Listen to my analysis of the three major developments of the past week and how they’re related: $1.3 trillion budget spending increase, Fed interest rate hike, and China trade measures
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SHOW ANNOUNCEMENT:
Dr. Rasmus looks at three major economic events of the past week: the Trump $1.3 trillion budget bill, the Fed’s latest rate hike (with 6 more coming 2018-19), and the Trade War he launched last week which (as I predicted on this show last week) was really an opening salvo in trade negotiations with China (not Europe, Mexico-Canada, Latin America, rest of Asia). On the trade war, Trump is already exempting the rest and targeting China. But even the China ‘war’ is hardly that. Trump’s opening ‘attack’ amounts to 12% tariffs on $50 billion of more than $700 billion China goods only exports to the US. Rasmus explains how this is all in the long tradition of US restructuring of trade relations with its capitalist competitors. (Nixon did it in 1971-73 and Reagan in 1986). Rasmus deconstructs the budget bill $1.3 trillion, as just the first in a series of war spending hikes totaling more than $1T a year. Along with $3T net tax cuts, it will mean $1T annual budget deficits for the next decade. The opening attack on social security, medicare, food stamps, education and other cuts to pay for it has already begun. Rasmus concludes with his analysis of the Power Fed’s latest rate hikes, and predicts when and at what level further hikes will precipitate another liquidity crisis and recession, as in 2008. (Read his blog, jackrasmus.com, for further written analyses of Fed, Budget, and Trade policies under Trump. Or join his twitter feed @drjackrasmus).
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
Jack, excellent podcast as always. In your next podcast, please mention the importance of the Libor-OIS spread in the financial system and its importance in the coming financial crisis. I want would like to hear your views on that spread. Thank you.
Yes, important, as you suggest. Check out my tweet in the last 24 hrs. where I note the Libor rate, fed funds rate, and 10y T-bond rate thresholds as the likely level that precipitates the coming transition to the next recession. I’m at @drjackrasmus.
Please make your posts into written TRANSCRIPTS.
I can then circulate to my emaillist. Thanks.
PeterLoeb
I dont have software that does that. can you suggest a program that does?
Reblogged this on Taking Sides.
Jack, do you believe that the fed funds rate is being raised to try to rescue pension funds besides trying to attract new bond investors?
I think the Fed realized (as many have been complaining to it) that its 7 year policy of zero rates was increasingly distorting financial markets and bubles that were leading to more instability in those markets eventually. So US policy makers shifted their corporate subsidization program from monetary (Fed) to fiscal (tax cuts, deregulation, defense spending, etc.). That shift in turn requires the Fed to sharply raise rates to finance the deficits that occur in turn. (Fed is issuing more than $400b in Treasuries this week alone). Pension funds benefit from the rate hikes (and banks even more so). So a consequence is to rescue pension funds to some extent. That doesn’t mean rescuing pension plans, however. Corporations will continue to try to throw off those plans and their liabilities (if defined benefit plans). This secondary rescue, however, is not the primary driver of the higher Fed rates; funding the deficits and debt is the primary reason.