Listen to my interview with WBAI-NY on the issues in the GM auto workers strike that began yesterday, as 46,000 walked off their jobs to improve job security, plant shutdowns protest, end to two tier wage structures, stop shifting of rising health care costs to them, and hundreds of other unresolved issues. What’s behind the legal attack on the UAW national leadership.




Listen to timeline starting at about 4:00minutes to 11:00minutes.


Listen to my Alternative Vision radio show today, September 13, discussion of the European Central Bank’s decision to restart QE and lower interest rates further into negative territory. What are the consequences of negative rates? Why will the $17 trillion global negative rates mean for the pending global recession? Why is Trump demanding the US central bank drive rates into negative range as well? What are central banks worldwide cooking up as responses to the next recession, now that they’re ‘at the end of their ropes’? For this discussion, and first preview of the main themes of my forthcoming October 2019 book,’

    The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’





Today’s show focuses on the recent decision by the European Central Bank to re-introduce QE and drive Europe’s more than $7 trillion in interest rates further into negative territory. Another $22b per month in QE and rate reduction to -0.5% when, over the past 5 yrs QE and negative rates have not stimulated the European economy. Reasons why QE and neg rates have little effect. How $17 trillion in negative rates worldwide is a growing problem and won’t stimulate the Euro economy. Lower rates as exchange rate currency/ trade move. Why Trump is now calling for US negative rates. Why central banks (including Fed) now secretly discussing new tools and tactics for the next recession, including ‘bail ins’ and calls are growing by high level capitalists for the Fed and central banks to expand their authority into fiscal policy areas (as predicted in my 2017 book, ‘Central Bankers at the End of Their Ropes’). Consequences of such for US Constitution and fiction of ‘central bank independence’. Rasmus discusses US deficit now officially projected to exceed $1 trillion a yr. The Democrat Party latest debate and opposition to Medicare for All. And what’s behind the recent ‘softening’ of US & China trade war (and why a deal may now be closer with ‘decoupling’ of technology issue). Rasmus introduces the show with brief outline of his forthcoming book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, October 2019, and shares its main themes. (Review of chapters coming in following weeks of this show).

Watch my video interview with ‘Other Voices’ TV show in Palo Alto, CA, on September 11. The topics: the latest developments in the US-China trade war and why next generation technology is the key issue behind the trade negotiations. An eventual settlement will require both sides putting aside the tech issue for later negotiations and settling on the many concessions already on the negotiating table. (Trump now talks of a ‘two track’ negotiation, suggesting a deal on what’s agreed to date and address tech and other issues later). Questions also address the firing of Bolton and role of Neocons in US-China trade negotiations to date. What’s the real picture on US wages and jobs. And the likelihood of a US recession in the next year.


    O WATCH the Youtube video

of the Interview GO TO:


Just a short addendum here to recent posts here challenging the official government (Labor Dept.) view that wages rose 3.1% last year. And a commentary on what the recent firing of neocon, John Bolton, may mean for the US-China trade war.

Median Income vs. the 3.1% Wage Gain Spin

Yesterday the Commerce Dept. issued its report on quintiles (20% segments) on income inequality in the US. It showed that Median Household Income rose only 0.9% in 2018, which “officials said isn’t statistically significant from the prior year” (Wall St. Journal 9-11-19).

This corroborates my argument that the 3.1% (really 1.5% after government’s own inflation adjustment) represents wage gains skewed to high end wage earners, the 10% or so of the labor force who are tech engineers, professionals, supervisors, advance degreed health care, etc.). The vast majority of workers saw little if any wage gains. Only 0.9% per the Commerce Dept. at the median household level. (Unadjusted for inflation also?).

This also supports the findings of the various independent surveys noted in my prior posts (Bankrate,Payscale, McKinsey, etc.) that estimated median wage gains ranging from -0.8% to 1.1% as well as the finding that 60% of the workforce saw no wage increases at all in 2018.

And now Trump’s tariffs are about to hit household consumption big time. Chase bank researchers estimate the tariffs that took effect Sept. 1, 2019 will result in a reduction of an average $1000 per household. That will whack consumer spending, two thirds of GDP, big time going forward. With construction spending, manufacturing, and business investment all turning negative now, only consumer spending has been holding up the US economy, based mostly on credit card and other debt based spending increases. Now that will be reduced by $1000. So watch for consumer spending to weaken over the coming winter.

Will Bolton Departure Weaken Anti-China Hardliners’ Opposition to a Deal?

That’s why Trump is now so desperate to force the Federal Reserve, Powell, to rapidly cut interest rates, as he is now demanding, to zero if necessary. But those cuts will have little, if any, effect on the real economy. The central bank rate cuts are instead about trying to slow the rise of the value of the US dollar, however, not about stimulating real investment and GDP. If that dollar rise continues, already up 10% this year, it offsets Trump’s tariff hikes and thus undercuts his hand in negotiations with China. That’s why a further slowing US economy and dollar rise, should they occur, will likely push Trump toward closing a deal on trade with China. But not yet. Wait until closer to 2020 election. The US economy will have to get worse. And it will.

Now that Bolton’s been thrown under the bus by Trump (with so many others), the influence of the neocons in Trump’s regime are reduced and chances of a trade deal with China are rising. Trump will eventually strike a deal, likely next year, take the major concessions China thus far has offered and has left on the table, and lie about the rest of his concessions to his political base. Trump desperately needs a deal on trade with China before the 2020 election in order to win next November. He also needs one or more ‘wins’ in foreign policy he can promote and exaggerate (Iran, So.Korea, etc.). Bolton was an obstacle who engineered the collapse of negotiations with So. Korea, the failed regime change and almost invasion of Venezuela, and the near war with Iran. (He may have also been behind the collapse of the Taliban meeting with Trump recently, which he, Bolton, adamantly opposed). With Bolton now gone, it will be interesting to see if Mnuchin and Pompeio are given the lead over the remaining neocon advisors–Lighthizer and Navarro–in the next round of China trade negotiations. If so, some kind of a deal grows closer with China.

In a post last week I took issue with the Trump administration’s claim–repeated ad nauseam in the media–that wages were rising at a 3.1% pace this past year, according to the Labor Dept. In my post I explained the 3 major reasons why wage gains are much lower, or even negative.

First, the 3.1% refers to nominal wages unadjusted for inflation. If adjusted even for official inflation estimates of 1.6%, the ‘real wage’, or what it can actually buy, falls to only 1.5%.

Second, the 1.5% is an average for all the 162 million in the US work force. The lion’s share of the wage gain has been concentrated at the top end, accruing to the 10% or so for the highly skilled tech, professionals, those with advanced degrees, and middle managers. That means the vast majority in the middle or below had to have gotten much less than 1.5% in order for there to be the average of 1.5%. More than 100 million at least did not get even the 1.5%. In fact, independent surveys showed that 60 million got no wage increase at all last year.

Third, the 1.5% refers to wages for only full time employed workers, leaving out the 60 million or so who are part time, temp, gig or others, whose wages almost certainly rose less than that, if at all. Other surveys noted in my prior post found wage gains last year only between -0.8% of 1.1%, depending on the study, and not the 3.1%.

But here’s a Fourth reason why even real wages are likely even well below 1.5%.

As I suggested only in passing only in my prior post, the 1.6% official US government inflation rate is itself underestimated. Not well known–and almost never mentioned by the media–is the fact that Labor Dept. stats do not include rising home prices at all in its estimation of inflation! Incredible, when home prices are among the fastest rising prices typically and always well above the official 1.6% or whatever. And the ‘weight’ of home prices in the budgets of most workers is approximately 30% or more of their total spending. So that weight means the effect on households is magnified even more. If appropriately included in inflation estimates, housing prices would boost the reported inflation rate well above the official 1.6%. How much more? Some researchers estimate it would raise the official inflation rate of 1.6% to as high as 4%. (see the discussion n the August 30, 2019 Wall St. Journal, p. 14).

If the inflation rate is higher, then the nominal 3.1% adjusts to a real wage even less than 1.5%.

If the inflation rate were 4%, not 1.5%, then real wages adjusted for inflation would be -0.9%. And when the ‘averaging’ and ‘full time employed’ effects are considered, real wages for the majority of US workers last year almost certainly fell by as much as -2.0% to 3.0%.

Since we’re talking about housing, here’s another official government stat related to housing that should be reconsidered since it makes US GDP totals higher than they actually are:

US GDP is over-estimated because gross national income (i.e. the income side to which GDP must roughly equal) is greatly over-stated. How is national income and therefore GDP over stated? The US Commerce Dept., which is responsible for estimating GDP, assumes that the approximately 50 million US homeowners with mortgages pay themselves a rent. The value of the phony rent payments boosts national income totals and thus GDP as well. But no homeowners actually pay a mortgage and then also pay themselves an ‘imputed Rent’, as it is called. It’s just a made up number. Of course there’s a method and a logic to the calculation of ‘imputed rent’, but something can be logical and still be nonsense.

Government stats–whether GDP, national income, or wages or prices, or jobs–are full of such questionable assumptions like ‘imputed rents’. The bureaucrats then report out numbers that the media faithfully repeat, as if they were actual data and fact. But statistics are not actual data per se. Stats are operations on the raw or real data–and the operations are full of various assumptions, many questionable, that are explained only in the fine print explaining government methodology behind the numbers. And sometimes not even there.

Here’s another reason why US and other economies’ GDP stats should be accepted only ‘with a grain of salt’, as the saying goes: In recent years, as the global economy has slowed in terms of growth (GDP), many countries have simply redefined GDP in order to get a higher GDP number. Various oil producers, like Nigeria, have redefined GDP to offset the collapse of their oil production and revenue on their GDP. In recent years, India notoriously doubled its GDP numbers overnight by various means. Some of ‘India Statistics’ researchers resigned in protest. Experts agree India’s current 5% GDP number is no more than half that, or less.

In Europe, where GDP growth has lagged badly since 2009, some Euro countries have gone so far as to redefine GDP by adding consumer spending on brothels and sex services. Or they’ve added the category to GDP of street drug sales. But any estimate for drug spending or brothel services requires an estimate of its price. So how do government bureaucrats actually estimate prices for these products and services? Do they send a researcher down to the brothel to stand outside and ask exiting customers what they paid for this or that ‘service’ as they leave? Do they go up to the drug pushers after observing a transaction and ask how much they just sold their ‘baggie’ for? Of course not. The bureaucrats just make assumptions and then make up a number and plug in to estimate the price, and therefore the service’s contribution to GDP. Boosting GDP by adding such dubious products or services is questionable. But it occurs.

The US Commerce Dept. that estimates US GDP has not gone as far as some European countries by adding sex and illicit drug expenditures. But in 2013 the US did redefine GDP significantly, boosting the value of business investment to GDP by about $500 billion a year. For example, what for decades were considered business expenses, and thus not eligible to define as investment, were now added to GDP estimation. Or the government asked businesses to tell it what the company considered to be the value of its company logo. Whatever the company declared was the value was then added to business investment to boost that category’s contribution to GDP. A number of other ‘intangibles’ and arbitrary re-definitions of what constituted ‘investment’ occurred as part of the re-definitions.

Together the 2013 changes added $500 billion or so a year to official US GDP estimates. The adjustments were then made retroactive to prior year GDP estimates as well. Had the 2013 re-definitions and adjustments not been made, it is probable that the US economy would have experienced three consecutive quarters of negative GDP in 2011. That would therefore have meant the US experienced a second ‘technical recession’ at that time, i.e. a second ‘double dip’ recession following the 2007-09 great recession.

The point of all these examples is that one should not blindly accept official government stats–whether on wages, inflation, GDP, or other categories. The truth is deeper, in the details, and often covered up by questionable data collection methods, debatable statistical assumptions, arbitrary re-definitions, and a mindset by most of the media, many academics, and apologists for government bureaucrats that government stats are never wrong.

Dr. Jack Rasmus
copyright 2019
Dr. Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: Economic Policy from Reagan to Trump’, Clarity Press, October 2019. He blogs at jackrasmus.com and tweets @drjackrasmus. His website is http://kyklosproductions.com and podcasts from his Alternative Visions radio show are available at http://alternativevisions.podbean.com.

Trump has announced a new plan to radically change residential housing market in the US to benefit investors at the expense of home buyers. At the core of his plan is the privatization of the quasi-public housing finance institutions, Fannie Mae and Freddie Mac. Both originated as government agencies to ensure lower cost 30 yr. mortgages. Now Trump wants to sell them off to hedge funds and other investors. They’ll issue new IPOs and reap hundreds of billions of speculative profits. Then they’ll continue to acquire the billions in operating profits from them for years to come, instead of the profits now going to the federal government to help offset US budget deficits and $1 trillion plus annual additions to the US national debt.

Listen to my 12 minute Loud & Clear radio show interview on the topic below


I very seldom post a 3rd party’s contribution to this blog, but Benl8, who often comments on this blog, and is an excellent researcher and quantitative analyst, has offered an explanation that I hope Henwood bothers to read. Ben has dug up what is the most likely explanation for the millions of workers who have dropped out of the labor force and don’t show up in official BLS stats.

Ben’s commentary provides an explanation for why the labor force participation rate has fallen nearly 5% since 2000–and thus in turn an explanation why the unemployment rate (U-3 or U-6) are inaccurate BLS estimates of employment and unemployment.

Ben has accessed the social security data base to find an alternative explanation. This is the same database that UC Berkeley prof, Emmanual Saez, used back in 2002 to expose official Commerce Dept. obfuscation of income concentration in the US. Before Saez used the social security database, US official stats refused to describe income distribution except in obfuscating 20th percentiles divisions. Saez exposed this, showing the income concentration among the wealthiest 1% households that now is commonly accepted. Saez performed yeoman service for all in his work. Benl8 may be on the same track when it comes to the labor force participation rate and other BLS estimates for discouraged, missing labor force, and other categories which I believe are grossly underestimated (which results in artificially low estimates for unemployment).

Ben offered his explanation as a comment to my blog posts. Many readers may not get to read it there. So I’m re-posting it here. Do read it. It’s the kind of research we all should be doing, instead of just blindly accepting or apologizing for government stats and interpretations, which Henwood always insists on doing. Here’s Ben’s comment: (and you read it too, Henwood, I know you read this blog).


I have thought about this. I regularly go to njfac.org, and take their figures. But then I also do this: The Social Security Administration publishes a wage income report. The latest is for 2017 and the next comes out in mid October. Here’s 2017: https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2017 — It shows 165,438,239 workers in 2017. While the BLS shows a labor force of 160,320,000 with average employment of 153,337,000 working. (I took that from https://www.bls.gov/web/empsit/cpseea01.htm) Now let’s agree that the SSA is correct, 165mn worked, and usually 153mn were at work, it indicates that 12 million were not working on average, that’s a U3 of 7.3%. Now I will go to National Jobs for All Coalition and add on the involuntary part-timers, 4.4 million in August, 2019 (and it was higher in 2017, but I don’t want to look it up). Therefore the U6 will be around 12mn plus 4.4 mn, or 16.4 mn, or about 10%. I agree that the BLS is much understated, and my method incorporates the SSA data, and is not dependent on phone surveys. Also, it must be stated, the SSA data shows that the collective income of the lower-earning half, or 82 million workers, is just over $1.1 trillion. The national income, which I take from the Joint Committee on Taxation (Overview, 2017), was about $14.4 trillion. So, the lower half earned in wages less than 8% of all income. Who received the other 92%? This is pre-tax income. The “State of Working America” has a table on the sources and distribution of income, Table 2.4, Income. It showed that the lower-earning 80% took in wages about 28% of all income. It was difficult to figure that out, but my memory serves me pretty well. See here: http://www.stateofworkingamerica.org/index.html%3Fp=29591.html
You can check, the lower 80% earned 50.2% of all wages, and wages were 54.3% of all income, therefore their wage income was 27.3% of all income. And this is post-transfer assessment, so the social security is taken out and transferred. Complicated. The end take away: low income workers make very little relative to total income, and the unemployment numbers don’t accurately show the huge number who are marginally employed, yet still submitting W-2 forms to SSA. My first blog (http://benL8.blogspot.com) has a graph showing that income for the lower-earning 90% held steady around 55% from 1940 to 1980, and since then has dropped to 38%, a drop of 17%, which comes out to about $23,000 per household in the lower-earning 90% of households. My current blog: http://benL88.blogspot.com, and the first one: http://benL8.blogspot.com where the graph is easily located. It comes from data by Saez and Piketty. Hope this helps. It’s a messy comment/answer. Is it really important that the BLS U3 is wrong? Definitely. And is it important to know how little the lower-earning half or 80% or 90% are earning. Yes, it’s a huge inequality that is disabling the economy and people’s lives.