Jack Rasmus

Readers of this blog, and audience of my weekly Alternative Visions radio show on the Progressive Radio Network have been asking me if my radio show can be transcribed and posted in print form on this blog. One of the regular listeners of the show has generously offered to provide a print version of my presentations. What follows is the verbatim transcript of my August 3, 2018, Alternative Visions Show that addressed the them of why Trump’s economic policies–taxes, trade, deregulation, etc.–represent an attempt by US elites to resurrect Neoliberal policies that nearly collapsed under Obama in the wake of the 2008-09 global crisis. Trump represents an attempt to resurrect a new, more virulent, aggressive and violent form of Neoliberal policies–a Neoliberalism 2.0. Here’s the transcript:

VERBATIM OF ALTERNATIVE VISIONS SHOW, AUGUST 3, 2018

[00:00 INTRO MUSIC]

[00:26]
Greetings all you 99%er’s. This is your host, Dr. Jack Rasmus, this is Alternative Visions.

In recent weeks we’ve been talking a lot about taxes and trade and central banks, and we’re going to do it again, because they are all related.

The theme of this show would be:

Do We Have a NeoLiberalism 2.0 Emerging?

I think so. A new, virulent, more aggressive form of NeoLiberalism under Trump. Obama could not restore NeoLiberalism to a new aggressive track after the 2008-9 crash. You can think of Trump as an effort to restore the NeoLiberal policy trajectory that was set in motion in the late 1970s and accelerated under Reagan, and continued under Bush1, Clinton, Bush2, and then it hit a wall with the 2008-9 crash and Obama could not restore it fully. What we have here is a more aggressive form taking shape under Trump. I say a more aggressive form because it is even pushing the NeoLiberal elements more aggressively than had been before 2008.

[2:20]
Okay, so what are the major elements of NeoLiberalism? Well, obviously tax cuts for the rich – the wealthiest 1%, both their corporations and their individuals. The tax cuts necessarily involve a tax shift, in other words, you raise taxes on the other 95%, while you shift the tax burden and make it lighter for the wealthy. Of course we’ve seen this with Trump’s tax cuts at the beginning of this year. Five trillion dollars in tax cuts for investors and businesses and corporations. Offset by 2 trillion dollars over the decade coming, in tax hikes for the middle class, by eliminating exemptions, deductions and credits. So we get a net of 3 trillion. Then they argue, it’s only 1.5 trillion because, making phony assumptions about getting no recessions for the next 10 years means, according to supply side ideology, that tax cuts will raise tax revenues by 1.5 trillion, so that net is only 1.5 trillion. See the games they play, and the media picks it up and pushes it as well.

[3:51]
So, tax cuts and tax shift is a central element of NeoLiberal policy. So is accelerated war and defense spending, that’s a major development. Of course that’s been continuing, not only under previous regimes, but continuing here as well under the current regime.

We just had an announcement that the senate overwhelmingly approved another $85 billion increase in Pentagon spending for the next fiscal year. We’re going to get these $85 billion, it’s actually more than $100 billion, because the Pentagon is not the whole war spending defense budget, it’s the major element, but a lot of war spending, defense spending is stuffed away in other departments – energy department, atomic energy, veterans and so forth. So, $85 billion is really well over $100 billion per year. We’re going to see this piecemeal increase in war/defense spending every year, 100 billion.

[5:08]
Alright so, that’s the second major element. Both of these together are what we call fiscal policy, taxes and government spending. NeoLiberalism means that big tax cuts for the rich, tax shifting burden for the rest – accelerated war spending – and of course that fiscal policy creates massive budget deficits. This gives a good example and a good opportunity to go after social spending programs as well. But that can’t even come near, the cuts there, can’t even come near to offsetting the tax cuts, and that hit on the federal budget.

[5:56]
Now there’s an ideological element here, that says, ‘well, you know, if we cut taxes enough, cutting taxes will stimulate economic activity and generate more tax revenues, as a result.’ That’s what’s called supply side ideology. That’s an important ideological element in NeoLiberalism that’s been here ever since Reagan, well actually just before, 1978. Jack Kemp and Arthur Laffer and others put forward this ideological element to justify the tax cuts and the deficits.

If supply side were true, the massive $5 trillion in tax cuts to the rich that were just passed January would have resulted in more tax revenues, right? Well, tax revenues so far this year are down 40%. Corporate tax revenues are down 40%, four-zero. Hmm, well, the hell with that theory. Look at reality, it’s not true, and it’s not been true ever Reagan. Tax cuts do not stimulate more tax revenues, just the opposite.

[7:12]
But that’s ideology. There’s a lot of ideological element in mainstream economics. We’ll talk about those next week, or maybe one of these days. You know, the idea that tax cuts create jobs, hmm. Uh, how about free trade benefits everybody, hmm. How about wages are a function of one’s productivity, hmm, I could go on and on. There’s at least a dozen major ideological elements that are force fed to the public to make them believe that these policies that are really designed to enrich the wealthy and their corporations are really sound economic science – they’re not.

A lot of economics is bullshit ideology. I’ve been thinking for some time to write a book, Ideology and Economic Policy. I wrote an article a couple years ago attacking the whole notion that tax cuts creates jobs, and that free trade benefits everybody and other such nonsense. Maybe soon.

[8:19]
Let’s get back to the elements of NeoLiberalism. The accelerated war spending and the tax cuts result in massive budget deficits. This has been going on for some time, and annual budget deficits mean the national debt rises every year. Deficits cumulative, mount up to the debt. Under Trump we’re moving from a $20 trillion national debt to, after ten years, it will be at least $32-$33 trillion in debt. And of course you have to pay the interest on that debt. Which comes to 100’s of billions of dollars every year. And who gets the interest? Well, the wealthy people and corporations – US and global – who buy government treasury bonds, The debt.

[9:12]
Okay, so for years they’ve been buying the debt. As we’ve been running these huge deficits, because of NeoLiberal tax and war spending, they, meaning the wealthy in the US and globally have been buying up treasury bonds. So, where do they get the dollars to buy up treasury bonds, is the next question? They get the dollars from two sources. One, US corporations, sending the money abroad to buy up companies and start up operations and so forth, imperialism, economic imperialism, whatever you want to call it – that’s called foreign direct investment – which is subsidized by US tax policy. But, even more so, the trade deficits.

[10:05]
The US purposely, under NeoLiberalism, runs trade deficits with the rest of the world. In other word, the trade deficit means, we buy more of their products than they buy of ours. Well, if we’re buying more of their products, dollars, we’re using dollars to buy them, are flowing out of the country, out of the US and into the rest of the world. That’s been going on for decades now, and it has resulted in a massive amount of dollars floating around the world, which end up in central banks and banks. And, those central banks, banks, wealthy investors, and foreign corporations and so forth, recycle the dollars back to the US, by buying treasury bonds. So you see the trade deficit under NeoLiberalism is essential to financing the US budget deficit.

[11:03]
The budget deficit from tax cuts and war spending has to be paid for by selling treasury bonds, and approximately half of our deficits now are financed by foreign purchasers of treasury bonds, securities, notes and so forth. So we’re able to run a huge budget deficit because the trade deficit and the agreement with the rest of the world to recycle your dollars back to the US, enables us to finance the budget deficit. This is called the Twin Deficits Solution. This is central to NeoLiberal policy.

[11:44]
What I’m saying is of course, US fiscal policy, and US trade policy are connected at the hip. They are one and the same – one enables the other.

Oh, but we’ve got Trump on a trade rampage here, now. Will this upset the twin deficit solution? Well, it just may, but not yet. Because, as I’ve been saying, a lot of the trade, it’s mostly a trade war of words, particularly with US allies. We’ll get back to this in a minute.

[12:27]
Alright, so the twin deficits – the budget deficits and the fiscal tax and spending, war spending, associated with the budget deficit, are integral parts of NeoLiberal policy. And of course, under Trump, the deficits from tax cuts and war spending have been accelerating. As I’ve been saying in recent shows, way over a trillion dollars, way more than a trillion. The congressional budget office says, about $900 billion. No, it’s way over a trillion dollars this year, more next year. And Trump, is now proposing a tax cut 2.0, that’s coming on top of the 5 trillion for the next ten years

[13:17]
Trump is now proposing, with friends in congress, Ryan and his buddies, he’s now proposing a 2.0 – Trump tax cut 2.0. In other words, they’re going to try to make these tax cuts, this 5 trillion, permanent. One way they sold it was it’s only for 10 years. Now they’re going to make it permanent. And, in the process give even more tax credits and tax shelters to wealthy individuals. Plus, they keep chipping away at the ACA, Affordable Care Act taxation elements. To pay for ACA $592 billion in taxes was raised, a lot of it on investors and corporations, medical device makers, insurance companies and so forth. They’ve been chipping away at that. The attack on ACA has really always been about the taxation element within it to pay for it. Okay, so they’re chipping away, item by item, on ACA, that’s part of 2.0 coming.

[4:40]
And now, just this past week Steve Mnuchan, Treasure Secretary, announced that they are looking at ways of bypassing legislation in congress and just using Treasury Department rules and guide lines to cut capital gains taxes by another $100 billion.

[15:05]
They’re cutting taxes any which way they can while they still have control. In other words, what they are doing is, at the expense of everybody else, they’re enriching themselves. And, congress and Trump are making it all possible. No wonder the rich folks aren’t that upset with Trump, he’s delivering for them. Who cares what his policies are with immigration and so on and so forth, ‘the guy’s delivering for us, let him go.’

[15:40]
Now, NeoLiberalism also has an industrial policy element associated with it. What do we mean by Industrial Policy? Regulations, industry regulations, and of course we know that was immediately being slashed left and right, and still is everywhere. A big financial boondoggle was announced this past week for the auto companies. Trump is trying to eliminate controls on auto emissions. In other words, companies won’t have to invest to get their auto mileage and emissions reduced by 2020 and 2025. That’s a big cost savings for them – deregulation everywhere.

[16:34]
Crush the unions. Well, they’ve crushed the private sector unions, they’re just a shell of what they were. They’re now going after public sector unions, and of course that was the Janus decision. Right to work is going after all of the unions, in other words, make it illegal to require to join a union. A lot of people will then be free riders, because the unions have to negotiate for everybody’s contracts. But workers won’t join and they won’t pay their fair share for the costs of negotiations, making it harder for the unions to organize. Keep the unions weaker. And what’s coming next in the attack on unions? I believe beyond the Janus decision, and beyond the right to work, they’re going to take away and make it illegal for unions to negotiate dues deduction from their members. In other words, the employer won’t gather the dues in the payroll check, and pass it on to the unions. They will impoverish the unions even more by requiring the unions to collect dues from their members, which means union representatives will be spending all of their time being dues collectors. Of course, that’s going to piss people off too.

[18:03]
Weaken the unions, destroy the unions, that’s what’s happening. They’re almost gone, and it really amazes me how union leadership has allowed this to happen. It’s allowed it to happen because ever since Reagan union leadership has thrown itself under the skirts of the democratic party, saying, ‘protect us, protect us’. The Democratic Party can’t even protect itself. DP has become inept and ineffective, it’s lost its base everywhere, except on the two coasts. DP has lost all of the governorships, and lost control of all, or virtually all of the state legislatures. DP is just a shell national electoral congressional party. But the unions thought they’d be saved by the DP. Take the easy way out, instead of fighting it. They thought, ‘well, our friends will save us.’ Well, the DP has done very little for the unions, first under Clinton, and then under Obama, and they won’t do much anymore, as well.

[19:17]
Okay, so Industrial Policy has crushed the unions, they’ve done that. Compress real wages, they’ve done that. You know, all of this data coming out, ‘Wages are rising, wages are rising,’ that’s BS, they’re not rising. Wages are rising for a small slice of the upper level of the wage structure, the top 10%, in tech and so forth, professionals. For the rest wages are not rising in real terms. Inflation is more than off setting the wage increases. Furthermore, when you read this data from the labor department, it talks about average wages – averages. The growth at the high end pulls the average up, which means the top 10% are getting wage increases of more than 2%. That means that the rest are getting wage increases at the median of maybe 1%, or less, if you’re below the median. And that’s in nominal terms, then you reduce it for real wages, and the real wages are still going backwards. And by the way, it’s not just average wages that they report, it’s only average wages for full time permanent workers. Read the fine print in the Labor Department’s statistics. If it’s only for full time workers, what about the 50-60 million people who are not full time permanent workers? Well, they make 60-70% of the median wage. Those figures, whether their wages are rising or not, and I believe they are not, even in nominal terms, would really drag down the total labor force, 60 million wage gains. So, the fact that its averages, the fact that it’s only full time, the fact that it’s not real wages, all of that negates the lies about wages are rising.

[21:30]
Alright, so that’s part of Industrial Policy, and then another element of Industrial Policy is to privatize social benefits, insurance benefits and of course that’s been happening ever since Clinton. As far as health care, employer provided health care, as contributions are concerned. It’s also been true for defined benefit pension plans, employer’s contributions, holidays and so forth. The pensions are in trouble, particularly muliti-employer pension plans, yes they are, because the employers aren’t making contributions, and they haven’t for over 20 years in many cases. Well sure, the pension plans are going to look like they’re in trouble. But they want them to go into trouble so they can dump them on the government – dump the pension plans on the Pension Benefit Guarantee Corporation, you see. A government agency that absorbs collapsed pension plans and pays maybe 50% of what the pension plan should pay. That’s a strategy ever since Clinton of NeoLiberalism. Let’s get out of these defined benefit pension plans, let’s crush them, let’s let them collapse, and we’re going to offer people 401k’s, which is privatized kind of a personal pension in which the stock market gets a big cut.

[23:01]
So all of these are elements of Industrial Policy, deregulation, crush unions, compress real wages, privatize insurances and retirement.

Another element of NeoLiberalism policy, on the monetary side, is to provide low interest rates. Low interest rates not only mean that bank loans are cheaper for businesses, even more importantly it means that businesses can issue corporate bond debt at virtually no cost. And then they take the bond debt, the corporate bonds and commercial paper they issue, and the money from that they then redistribute to their share holders in buy backs and dividend payouts.

[23:55]
Look at Apple, today, Apple announced it’s a trillion dollar company. Apple is sitting on 100’s of billions of dollars of cash. Apple issues corporate bonds at record levels, 10’s of billions of dollars, and then uses that money from the bonds to pay off it’s shareholders. Yeah, that’s why low interest rates are part of NeoLiberalism policy. And of course what happens when they do the stock buy backs, the value of their stock rises. In other words, the low interest rates subsidizes stock and bond prices. That’s been going on, especially under Obama, over a trillion dollars per year, every year. This year 1.3 trillion dollars in payoffs of stock buy backs and dividend payouts to the wealthy 1 or 2% that own all of these stocks. ***

[25:00]***
So, monetary policy is really about subsidizing shareholders and stockholders. That’s the true role of the Central Bank, to subsidize other banks, and subsidize the wealthy investors. Well, isn’t tax cutting about subsidizing them as well? You betcha. So we have this fiscal and monetary policy game being played under NeoLiberalism, both are about subsidization of the rich. And we have Industrial Policy holding down, and compressing wage incomes. Well no wonder we got runaway income inequality. You see, they’re getting two bites of the apple, they’re holding down wages for the 90%, and they’re, as fast as they can, shuffling the money into the shareholders, the rich. In fact, the subsidizing through buy back and dividends and corporate profits, and other forms of corporate subsidy and so forth, far more contributes to the income inequality trends, than even holding down wages.

[26:20]
Alright, so low interest rates really mean a low dollar, a low dollar globally. That’s another element of NeoLiberalism Policy, a low dollar.

Again, to summarize:
Tax Cuts for the Rich, Accelerated War Spending, Industrial Policy, Low Interest Rates, and a Low Dollar Globally.

The low dollar is associated with Free Trade. The US likes free trade. Even before Trump got elected I said he’s a Free Trader, and he is. It’s not that he didn’t sign the TPP. He simply wants bi-lateral free trade and he said so himself. Why do you think he’s going around with his war of words, threatening Europe and NAFTA and all the rest with his trade tariffs? He wants to shake them up, come to the bargaining table and renegotiate, bi-laterally all of these free trade deals. He’s a free trader, he’s just not a multi-lateral free trader. And that plays into his ego, because, one thing he wants to do is to show that he’s a better negotiator than Obama and all the rest before him. He’s going to get better deals. Better deals for whom? For US corporations.

[27:52]
So, low dollar globally. The low dollar globally in free trade means big trade deficits, but it’s the trade deficits that finances the budget deficit. If the trade deficit gets larger, then they can run a bigger budget deficit. Which means they can cut taxes more and raise more spending more. So the trade policy is integral to the war policy, the tax policy, and the budget and debt policies. They are all integrated. But the big picture is that this Trump NeoLiberalism 2.0 is about asserting and insuring US global hegemony for another decade. That’s what this is all about. And not just economic hegemony, but political and military.

[29:00]
But we have a contradiction here that has emerged that is in the works, and that wrench in the works is that the Federal Reserve is not going along any further with low interest rates and low dollar. You see there’s a direct correlation between low interest rates and low dollar. And, conversely, if you raise interest rates you raise the value of the dollar. And the Fed is raising interest rates, isn’t it, yes, very fast. And the dollar is rising as a result. Well, if the dollar rises that means that other currencies, other currencies, are declining. It’s that inverse relationship between exchange rates – dollar rise, other currencies fall in relation to it, simply because there is an exchange rate. One goes up the other must go down.

[30:02]
Well, the Fed’s raising rates, and the dollar is rising, and Trump is now complaining. He has this big complaint about the Fed, saying, ‘Oh, you’re raising rates too much.’ Well, come on dummy Trump, how else you gonna finance your trillion dollar plus deficits if you don’t raise your interest rates to attract more buyers of treasury bonds? You see, the Fed’s raising interest rates has nothing to do with inflation, it never had. The Fed has to finance the trillion dollar deficits by raising rates, that’s why rates are going up. There’s no other reason, it has nothing to do with inflation, that’s just a cover to sell it to the public.

[30:57]
Okay so, raising rates causes significant problems. The dollar goes up, and when the dollar goes up other currencies devalue, and offset the tariffs that Trump is threatening to impose. ‘I can make foreign goods more expensive by raising tariffs on them.’ But if their currency devalues it offsets the tariff increase. So Trump is caught in a contradiction here, and the key is the Federal Reserve. The Fed continues raising rates, and other currencies devalue, and it offsets his tariffs.

[31:40] (China)
Well, let’s take a look at China. Trump has threatened 200 billion dollars of more tariffs on top of the on top of his $36 billion on Chinese imports to the US. It’s a threat, it’s not real yet. When you talk about trade war you have to distinguish between the war of words, the threat, the announcements of actual tariffs and the implementation of those tariffs. We had a lot of threats and war of words about tariffs, but the announcement and actual implementation has been pretty low. Only $36 billion on Chinese goods. Maybe $70 billion worldwide, mostly steel and aluminum tariffs, plus the China tariffs. This is on $3.6 trillion of imports to the US, that’s about 2.3%. In actual fact, there’s very little trade war if you just talk about tariffs. Trade war is not here yet, but it may come.

[32:54]
I’ve been saying and writing about the two track trade war. One, Trump’s trade war with everybody except China, and then Trump’s trade war with China. Well the former is phony. You could see in recent weeks he totally backs off his threats to Europe to put tariffs on autos. Junker, the president of Europe comes over here and they agree to put everything off. Junker announces, ‘well, we’ll buy more soy beans and natural gas from you if you don’t slap auto tariffs on us,’ maybe, in the future, nothing for real. And now we have a deal that’s going to be announced imminently with Mexico. What’s holding the Mexico deal up is that Trump introduced, unilaterally a few months ago, a sunset clause, saying, ‘oh, we’re going to renegotiate this deal NAFTA every 5 years. And we don’t want you, secondly, to go after US corporations under the deal in the courts.’ They had a deal with NAFTA, with Mexico at least, months ago, and Trump held it up, but now it’s imminent. It’s going to be released before the November elections.

[34:25]
So, no real war with Europe here, and about to resolve the issues with token adjustments, which Trump will exaggerate and misrepresent to his base, and claim that his economic nationalism is working. That’s about to happen soon. The South Korea trade deal was a softball template for it all. So Europe, and Asia, and NAFTA and so forth, no trade war. A lot of hoopla and threats. The media loves it, picks up on it, Trump loves it that they pick up on it. But, no trade war going on with US allies.

[35:12]
Ah but, China is another question here. China is the real target. Not yet a trade war but getting close to it with China. Both sides have slapped $36 billion of tariffs on each other, but it’s still minuscule in the bigger picture. Ah but, China won’t come to the bargaining table anymore. You see they had a deal back in May. Steve Mnuchin went over with a trade team and they had a deal.

As I’ve said before, and it’s worth repeating, the US wants 3 things from China, 1. more market access, 2. wants China to buy more agricultural goods, 3. and it want to stop the tech transfer going on.

US corporations being forced to share their technology, particularly next generation technologies associated with cyber security, 5g wireless, and artificial intelligence. The US, in particular the pentagon and the defense establishment, is getting worried that China may use these next generation industries and markets also to leap frog the US, or to come to parity with the US on military capabilities. That’s what it’s all about. The US says, ‘Oh, this is intellectual property.’ Well, it’s software, military important software intellectual property. That’s what it’s all about when the US say IP, intellectual property.

[36:55]
Okay, so that’s gonna be, that third element of what the US wants out of China is the sticking point. China’s already agreed massive increases in US access, and has agreed, and signaled, it will buy $100 billion more per year in US agriculture. But what’s holding it up is the US tech transfer issue, that’s going to be harder. While Trump was able to intimidate with threats, the other weak US trading allies, including Europe, NAFTA, S.Korea and others – they’re at a big disadvantage economically and politically with the US, and they cave in. They’re becoming economic Setrapes, in the old Persian Empire they had governors who ran the regions called Setraps. These other region’s goal, integrated with the US economic empire are like Setraps. They don’t really control their own fate anymore. The US can easily bully them into submission, economically and otherwise, and that includes Europe now – Japan, Europe, NAFTA – they can all be brought around to NeoLiberalism 2.0, the future, and that is occurring.

[38:23] (China)
China’s another story. China won’t even come to the bargaining table now. After the $36 billion in mutual imposition of tariffs, Trump, trying to force China to the bargaining table said, ‘well, uh, I’m going to slap another $200 billion on you,’ – 10% on $200 billion of goods imported to the US. China said, ‘well, we’re going to do the same.’ That kind of pissed Trump off, and he said, ‘well, I’ll make it $500 billion.’ [chuckles].
China sits back and says, ‘okay, Mr. Bluster, just continue, we’re not going to come to the table while you’re trying to brow beat us, we’re not Mexico, you can’t do that.’ And they’re (China) sitting back there, dangling some nice bait to US bankers and multinationals saying, ‘we’re going to give you 51%, 100% access ownership of companies in China and we’ll buy a $100 billion more of your agricultural goods.’ Ooh, US interests like that, right. But it’s being held back, as I said, by the military establishment in the US and the defense companies.

[39:51]
Okay, so that’s the big sticking point here, and China’s not falling for the threats. And, what can China do? Well, China could slow its purchase of US Treasuries, they’re a big buyer of US Treasuries. Nah, I don’t think they’ll do that, because that will probably cause a collapse of the trillion dollar plus treasury assets that they hold. They could start boycotting US goods in China. In another words, a campaign, ‘Buy China, or, don’t buy US.’ China could introduce various kinds of non-tariff barriers to US companies. They’re imposing counter tariffs that are targeting agriculture in the US midland. But most likely, I think, they will allow its currency, the Yuan, the Renminbi, globally they call it, to devalue. Think about it, if Trump slaps a 10% tariff on $200 billion dollars of goods, it raises the costs of Chinese goods. But if China allows its currency to devalue by 10% it negates that 10% tariff.

[41:18]
Since the beginning of the year, since this trade war tiff with China began, the yuan has devalued 10% against the US dollar, 6% in the just last 2 months. So we already have a 10% devaluation. Maybe that’s why, in the last few days, Trump increased his threats and said, ‘well, before I said 10% tariff on $200 billion of goods, I’m going to raise it 25%, if you don’t come to the bargaining table, China.’ Well, he has to raise it to 25% because the 10% has already been negated by the devaluation of the yuan.

[42:06]
Now China tries to keep the yuan within a trading band, they say, between 6.2 to 6.8-9 yuan to the dollar. China’s been entering the markets buying and selling yuan in order to keep it within that band. Well, it’s at the end of that band, at the edge of that band, 6.8-6.9, and the next move will have to be to break that band to allow the yuan to devalue further. Well, if Trump imposes 25%, you bet China will allow the yuan to depreciate, to devalue by another 10-15%.

[42:45]
You see how this trade war can easily slip into what’s called a currency war? That’s the real indicator of a trade war. Not this tariff spat going on, which isn’t that significant anyway, yet. That’s why US business interests are only now becoming a little concerned about Trump’s trade war. If you look at the facts, it’s mostly huff and puff and smoke and threats and war of words, tariffs of words by Trump, which is so typical. And it only brings to the table, his threats and his belligerence, only brings to the table the weak players. This allows him negotiate a deal, which he’s timing these deals right before the November elections. It allows him to negotiate a deal that makes him look good. ‘Oh, see what I did, bi-laterally I renegotiated these agreements that were so terrible, free trade deals, now I have a better free trade deal, see I’m a great negotiator.’ And of course, he’ll misrepresent it, and blow it out of proportion, and lie about the terms and conditions, and the economic effect for his political base. That’s the politics at the heart of all this trade hullabaloo, at least with the allies.

[44:17]
Technology and military are at the heart of the China/US trade dispute.

I recently wrote a piece on my blog, Will Trump’s Trade War Become A Currency War? – jackrasmuss.com – Also some other blogs picked it up, The World Financial Review…. A lot of this stuff I say in more detail, numbers and so forth, go read it on the blog. It’s my third in my series on Trump NeoLiberal trade policy.

[44:55]
Okay, so, China will devalue I predict. Now, a devaluation will set off a global trade currency war. Already emerging markets are in a crisis, as their currencies are already devaluing against the dollar as the Federal Reserve raises interest rates. They’re already devaluing, already collapsing. I mean Argentina, Turkey, Brazil, now Indonesia and India are beginning to look like they’re being effected by this. As the dollar goes up, and it will continue to go up, because rates will continue to go up, their currencies will continue to decline. Well now, when their currencies decline that means the value of profits earned by US multinational corporations in those countries decline. Their earnings, for example, US corporations in Argentina and other places are earning incomes in the currencies of those countries, as they operate in those countries. But then if they want to bring the money back, it buys fewer dollars. That’s why you’re not going to see a lot of this repatriation bullshit ideology they’ve been talking about with the Trump tax cuts. They have to bring it back in dollars. They buy fewer dollars, i.e., the profits in dollar terms declines because the currencies in those countries decline, and the currencies decline because you have a trade war that’s going to spill over into a currency war.

[46:50]
Okay, see how all of this is linked? And if have currency in the EME, Emerging Market Economies, where currencies are falling, that means those countries then raise their interest rates, domestically, in order to prevent the capital flight out of those countries that occurs because their currencies are declining.

[47:19]
If you’re an investor in Argentina or Turkey or places like that, you don’t want to keep your investment in those countries as your profits are being eliminated as the currencies collapse. You want to sell those investments and convert them to a higher currency, or a more stable currency, like the Japanese yen, and sit out the profit collapse because of the currency collapse.

[47:54]
Well, when you do that you sell your Argentine peso, which means you dump more pesos on the market, which means the currency declines even more. So they raise interest rates in order to keep the money in Argentina. Instead of repatriating it out of the country as capitalist investors, both US and domestic will do, they raise interest rates, which at least keeps the money in the country.

[48:29]
Well, raising interest rates deepens the recession in those countries. Why do central banks do that, why do they raise interest rates? Because central banks everywhere have their primary objective to protect the values of the wealth of the wealthy. Even if it means recession. Raise interest rates to protect the values of their bonds, and their stocks. Even if means slowing down the country, and even if it means higher import goods inflation, which devaluation also means.

[49:08]
So the working class, those who don’t own stocks and bonds get hit big time with recession and joblessness and simultaneous rising inflation due to import prices. This is all a consequence of collapsing devaluations and currencies in the EME’s. Now this is already going on because the Fed is raising interest rates, but if China then devalues it will have a reverberating effect across all these emerging markets, and devaluations will occur even further. Thus recessions and inflation will recur even further in those emerging markets.

[49:45]
Argentina’s one of the worst cases, maybe 30% devaluation of its currency already. Turkey, their lira, even more so. They’re on the cusp of a big crisis, you see.

[50:01]
A crisis made in the China/US trade, and mostly the US federal interest rate hikes going on – raising the dollar. And why is the dollar going up, because the hikes are going on. And why are the interest rates going on? Because the deficit is getting bigger and bigger. And why is the deficit getting bigger and bigger? Because they are giving more tax cuts and more defense spending to the wealthy in the US.

[50:27]
This is the big contradiction for Trump. How does he get NeoLiberal monetary policy back on track with low rates and low dollar? Well, he’s attacking the Fed, and he’s going to continue to do that. But it’s going to be very hard for him to do something about the Fed. Unless of course he can stack it with his own people, which of course, he’s trying to do. A lot of positions were left open in the Fed on the board of governors and he’s filling them. And his Boy Powell may play the game, and go along with him. But not yet, you see, it’s not so clear that the Federal Reserve will bow to pressure from Trump. Because they’re really there to protect the corporate capitalists’ interests in this country. And, so far, it looks like they’re doing it by raising interest rates. They know a recession is coming, and when they had interest rates at a quarter of 1% there was nothing the Fed could do if there was another recession. So now, they are desperately trying to raise interest rates to give themselves a cushion for the next recession, which I say is coming late next year, 2019. And of course they have to somehow finance the deficit and debt.

[52:06]
Well, we’ll see how that works out, keep a close eye on that. But if this provokes a deeper crisis in emerging markets it’s going to have a psychological contagion effect across all of these markets. Not only on emerging markets, but it will have an effect as well on advanced economies.

[52:40] (England)
Well, what’s happening with central banks elsewhere, in the advanced economies, in Europe, Japan, North America – other than the Fed? This past week, the Bank of England indicated its raising its interest rates. How much more proof do we need that the Central bank has nothing to do about insuring economic stability, but it’s really about subsidizing the assets of the rich, than this recent Bank of England increase? The British economy is heading fast towards stagnation. Its growth rate, I think, is less than half percent now, and moving further down. And, the Bank of England raises interest rates in the midst of this, which will slow down the economy even more? Well, why do they raise interest rates? Once again, because they need to keep the value of the pound, the British pound, up. Because if it devalues that means the wealth, the stock and bond wealth of the rich will decline, because of the devaluation, you see. On paper it will decline. So, keeping interest rates up, as the US raises rates, the British, the BoE, raises rates as well. Also, they need to keep the pound value up, because if it continues to fall, or if they allow it to fall, like emerging market currencies, it will really complicate their Bexit negotiations right now. It will put them in an even weaker negotiating position with the rest of the European Union. So they have to keep the value of their currency up, that’s why they’re raising rates. But it’s going to slow their economy. The British economy, 6 months from now is going to be in a recession, no doubt.

[54:39]
So, it’s very clear, central bank policies are about subsidizing asset values. Not stabilizing the economy, or getting growth going, or slowing inflation. No, no, that’s what they sell to the public, that’s the ideology of central banks, ‘oh, central banks are about stabilizing the economy.’ Central banks destabilize the economy by subsidizing asset values, causing bubbles in financial assets that lead to crashes. And then they step in and clean it up, and create the same, next round of financial bubbles.

[55:28] (Europe Central Bank)
Well, what about Europe, the European Central Bank? They’ve been pumping money into their bankers and their corporations by buying up the bad bonds and so forth. Not just government bonds, but in Europe they’re buying up corporate bonds. Most of which is going to northern European banks, by the way, and at zero interest rates, near zero interest rates – subsidizing. Well, they were supposed to, recently say, ‘okay, we’re going to reduce and end this whole problem of subsidizing QE,’ which means, buying up bonds, 10’s of billions of dollars per month, I think 30 billion, or something like that. They’re supposed to do that. But they recently decided, ‘nah, we’re going to hold off on raising rates.’ So Britain is raising rates and the ECB says, ‘we’re going to not raise rates, we’re going to keep subsidizing,’ because their economy is even weaker.

(Japan)
And, Japan, which is the weakest of all, says there is no change. They are going to continue buying massive amounts, not only of corporate bonds, but stocks, massive amounts of stocks with zero interest.

[56:55]
So central banks continue to subsidize, around the world. Except in the US which is raising rates, and to some extent, the Bank of England, raising rates. But they have to raise rates to finance the budget deficit, the trillion dollar plus budget deficit if they want to continue tax cutting for the rich and defense spending increases.

[57:17]
And now Trump is going after China which may totally undermine this twin deficit solution. This is the big danger for the US NeoLiberal policy. Finally, we have trade policy coming in contradiction with domestic fiscal monetary policy. So he hasn’t really reestablished NeoLiberalism Policy 2.0 yet, only part of it. And if he doesn’t, we’re going to have big problems in 2019 and 20. We’ll have big problems anyway.

[58:00]
NeoLiberalism 2.0, to summarize, is really about restoring and reasserting US economic hegemony for another decade. It’s about preventing and slowing China’s military progress. It’s about crushing US domestic opposition and resistance, here domestically as a new harsher 2.0 is introduced – attacking unions, reducing voting rights, stacking courts, attacking islands of opposition within the US bureaucracy, attacking the media, the 4th estate with fake news and all this nonsense, and controlling public opinion.

This Is What NeoLiberalism 2.0 Is All About!

[58:50: OUTRO MUSIC]

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