Archive for the ‘Uncategorized’ Category

Listen to my recent radio interview with ‘The Critical Hour’ explaining why current US jobless are 50 million: 40m getting benefits+7.3m in the pipeline applying+5m more ‘not in labor force’ and thus not calculated in unemployment numbers.

Also, what’s going on in current negotiations in US Senate to end $600/wk supplemental unemployment benefit in July and replace it with a massive wage subsidy to business–US govt to directly pay business 80% of wages up to $45k per year or more! Is this the beginning of the end of unemployment insurance program? Why Senate Democrats are falling for the Republican drive to replace unemployment benefits with subsidizing business wages. .


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Watch my 60 minutes May 27, 2020 interview on the US economy with ‘Other Voices’ TV, Paul George.

TO Watch GO TO:

https://youtu.be/M70H0ziTovc— /wp:paragraph –>

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Mainstream economics consistently fails to predict the future. I’m talking about those ‘schools’ of mis-thought, ranging from Paul Krugman on the ‘left’ to Glenn Hubbard and other apologists of business and neoliberalism on the ‘right’.

One of the favorite myths they perpetrate is that ‘wages are sticky downwards’. That means that in conditions of recession or worse, because workers won’t accept lower wages the recession tends to continue. If only workers would allow wage reductions it would mean business would have more disposable income (from wage cost savings) on hand. Business would then reinvest the extra income. Investment would rise. Workers would be rehired. Wage income would then recover and the economy would grow from more investment and consumption.

This fiction has ruled for more than a century. The economist John Maynard Keynes debunked it in the 1930s. But it was retained by the mainstream economics profession nonetheless, even to this day. Just read most of the entry college level textbooks. It’s still there. Along with at least a dozen other false propositions (like free trade benefits all; inflation is caused by too much money chasing too few goods; income inequality is due to workers not educating themselves and making themselves more productive; business tax cuts create jobs–and a host of other nonsense statements with no support in reality.

The notion that ‘wages are sticky downward’ is a clever way to argue that workers are responsible for the lack of a quick recovery from a recession. If they only would reduce their wages it would all be ok in a short while.

But take a look what’s going on right now. As of late May 2020 at least 45 million American workers are unemployed. In just two months they have lost $1.3 trillion in income. More than $1 trillion due to unemployed. Another $260B due to shorter hours of work. That’s a wage reduction of -$1.3 trillion! As in all recessions, workers do experience severe wage reduction–in joblessness (no wages), shorter hours of work, cuts and loss of benefits, lower pension contributions by employers, wage theft, etc. etc. So wages do fall, and are falling today faster and deeper than ever. And is business and investors spending and investing given the wage reductions? No. They’re hoarding the $1.74 trillion in Congressional loans and grants bailouts. And hoarding the $650 billion in business tax cuts also in the bailout legislation thus far (which one hears very little about in the media, I might add).

As journalist David Cay Johnson just revealed in a piece today, the short term cash deposits by business in just institutional money funds (only one source) has risen from $2.3 trillion before March 1, 2020 to $3.3T today. That’s a $1T rise in cash deposits by businesses, just in institutional money funds. More is being deposited in commercial banks. The long run average of business deposits in commercial banks has been around 5% (6% under Obama and 4.6% under Trump 2016-19) to 15.8% since March 1. Businesses and investors are hoarding their cash and stuffing it in their short term accounts in banks, funds, and who knows where else, on and offshore. No doubt some of that will be committed at some point to stock buybacks, dividend payouts, mergers & acquisitions, derivatives speculation, and all the rest of the financial gambling that in the 21st century defines capitalism. Don’t expect much to get into real investment that increases production, requiring the rehiring of workers, that generates wage incomes.

So wage cuts and reductions, now underway, will not result in renewed business investment and general rehiring of the 45 million laid off. Wage cuts don’t result in real investment and growth.

The nonsense economics notion that wages are sticky downwards is just pure economic bullshit today, as it has always been! And so is the parallel mainstream idea that if you can just find a way to boost business cash (via tax cuts or bailout loans) it will lead to economic recovery as well.

Dr. Jack Rasmus
March 24, 2020

Dr. Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020, where the empirical record on wages, investment, taxes, employment thoroughly debunks the various myths and misrepresentations of mainstream economics.

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Listen to my Alternative Visions radio show of friday, May 22, and my background analysis of the recently proposed ‘Heroes Act’, the fifth in the series of US House of Representatives (i.e. Democrats) economic mitigation bills for the US economy. Will it stimulate recovery? Is it a stimulus bill or still a mitigation bill? What’s the background leading up to the Heroes bill? What has the March ‘CARES Act’ accomplished thus far. Why businesses and corporations will commit very little of the $1.74 trillion loans & grants to investment, production and hiring back of the unemployed. Why the unemployment totals are now well over 45m, or about 30% of the work force. (Part 2 of the Heroes Act described in detail to follow next week’s Alternative Visions show on friday, May 29)




Dr. Rasmus explains the latest Congressional bill to try to stimulate the US economy, called the Heroes Act, passed a week ago. What are the elements? Will they continue to ‘mitigate’ the virus impact on the economy or actually stimulate recovery? Why is McConnell in the Senate, Republicans, and Trump opposed and blocking it? What are their arguments and are they accurate? Rasmus provides a background analysis of the four previous ‘mitigation’ bills, the central CARES ACT passed in April in particular. Why are the large corporations not taking up the $500B in loans, why is the Main St. provision for medium sized corps not even implemented yet? Why and how the small business PPP provision being ‘gamed’ by larger companies? Problems with a primary monetary stimulus strategy that is the CARES ACT.

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Listen to my radio interview of 5-19-20 with ‘By Any Means Necessary’ Radio and my explanation why current health-economic crisis will continue for years, in ‘W-Shape’ recovery with relapses later this year and in 2021. Why Fed central bank monetary policy will NOT lead to more investment, restoration of bank lending, business production, and return of consumer spending (given current 47m jobless and actual 28% unemployment rate). The limits of Fed monetary policy solutions, including MMT. What happens to the additional 45m now jobless health coverage come August? Or when extended unemployment benefits expire in August? Comment on Mark Cuban’s proposal for a $4k/mo guaranteed income to be spent within one week of receipt.

    Listen GO TO


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Listen to my Alternative Visions radio show of friday, May 15, when guests Nick Brana and Jerry Perez are interviewed. Topic is the break away of the Los Angeles Sanders’ Our Revolution grass roots organization and move to form an independent political party. Other ‘Our Revolution’ groups status. OR-LA merging with Peoples Party’s 70,000 members.

on Progressive Radio Network

Today’s show invites former Sanders’ grass roots organizers, Nick Brana (senior staff member of Sanders’ 2016 campaign) and Jerry Perez (current field director for Sanders’ Our Revolution grass roots organization in Los Angeles) , to discuss the emerging formation of an independent political party in the wake of Sanders’ capitulation, who abruptly dropped out of the Democrat party primary race and endorsed Joe Biden. Rasmus briefly explains the dimensions of the ‘triple crisis’ today: the economic crisis now deepening; the health (virus) crisis accelerating the economic decline that began late 2019; and the political crisis about to intensify even further between the two wings of the corporate party of America—aka Trumpublicans and Democrats. Rasmus reviews the dimensions of the emerging political crisis and the recent trajectory of the Sanders campaign and its collapse. Guests Nick Brana and Jerry Perez discuss what’s happening now with the growing movement to form an independent political party. Brana’s ‘Peoples Party’ with 70,000 members throughout the US and Perez’s LA Our Revolution group and other interested OR groups current considering and discussing going independent. What’s happening at the grass roots with regard to independent party formation. (For more information, go to http://peoplesparty.org and to http://ourrevolutionLA.com )

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The current pandemic is wrecking havoc with the US and global economy, accelerating and deepening the general economic crisis–and threatening to provoke a global financial crisis that will exacerbate the decline and usher in a great depression no doubt even worse than the 1930s. We are now somewhere between the Great Recession of 2008-09 and the depression in the 1930s in depth of contraction and duration. Today’s Great Recession 2.0 is no doubt already worse than 2008-09 and approaching (and in some already exceeding) the depression of the 1930s.

As 40 million plus of US workers find themselves unemployed and barely able to cover their rents, food and other bills, their ability to afford or even secure fundamental health care services is a growing problem. Most of the 40 million will lose their employer health insurance coverage. Millions more will be unable to afford it, or to acquire even minimal ACA or Medicaid health services.

This writer was asked the following questions by an International News Agency about what happens to health care services in the near future, given not only the health but the economic crisis.

Here’s the questions, followed by my commentary and analysis where US health care is likely going in the foreseeable future:


“We’re discussing the US health insurance crisis. Millions of Americans have been hit by a double blow, being out of work and without health insurance if they get sick. Prior to the pandemic, 160 million Americans received their medical insurance through their job. The wave of layoffs triggered by quarantine measures now threatens that coverage for millions. Up to 7 million of those people are unlikely to find new insurance as poor economic conditions drag on, researchers at the Urban Institute and Robert Wood Johnson Foundation think tanks predict. Such enormous insurance losses could dramatically alter America’s healthcare landscape, and will probably result in more deaths as people avoid unaffordable healthcare.

In this respect, we’d be happy if you could share your opinion in a short commentary on the pros and cons of Obamacare: 1. why the system failed to cope with multiple healthcare issues, 2. what prevented it from being as successful as was expected and 3. what do you think could have been an alternative, especially now, when the pandemic is ruining the already fragile healthcare system.”


Obamacare should be understood as a program that attempted to resolve the decades-long growing health care system crisis in America by means of privatization. In the early 1990s Bill Clinton’s effort to pass legislation to correct a national insurance program was defeated by massive lobbying by the healthcare industry (insurance companies, hospital chains, clinics, physicians, pharmaceutical companies, medical device manufacturers, etc.). Clinton’s response was to pass what was called Health Maintenance organizations, or HMOs. But also part of his market solution was to allow insurance companies to merge with other financial institutions (previously prevented) and allow hospitals to acquire each other without anti-trust liabilities, which were exempted in this industry. A concentration of insurance and hospital chains followed. Concentration led to oligopoly and higher prices. In order to buy up each other, hospitals and insurers went to Wall St. for financing of the deals. Wall St. demanded higher profit margins, at least 22% of revenues, in order to provide the merger financing. That led to still further price increases after the mid-1990s, and insurers dropping from coverage households with pre-existing conditions. Prices rose and coverage (costs) fell. As insurance prices rose, companies providing health insurance shifted more and more of the rising cost burden to its workers in the form of higher monthly premiums, more co-pays, more deductibles. Big companies that used to provide retirement health care benefits to their workers (e.g. AT&T, IBM, etc.) began dropping those benefits. The courts supported them. Millions of retirees lost benefits, while for the still employed prices rose, as insurers expanded price increases while reducing coverage. BY 2000, 50m workers were without health insurance coverage; and those that still had it were paying higher prices for less coverage. In 2000, Clinton arbitrarily redefined what it meant to not have insurance coverage, reducing the total without health insurance from 50m to 40m. This was a repeat of what he had done to reduce poverty: he simply defined it lower, if not away.

The dynamic of health insurers and hospital chain concentration—driving oligopoly and inflation higher as coverage declined—continued in the 2000s decade under George W. Bush. More and more were dropped from coverage by insurance companies for dubious reasons like pre-existing conditions, in order to satisfy Wall St. they were attaining 22% margins as a qualification for getting loans to buy up their competitors. As insurers gouged the public and got away with it, other sectors of the health industry followed suit “to get their share” as they said. Hospitals raised prices. So then did doctors and clinics and medical device manufacturers and pharmaceutical companies.

In 2005 the big pharma companies got a second boost from government policy. George W. Bush passed the addition to Medicare called ‘Part D’ that meant the government provided drug prescriptions in part to seniors on Medicare. The problem, however, was that the politicians, Republican and Democrat alike, did not pass any funding for Part D. The cost of the program was paid out of general tax revenues, not a specific addition to the payroll tax earmarked just for Part D. That would add $50b a year to the US budget deficit and debt every year thereafter. Big Pharma got $50B a year more customers. Big Pharma and health insurance companies are among the top 3 or 4 biggest campaign contributors and lobbyist spenders in Washington. Part D became a big subsidy program to the industry.

The economic crash of 2008-09 then exacerbated the problem of ever escalating health care costs amid falling affordability by households. On top the above secular trends driving up prices and the uninsured, cyclical collapse of the economy drove tens of millions more households into the ranks of the uninsured. A major healthcare reform package was proposed in 2010 to try to rectify this. It was called Obamacare, or officially the Affordable Care Act, or ACA.

It should be noted that the historic Democrat Party proposal for health care reform and accessibility to all since the 1930s, which was called Medicare, was not allowed even for discussion in the then Democrat controlled US House of Representatives and Senate. Medicare for seniors was passed in 1965 and the party’s platform always called for extending it to all,but when the opportunity came in 2010, Obama and his business advisers prevented it from even being discussed. Instead, Obama offered what was called the ‘public option’ in lieu of Medicare for All. The public option was simply to have the federal government offer its own competing health insurance to the private insurance companies. But the private insurance industry demanded Obama pull it from proposed legislation as a condition for their support for the legislation. Obama quickly then pulled the public option. There would be no government competitive offering—even if in the form of an insurance solution and not a Medicare for All solution. What resulted was an ACA (Obamacare) that was in effect a proposal to subsidize the health insurance industry to the tune of nearly $1 trillion a year more revenue by having the US government and states manage private health insurance offerings with certain restrictions concerning price changes and health coverage minima and guarantees. Under the ACA, pre-existing conditions requirements were ended. Students up to age 26 could now also get coverage under parents’ insurance plans. The big improvement under the ACA was expanded coverage for the working and non-working poor under the Medicaid (not Medicare) program. This is a bare bones minimal doctor and hospital access provided to the poor who could not afford an insurance plan. There are few doctors who will provide services to Medicaid patients (who are mostly single mothers with children, minorities households earning less than $20k a year, and homeless, and some students). Typically only one hospital in a county accepts Medicaid patients. But it was better than nothing. However, more than a dozen states, run by Republican governors or legislatures, refused to participate in the expansion of Medicaid benefits to the poor, mostly for ideological reasons. These were Trump ‘red states’ predominantly.

In terms of uninsured, the ACA was able to add fewer than 17m to the health coverage rolls, out of the 50 million previously uninsured. It cost the government $900B a year to add these. Not a very cost efficient solution, but one which the health insurance companies liked. As one nurse I spoke to described it, the ACA was not a health insurance reform program; it was a health insurance industry subsidy program.

The ACA was financed by an amalgam of measures that raised the money for the $900b. Among these included a tax on medical devices, a tax on private high cost and often union-negotiated health insurance plans with their employers, a 3.8% surtax on investors income, a mandate that non-insurance companies had to buy into the program if they didn’t have equivalent coverage already, a mandate that individuals had to buy into the government managed plans if they didn’t have employer coverage, and dozens of other money raising measures. Immediately, business interests opposed the taxation and mandates and organized against the ACA, not just lobbying but directly as well, including in the streets demonstrations, protests, etc. The growing right wing media, led by Fox News and right wing social media, launched a constant attack against the ACA. This was encouraged by the fact that Obama and the Democrats allowed four years of ‘commentary’ before the ACA actually took effect. Passed in 2010, the law would not become effective until 2014. In the meantime, a window was allowed for opposition to grow. Lobbyists also picked away and reduced the law as well. Over time, even after 2014, court challenges chipped away at the funding and financing of the ACA. Mandates disappeared, taxes were reduced or eliminated, and only half or so of the states actually joined up.

By the time Trump entered office, Obamacare was a shell of its even limited intent. Without a public option, private insurers could, and did, ‘game the system’. Health care coverage was reduced and, most importantly, the costs of monthly premia, co-pays, and deductibles were allowed to rise significantly. What exists today is high unaffordable private industry offerings, with extremely high deductibles. It amounts for most to only extreme disaster insurance. Those covered amount to no more than 10-15 million at best who were previously uninsured. There therefore remain at least 30 million still uninsured in the US, while the health insurance companies continue to reap at least a half trillion dollars in new revenues a year from the program.

The big failure of the ACA, as this writer forewarned back in 2010-11, was it would fail to control health care rising costs and declining coverage. And that is true as well to this day. The other problem was the willingness of Obama and corporate Democrats to scuttle the public option, and prevent any discussion of Medicare for All being far more cost efficient and beneficial to households.

Now in the wake of the near collapse and deep failure of Obamacare—which repeated the failure of all prior health care privatization solutions—overlaid on the US health care affordability and coverage (and quality of health care for most) crises is the Covid-19 health crisis. Now tens of millions more are losing their health coverage, as poor as it has proven. Mass industry layoffs will result in mass decline in health care services. And re-employment will not occur rapidly, as Trump and other media declare a V-Shape quick recovery. Job losses will continue for years. Only some will come back in 2020-21. Most won’t. Health coverage crisis will continue.

The left wing of the Democrat party has been proposing Medicare for All as the only cost effective and moral alternative solution. But corporate wing Democrats refuse to consider it. And Trumpublicans consider Medicare for All anathema and will vigorously oppose it, labeling all you advocate it as ‘socialists’. And soon the massive budget deficits now being run up to bail out businesses and investors ($3.7T this year and another $2.2T in i2021) will no doubt result after the November 2020 elections in a major drive b y business interests to cut Medicare and Medicaid in order to reduce the deficits caused by business bail outs and America’s current 2nd Great Recession underway at present.

In short, it is clear that US elites since Clinton have only envisioned private, market based solutions to the US growing and continuing health care affordability crisis. All such have failed to date, as will those that may come. Whomever wins in November—Trump or Biden—there will be no Medicare for All solution considered. (Biden, like Trump, has publicly rejected it). That means that tens of millions more American workers and families will be uninsured and do without fundamental health services as the pandemic continues in inevitable second and third waves in the coming months. Those disproportionately affected by loss of medical services, insured and not, are the working poor, single female heads of households, and black and Latino households. The ranks of the uninsured will almost certainly surge once again, and quickly, above 50m and most likely much higher. That means nothing has changed or improved for the last 25 years since Clinton’s abysmal failure at health care reform, through Obama’s failed ACA, through Trump’s virtual disregard for doing anything except to continue to ensure insurance companies are taken care of first and foremost.

Private market solutions to the healthcare crisis, past present and future, have not only failed. They are in effect a central cause of the crisis. The US spent more than $3.5 trillion a year on health care services even prior to the current pandemic. It’s now spending well over $4 trillion ! More than a $1 trillion a year was being paid to paper pushers and middlemen call the health insurance industry. Today at least $1.5T will be paid to the paper pushers who provide not one iota of health care services. The health insurance industry is giant rentier profits industry sucking money out of the economy on a massive scale. The big pharmaceuticals are a close second. They continue to do so because they continue to buy elected politicians and lobby them and the rest in between elections, in the era in America where Citizens United and other court decisions mean corporations are first class citizens and the rest of households are second class (and minority households third class). And nothing will change except for the worse after the November 2020 elections, regardless which candidate of either wing of the Corporate Party of America prevails in the election.

Dr. Jack Rasmus
May 17

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Dr. Jack Rasmus
Copyright 2020

This past Friday, May 8, the US Labor Dept. released its latest jobless figures. The official report was 20 million more unemployed and an unemployment rate of 14.7%.
Both mainstream and progressive media reported the numbers: 20 million more jobless and 14.7%. But those numbers, as horrendous as they are, represent a gross under-estimation of the jobless situation in America!

One might understand why the mainstream media consistently under-reports the jobless. But it is perplexing why so many progressives continue to simply parrot the official figures. Especially when other Labor Dept. data admits the true unemployment rate is 22.4% and the officially total unemployed is 23.1 million.

Here’s why the 20 million and 14.7% is a gross under-representation of the magnitude of jobless today:

Only Half Month Data

First, the 20 million for April is really only for data collected until mid-April. Nearly 10 million more jobless workers filed, and received, unemployment benefits after mid-April. And likely millions more jobless have been attempting to get benefits but haven’t. Even officially, more 33.5 million have filed for benefits, with several millions more in the pipeline. So the April numbers of jobless—both receiving benefits and not yet getting them—are more than 20 million!

Only Full Time Employed Layoffs

An even greater misrepresentation is that the official 20 million unemployed represents only full time workers becoming unemployed. It’s the figure from the government report that is the category called U-3, or full time workers. There are between 50-60 million more workers who are part time, temp, contract, gig and otherwise ‘contingent’ workers (i.e. not full time) who are not considered in the 20 million and 14.7%.

Check out the Labor Dept’s own data, in Table A-8, which shows for March and April no fewer than 7.5 million part time workers became unemployed. In April jobless in this group doubled over the previous month, rising by about 5 million in April, according to the Labor Dept.’s own monthly ‘Employment Situation Report’. 5 million to 7.5 million represent what’s called the U-4 government unemployment rate.

But there’s still more. It’s what’s called the U-5 and U-6 unemployed. Who are they? They are what the government calls workers without jobs who are ‘marginally attached’ to the labor force and workers who are too ‘discouraged’. They are just as ‘jobless’ as full time and part time workers. But they’re put in another category simply because they haven’t actively looked for a job in the most recent four weeks.

You see the US government defines unemployed as that subset of jobless who “are out of work and actively looking for work”. If you haven’t looked in the last four weeks, you may be jobless but aren’t considered unemployed! Go figure. Add them to the U-3 unemployed, and the totals for unemployed in America rise to 22.4%. Add in those who filed for benefits in the last half of April, or tried to, and we get closer to the publicly admitted 33.5 million without jobs and receiving unemployment benefits.

The Disappeared 8 Million Unemployed

But that’s not even the whole real picture. The way the government defines unemployment a worker must be part of the labor force. The labor force is composed of two groups: those who have jobs and those who are officially unemployed—i.e. out of work and looking for work in past four weeks. If you are not looking, you’re ‘marginally attached’ (U-5, U-6). It assumes if you have stopped looking in the past four weeks you are part of the 850,000 ‘marginally attached’. But that figure is not credible. Somehow there are less than a million jobless who simply haven’t tried to find a job in the last four weeks? Really? There are many millions.

A government stat that suggests there are likely millions more not in the labor force who are jobless nonetheless is called the ‘Labor Force Participation Rate’. It estimates the percent of the working age population who either have a job or are officially unemployed.

There’s approximately 164.5 million employed/officially unemployed in the US labor force as of May 1, 2020. In February 2020 the labor force participation rate was 63.4% of the US labor force. As of May 1, that had dropped to only 60.2%. Roughly 8 million had dropped out of the labor force over the past year ending this April 2020. And remember: if they aren’t in the labor force they can’t be counted as unemployed. So where did the additional 8 million dropping out go?

The US government doesn’t consider them unemployed so they don’t show up in the U-3 or even U-6 statistics! But if they aren’t in the labor force they are jobless by definition. Perhaps 850,000 are counted as the ‘marginally attached’. But what about the remaining 7.2 million or so? The government has no category for them except the estimation of them in the labor force participation rate. It tries to explain the large number away by saying they retired or went back to school. But did 7.2m (63.4% in Feb. drop to 60.2% in April) retire in 2 months? And they certainly can’t have gone back to school in mid-March/April 2020.

Another government statistic that corroborates this ‘missing 8 million’ in the labor force participation rate is called the Employment to Population Ratio stat. It measures how many are in the labor force as a percent of the total US population of nearly 340 million.

If the EPOP percentage goes down, then fewer are working even though they’re obviously still alive and part of the US population. That figure has declined from 61.1% of the US population employed to 51.3% of the population employed as of May 1, 2020. That’s a nearly 10% drop. 10% of 340 million is about 34 million. And 34 million is not 20 million for April, or even the Labor Dept.’s total 23.1 million.

So both the labor force participation rate and the employed to population ratio both suggest the Labor Dept.’s official U-3 (or even U-6) unemployed figures are grossly under-representations of the total Americans without jobs today.

Voluntary Jobless Are Not ‘Unemployed’

One possible reason for the discrepancies between the official unemployed of 23.1 million vs. the 33.5 million receiving benefits, or the 7-8 million not being counted per the labor force participation rate and EPOP ratio, may be due to the government in this current crisis choosing not to count as unemployed those workers forced to leave work since February to care for dependents.

Remember the government’s driving definition of unemployed is the worker must be ‘out of work and actively looking for work’. Millions of workers who have been forced by the current crisis to leave their job to care for elderly and disabled family members, or to care for young children forced to stay home due to school closures, are not ‘actively looking for work’. Few Americans can afford nannys to watch their young children so they can work. But those in this situation are not considered unemployed by the US Labor Dept. because they don’t fit the definition of ‘actively looking for work’! It’s not clear how many in this category the Labor Dept. has recently refused to acknowledge as officially unemployed.

In America you may be jobless, but that doesn’t necessarily mean per the government you are unemployed!

The above stats and data show that the under-reporting of the jobless in the US is not some kind of conspiracy by the Labor dept. and the government. The data are there, buried in the monthly labor reports beyond the executive summaries. The government stats, moreover, are not perfect. There are serious problems related to raw jobs data recovery, to the various assumptions on that raw data the government makes to come up their jobs ‘statistics’ (always operations on raw data with assumptions which data to count and how). There are conflicting conclusions often between this or that data or statistic. Furthermore, in recent years changes in statistical processing have sought repeatedly to change definitions and processes in order to ‘smooth out’ swings in the statistics—whether employment, unemployment, wages, or inflation. The government has a vested interest in ensuring the smoothing. It reduces government (and especially business) costs of programs and operations.

If there’s a conspiracy of sorts, it’s in the media that purposely seems to always ‘cherry pick’ the most conservative stat to report. Thus we get the media trumpeting every month the nearly worthless statistic of the U-3 unemployment rate—a stat that applies only to full time workers and ignores part time, temp and other contingent labor who make up now nearly a third of the US labor force; a statistic based on a narrow definition of unemployed that has become an oxymoron when estimating unemployed; a statistic based on questionable assumptions and data gathering; and a statistic that can’t be reconciled with other statistics like the labor force participate rate.

The real unemployment rate is not the U-3 figure of 14.7% but easily 25% today. And the real total jobless are not the U-3 20 million, or even 23 million, but somewhere between 35-40 million… and rising!

However, what’s really disappointing is that many progressive and left economists simply parrot the government’s and mainstream media’s misleading U-3 statistic. One can understand why the corporate mainstream media keep pushing the U-3 stat and thus trying to make the unemployment situation look better than it is (or today not as bad as it is). But progressive economists should know better.

Dr. Jack Rasmus
May 11, 2020
Copyright 2020

Dr. Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020; and the previously published ‘Central Bankers at the End of Their Ropes, Clarity Press, August 2017. He blogs at jackrasmus.com and tweets at @drjackrasmus and hosts the weekly radio show, Alternative Visions, Fridays at 2pm eastern time.

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There’s a historic experiment underway among US capitalists and policy makers. That experiment may or may not succeed. It’s the Federal Reserve PRE-BAILOUT of not only the US financial system but the entire business economy as well. The Fed has introduced at least $9T in liquidity (money) injections into the system in the goal of heading off a massive wave of potential and forthcoming debt defaults, deflation, and bankruptcies via various measures: new QE, trillions of $ to Repo markets, funneling trillions more via recent bailout funds for large, medium and small businesses through the private banks, ending financial regulations on the banks, liabilities for corporations, guaranteed loans, and so on. It’s all about fattening bank and non-bank balance sheets to weather the loss of revenues required to keep paying interest and principal on the tens of trillions of excess business and household debt (latter held by investors). The continuing payments on that debt is necessary to prevent a massive historic wave of debt defaults that will eventually sink bank balance sheets, creating a credit crash and a further and deeper collapse of the real economy–i.e. a depression. The Fed succeeded in 2008-09 in preventing a second banking crash by injecting $5-$6T into the banking system. The cost of that was to set off massive financial asset market speculation and bubbles, enriching investors as never before. The cost was also chronic low interest rates for 8 yrs that resulted in corporate binging on new business debt accumulation. Now the consequences are coming home once again. The Fed’s bailout of 2008-09 created a fragile system highly susceptible to another crash. The Fed’s solution in 2008-09 has become the Fed’s nightmare of a repeat, even greater, in 2020. So the Fed is throwing even more money at the system to prevent another crash. History will tell (soon) if it will be successful in staving off another financial crash, that will all but ensure a collapse into a bona fide depression.

The US economy is today unstably between a ‘great recession 2.0’ in the real economy and a bona fide great depression a la 1929-34. Whether the future trajectory is more like 2008-2017 or whether it slips into a 1929-34 scenario depends on whether the Fed’s $9T (and rising) money injections can prevent a financial crash in 2020-21, as defaults and bankruptcies rise and expand throughout the US economy in 2020-21.

In my Alternative Visions radio show of May 1, 2020 I discussed these conditions and scenarios in detail.




The US central bank, the Federal Reserve (Fed), is in the process of throwing trillions of dollars at the economy, most to businesses and corporations, in an historic effort to bail out the banks and now non-bank businesses as well (for the first time). The objective is to head off and prevent the deep and rapid contraction of the US economy from spawning a wave of defaults and bankruptcies among non-bank businesses that will soon fail to ‘service’ their massive accumulated debt loads run up since 2010. Broad sectors of US business heavily laden with corporate debt—corporate junk bonds, junk loans, and related debt amounting to several trillions $ in the US alone—are on the verge of failing to make principal & interest payments on that massive debt. The Fed is feeding them free money to continue to do so. As well as pumping up bank balance sheets to provide a cushion for the defaults and bankruptcies and avoid a banking-financial system crash in the event of defaults when they come. Rasmus explains how the capitalist drive to return workers to their jobs now gaining momentum is also about business revenue restoration to avoid defaults. Industries most prone to defaults: travel, oil and energy, retail, entertainment will be the leading edge. Rasmus explains the magnitude and composition of the Fed’s $9T commitment to ‘pre-bail out’ the banks and business, and how the US working class will be required to pay the bill—a present on this May Day to workers.

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One of the readers of this blog recently asked me my views on topics such as the call by some left economists for a general debt forgiveness (Debt Jubilee), on Modern Money Theory (MMT or sometimes referred to as ‘Magical Money Tree’), and the Federal Reserve bank (central bank) pre-emptive bail outs of banks and non-banks underway and whether the latter will succeed in generating an economic recovery from the current deep Coronaviral impacted US economy. What follows are some of my quick reflections and commentary on these topics.

My views on monetary policy are somewhat summarized by the argument that in the current era of finance capitalism dominance, monetary policy has been the first and foremost choice of capitalist governments and policymakers. Push the bail out (and normal times economic stimulus as well) through the central banks and into the private banking system. The latter then distribute the money injection to the non-banks and financial investors of their preference. What trickles down to the wage earners, consumers and households is a residual in terms of income. Fiscal policy in terms of taxation is focused on business-investor tax cutting and on expanding government fiscal spending on corporate subsidies. Deficits that remain are financed by global purchases of US Treasuries as the money capital is recycled back to the US from offshore where it accumulates due to US trade deficits with the rest of the world. Industrial policy is to compress real wages, weaken or destroy unions, incrementally shift the cost of benefits to workers, and deregulate and privatize what remains of public works and public goods. Monetary policy is designed to keep interest rates low and ensure a low dollar exchange rate to maximize US multinational corporations offshore repatriation of foreign profits into the maximum amount of US dollars.

In the 21st century both monetary and fiscal policy are about subsidizing capital, especially finance capital, and less and less about stabilizing or stimulating the economy. (See my recent book, The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020, for more of this argument in detail)

As a result of this view, needless to say I am not a big fan of capitalist central bank monetary policy. Nor of monetary policy in general, since it has always been about subsidizing and/or bailing out finance capital. Debt is a means by which financial assets are subsidized as well. Money and Debt are thus central to maintaining the current 21st century capitalist system which requires excessive money injections (liquidity) and corresponding Debt accumulation as means to further expand capitalist wealth. Since it is central, I argue that capitalists and their governments will not entertain either a ‘debt jubilee’, and MMT is a theory that attempts to invert capitalist monetary policy and employ it for fiscal income redistribution to workers, consumers and households; thus that too is a contradiction to the system and would not be allowed. In short, both a Debt Jubilee or MMT require a virtual political revolution first before they could ever be introduced. The advocates of both Jubilee and MMT are politically naive to advocate solutions that cannot be introduced in the era of 21st century global finance capital hegemony. They are impossible ‘reforms’ of the system without a fundamental political change that drives capitalist interests from the sources of institutional government and state power.


My questions for you (Jack) are about the ‘Magical Money Tree’ (i.e. MMT, my italics). Does it exist? Can the Fed create money to pay for whatever it decided was necessary for the economy? If the decision was to pay off all student debt, could the Fed do so? If so, who gets stuck with the bill. Could there be a complete debt repayment for personal debts and corporate debts? If there is not a Magical Money Tree could one be created? If so, how? What if the government took back the constitutional power to create money and a new Greenback-era developed?


This is the old Modern Money Theory hypothesis, renamed ‘Magical Money Tree’. It assumes that monetary policy, as money creation, can stimulate economic growth. MMT is just QE flipped on its head. Instead of the Fed bailing out corporations and capitalists only (per its mandate) it can be used to bail out the rest of us. But there are limits to monetary solutions to a crisis, whether QE or a public interest QE that would transform the Fed into a kind of public bank. The problem with MMT is it is politically naïve. To create a Fed as Public Bank it will take a political revolution. The banks and investors behind the Fed (they’ve controlled it ever since 1913) won’t allow that without a political fight that changes the nature of the capitalist system itself.

Beyond that, the problem with monetary solutions is that it holds that the redirecting the money supply is sufficient. It ignores the role of money demand and money velocity. You can provide all the money supply you want by creating money electronically, as the Fed does, but that doesn’t mean there’ll be the demand for money or that money demanded will eventually be used for investment, employment, and real growth. In times of deep crisis like this, much of the money supply might be ‘borrowed’ but will be hoarded, redirected offshore, distributed to shareholders, or invested in financial assets that are more profitable but produce no real growth.

Can debt be ‘expunged’? Yes, but all the talk of debt jubilee is again political naivete. Why? Because it means the finance capitalists that ultimately ‘own’ the debt will not just take a haircut but will have their heads shaved at the neck. They will resort to any undemocratic violent response necessary with the help of their politicians to stop it. All private debt forms, including credit card debt, auto debt, mortgage debt, revolving debt, and private bank provided student debt are owned by big capitalist investors. Debt forgiveness means their assets would collapse to zero. What about public held debt? US government, government held student debt, fannie mae-freddie mac government held mortgage debt, state-local government debt? While that could technically be expunged since the government (taxpayers & citizens) own it, to do so would cause a collapse of private debt markets’ price values and, in turn, mean a major loss of asset values for capitalist investors. So the latter resist that as well. A progressive government might be able to introduce a staged reduction in student debt. Or as I have argued, stretch out the 10 yr. normal term of student debt to 30 yrs and reduce the rate of interest to no more than that for the 30 yr. Treasury bond, or forgive one tenth of the principal per yr. over ten years for all student debt holders. That might pass but not with the Neoliberal governments we’ve had. Again the concern of capitalists is that even student debt expunging will have a negative impact on the values of other assets held by the capitalists.

What about relief from rents and mortgages.? Same story here. Who puts up the money capital for multi-family apartments, and for both residential and commercial property mortgages? It’s the rich private investors and their financial institutions (hedge funds, private equity, etc.). They take major losses if there’s a rent or mortgage forgiveness. A moratorium for rent and mortgages is different. It just means they move the payments to the back of the term of the debt payment schedule. On paper it doesn’t change the value of their assets significantly. But forgive it, or expunge it, and it destroys their values.

The current crisis has only just begun, both in health terms and economic. The virus is a precipitating causal force, not the fundamental driver of the current crisis–which is still unfolding both in health effect terms and independent dynamics of economic contraction. There will be a second virus wave, likely worse than the first which always happens in these severe pandemics. The present reopening of the economy by Trump and business interests behind him demanding it will exacerbate the contraction in a second wave, moreover. It’s certainly not a V shape recovery; it will be more like a ‘W’ shape, with successive contractions after short shallow recoveries. And if defaults lead to general bankruptcies it will mean a financial crisis at some point that will exacerbate the contraction still deeper.

And there’ll be no re-shutdown once a second viral wave happens, later this year most likely. Trump and broad sections of the capitalist class have already decided that they’ll accept the death toll and stay open throughout the second wave. (and the third, which also historically follows about 6-12 months later).

That’s been the pattern with the 1918 and 1958 pandemics. The second wave is always the worst.

Ditto for the economy. In other words, there are forces economic released that are now independent of the health effect, although the latter will also continue to wreck havoc economically. The massive $9T Fed-Treasury liquidity injection (so far, more coming) should be understood as a pre-emptive bank and non-bank bailout. Massive defaults are coming, already spreading from oil,energy and retail sectors, eventually to other service sectors and state and local governments. The bailouts are designed to flood the banks with liquidity and the contain the defaults in the non bank sectors. But once again, massive liquidity as money supply injection may slow down or even prevent some insolvency crises (i.e. defaults and bankruptcies) but that doesn’t mean stimulate economic investment and recovery. Once again, money solutions don’t necessary result in boosting the real economy, and that means jobs, and wage incomes that will collapse. Most of the liquidity will be hoarded on balance sheets or to make minimal payments on debt. It won’t go into real investment that generates real jobs, wages, consumption, and recovery.

Can the government, using MMT, engage in direct spending to restore the economy? Technically yes. But that kind of Treasury provided funding will add to the government debt at a time when business and capitalists are demanding more funds (and debt) for them (i.e. raise the government debt to bailout them out). So there’s a competition for who gets bailed out. Who do you think in the current Neoliberal era is going to get funded then: capitalists or consumers/households/workers? Corporations will come first, as we’ve seen in the bailouts of the last couple months: Trillions in loans and grants (mostly grants in the end since loans will be converted and forgiven eventually for businesses) for them vs. just $500b for workers. And there’ll be no more for extended unemployment benefits after July or supplemental income checks of $1200 forthcoming. That’s it. Go back to work and die. And if you’re on unemployment benefits now, if you don’t return to work you lose them.

The Fed ‘money tree’ is backed by US Treasury bonds sales. And those bonds add to the federal government debt. The Fed doesn’t simply create an electronic entry in its accounts from which banks and capitalists can withdraw funds. US Treasuries are created to allow the Fed to make those entries. And that adds to the government debt. You could have the US Treasury to perform the function of the Fed, as was the case before 1913. But the function remains the same, whether carried out by the Fed or by the US Treasury-Government. The Treasury was the Fed before 1913. So the problems of excess debt to bail out capitalism will continue even if the US Treasury took back the money supply creation function. Nothing really changes. The choice will always remain: create Treasury bonds for spending (or lending to banks, non-banks) for whom? Finance capitalists (bankers)? Non-bank capitalists? (airlines, oil frackers, etc.). Or consumers and workers? It again comes down to a political issue and whether the capitalist State will bail out capitalists or us. And who pays their politicians? So guess who they’ll bail first and foremost?

The Fed was created so that the politicians would not have to bail out the bankers and capitalists directly, by raising taxes. The bailouts funnel through the Fed, funded still however by T-bonds, which add to the national debt. How high can the US debt rise? It’s now well above 100% of annual GDP. But Japan’s is over 200%.

The US government is creating the money supply, but indirectly: by using T bonds to fund the Fed who injects liquidity into the banks (and now non-banks too). To say let’s get rid of the Fed as intermediary and use the Treasury itself only changes the structure but not the actual process. The Fed now in effect transfers the private capitalist debt on to its own balance sheet each time it bails out the banks and corps now. The Treasury would do the same without the Fed. But that would pose a political problem for the politicians with the electorate, so they prefer an intermediary like the Fed, central bank, to do it so folks don’t understand what’s really going on. Simply put, the government ultimately bails out the banks and capitalists. So ending the Fed and giving money creation back to the Treasury changes nothing but the appearances!

MMT simply creates the fiction that somehow, if the Fed or Treasury could directly fund social spending, that the liquidity injection to households could stimulate the economic recovery.

To sum up my view: it doesn’t matter if it’s the Fed or Treasury. Pure monetary solutions don’t work well in a deep contraction and crisis. Liquidity injections get hoarded not invested. And they don’t stop, only maybe slow, insolvency crises (defaults, bankruptcies). And what we have today is a Fed massive liquidity injection trying to hold off a general insolvency crisis. I predict it will fail. What we’ll need is another even larger ‘New Deal’ direct government spending, including government hiring (per WPA). But you don’t need an MMT program for that. You don’t need a Fed. The Fed is there to provide cover for the politicians and capitalist State so they don’t appear directly responsible for bailing out bankers and capitalists to the electorate. (Check out my 2017 book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’ for more on the limits of monetary policy in general).

Jack Rasmus
May 6, 2020

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