consolidating the two brackets to a combined 12% rate. The former 10% group will of course get a 2% tax hike. But the increase in the income limit at which taxes are paid, from current $12,000 to $24,000, will offset this hike, according to Trump-Ryan. But the plan’s shift to a new, lower consumer price index will reduce the amount increasingly over time the working poor may claim tax reimbursement under the Earned Income Tax Credit, EITC. And it’s highly likely in any final bill that the $24,000 will be significantly reduced.

The foregoing is just a short list of the many ways the middle and working classes will pay for the Trump-Ryan tax bill. We’re talking about approximately $3.5 trillion in tax hikes in the Trump-Ryan bill negatively affecting mostly middle and working class households.

Closing 3 Big Capital Income Tax Loopholes

If Trump-Ryan really wanted to raise taxes, instead of targeting the middle class, they could have easily raised $2 trillion by ending just two other programs: Eliminating the preferential tax rate for long term capital gains taxation, which would bring in $1.34 trillion by 2024; and ending the practice of foregoing all taxation on stocks transferred at death, for which recipients of the stock pay no taxes whatsoever. That would generate another $644 billion. That’s $2 trillion.

Another at least $2.5 trillion could be raised by ending corporate tax deductions for payments into company pension and health insurance plans. Workers don’t get to deduct their contributions to these plans. Why should employers?

In other words, just three measures alone targeting corporate and capital incomes would raise $4.5 trillion in tax income over the coming decade. The three could pay for all the corporate-business-wealthiest 1% tax cuts in the Trump-Ryan bill, without raising any taxes on the middle and working classes! But that’s targeting capital incomes of the rich and their corporations, and politicians elected and paid for by the same won’t ‘bite the hand that feeds them’, as they say.

Concluding Comments

My prediction is that the Senate version, and final joint House-Senate version, of the bill that will now follow in coming weeks will have to pare down the tax cuts for wealthy individuals and raise some more the tax hikes on the middle class. Cutting the corporate tax rate is the priority for the Trump administration. After that ensuring US Multinational corporations get to shield even more of their profits from taxation. Congress will take it out of the personal income tax provisions which will be scaled back from the current Trump-Ryan proposals. Tax breaks for wealthy individuals will be softened, and new ways to quietly raise taxes on the middle class households may be found.

But the main solution will be to offset the more than $1.5 trillion net tax breaks with more spending cuts on social programs. In 2011 Congress and Obama cut spending by $1 trillion on education, health, transport, etc. Another $500 billion was cut in 2013. They will therefore try to repeat the ‘fiscal austerity’ solution to enable tax cutting for corporations. But that’s not new. The process of spending cuts to finance corporate-wealthy tax cuts has been going on since Ronald Reagan. It’s one of the main causes of the growing income inequality in the US that is the hallmark of Neoliberal policy since the 1980s.

The Trump-Ryan proposals are just the latest iteration of Neoliberal fiscal policy that has been making the rich richer, while destroying the economic and social base of the USA. Neoliberal policies associated with tax and spending programs, free money for bankers and investors provided by the central bank (the Federal Reserve), industrial policy deregulating everything and destroying unions, and trade policy enabling offshoring of production and jobs and free re-entry of US goods produced overseas back to the US (aka free trade) have been together ripping a gaping and ever-growing hole in the social fabric of the country. That has in turn been giving rise to ever more desperate radical right wing politics and solutions—i.e. the political consequences of the Neoliberal economic policies.”

Dr. Jack Rasmus is author of ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, and ‘Systemic Fragility in the Global Economy’ and ‘Looting Greece’, also by Clarity Press, 2016. He blogs at jackrasmus.com and his website is http://www.kyklosproductions.com and twitter handle, @drjackrasmus.

To listen to my detailed analysis of the US House of Representatives’ just announced tax bill this past week,



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Dr. Rasmus dissects the just announced US House of Representatives’ version of the Trump Tax Cuts. The ‘tax cut shell game’ is explained. The main elements of the business tax cuts under the House proposal are described, including corporate rate, virtual ending of US multinational offshore taxation, retention of carried interest, inversions, and other business deduction tax loopholes. Personal income tax cuts targeting high end brackets, the AMT, Estate Tax, personal exemptions, carried interest and standard deductions provisions are reviewed. How middle class households will pay for the corporate and high income household cuts are explained, including deductions elimination, elimination of credits, and coming cuts in healthcare (medicare-medicaid), food stamps, education, etc. to pay for it. House claims of $1.5 trillion hit to the budget is really at least twice that amount. Discussion concludes with a critique of the ideological themes used by Trump/House (and ever since Reagan) to justify the cuts and sell them to the country: including the supply side economic nonsense that tax cuts create jobs, that they will be passed on to workers to raise wages, and will lead to greater economic growth and tax revenues, that US business pays the highest taxes in the world and can’t compete, and that the measures proposed amount to a ‘tax code reform’, not another tax cut for the rich and their businesses. (Next week: how Trump’s appointment of Powell means no change of the Fed’s policy of providing virtually free money to bankers and investors, and a continued subsidization of the banking system by the State).

The past year the US and global ‘real’ economies have enjoyed a moderate recovery. Much of that has been due to China stimulating its economy to ensure real growth in anticipation of the Communist Party’s convention, which has just ended. China’s president Xi and central bank (Peoples Bank of China) chair, Zhou, have announced, post-convention, that China’s real growth will slow and have warned a global ‘Minsky Moment’ (i.e. financial crisis) may be brewing. China will now try, once again, to tame its shadow bankers and speculators who have been feeding China’s debt and bubbles, and prepare for the global financial instability that is brewing.

The global financial bubbles–in stocks, bonds, currencies (crypto and real), derivatives, real estate, etc.– have been fueled since 2008 by capitalist central banks–led by the US Federal Reserve and followed even more aggressively by the European Central Bank and Bank of Japan. Central bank ‘free’ money has boosted stock and other financial asset prices into bubble territory and produced historic capital gains profits for corporations, professional investors, and the wealthiest 1% households in the US and worldwide. The world’s approximately 1500 billionaires’ wealth now totals more than $6 trillion–and that is only the officially admitted figure. More is not accounted for in the dozens of tax havens worldwide in which they park their money away from public and tax collectors’ view. US and other governments meanwhile are feverishly trying to pass even more tax cuts for billionaires and multi-millionaires, so they can keep even more $ trillions for themselves. Financial speculation has become the primary means by which the super-rich enrich themselves even more–with the help of central bankers and their paid-for Congressional government tax cutters.

Central banks have enabled their wealth acceleration by providing virtually free money for them to invest in financial markets through borrowing (debt) and leverage. Government tax cutters also let them keep more and more of the free money, profits, and their financial capital gains. Financial bubbles are the consequence. More and more financial writers have begun lately to write articles in the mainstream business press forewarning of the growing bubbles that are the engines of the the super-rich wealth acceleration.

The central banks and their policy of free money have created their own contradictions however. They have enriched the rich as never before, but in so doing have enabled and fueled the bubbles that threaten it all. After 8 years of pumping free money into private banks, corporations, and investors, the US central bank has this past year begun a desperate effort to raise interest rates and try to slow the flow of liquidity from the ‘free money firehose’ since 2008 that have produced a tripling of corporate profits, a quadrupling of US stock prices, bitcoin and crypto-currency bubbles, and $6 trillion of corporate bond debt issuance, much of which has been passed on to shareholders in dividend and stock buyback payouts. But the massive money and capital income growth has also produced financial asset bubbles that are now growing alarmingly as well. So the Fed over the past year has tried to raise interest rates a little to slow down the bubbles. It will be too little, however, as I have argued elsewhere that the Fed cannot raise rates much higher without precipitating a financial credit crunch that will generate the next recession. So the Fed talks tough on rates but does very little. The central banks of Europe and Japan do even less. Global banks and investors are addicted to the free money from the central banks and that policy will change little apart from token adjustments and talk.

The Fed’s (and all central banks’) dilemma is that raising rates and selling off its balance sheet (that will also raise rates) will cause the dollar to rise in global markets, cause in turn currency collapse in emerging markets that will sharply reduce US multinational corporations’ profits offshore. The Fed will not jeopardize US multinational corporations’ offshore profits therefore by raising rates too much. Higher rates will also shut down the US construction sector, already weak (new residential housing is declining), and reduce US consumption spending that is also barely growing, as it is based on debt and savings reductions instead of real wage growth. So the Fed is engaged in a charade of raising rates. And whomever Trump reappoints to the Fed chair after Janet Yellen won’t matter. The same free money policies will continue. For the system is addicted to free money and low rates for years to come–and that will continue feeding financial bubbles.

The Fed, like all central banks today, has become an institution whose main task is to continue subsidizing capital and capital incomes. As the Fed raises rates tokenly, other State institutions (Congress, Presidency) are also embarking on massive tax cuts for corporations and investors to offset the moderate hikes in interest rates coming from the Fed. More than $10 trillion in corporate-investor tax cuts occurred under Bush-Obama. Trillions $ more is coming under Trump.

In the 21st century, advanced capitalist economies are increasingly being subsidized by their states–monetarily by their central banks with free money and fiscally by their governments with more and more tax cuts for corporations and investors. Via both central banks and legislatures, the State is increasingly engaged in reducing capital costs and thus subsidizing capital incomes. This is the primary emphasis of ‘neoliberal’ policy in the 21st century capitalist economy.

The weaker capitalist sectors–Europe and Japan–are engaged in even more aggressive central bank free money provisioning. Europe’s central bank has just announced a ‘sleight of hand’, fake change in monetary policy: reducing its monthly free money injection (which has been benefiting mostly going to Germany and France bankers and corporations), while extending the period over which it will continue its program. It will provide less per month but for longer. Just moving the money around, as they say. Not really reducing anything.

The Bank of Japan has been even more generous to its bankers, investors and businesses. The Bank of Japan has refused to engage in a free money/higher rates charade (US) or language manipulation to fake a reduction in the free money flow (Europe). Japan’s central bank has announced it will continue buying and subsidizing corporate bonds, private stocks, and other financial assets, at an historic pace, thus contributing to propping up financial markets with no end in sight. Not suprisingly, Japan stock and financial markets are also on a tear, rising to levels not seen in 20 years. Similarly, financial asset markets have begun to escalate as well in Europe.

As I have indicated in my just released book, ‘Central Bankers at the End of Their Rope'(see book icon on this blog, jackrasmus.com, and the several book reviews), capitalist central banks are the original primary culprits of the free money policies adopted by all advanced capitalist economies–a policy that has been fueling debt and leverage, and stoking financial asset markets now entering bubble territory once again–i.e. creating the ‘Minsky Moment’ of financial instability about which China’s PBOC central bank chair, Zhou, has just forewarned.

Two big decisions will occur in the US in the first week of November: Trump will announce his new nominee for the chair of the US Federal Reserve Bank and the right wing-dominated US House of Representatives will define the Trump corporate-investor tax cuts further.

But whoever leads the Fed, there will be no real change in policy set in motion decades ago by Greenspan, continued by his protege, Ben Bernanke, and extended by Janet Yellen. Free money will continue to flow from the Fed (and even more freely from the central banks of Europe and Japan). Whether Powell, Taylor, Cohn or whoever are appointed, the policy of free money will continue. Rates will not be allowed to rise much. The private bankers and investors want it that way. And their ‘bought and paid for’ politicians will ensure it continues. Meanwhile, the Trump tax cuts will additionally subsidize corporations and investors at an even greater rate with Trump’s multi-trillion tax cuts. The Trump tax cuts (which follow more than $10 trillion under Obama and Bush) will enable US Corporations to continue paying record dividends and stock buybacks to enrich their shareholders. The $6 trillion in dividends and stock buybacks since 2010 will be exceeded by even trillions more. Income inequality trends in the US will therefore continue to accelerate unabated.

It is true the global economy has ‘enjoyed’ a brief and mild growth spurt in 2017, as noted previously. That growth has been driven by China’s stimulus and by US business inventory investing in anticipations of Trump tax and other deregulation (also cost reduction) policy driven changes. But the growth of the summer of 2017 will soon slow significantly. Now China will purposely slow, as policy shifts to rein in its own financial bubbles and in part prepare for a global ‘Minsky Moment’ crisis that is coming.

Meanwhile, the Trump bump in US economic growth will also fade in 2018, driven up until now largely by inventory investing by business that won’t be realized in sales and revenue in 2018. Working-middle class household consumption has been based on debt and savings reduction instead of real wage income recovery this past year. That is not a basis for longer term growth. Household consumption cannot be sustained. US autos and housing are already fading. Simultaneously, escalating costs of healthcare insurance premiums will cut deeply into consumer spending in 2018 as well. And government spending, now stagnant, will also slow, as Congress cuts social programs in order to offset deficits created by the massive tax cuts for corporations and investors.

In Europe, political instability forces will keep a lid on economic recovery there (a ‘hard’ Brexit looking increasingly likely, Catalonia independence uncertainty, new breakaway regions in Italy soon also voting for independence, the rise of right wing governments in eastern europe, etc.). In Japan, business interests will continue to ignore prime minister Abe pleas to raise wages, as they have for years, while Japan gives the green light to become the global financial center for crypto-currency speculative investing.

Consequently, odds are rising there will be a recession in the US, and globally, by late 2018 or early 2019. That will likely be accompanied soon, before or after, by a new ‘Minsky Moment’ of financial instability that will exacerbate the real economic downturn.

In recent weeks, as host of my Alternative Visions radio show on the Progressive Radio Network, I have been focusing discussion on the growing financial bubbles and instability in the US and global economy that has been growing beneath the surface. I’ve also been dissecting the fundamental weaknesses in the US real economy that have gone unnoticed (or noted) by the mainstream press and economics establishment. The US real economy is thus no where as healthy as the 3% official GDP growth rates maintain. It can slow rapidly even in terms of official GDP numbers once it becomes clear that Trump tax cuts won’t create jobs or wage growth, and that tax cut driven deficits will mean no meaningful infrastructure fiscal spending by Congress.

The following, most recent of my Alternative Visions radio show, of October 27, 2017, thus addresses further these various preceding themes (as did my prior radio shows did in October). To listen to the show(s)



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Alternative Visions -China Shifts Course As Global ‘Minsky Moment’ Grows -10.27.17

Oct 27th, 2017 by progressiveradionetwork

Statements by President Xi and China central bank chair, Zhou, indicate China is about to shift economic focus again to attack financial speculators and shadow bankers and allow its real economy growth to slow as it does so. What does this mean for global real economic growth? Dr. Rasmus reviews today’s 3rd Quarter US GDP announcement, and why it reflects conditions in business investment, household consumption, and government spending that are weak. Why US GDP stats overestimate summer quarters and underestimate winter quarter growth. China’s PBOC Zhou warns of a growing ‘Minsky Moment’. What it means for China, and US stock-crypto-junk bond bubbles that continue to grow. Rasmus reviews last week’s decisions by the European Central Bank for a token reduction in QE and free money. Bank of Japan keeps its QE going. Why 21sts century capital is increasingly being subsidized by the State—with free money by central banks and more tax cuts for corporations and investors. (Next week: The US Congress further defines the Trump Tax Cuts).

Recent posts on this blog addressed the anniversary of the Greek Debt crisis of 2015. Since the posting, the Syriza government’s president, Alexis Tsipras, has been making a tour, hat in hand, to the IMF, heads of the big Eurozone states, and just last week, Donald Trump. Tsipras is no doubt seeking new private bank loans, with which to pay the interest on the Troika government loans Greece accumulated since 2009. Instead of getting debt relief and lifting of the severe austerity imposed on Greece, as Tsipras and Syriza promised when coming to office in January 2015, now they seek to become further indebted to private bankers once again to make payments to the Troika (which then distributed 95% of the money to the private bankers. It’s further debt (and austerity) for Greece, this time only without the ‘middleman’ Troika.

Readers of this blog have found my earlier posting on Greek debt of interest–an excerpt from the concluding chapter of the book–that argued this arrangement between the State and bankers imposing austerity on smaller economies like Greece represents a new form of ‘financial imperialism’, since imperialist wealth extraction now in the 21st century increasingly takes a form mediated by debt managed by the State apparatuses.

What follows is a review of the book, ‘Looting Greece’, now on Amazon by one of Amazon’s ‘Top 500’ reviewers, Graham Seibert. (Who by the way recently also reviewed my ‘Central Bankers at the End of the Rope’ book as well).

The themes of the two books–‘Central Bankers at the End of Their Ropes’ and ‘Looting Greece’ are of course related: The central banks create the credit for the private banks to lend to smaller economies in order to get them ‘hooked’ and indebted in the first place. The central bank (i.e. the European Central Bank in the case of Greece), along with other supra-government agencies (e.g. European Commission and IMF), then impose austerity on the smaller country in order to extract wealth to pay the interest on the debt, which is ultimately redistributed to the private banks of the larger economies (e.g. Germany and northern Europe).

Here’s Seibert’s Review of ‘Looting Greece’. He also appends to the review some of the more succinct quotes from my book that explain how financial imperialism in the 21st century is an essential element of ‘Neoliberalism’.

Review of ‘Looting Greece:
A New Financial Imperialism Emerges’,
by Dr. Jack Rasmus, Clarity Press, October 2016

By Graham H. Seibert,

October 20, 2017

“Opinion has long been divided on the organs of the so-called New World Order. The Panglossians maintain that all is for the best in the best of all possible worlds. The International Monetary Fund, the World Bank, the WTO and the other organizations put in place by the developed countries of the world are overall a good thing. They believe the best about the governments that founded them. The United States is a City on a Hill whose Constitution and institutions provide an example for the world. They further believe that the European Union was conceived by selfless geniuses like Jean Monnet and Robert Schuman in order to prevent conflicts on the European continent in perpetuity.

Others take a darker view. They believe that the world is run by moneyed interests, interests that are best represented by the world’s central banking community. Jack Rasmus’most recent book, Central Bankers at the End of their Rope provides an evenhanded account of the situation in which the central bankers find themselves today and a history of how they got there.

Rasmus’ thesis in this book echoes that of former Greek finance member Yannis Varoufakis in his book Adults in the Room, that social democracy in Europe is a dead letter. It has been replaced by neoliberalism and policies that enable economic exploitation of the weaker by the stronger. This book is a good companion to Varoufakis’. Rasmus sees and identifies Varoufakis flaws and naïveté as of finance Minister, but has to agree with his bigger thesis that Greece is the victim of financial manipulation by the more powerful countries of Europe, chief among them Germany.

Rasmus’ book is thorough, covering the events from beginning to end, and as such it becomes a bit tedious to read. It seems to be a litany of the same players repeating the same deceits, bluffs, con games, and mistakes again and again over the period from the time that Greece’s problems were first recognized, about 2008, up to the present.

The short story is this. Greece had no business entering the Euro in the first place. It did not meet the criteria for membership when it began back in 1999. It has always been genially corrupt and undisciplined. It is the kind of country the bankers should be leery of.

However, once it entered the Euro, the bankers were happy to accommodate the Greeks appetite for borrowing. They were fairly sure that Greece’s membership in the European community was sufficient to back them up when they went to collect. Greek businesses made extensive borrowing for capital investment and Greek consumers borrowed to buy German consumer goodies like Mercedes. The Greek government, already running a national debt about 100% of GDP, did not actually borrow all that much more.

The problem came with the crisis of 2008. Greece’s private borrowers could not service their debt. The northern European creditors lumbered the Greek government into taking responsibility for the private debt that had been run up through Greek banks. Once they did this, Greece had no escape. The northern creditors forced new loans on Greece in order to pay back the old loans. They would not allow Greece to default – though there was one haircut along the line. The result was that Greece is always had more debt than it could service, the growth projections used to justify the new loans have never materialized, and Greece keeps getting deeper and deeper into debt.

To put it succinctly, the northern Europeans are like Mafia loan sharks or payday lenders, unwilling to let their victim off the hook. If they were to show any mercy for Greece, they would have to turn around and do the same for the other broke Southern tier countries such as Portugal, Spain, Cyprus, Italy, and even France. The European troika (IMF, European Commission [of finance ministers], and European Central Bank) cannot afford to let them off the hook. They also cannot afford to be honest about that fact. Rasmus’ most serious indictments is that Prime Minister Alex Tsirpas and finance minister Yannis Varoufakis were incredibly naïve about the northern Europeans’ supposed commitment to social democracy and even their freedom to negotiate.

Greece’s situation is unique mainly in that it cannot easily extricate itself from the Euro. It does not belong, but getting out will be incredibly difficult. Aside from that, the Greek situation has quite a bit in common with other serial deadbeat nations such as Argentina, the Andean nations, and most of Africa. These countries all get in trouble through excess debt. Many authors contend that they are conned into assuming debt that they cannot service. See Hoodwinked: An Economic Hit Man Reveals Why the World Financial Markets Imploded. What I have seen of the World Bank and the IMF in Argentina, Central America and now Ukraine leads me to believe the substance of these claims.

My counsel to my Ukrainian friends, especially upon reading Rasmus’ two books, is not to take money from smiling briefcase-toting European bankers. It will end badly. There is money enough in Ukraine if and when the country reforms itself enough to oblige the oligarchs to pay taxes or convince the oligarchs to buy bonds for infrastructure in the country. If they cannot reform themselves to make this happen, they have no business borrowing abroad and committing future generations to pay back money that will only be stolen by the current generation of oligarchs.

As you will note in the quotes below, the book has something of a Marxist flavor. Rasmus quotes Marxist economists rather extensively and uses something of a Marxist vocabulary. However, he comes across as clear thinking and non-dogmatic. He has an endorsement from Paul Craig Roberts, a Reagan guy.

That’s the end of the review. A five-star effort. Here follow some very useful, informative quotes, and Rasmus’ own, highly detailed, table of contents.


“Placed in context, the debt crisis at a deeper historical level reveals the limits and instability of the Euro form of Neoliberalism—i.e. what might be called a ‘weak form’ of Neoliberalism. Secondly, the Greek debt crisis shows that Euro Neoliberalism is fundamentally incompatible with classical European Social Democracy and economic policies and programs associated with social democracy. Proposing an incremental return to social democratic policies and programs as an immediate and coexisting solution to Neoliberal policies and programs is a contradiction in terms. The two cannot coexist. They represent a zero sum game. Third, the policies and processes evolved to address Greek debt, its deepening accumulation and its ostensible recuperation reflect the development of a new form of imperialism and colonialism that is taking root in Greece, which is a portent of things likely to come elsewhere wherever smaller states and economies choose to integrate themselves deeply in terms of trade and money capital flows with larger capitalist economies. ”

“Greek Debt Crises and ‘Weak Form’ Euro-Neoliberalism

“The Greek debt crisis is a reflection of the ‘weak form’ that Neoliberalism has assumed in the Eurozone. Before explaining how Euro-Neoliberalism represents a peculiar ‘weak form’, and how that differs from the stronger forms of Neoliberalism introduced by both the USA and UK, it’s necessary to describe the major characteristics of Neoliberalism in general. From there, an explanation of how Euro Neoliberalism differs—i.e. is weaker—may be offered. And thereafter an explanation may follow describing how that weak form has resulted in the especially excessive debt accumulation and the repeated debt crises in the case of Greece.

“Neoliberalism represents a fundamental restructuring of capitalist economic relations, implemented by leading capitalist economies in response to the general crisis of capital that emerged globally in the 1970s. At that time real investment and trade had begun to stagnate. The international monetary system based on the 1944 Bretton Woods agreement had collapsed. Productivity was stagnant and the growth period from 1946 to 1973 had passed. Both inflation and unemployment were rising. The working classes, their unions and parties were challenging capitalist ruling elites on various economic and political fronts. Non-capitalist states were making inroads on key resource markets and creating alliances in Asia, Africa, and Latin America. Nationalist movements in the ‘Third World’, as it was then called, were demanding and getting a greater relative share of returns from the global oil and commodities pie. Even the ideology of the system on various levels—including economic theory—was undergoing significant challenge and change. Neoliberalism emerged as a set of policies and programs designed to stabilize the global capitalist system and return it to growth. It succeeded in doing so in the 1980s and 1990s, although on a more fragile basis than in the 1948-73 boom period. In 2007 that fragile basis cracked and the Neoliberal model appeared to have run out of economic steam. Ever since 2009, global capitalist elites have been attempting to reconstruct and salvage it, with some apparent difficulty. Humpty-Dumpty hasn’t quite yet been put back together again. Another major capitalist restructuring is now required—as had been achieved in the 1980s, before that in the immediate post 1944 period, and before that immediately before and after World War I.

“Generic Neoliberalism

“To briefly state the specific elements of generic Neoliberalism, it can be said to include:
• An industrial policy that focuses on containing wage incomes to help control corporate costs. The destruction of unions, limits on collective bargaining, and further restrictions on workers’ right to strike and politically mobilize are the more obvious measures for nominal wage containment. Other measures include reducing and even reclaiming ‘deferred’ wages in the form of private pensions, and reducing ‘social wages’ in the form of national retirement benefits by means of legislation. Allowing minimum wages to atrophy in real terms is another. A more recent expression is the growing movement for what is called ‘labor market restructuring’, where wages are reduced by contingent and contract labor arrangements, the ‘gig’ or sharing economy, as well as other measures that reduce compensated hours of work per employee while expanding uncompensated hours and work.
• Neoliberal industrial policy also includes the privatization and sale of government public works, public services, and where still existent, government direct production. It means as well deregulation of industry.
• Neoliberalism includes a fiscal policy reducing government expenditures, typically for low-profit social programs, but also for government funded infrastructure projects. The tax side of fiscal policy favors tax reductions for corporations and investors, but tax hikes for sales and VAT, other forms of regressive taxation, and little or no tax reduction for middle income or below households. Neoliberal taxation policy also includes tax credits and incentives to move capital investment offshore, and thus reduce employment and wages in industries that relocate ‘offshore’.
• Neoliberalism also places more relative emphasis on monetary and central bank solutions. Monetary policy is primary, and central bank injection of liquidity into the financial system is envisioned as the means by which to generate both economic growth and ensure stability.”

Table of Contents:

Chapter One
Syriza’s Poorly Bet Hand / 13
The Troika’s Stacked Deck / 17
Greek Debt Crises and ‘Weak Form’ Euro-Neoliberalism / 21
Generic Neoliberalism / 23
Eurozone Neoliberalism / 28
The Greek Debt Crisis and Euro Social Democracy / 34
The Emerging New Debt-based Imperialism / 36
Chapter Two
The Lisbon Strategy and ‘Internal Devaluation’ / 47
Germany’s Lisbon Strategy Implementation / 49
Germany’s Bundesbank Dominates the ECB / 51
Greek Debt as Private Bank-Investor Debt / 55
The Myth of Greek Wages as Cause of Debt / 56
From Private to Government Debt / 57
The German Origins of the Greek Debt / 61
Chapter Three
2009: PASOK’s Strategic Error / 66
PASOK’s Voluntary Austerity Program / 68
Bond Vigilantes Escalate the Debt / 72
The 2010 Debt Agreement / 74
Who Was Really Bailed Out? / 75
Chapter Four
A Brief Recapitulation / 79
Some Defining Characteristics of the 2012 Debt Crisis / 82
2011: Interim Preceding the Second Debt Crisis / 84
The 2012 Debt Crisis and the Three-Way Negotiating
Farce / 87
The ‘German Hypothesis’ / 90
The Second Debt Restructuring Deal of 2012 / 92
Chapter Five
New Democracy Pleads to Renegotiate / 104
The Bond Buyback Boondoggle of December 2012 / 107
Who Benefits? / 109
Muddling Through: 2013-2014 / 112
Syriza Comes of Age / 113
The Eurozone Stagnates Once Again / 114
Chapter Six
The Troika’s $2.8 Trillion Grexit Firewall / 121
Troika Strategy to Defeat Syriza at the Polls / 123
Syriza’s Electoral Offensive / 126
Chapter Seven
The Debt-Swap Proposal and Euro Tour / 139
The February 20 Interim Agreement / 146
The Lessons of Bargaining: February-March 2015 / 154
Chapter Eight
Troika Economics: 1932 Déjà vu / 161
Varoufakis Marginalized / 163
Brexit Before Grexit? / 165
The Troika’s ‘Final and Best’ Offer—June 2015 / 167
Greece’s Interim ‘Final’ Offer / 172
The Road to Referendum / 176
Referendum and Fallout / 182
Chapter Nine
Greece as an Emerging ‘Economic Protectorate’/ 190
Party Restructuring as a Precondition for Economic
Restructuring / 191
The Third Debt Deal of August 2015 / 193
The Parliamentary Election of September 20, 2015 / 197
General Strikes and Grexit / 198
Feints, Rear-Guard Actions, & Longer-Term
Agreement / 200
The IMF’s Secret Concerns in Negotiations / 202
The IMF-EC/Germany Split / 204
Debt Restructuring by Another Name? / 207
Observations on the Third Debt Agreement
of 2015-18 / 209
Chapter Ten
An Overview of Greek Economy 2015-2016 / 216
The Greek Debt Crisis as a Banking Crisis / 217
The Big Picture / 220
Eurozone Structure and the Greek Crisis / 223
Syriza’s Fundamental Error / 228
Syriza’s Objectives / 231
Could a Grexit Have Succeeded / 233
Syriza Strategies / 235
Troika Strategies / 241
Tactics—Troika vs. Syriza / 247
The Individual Factor in Syriza’s Defeat / 251
Organization and Public Consciousness Factors / 253
Is a Fourth Greek Debt Crisis Inevitable? / 257
The Many Meanings of Imperialism / 264
Colonies, Protectorates, and Dependencies / 266
Gerece as an Economic Protectorate / 269
Wealth Extraction as an Imperialist Objective / 271
‘Reflective’ Theories of Imperialism / 273
Alternatives to Hilferding-Lenin / 278
Greece as a Case Example of Financial Imperialism / 284
Private Sector Interest Transfer / 287
State to State Debt and Interest Aggregation
and Transfer / 289
Financial Imperialism from Privatization of
Public Assets / 297
Foreign Investor Speculation on Greek
Financial Asset Price Volatility / 299

The following is the most recent review of my just published book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression, by Graham Seibert, who is a top 500 reviewer on Amazon. The review is approximately 1k words, but at its conclusion Seibert has appended his chapter by chapter, detailed commentaries as well. A reader interested in the extended commentaries by Seibert on the book’s key chapters, ‘Yellen’s Bank’, ‘Why Central Banks Fail’, and the book’s concluding chapter that advocates measures to democratize the Federal Reserve in the interests of the public, will find Siebert’s detailed summaries of the main themes and arguments of these chapters. Readers who wish to read Siebert’s extended commentaries on all the book’s chapters–including China, Japan, Europe, and the UK, may do so by going to the ‘articles’ page and tab on my own website, at http://www.kyklosproductions.com/articles.html. (Dr. Rasmus)

Review of ‘Central Bankers at the End of Their Ropes’,
by Dr. Jack Rasmus, Clarity Press, August 2017

By Graham H. Seibert,

October 10, 2017

This book does a better job of explaining how central banks work in any of the others I have read. Two mainstream books, Mohamed El-Erian’s The Only Game in Town and Banking on the Future: The Fall and Rise of Central Banking appear to be limited by the obligate blindness that bankers must have to the fact that there is no correct way to do it. The central bank’s goals are too elusive, the tools are too blunt and ineffective, the process is inherently political, and there are demographic and economic variables at play which are beyond the central bankers’ ability to control. Losing Control: The Emerging Threats to Western Prosperity is another book that covers more or less the same ground, though I think Rasmus does it better and with less bias.

Other books such as The Creature from Jekyll Island: A Second Look at the Federal Reserve and The Secrets of the Federal Reserve are conspiratorial. The Jekyll Island does a great job of describing how the Federal Reserve was established, but it ascribes to conspiracy that which can be better explained by mere self-interest. The bankers look out for themselves. The second book edges close to describing a Jewish conspiracy. As Kevin McDonald writes in The Culture of Critique: An Evolutionary Analysis of Jewish Involvement in Twentieth-Century Intellectual and Political Movements, the Jews have evolved to look out for one another, but that does not rise to the level of conspiracy. Murray Rothbard’s 1962 What Has Government Done to Our Money? was a prescient vision of things to come.

The Tyranny of the Federal Reserve, not widely read, is valuable in that it puts the operation of the central bank into a much broader perspective. It addresses an entire range of tyrannies: those of debt, usury, fractional reserve banking, gold, central banks, war, free trade, mass immigration, the media and public education. This Time Is Different: Eight Centuries of Financial Folly is a survey of fiat money regimes going back eight centuries. They all fail, and all for the same reason: politicians cannot control themselves when it comes to printing money. James Rickards makes the same point well in The Death of Money: The Coming Collapse of the International Monetary System.

Rasmus’ book is the most valuable of the group, effectively enumerating and describing the tools, policy objectives and targets of the central banks, and evaluating their effectiveness in light of their own targets and their ability to manage their respective economies.

Rasmus recommends a constitutional amendment to address the problem. The effect of the amendment would be to redress the abuse that he sees in the present system, whereby central banks worldwide are generating a great amount of liquidity most of which flows into financial instruments instead of the real economy, benefiting the rich and starving pensioners and savers.

He recommends democratizing the governance of the Federal Reserve, taking it out of the self-serving hands of the bankers.

This would be a good start. The book does not address larger issues, such as the coming demographic crisis as world populations age.

This is as good a book as one will find describing the problems as they exist and how they came to be. One cannot fault the book for failing to recommend a complete solution. Nobody in the world has found one. For this reason prognosticators are increasingly forecasting a global collapse, a reset that will require something new to rise from the ashes. Only between the lines does Rasmus suggest that that’s where things are headed.

A five-star effort. The best single book I have read on the Federal Reserve and central banks. I am including my (somewhat unedited) reading notes as comments. See my reviews of the books cited in this review for similarly detailed analyses.

By Graham Seibert

Chapter 10:
Yellen’s Bank:
From Taper Tantrums to Trump Trade / 257

Yellen has pretty much followed Bernanke’s policies. Although quantitative easing may have ended at some point, the Fed continues to use other tools to inject liquidity into the economy.

Rasmus says very directly that this is a conscious gift to the wealthy financial interests at the cost of everybody else, especially savers and pensioners. The money flows to corporations which pay generous dividends and conduct stock buybacks that favor the financial classes. Interest rates are so low that pension funds cannot make a decent return by buying bonds and by keeping money in banks. They too must reach for yield by buying overpriced stocks. It is unsustainable. The inequalities in wealth have grown insupportable.

Rasmus concludes with Yellen’s five challenges:
“1) how to raise interest rates, should the economy expand in 2017-18, without provoking undue opposition by investors and corporations now addicted to low rates; 2) how to begin selling off its $4.5 trillion balance sheet without spiking rates, slowing the US economy, and sending EMEs into a tailspin; 3) how to conduct bank supervision as Congress dismantles the 2010 Dodd-Frank Banking Regulation Act; 4) how to ensure a ‘monetary policy first’ regime continues despite a re-emergence of fiscal policy in the form of infrastructure spending; and 5) how to develop new tools for lender of last resort purposes in anticipation of the next financial crisis.”

There are not, obviously, clear answers to any of these. The Fed has painted itself into a corner with no apparent exit.

Chapter 11:
Why Central Banks Fail / 287

“But the new function of ensuring financial stability is something of a misnomer. The fundamental means by which central banks today attempt to stabilize the banking system is by permanently subsidizing it.”

Rasmus has earlier said that the quantity theory of money, the idea that increasing the money supply will lead to inflation, has been repeatedly disproven. Others such as Kenneth Rogoff and Carmen Reinhart would say that it is only being held in abeyance and will come back with a vengeance when excessive injection of liquidity finally topples the institutions.

Rasmus writes that” Therefore, if discussions on central banking in the 21st century are to address new functions, this one should be more accurately termed the subsidization of the banking system by virtually free money enabled by central banks’ chronic and massive liquidity provisioning.” Rasmus says that this subsidization function started in the 1970s.

The most important development, per Rasmus, is the capture first by Citibank and then by Goldman Sachs of all of the key appointed positions in the Bush, Obama, and Trump administrations. How else, Rasmus asked, can one explain the fact that the Federal Reserve has continued massive liquidity injections for seven years after this last crisis was wound up in 2010? Only for the benefit of the banks.

Rasmus provides two lists of reasons central banks fail: excuses, and real reasons.

The excuses include
• too much discretion; no monetary rule.
• Fiscal policy and the gates monetary policy. I, the reviewer, add the there is no discussion of the immense government deficits anywhere in this work. That would be a function of fiscal policy.
• Banks become bottlenecks to lending. The monetarist theory is that if you increase the money supply you will get lending. Wrong. The banks may simply sit on the money.
• Wrong targets: 2% growth in what?
• dual mandate: which is it? Prices, inflation, or employment?
• Global savings glut – those damned foreigners
• the need for new tools
• government influence with central-bank independence

Rasmus list of real reasons central banks fail is as follows. Enlisting them, Rasmus is offering the conclusion that the central banks have failed. As he has so elaborately described, they have failed in their assigned missions. But they, and the countries they represent, are still in place. As institutions they have survived. This is therefore our list of reasons why they haven’t been effective in their assigned role.

• Mismanaging money supply and serving as a reactionary lender of last resort
• fragmented and feeling banking supervision
• the inability to achieve 2% price stability. The problem is persistent deflation.
• The failure to address financial asset price inflation
• declining influence of interest rates on real investment
• central-bank policies and the redirection of investment to financial assets
• monetary tools: declining effects and rising contradictions
• victims of their own ideology: Taylor rules, Phillips curves, and NIRP’s. It doesn’t work like the book says. Rasmus: “central bankers may be victims of their own false ideological notions, just as politicians and government bureaucrats may be. The Taylor rule maintains that central banks should not pursue policies that attempt to adapt or respond to economic business cycles.”

Rasmus concludes that central banking has been failing to perform even its own presumed functions, targets and tools. They have not adapted or changed keep up with global developments. Monetary policy is a path to yet more financial and economic stability.

Revolutionizing Central Banking in the Public Interest:
Embedding Change Via Constitutional Amendment / 323

This final chapter is in the form of a constitutional amendment to democratize the function of the federal reserve. It would give the general public the power to select the leadership. It would require that the Federal Reserve, and its lender of last resort function, ensure that liquidity flowed to the real economy rather than financial assets. It provides for consistent banking supervision by parties not connected to the banks themselves.

The amendment does not address related problems. It makes no mention of fiscal policy, chronic government debts. The federal reserve has the power both to redistribute money within the economy, which Rasmus rightly says that it does, favoring the financial interests. It also has the power to create money that the government needs to offset budget deficits, currently running between $500 million and $1 billion.

The national debt, standing at $20 trillion, requires $400 billion per year just to service. The government debt is about equal to GDP in the United States; unsupportable, but better than Europe, England, China or Japan. None of these would be able to withstand a significant increase in interest rates.

The book does not address the question of demographics. The demographics in the United States are terrible, with the rising generations barely keeping up in numbers with those who are retiring. This is not to even to mention its composition. There is a question of whether the current rising generation, 50% made up of disadvantaged minorities, will have the same productivity as the retirees it replaces.

The demographics in China, Japan, England and Europe are worse. They all have inverted population pyramids. Supporting the promised pension and healthcare benefits will require more tax income from fewer taxpayers. Printing money will not do the trick; at some time the printed money has to be recognized as being increasingly less valuable. Inflation has to kick in and the real economy, just as Rasmus documents that it has in the financial economy.
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