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The following is another excerpt from my interview with the American Herald Tribune earlier this month on the subject of what are the causes of capitalist crises in the 21st century and the connections between financial cycles and real cycles. The interview, Mohsen Abdelmoumen, refers to my various publications since 2010 and the evolution of my analyses.

Mohsen Abdelmoumen:

In your very interesting book, Epic Recession: Prelude to Global Depression, you make a wise review and provide solutions. Why is the crisis inevitable?

Dr. Jack Rasmus:

Because the solutions applied to the last crisis will inevitably lead to a more generalized, and potentially deeper and more serious crisis next time. Here’s how: the excess liquidity injected by the central banks to stabilize the financial markets after 2008-09 has been generating even more debt and debt leveraged investment. That has created financial asset bubbles today in global stocks, junk bonds, leveraged loans, triple BBB (junk) rated investment grade bonds, bubbles in derivatives and other asset markets, commercial real estate, etc. The debt levels have reached a magnitude such that once asset market prices begin to unwind and contract (some of which are now occurring), servicing of the excess debt will fail. That unwinding will contract asset prices further, causes defaults and bankruptcies, and generates a credit crash. The contagion then spills over to the real economy. Non-financial sectors of the economy then begin to contract in turn, as credit availability disappears. Production cutbacks, cost cutting, and layoffs follow. Households, already carrying severe debt loads ($13.5 trillion in US alone) default on their loans. Banks with existing severe non-performing loans (more than $10 trillion globally, centered in Europe, Japan, and India will have to write them off en masse. Business and household defaults result in the collapse of bank lending. Business confidence plummets, real investment dries up further, and prices for assets, goods, and inputs deflate, causing a still further deterioration. In other words, the excess liquidity injected into the global economy by central banks after 2008 (more than $25 trillion) temporarily stabilized the financial system. But in doing so it generated more even cheaper credit and debt that flowed into highly leveraged investment in both financial assets and real assets. The solution—i.e. excess liquidity and more debt and leveraging—thus becomes the basis for renewed bubbles and financial crisis. The now even greater debt and leveraging intensifies contagion effects, amplifies the scope and magnitude of the next crisis, and accelerates the propagation across markets and economies. The solution to the last crisis becomes the fundamental cause of the next. That’s why it’s inevitable. Again, watch the most fragile financial markets associated with junk bonds, leveraged loans, BBB corporate bonds, stock markets, already non-performing loans in Europe and Asia, and government bonds of economies like Argentina, Turkey, and others. I’d throw in exchange traded funds, a form of derivatives, probably as well once stock markets correct more than 20% next time. Another problem is that central banks in Europe and Japan already have negative interest rates. Once the next crisis appears they will be limited as to what they can do. They’ll likely double down on even more QE (note: Quantitative Easing), interest free loans to businesses and other banks, and even more draconian measures like bail-ins of depositors money where depositors are forced to convert their cash to near worthless bank stock.

Mohsen Abdelmoumen:

In your book Systemic Fragility in the Global Economy, you explain that traditional economic policies have failed and that the next crisis may be worse than 2008-09. Is not the capitalist system out of breath and unable to regenerate itself?

Jack Rasmus:

Thus far, it has been able to regenerate—but only temporarily. As the economy is restructured following a major crisis—as it was in 1909-14, 1944-53, and again 1979-88—the restructuring regenerates the leading capitalist economy (e.g. the US) but at the expense of working classes and some capitalist competitors. The recovery thereafter dissipates and the crisis then reappears in more severe form. This has been the case since the early 1970s in particular. Reagan’s restructuring succeeded in generating a recovery—at the expense of Europe, Japan, and American working class—but the same restructuring led to financial instability and crises in all three sectors of global capital and culminated in the crash of 2008-09. The US recovery thereafter was rapid for capital incomes, but slow and tepid for wage incomes. And the recovery never really took hold in the weak links of Europe and Japan where subsequent recessions occurred after 2008-09, in a kind of ‘stop-go’ slow and shallow recovery punctuated by recessions—i.e. what I’ve called a classic ‘epic recession’.

Mohsen Abdelmoumen:

You also wrote Central Bankers at the End of Their Rope ? : Monetary Policy and the Coming Depression. Your analyzes and your work constantly warn about a major economic crisis to come. Why, in your opinion, can’t the capitalist system learn the lessons of previous crises?

Jack Rasmus:

After a crisis capitalists do find a way to restore profitability and expand capital. However, the restoration is only temporary, as I’ve said. But that’s acceptable for them. They’ll take a temporary recovery for all so long as it’s a significant temporary recovery for capital incomes. An alternative, longer term solution to the crisis would not as quickly restore profitability and growth, so they do not undertake it. A broader based, longer term restoration also risks strengthening opposition (to capitalism) forces and they don’t want to ‘go there’, as they say. For example, the US policy makers after 2008-09 embarked on a massive central bank money injection to bail out the banks and large corporations to the tune of more than $10 trillion, half of which was QE direct subsidy by the Fed buying bad securities. Tens of trillions in tax cuts for corporations and investors followed as well. Profits and capital incomes accelerated, as the bailout by the Fed (monetary) and Congress (fiscal tax cuts) was redistributed by corporations to shareholders.

More than $1 trillion a year was thus redistributed in the form of stock buybacks and dividend payouts just from the Fortune 500 alone. In 2018 it was $1.4 trillion. In 2019 it’s running at more than $1.5 trillion. Meanwhile, wage incomes are stagnating for the bottom 90% of the 162 million labor force in the US due to the restructuring of labor markets to the disadvantage of working class folks. So the ‘lesson’ capitalists have learned is how to quickly ensure they recover from a crisis by using monetary and fiscal policies to directly subsidize their incomes. Such policies in the 21st century are more about the State subsidizing capital incomes than they are about stabilizing the unstable, crisis prone economy.

Mohsen Abdelmoumen:

You wrote The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump, to appear this September 2019. Why in your opinion can the capitalist system only generate crises?

Jack Rasmus:

Crisis generation is embedded in the very ‘economic DNA’ of 21st century capitalism. It constantly over-expands (externally & geographically and internally & technologically). The over-expansion gets away with itself and results in severe global imbalances of various kinds: financial investment over real investment; money capital outflow excesses from the advanced capitalist core economies (US, Europe, Japan) to the emerging market economies; labor inflows from the periphery economies to the advanced core; trade imbalances or goods flow imbalances; technological change imbalances within the advanced economies; imbalances in the price systems as asset bubbles expand faster than goods or factor input prices; employment imbalances as need for skilled labor goes unfulfilled as unskilled labor accumulates on the sidelines as unemployed, underemployed, and contingent-gig service workers. All these, related imbalances generate the crises.

But capitalism feeds off the crises it creates. It feeds off its ‘dead and rotten’ destruction it creates during the. It creates a kind of ‘carrion capital’ during the crisis which it then devours in order to jump start a re-expansion process once again. Capital is by nature cannibalistic. It needs periodic destruction in order to resuscitate itself. The problem is the destruction is growing in magnitude and severity and causing increasingly severe consequences for the working classes, while leading to more intense competition among capitalists sectors globally as well. To use a metaphor, Capitalism is like sharks. It is reborn after a crisis like fetal sharks in the belly of the mama shark. The larger devour their smaller brethren while still in the womb. The few then emerge and reborn even stronger, larger, and more voracious than before.


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Once again I have been asked to comment on Modern Money Theory, MMT, and the growing interest in it on the ‘left’. What follows is a further, albeit still preliminary, comment on it, as I replied to one of the readers of this blog. (More forthcoming in depth later this summer).

“I’ve been following the various ‘forms’ of MMT being proposed. I intend to join the debate once I finish my next forthcoming book, The Scourge of Neoliberalism, due out in September. My initial impression to date, however, is not positive about monetary solutions of any kind to crises or restoration of economy growth, and that includes MMT.

I sense that MMT is in part Quantitative Easing turned on its head, and I’ve been a strong opponent of QE and all forms of ‘monetarism’ in economics which has always been more ideology than economic science. There’s thus the matter of how much of MMT is economic science and how much of it is economic ideology (meaning misrepresentation of reality in service of particular economic interests).

Another problem with MMT is that it leaves recent capitalist fiscal policy—i.e. massive cuts in taxes to investors, businesses and wealthy 1% unaddressed and in place. That is, the solution is not reversing the $15 trillion in tax cuts for investors, corporations and the rich since 2001, or reversing social program austerity policies; for MMT the solution is just creating more money and using that in lieu of reversing tax and spending trends that have increasingly benefited capital incomes. Furthermore, contrary to MMT, deficits do matter, I believe. Especially when they get exceptionally large. The federal debt will reach $34 trillion by 2028 (due to tax cuts and defense spending mostly). And interest on it will reach $900 billion a year. It’s not the deficit that matters, but the cost of financing, i.e. paying for, that deficit that does matter. To pay for that $900 billion, they’ll have to attack social programs even more aggressively and raise even more taxes on the middle class, the latter of which has now begun this year and will intensify after 2024.

Finally, another initial impression is that MMT strikes me as a kind of ‘accounting ledger’ and/or de facto ‘equilibrium’ approach to economic analysis, neither of which I find very useful to understanding the real world of the economy.

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the following is an excerpt from my recent May 2019 interview, just published June 8 by the American Herald Tribune by its reporter and interviewer Mohsen Abdelmoumen of Algeria. The excerpt addresses the subject of the general transformation of global capitalism in recent decades, in particular the six major changes since the 1970s and the four big challenges it faces in coming decades that may disrupt and derail its trajectory in the decade ahead.

(Subsequent postings of the interview to follow will address what are the fundamental, enabling, and precipitating causes of the repeated crises of capital since the 1970s and why more instability is inevitable and forthcoming. For a single posting of the entire interview, go to the website http://kyklosproductions.com)


    Mohsen Abdelmoumen:

Why in your opinion can the capitalist system only generate crises?

    Jack Rasmus:

There are six major changes in the global capitalist economy since the 1970s that increase the potential fragility, instability, and the amplification and propagation rate of the fragility-instability events:

1. Greater Integration of the Former Colonial Elites into the Capitalist Global Economy as Partners

This began in the 1970s as global capitalism integrated the petro-economies, allowing them to nationalize oil and related resource production and share significantly in the revenues from that production—so long as it was understood those elites would recycle much of their income back to the capitalist core economies through direct purchases or the global banking system. In the 1980s, the US added Japan to this wealth recycling arrangement with the Plaza accords of 1986. Europe was to a lesser extent thus integrated as well via the Louvre agreements of that decade. In the 1990s it was Eastern Europe and to a lesser extent south Asia. In the 2000s it was China in part. The recycling benefited US capital greatly. US dominated institutions like the IMF and World Bank were put in service of helping facilitate the integration. The recycling was accompanied by a major acceleration of US foreign direct investment into the economies of the new partners. The dollars flowing back to the US in the form of US Treasury bonds and bills purchases allowed the US to run chronic massive budget deficits, caused by accelerating defense-war spending and simultaneous business-investor tax cutting in the amount of tens of trillions of dollars. The recycling allowed the US to build up its military into a global force on nearly all continents, with a budget of a $trillion a year, the most advanced technology, and more than 900 bases worldwide. Integration economically with the US enabled the US to more effectively wield a ‘carrot and stick’ policy within its global empire to ensure partners would adhere to its fundamental political interests in turn. But global financial and economic integration also means that crises that build and erupt in the US and/or within the key core partners of the US economic empire (aka Canada-Mexico, Japan, Europe), now more quickly spread across the integrated markets and economies. Integration increases the amplification magnitudes and propagation rates of crises.

2. Financial Restructuring of the Global Economy and the Relative Shift to Financial Asset Investing

I argued in some detail in ‘Systemic Fragility in the Global Economy’ that what has been underway since the early 1980s decade is a relative shift toward financial asset investing. This shift is structural and has not abated. In fact, technology is accelerating it. The opportunity for greater financial market profits is also a key driver. The financial asset investing shift, as I call it, has had the result of distorting real investment in plant, equipment, etc. The latter still goes on and may also grow during periods, but in relative terms it is slowing and even declining compared to financial asset investing. At the core of this is the explosion of free money provided by the central banks, made possible by the collapse of the Bretton Woods International monetary system in the 1970s.

Technology and new forms of what is money have also contributed, and increasingly so after 2000, to the explosion of credit enabled by money and near money forms. With excess credit comes excess debt—at all levels: government, banking, non-bank businesses, households, ‘external’, etc.

The magnitude of debt is not per se the problem. The failure to service that debt (i.e. pay interest and principal) is the problem, and that occurs when prices collapse (asset and goods and inputs prices). Price deflation occurs when financial asset bubbles implode. Assets are all substitutes for each other, and when one key asset collapses it has a contagion effect across others. So the price system is the transmission mechanism. This idea is quite counter to mainstream economics which purports the price system stabilizes the economy and markets via supply and demand. But that’s a myth. The price system is a destabilizer. And there isn’t just ‘one price system’, another mainstream error. There are three key price systems that are inter-related but behave differently. They are financial asset prices, goods & services prices, and in put prices (e.g. wages). The relative shift to financial asset investing tends to drive up financial asset prices into bubble range, that then bust and drag down goods and input prices in turn, causing the recession to deepen and recovery to occur slowly. But the financial asset shift and inflation has a further negative effect: it reduces productivity as real investment slows. That slows wages (price for labor) while causing greater unemployment or underemployment (especially the latter).

Financialization is measured not by the share of profits or jobs going to the banking sector. It is defined by the explosion of financial asset securities (especially derivatives), the new highly liquid markets worldwide created in which to trade those securities, and the new financial institutions that dominate that trade—i.e. what are called the shadow banking system. Around this securities, markets, and institutional new framework (that functions globally due to technology) a new global finance capital elite has emerged as the human ‘agents’ of this new global financial structure that I define as ‘financialization’. That global finance capital elite now manages more investible assets than do the traditional commercial banking system (which by the way is increasingly integrated with the shadow banking system). But the shadow banks are virtually unregulated and thus prone to engage in excess risky financial investing, which is behind the chronic shift to financial investing and the financial instability globally it is creating.

3. Global Restructuring of Labor Markets & Collapse of Unionized Labor

Not all of contemporary capitalism is of course financialized. There is still much non-financial production going on and, in the (non-financial) services sectors, actually growing. It’s just that it isn’t as profitable as financial investing and thus is getting relatively less money capital than it otherwise would for purposes of expansion. Financialization is diverting more money capital to itself relative to non-financial investing—i.e. a shift that is slowing productivity gains in the latter and, as a consequence, wages and raising underemployment as businesses cut costs in order to offset the slowing productivity and higher costs of investing in real assets.

We thus now see major transformations in labor markets worldwide that is resulting in lower wage income gains. The ‘global integration’ process in item #1 above is accompanied by the ‘offshoring’ of higher wage manufacturing and other sector jobs to the emerging markets, following the capital outflow from the capitalist core (US, Europe, Japan) to the periphery of EMEs (note: Emerging market economies). Simultaneously, businesses still producing in the core intensify their cost cutting to compete with producers in the EMEs. That means the rise of contingent labor (part time, temp, gig, etc.) which is paid less and paid fewer benefits. The rise of contingency and offshoring reduces union membership and in turn bargaining power. Whereas in the past unions recovered some of income lost during the recession and downturns during the business cycle upswing, this is no longer occurring as unionization has collapsed. The offshoring of jobs also increases worker insecurity and means less likely worker resistance to wage compression by strikes and collective bargaining. As unions decline their political influence also wanes, and with it the ability to achieve wage and benefit improvements via political action. Minimum wage legislation in particular suffers.

Labor market restructuring thus becomes a popular project of business elites and their politicians. It takes the form of job offshoring as the State increasingly subsidizes foreign direct investment. It takes the form of job creation that is now almost totally contingent in character in the advanced capitalist core of US-Japan-Europe (60%-80% of jobs created in Europe in recent decades have been contingent—part time, temp, etc.). As unions weaken economically, it means the restricting and limiting of what union labor may legally negotiate over. As unions weaken politically, it means slower legislated wage adjustments (min. wages) and cut backs in ‘social wages’ like pensions, national health insurance, etc. As union effectiveness weakens, they are attacked and removed by business action or abandoned by workers who see them ineffective in defending their interests. Business led political parties then propose national legislation to, in part, codify the changes and in part to drive them deeper.

Just as the financial restructuring of the capitalist economy leads to accelerating income and wealth accumulation by the financial elite and business class, the restructuring of labor markets had the effect of compressing and stagnation (or for some sectors of the working class even reducing) wage incomes. The former financial restructuring causes income and wealth inequality to accelerate even faster than the labor market restructuring causes wage, working class, incomes to stagnate and decline. Both restructurings result in accelerating income inequality that we see today. And with income inequality, wealth (i.e. assets) grows in turn. Conversely, more asset accumulation produces even more non-asset income inequality. So the two, income and wealth, inequality in favor of financial and business classes feed off each other to expand even further. Meanwhile wage income stagnates.

Thus de-unionization, wage compression, social benefits cut backs, job offshoring, decline of collective bargaining and strike activity, labor market ‘reform’ legislation, etc. are all the consequence (and objectives) of labor market restructuring. Labor market restructuring is largely for the benefit of those sectors of capital still mostly doing business in the domestic economy.

Financialization, subsidization by the State of foreign direct investment, and free trade agreements are largely for the benefit of the multinational corporate sector. Free trade agreements subsidize multinational corporations in two major ways: They are primarily about legalizing terms and conditions for US multinational corporate and banking penetration of other economies on favorable terms. Free trade deals also serve as a multinational corporation cost cutting aid, as corporations are able to bring back their goods and services and not pay the tariff (tax) to re-import back to the US. For example, 49% of the US’s more than $500 billion a year in goods trade deficit with China involves goods made by US corporations in China.

4. Destruction of Former Social Democratic Parties and Movements

Everywhere globally we see the collapse of social democratic parties that once dominated government. This has been true even in the ‘heartland’ of social democracy, in Europe, but also in USA, in South America, Israel, and select economies in Asia where ‘weak forms’ of social democracy previously participated. The rise of right wing ‘populism’ should be viewed as a direct result of the political vacuum created by the demise of social democracy. It is the consequence. So why have they declined? And how has this decline fueled the global integration, financial restructuring, restructuring of labor markets, the financial investing shift, and the accelerating income and wealth inequality? Those are key questions that remain largely unanswered still today among the so-called ‘left’ or ‘progressive’ movements everywhere. Some likely causes of the collapse of social democracy at the political level parallels include the destruction of their political base, the unions, and their significant loss of political influence. To some extent it has been the result of strategic errors by these parties, allowing themselves to become too closely associated with the neoliberal offensive that began circa 1980. But whatever the cause, their decline has opened the floodgates to legislative and other capitalist initiatives to restructure the capitalist financial system and capitalist labor markets globally along lines noted above. Capital has never been more powerful relative to labor than it is today. That’s why, in desperation, working classes vote in mere protest of conditions without being able to propose and promote solutions in their interest. Thus we get Brexits. Support for far right parties that promise to change the system and argue falsely the change will better the conditions of workers. That’s why we get Donald Trump. Bolsonaros and Macris in South America. Salvinis and Orbans in Europe. Dutertes in Asia. Etc. Working classes worldwide have been ‘de-organized’ both economically and politically. Into the vacuum step the far right movements, ideologues, and their parties, who take power often by default. The working classes are left with mere periodic protest votes and they vote for parties and movements that say they are going to ‘stick it to’ the capitalists that have created their declining working conditions and standard of living—even if they know little will come of that pledge.

5. Transformation of Mainstream Capitalist Political Parties

Political change has taken the form not only of the demise or rise of certain political movements and parties, but also the change in formerly ruling parties.In the US the Republican party has assumed the mantle of the far right populism. Its former challenger of the past decade, the Teaparty, has been integrated and transformed that party fundamentally.Its ideology, policy mix, and willingness to undermine democratic norms and even institutions has signified a basic change in the composition and strategy (and tactics) of the Republican party. A similar transformation to the ‘left of center’ is in the early stages with the US Democratic party.Not just in the US is this process occurring. In the UK the formerly dominant parties are in crisis and losing popular support.A ‘Brexit’ right wing populist party is emerging within the Conservative party, while the Labor party continues to lose support to nationalists and environmentalists in its ranks as well.At earlier stages a similar development is occurring in France and even Germany, where both the national front and AfD are growing support. And of course, Italy is well ahead in the rightward shift. The parties of the ‘center’ are collapsing in various stages everywhere.

These political party changes are the consequence of the intensifying income and wealth inequality, and the forces driving it associated with global capitalist economic integration, financial restructuring, and labor market restructuring.On the periphery of the political system are the demise of social democracy and rise of the populist right parties;but ‘in the middle’ as well the traditional capitalist parties are becoming fluid and experiencing internal instability.

6. Increasing Subsidization of Capital Incomes by Capitalist States

Capitalists have totally captured the direction of fiscal and monetary policy and have turned it to the benefit of their direct interests.In past periods, the primary mission of fiscal-monetary policy was to stabilize capitalist economies when recessions or goods inflation occurred. Fiscal-monetary policy was also employed in a manner that shared the benefits of such policy with working classes and other sectors. But 21st century capitalist fiscal-monetary policy (taxation, government spending, budget-national debt management, interest rates, inflation targeting, employment, etc.) has been transformed. Today the primary mission of such policy is to directly subsidize capital incomes, both in periods of economic contraction and in subsequent periods of recovery.Keeping interest rates low chronically allows constant cheap credit and the issuance of multi-trillions of dollars of corporate and household debt.Providing excess liquidity fuels financial asset market (stocks, bond, derivatives, etc.) bubbles that boom capital incomes from financial investing. Equally massive, multi-trillion dollar tax cuts for businesses, corporations and investors, bankers and shadow bankers, results in the US alone more than a $1 trillion a year annually in redistribution to shareholders from stock buybacks and dividend payouts (in 2018 rising to $1.4 trillion in US alone). Ever more funding is simultaneously provided for defense and war production.

The direct subsidization fuels the financial asset investing shift and in turn the financial asset bubbles, corporate and household excess debt, and generates the financial fragility and instability in the form of the next crisis. It also results in escalating government sector debt and rising debt servicing costs.

Thus all three major sectors of capitalist economy—business, households, government—keep loading up on debt and leverage. In the US, government debt (national and local, central bank and government agency) is well over $30 trillion. Another $20 trillion could easily be added by 2030. Corporate and business bond and loan debt may be as high as $20 trillion today.And household debt nearly $14 trillion and rising rapidly. The problem of debt is multiplied many fold across the global capitalist economy, with areas of high concentration of either corporate and/or government debt.The amount is easily more than $75 trillion. It is worth repeating, however, that the sheer magnitude of debt is not by itself the problem.The problem is when the incomes for servicing the debt cannot keep up.And that gap widens rapidly when financial asset prices, and other prices, rapidly collapse and contagion spread just as rapidly from the financial to the real economy. Price collapse, beginning with financial markets, is the critical chemical additive that makes the debt problem explode. And when that explosion takes place, the massive debt accumulation at government levels prevents traditional fiscal-monetary policy from playing an economic stabilization role. All it is then used for is to subsidize the losses incurred by owners of capital incomes.


    Mohsen Abdelmoumen:

You are a brilliant economist and a prolific author. Unlike most economists linked to the establishment who see nothing, you keep warning with very solid arguments and careful work that we are heading for another cycle of crises more serious than the previous ones. Is the capitalist system reformable or should we not seek an alternative as soon as possible?

    Jack Rasmus:

It depends what you mean by ‘reforms’. There are obviously minor reforms that, while important for protecting average folks income, their standard of living, protecting their basic rights and civil liberties, etc., don’t challenge or stop the fundamental drift of US and global capitalism, including its growing tendency toward crises that I noted above. These should be distinguished from structural ‘reforms’ that do attempt to fundamentally change the direction of 21st century global capitalism. These fundamental reforms are, of course, strongly resisted by capitalists and their political representatives. What then are these transformable ‘reforms’?

They would be changes that halt and roll back the financialization and the multiple forces now accelerating income and wealth economy, with emphasis on ‘roll back’ here.They would reverse the changes in the labor markets of recent decades, by prohibiting for example the excess hiring of part time, temp and otherwise ‘contingent’ labor. They would restore an even field for the recovery of unions and collective bargaining.They would democratize the central banks and give them a new mission to serve not only the banks but the rest of society; central banks would become part of a broader public banking system and their decisions made by elected representatives accountable to all of society (my recent book provides proposals of legislation that would do this). The tax shift of recent decades that gave ever more income to businesses, investors and wealthy 1% would be reversed, perhaps via a financial transaction tax system and would make tax fraud and offshore tax sheltering a criminal offense with guaranteed jail time. And of course the massive $ trillion a year war budget would be significantly reduced by fundamental reforms. All these fundamental reforms challenge the trajectory and dynamics of 21st century capitalism. Capitalists and politicians would vigorously resist them. In that sense the system is not ‘reformable’. Minor reforms are sometimes allowed, and concessions granted especially in times of system crisis. But both kinds of reforms should be aggressively pursued.

There are four great challenges confronting 21st century US dominated global capitalism.It is questionable whether the system can overcome them. If it can’t it will be perceived by the general, non-capitalist populace that it is failing and no long can deliver on improving standards of living or even maintaining past levels of living standards. If that occurs, it’s a game changer. Here are the four great challenges it faces:

1. Will Capitalism be able to resolve the crisis of climate change in the next two decades.

If it can’t do that, the economic negative impacts of climate change by 2040 will have reached such a level that they will become economically unresolvable.The system will be appropriately blamed for not resolving the problem. It remains to be seen if the private profit and capital expansion system of capitalism can co-exist with the climate crisis. Can profits be maintained and the climate crisis simultaneously resolved? We shall see, but I’m not optimistic the two can coexist.

2. Can the system control the coming huge negative impacts of technological change?

We’ve seen how technology has transformed financial and labor markets, to the great detriment of 80%-90% of the working classes. It has spawned new business models like Amazon, Uber, and others that have devastated jobs and wage incomes.In the US more than 50 million are already ‘contingent’ labor of some kind (in Europe and Japan even more) and it’s just the beginning. The real crisis will begin when next decade the technological effects of Artificial Intelligence and machine learning software have an even greater impact. A recent Mckinsey Consultant study predicts a minimum of 30% of all occupations and jobs will be replaced or reduced. How are these people going to earn a decent living, start families, afford housing, etc.? Some say a Guaranteed Basic Income will have to be the answer. I don’t see capitalists going along with that.It’s a ‘structural reform’ they’ll resist tooth and nail. What are the economic and political consequences of AI (note: Artificial Intelligence) if they allow it to happen and drive down living standards for hundreds of millions of workers worldwide? Here again I don’t see the capitalist system, as it pursues profits via AI, being able or willing to soften its massive negative effects on jobs, income and living standards.

3. Will They do anything about accelerating Income Inequality?

Capitalists and politicians talk about this but so far put forward no solutions to it.And the realization of ‘them vs. us’ is beginning to deepen in the consciousness of more workers. That resentment is fueling the right wing populism globally. It is also making the young workers, the millennials and next ‘generation Z’ coming, to turn against the system in droves. Polls in the US show a majority of under 30 year olds now reject the capitalist system as it is and prefer some kind of ‘socialism’. We shouldn’t make too much of this yet, but ‘socialism’ means to them ‘none of the above’ currently.

4. Can capitalists ‘manage’ the radical right populist surge underway?

They think they can but are losing in that effort thus far. They thought they could control Trump, but he is transforming the Republican party by driving out traditional capitalist representative from it and from their initial placement in his administration.He is terrorizing the opposition from within. It’s not unlike what’s going on elsewhere in Europe and South Asia countries where authoritarian right ideologues like Trump and his neocons are slowing changing the political rules of the game in their favor, at the expense of the traditionalists, sometimes called ‘globalists’. But it’s really about an internal internecine intra-capitalist class fight going on the US and elsewhere.A more aggressive and violent wing views the crisis of living standards as an opportunity to assert itself, take control of the institutions of government, transform the State apparatus and bureaucracy to serve it and not the traditionalists, and govern in a more direct way, even approaching a kind of dictatorship of its wing over the formal institutions of government and state. In short, I don’t see that the capitalists have had much success so far in containing this development, this shift toward a more radical right. There are of course some historical parallels here. It’s what Hitler was able to do in the early 1930s. There are numerous disturbing historical parallels between Trump and his movement and Hitler’s early strategies. Of course, the process was accelerating in Germany as the economic and social crisis was more intense and concentrated in a shorter time frame in the 1920s there. The crisis is not as intense yet in the US and the process of Trump’s take over of the political system is more drawn out and protracted. But there are similarities to the process nonetheless. The traditionalist capitalist wing and globalists are clearly ‘losing’ in the US. And if Trump should win another term in 2020, which he might if there’s no recession in the US in the interim, then this transformation of American democracy and American political institutions and culture will then become quite obvious. Meanwhile, we see a similar rightward drift and transformation of the capitalist political systems occurring in the UK, in central Europe, maybe even France soon, in the Philippines, in India, in Brazil-Argentina, in places in Africa and elsewhere. I think the traditionalists have no idea or strategy of how to stop it.

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Central banks are lowering interest rates worldwide, in anticipation of the US Federal Reserve soon to do so, as the global economy continues to weaken.

Both the IMF and World Bank have this past week cut their estimates of economic growth… again. Global oil prices continue to decline (as I predicted earlier this year after prices rose following last year’s 40% collapse). US and Europe factory orders and output are flat. Manufacturing globally is stagnating. (Watch for US jobs, a lagging indicator, likely to soon retreat as well). Emerging market economies are slipping into recession, one by one. Advanced economies like UK and Australia now beginning to contract. Bond prices worldwide are booming as bond (long term) rates fall everywhere due to weakening global economies, dragging down short term rates, as the Fed prepares to ‘catch up’ by cutting its own benchmark rate now lagging behind the real economy.

Can the Fed and other central banks boost the sagging US and global economy? Can European central banks even try–with more than $10 trillion in negative interest rates already, with trillions of dollar equivalent in non-performing bank loans(NPLs)? With trillions $ more in bad bank debt and NPLs in Japan, India and China?

Why the Fed’s official 2% inflation target is, and has always been, a phony target and number. And subsidizing capital markets and incomes always its true target. Why monetary policy and central banks are at the end of their fraying ropes and their imminent rate cutting moves will prove ineffective.

For my discussion of these and related questions about the ineffectiveness of monetary policy approaches to the economy (including the emerging popular notion of modern monetary theory–i.e. ‘QE turned on its head’–listen to my 2-part hour long interview with Radio4All on my 2017 book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’.

    GO TO: (for part 1 of the interview)


    GO TO: (for part 2 of the interview)


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In a recent radio interview on May 31, 2019 I was queried by Global Research interviewer, Michael Welch, on a number of topics, including the US-China trade war’s longer term meaning.

Here’s my segment of the interview. Download the MP3 podcast below.

(Go to 7:30 minutes into the interview and listen up to 29:30)


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For succinct commentary and predictions on key developments in the US and global economy during the recent months of April-May, check out my following tweets. (Join me at @drjackrasmus to receive my future tweets as posted)

May 29
#yieldcurve The 10 mo. Treasury bond is now priced below that of the 3 mo. Treasury bill, a degree of inversion not seen since 2007; and an inversion that has predicted every recession since 1955. My prediction of US recession by late 2019 comes closer.

May 28
#Japan While Europe’s economy is now slowing rapidly approaching stagnation, and US weakening noticeably, don’t forget 3rd largest economy, Japan, where both consumer spending & Bus. investment contracted 1Q19. As $US declines, Yen will rise, deepening Japan recession’s recession

May 25
#USWages Mckinsey Consultants report on the decline of US Labor’s share of income (e.g. income inequality) shows in 2000 Labor’s share national income=63.3%. In 2016=56.7%. That’s -6.6% and $1.3 trillion/yr. less every year (2017 national income=$19.9T). Capital incomes up $1.3T)

May 25
#Trumptaxcuts Institute on Taxation & Economic Policy’s just issued report shows following companies not only paid NO TAXES last year but got refund checks from the IRS: Amazon, Delta, Chevron, GM, Duke, IBM, Prudential, Jetblue, Gannett, & others. Rebate total $79 billion

May 24
#Fed Fed’s annual household financial survey yesterday showed 40% (130m + households) don’t have $400 for emergencies (i.e neither cash, savings or credit cards). That’s >50 million. (27% have to borrow from friends or sell personal assets; 13% can’t even do that).

May 23
#TaxReform New report released by Bloomberg Business Week (latest issue) shows the richest 0.1% have stuffed $7.6 trillion offshore to avoid taxes. Meanwhile, F500 corps gave US shareholders in 2018 another $1.4 trillion in buybacks & dividends. 2019 running at $1.5T.

May 21
#USeconomy My prior posts showed US GDP basics very weak in 1Q: consumer spending up only 1.2%. Then April ’19 retail sales -0.5%. Now 1Q capital spending data in: only up 3% (vs. 20% year ago). Fixed investment only 2.7% vs. 4Q18 5.4%. All this before China trade breakdown.

May 21
#Fed Chicago Fed index of national econ April activity turns negative more than analysts’ worst forecast. Prior months also revised down & neg. 3 mo. ave. Feb-March also neg. All this before Trump trade war escalation. My forecast: no China trade deal at June G20 mtg either.

May 5
#Chinatrade China-US trade ‘make or break’ this week. Trump follows hardline anti-China advisers & threatens higher tariffs before final mtg this week. Hardliners raise impossible demand China share tech with US to scuttle deal. US Neocons now running US trade & foreign policy

May 4
#USjobsReport For my deeper analysis of the april 2019 just released US jobs report, and why the labor market is much weaker than the unemployment and jobs creation numbers suggest, go to my blog at (link: http://jackrasmus.com) jackrasmus.com and to my April 3 radio show link at the end of the blog

May 1
#Negativerates ECB neg. rate now -0.4%; ECB to lower further to follow Fed. Total Neg. EU debt rose from$6.2 trillion to$10.1 in just last 12 months. ECB neg. rates supposed to = more bank lending; Instead, lending falling & money flowing to US. EU banks are locus of next crisis?

May 1
#Fed meets today. Trump & Kudlow call for 1% point rate cut in Fed funds rate, as global economy slows driving capital flows from EU, EMEs, JP to US & driving up US$. Argentine Peso, Turkey Lira & Euro down 10%-20% so far 2019. US MNCs offshore profits (GM,GE,etc) taking big hits

Apr 26
#GDP 1st Qtr US GDP driven by temporary excess inventories & import effects. 80% of economy–bus. investment + consumption–grow only at 2.7% (structures & equipment flat) and 1.2%. With Trump tax cut effects now over, Trump to bet on China trade deal & Fed rate cuts for 2019-20

Apr 20
#Fed As a sign of more Fed capitulation to political pressure by Trump & investors, Fed district presidents & vice-chair (Evans, Kaplan, Clarida) now preparing markets for rate cuts later this year. All now say inflation rate of 1.5% justify cuts even if US economy keeps growing

Apr 14
#TaxDay Tomorrow is ‘taxday’. For an analysis of how much businesses, corporations, investors and the 1% are getting from the Trump 2018 tax cuts–and how the middle class is paying for it all–read my latest blog piece ‘Trump Whacks the Middle Class’

Apr 12
#USdeficit Latest govt data show US budget deficit widening in first half (Oct-Mar) of current fiscal year: $691 billion. Annual run rate projects deficit of more than $1.3 trillion for current 2018-19 year; watch for even more in next 2019-20 budget when recession hits late 2019

Apr 9
#Democracy means the people are sovereign & may delegate that to elected representatives. But Trump’s attorney general, Barr, says no. Congress won’t get to see actual Mueller rept. Where does the US Constitution say anything about grand juries, or Congress has no right to know?

Apr 8
#Fed Trump nominates 2 political sycophants to Fed board. For why the Fed is NOT independent, read my 2 latest articles (“Trump v. Powell” & “The Capitulation of Powell & the Fed”) at (link: http://jackrasmus.com) jackrasmus.com (also Counterpunch blog & European Financial Review magazine, Feb. 19)

Apr 3
#globaltrade Data for slowing global trade show possible accelerating downtrend. After 4.6% growth in 2017, down to 3% in 2018. Most ominous, fourth quarter 2018 actually declined by -0.3%

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The following is my commentary on special counsel, Mueller’s, public nine minute statement before the cameras today on the Trump investigation. Why no indictment. Why no impeachment yet. Despite massive evidence of obstruction of justice and the investigation, which continues still almost daily.

“Today special counsel Mueller went before the cameras and in nine minutes essentially said his report was all he had to say and he wouldn’t go before Congress, even if subpoenaed, to say anything else.

Mueller summarized his recent report in the nine minutes. Here’s what he concluded were its main points:

First, there was insufficient evidence to conclude Trump colluded to a criminal extent. Insufficient evidence. Not no evidence. Insufficient. And much of that was destroyed by Trump (erased emails). Or Mueller couldn’t get it because the Trump administration wouldn’t release it. Or key witnesses refused to testify to the Muller commission, including Donald Trump Jr. who had direct conversations with the Russians but was prevented talking to Mueller by Trump from speaking. Which raises the question: why didn’t Mueller subpoena Trump Jr.? Or even Trump himself? After all, special prosecutor Starr subpoenaed and questioned Bill Clinton in his impeachment. Why were the Trumps let off the hook by Mueller?

In short, the first conclusion was that some kind of collusion between Trump and the Russians was likely, according to the Mueller Report, but not enough evidence was provided to prove the more demanding charge of criminal intent.

Second, in contrast, the Report concluded there was an abundance of evidence that Trump obstructed the investigation. In fact, multiple times and in various ways. Take a look at the summary of evidence on Trump’s obstruction of justice in vol. 2 of the Mueller Report. It’s overwhelming.

Nixon was impeached in 1974 in large part based on his obstruction of the Watergate investigation. And if obstruction is a criminal act, why then did Mueller not also indict Trump on that evidence, as Nixon had been?

In the Nixon case, impeachment was actually based on three findings: Nixon was found to have engaged in obstruction of the investigation of the “Watergate” burglary inquiry, of misuse of law enforcement and intelligence agencies for political purposes, and of refusal to comply with the House Judiciary Committee’s subpoenas.

The Mueller report substantiates without a doubt that Trump obstructed the investigation many times and in many ways. But History here is repeating itself, as they say. Trump’s recent order to have his Justice Dept. start investigating the origins of the Mueller investigation, using law enforcement and intelligence agencies, is an act for which Nixon was also impeached. It’s using government agencies to go after political adversaries. And then there’s Trump’s recent additional order in recent weeks, that no one in his executive branch should respond to Congressional subpoenas if called on to testify before the House (which includes Mueller, by the way, who technically works for Trump as a member of the Justice Dept. Maybe that’s why Mueller stood before the cameras and won’t stand before Congress). As in the case of Nixon, refusing to cooperate with Congress in an investigation is also an impeachable act.

So Trump is not only impeachable based on his actions and events that preceded the Mueller Report release. He’s impeachable based on his repeated follow up acts since the Report. In other words, the obstruction continues.

So why is Trump not being impeached? Do you hear that Nancy Pelosi? (Not that Nancy doesn’t already know, of course). Pelosi’s excuse is that impeachment might cause the Democrats to lose the House in 2020 and the presidency. She should tell that to the Republicans who, after their failed impeachment of Bill Clinton, actuallyl gained House seats in 2000 and won the election that year as well! So much for false historical analogies.

This leads to the third essential, and most important, point made by Mueller today in his brief appearance before the cameras: Mueller said he couldn’t indict Trump, based on the rules of the Justice Department no matter what were Trump’s criminal acts. What? Trump engages in criminal acts but is above the law simply based on a rule his own Justice Dept. created to protect presidents while in office?

Mueller apparently places his obligation to abide by a rule created by the bureaucracy above his obligation to recommend action due to obvious criminal activity! Maybe that’s the new modus operandi of the FBI, of which he is a former director.

Mueller was supposed to be the paragon of right and justice, according to the eastern elite establishment media that elevated him to a rank just short of secular saint during his investigation. He was the incorruptible, a straight shooter. So how does one explain Mueller’s decision to place bureaucratic rules above the prosecution of criminals then?

Is it because he’s always been a Republican and Republican pols always cover each other’s ass? Or maybe he just preferred to toss the hornet’s nest into the lap of Congress and retreat to the sidelines to personally avoid being engulfed by the firestorm that might result if he indicted Trump. Or maybe he just didn’t want to go ‘head to head’ with Justice Secretary, Barr, who happens to be an old buddy of Mueller. Their families have reportedly socialized together for years. Of course, I would not think of suggesting that had any effect on Mueller’s decisions in his report.

Regardless the his motive, before the cameras today Mueller made it clear he agrees with the Executive-Justice Dept. rule preventing him from indicting Trump for criminal obstruction of justice—examples of which abound in the report. That’s the real take-away from Mueller’s Report and his 9 minute historical contribution to the further demise of Democracy in America.

Just consider that carefully folks. It’s worth repeating. That interpretation, that rule, means a president can engage in any kind of criminal act. He could launch world war III on a whim. He could order the incarceration of protestors en masse. He could strangle his grandmother on the white house lawn, but nevertheless he can’t be indicted because it, the Justice Dept., issued a rule that said he can’t while in office!

You know what that is? That’s Tyranny. Which is the definition of someone in power who is ‘above the law’.

We now have a tyrant in the oval office and the Justice Dept., the highest government office responsible for upholding law and prosecuting criminals, simply says it’s not allowed. What bureaucrat assumed the authority to make that rule?

Barr and Mueller agree that the Justice Dept. rules preventing indictment of a sitting president for criminal activity is based on the US Constitution. Oh Yeah. So where does the Constitution say that? I couldn’t find it anywhere in Article II of the US Constitution on the Presidency. Nor in Article I on the legislative powers of Congress. Nowhere does it say a rule created by a department of the executive branch of government negates criminal law. Or can stop an investigation of the president relevant to impeachment proceedings.

What I did find is that the Constitution doesn’t even require a criminal act to justify impeachment. (Hear that Nancy?). Criminality certainly strengthens the case for impeachment. And we have now three clear cases of criminal activity by Trump that a former crook, Richard Nixon, was impeached on: obstruction of justice, using law enforcement and intelligence agencies to investigate his political opponents, and refusing to respond to Congressional subpoenas.

So here we are in 2019. A President is above the law. Bureaucratic rules absolve criminal activity. The president continues to move toward unilateral governing by the executive branch, thumbing his nose at the legislative. Trump repeatedly violates the US Constitution by arbitrarily diverting money appropriated by Congress for specific legislation to whatever he wants. He orders investigations of his opponents—i.e. McCarthyism write large. He orders employees of the Executive branch to refuse to cooperate with Congress, including subpoenas, ignoring Congress’s Constitutional right to investigate. He repeatedly invokes phony ‘national emergency’ declarations to take unilateral action, bypassing Congress. He has publicly declared he will pardon himself if convicted. And so it goes, as the US drifts into a bona fide Constitutional Crisis not seen since the 1850s.

What’s next? Could Trump refuse to leave the White House if defeated in 2020? Don’t think that’s outrageous. It’s more than just possible.

And what would the leaders of the Democratic party do in that case, when they can’t even show enough backbone to take up their Constitutional duty to confront a criminal in the White House, who almost daily abridges their Constitutional rights and marginalizes them as a governing body.”

Jack Rasmus
May 29, 2019
Dr. Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy From Reagan to Trump’, Clarity Press, September 2019, and the recently published ‘Alexander Hamilton and the Origin of the Fed’, Lexington books, March 2019, and ‘Central Bankers at the End of Their Rope’, Clarity Press, August 2017. He blogs at jackrasmus.com, tweets at @drjackrasmus, and hosts the Alternative Visions show on the Progressive Radio Network (http:..alternativevisions.podbean.com).

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