Jack Rasmus

This past August marked the second anniversary of the Greek debt crisis and the third major piling on of debt on Greece in August 2015 by the Eurozone ‘Troika’ of European Commission, European Central Bank, and the IMF. That 2015 third debt deal added $86 billion to the previous $230 billion imposed on Greece—all to be paid by various austerity measures squeezing Greek workers, taxpayers, retirees, and small businesses demanded by the Troika and their northern Euro bankers sitting behind it.

Studies by German academic institutions showed that more than 95% of the debt repayments by Greece to the Troika have ended up in Euro bankers’ hands.

But the third debt deal of August 2015, which extends another year to August 2018, was not the end. Every time a major multi-billion dollar interest payment from Greece was due to the Troika and their bankers, still more austerity was piled on the $83 billion August 2015 deal. The Troika forced Greece to introduce even more austerity in the summer of 2016, and again still more this past summer 2017, to pay for the deal.

Last month, August 2017, Syriza and its ‘rump’ leadership—-most of its militant elements were purged by Syriza’s leader, Alex Tsipras, following the August 2015 debt deal—-hailed as some kind of significant achievement that the private banks and markets were now willing to directly lend money to Greece once again. Instead of borrowing still more from the Troika—-i.e. the bankers representatives—-Greece now was able once again to borrow and owe still more to the private bankers instead. In other words, to pile on more private debt instead of Troika debt. To impose even more austerity in order to directly pay bankers, instead of indirectly pay their Troika friends. What an achievement!

Greece’s 2012 second debt deal borrowed $154 billion from the Troika, which Greece then had to pay, according to the debt terms, to the private bankers, hedge funds and speculators’ which had accumulated over preceding years and the first debt crisis of 2010. So the Troika simply fronted for the bankers and speculators in the 2nd and 3rd debt deals. Greece paid the Troika and it paid the bankers. But now, as of 2017, Syriza and Greece can indebt themselves once again directly to the bankers by borrowing from them in public markets. As the French say, everything changes but nothing changes!

What the Greek debt deals of 2010-2015, and the never-ending austerity, show is that supra-state institutions like the Troika function as debt collectors for the bankers and shadow bankers when the latter cannot successfully collect their debt payments on their own. This is the essence of the new, 21st century form of financial imperialism. New, emerging Supra-State institutions prefer weaker national governments to indebt themselves directly to the banks and squeeze their own populace with Austerity whenever they can to make the payments. The Supra-State may not be involved. But it will step in if necessary to play debt collector if and when popular governments get control of their governments and balk at onerous debt repayments. And in free trade currency zones and banking unions, like the Eurozone, that Supra-State role is becoming increasingly institutionalized and regularized. And as it does, forms of democracy in the associated weaker nation states become increasingly atrophied and eventually disappear.

Syriza came to power in January 2015 as one of those popularly elected governments intent on adjusting the terms of debt repayment. But after a tragic, comedy of errors negotiation effort, capitulated totally to the Troika’s negotiators after only seven months.

The capitulation by Syriza’s leader, Alex Tsipras, in July 2015 was doubly tragic in that he had just put to a vote to the Greek people a week beforehand whether to reject the Troika’s deal and its deeper austerity demands. And the Greek popular vote called for a rejection of the Troika’s terms and demands. But Tsipras and Syriza rejected their own supporters, not the Troika, and capitulated totally to the Troika’s terms.

The August 2015 3rd debt deal quickly thereafter signed by Syriza-Tsipras was so onerous—-and the Tsipras-Syriza treachery so odious—-that it left opposition and popular resistance temporarily immobilized. That of course was the Troika’s strategic objective. Together with Tsipras they then pushed through their $83 billion deal, while Tsipras simultaneously purged his own Syriza party to rid it of elements refusing to accept the deal. Polls showed at that time, in August-September 2015, that 70% of the Greek people opposed the deal and considered it even worse than the former two debt agreements of 2010 and 2012. Other polls showed 79% rejected Tsipras himself.

To remain in power, Tsipras immediately called new Parliamentary elections, blocking with the pro-Troika parties and against former Syriza dissidents, in order to push through the Troika’s $83 billion deal. This week, September 20, 2017 also marks the two year anniversary of that purge and election that solidified Troika and Euro banker control over the Syriza party—-a party that once dared to challenge it and the Eurozone’s neoliberal Supra-State regime.

The meteoric rise, capitulation, collapse, and aftermath ‘right-shift’ of Syriza raises fundamental questions and lessons still today. It raises questions about strategies of governments that make a social-democratic turn in response to popular uprisings, and then attempt to confront more powerful neoliberal capitalist regimes that retain control of their currencies, their banking systems, and their budgets–such as in the case of Greece. Even in the advanced capitalist economies, the message is smaller states beware of the integration within the larger capitalist states and economies–whether by free trade, central banking integration, budget consolidations, or common currencies. Democracy will soon become the victim in turn.

The following is an excerpt from the concluding chapter of this writer’s October 2016 book, ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, which questioned strategies that attempted to resurrect 20th century forms of social-democracy in the 21st century world of supra-State neoliberal regimes. It summarizes Syriza’s ‘fundamental error’—a naïve belief that elements of European social democracy would rally around it and together they—i.e. resurgent social democracy and Syriza Greece—would successfully outmaneuver the German-banker-Troika dominated Euro neoliberal regime that solidified its power with the 1999 Euro currency reforms.

Syriza and Tsipras continue to employ the same error, it appears, hoping to be rescued by other Euro regime leaders instead of relying on the Greek people. Tsipras-Syriza recently invited the new banker-president of France, Emmanuel Macron, who this past month visited Athens. Their meeting suggests Tsipras and the rump Syriza still don’t understand why they were so thoroughly defeated by the Troika in 2015, and have been consistently pushed even further into austerity and retreat over the past two years.

But perhaps it no longer matters. Polls show Tsipras and the rump Syriza trailing their political opponents by more than two to one in elections set to occur in 2018.

EXCERPT from ‘Looting Greece’, Chapter 10, ‘Why the Troika Prevailed’.

Syriza’s Fundamental Error

To have succeeded in negotiations with the Troika, Syriza would have had to achieve one or more of the following— expand the space for fiscal spending on its domestic economy, end the dominance and control of the ECB by the German coalition, restore Greece’s central bank independence from the ECB, or end the control of its own Greek private banking system from northern Europe core banks. None of these objectives could have been achieved by Syriza alone. Syriza’s grand error, however, was to think that it could rally the remnants of European social democracy to its side and support and together have achieved these goals—especially the expanding of space for domestic fiscal investment. It was Syriza’s fundamental strategic miscalculation to think it could rally this support and thereby create an effective counter to the German coalition’s dominant influence within the Troika.

Syriza went into the fight with the Troika with a Greek central bank that was the appendage, even agent, of the ECB in Greece, and with a private banking system in Greece that was primarily an extension of Euro banks outside Greece. Syriza struggled to create some space for fiscal stimulus within the Troika imposed debt deal, but it was thoroughly rebuffed by the Troika in that effort. It sought to launch a new policy throughout the Eurozone targeting fiscal investment, from which it might benefit as well. But just as the ECB was thwarted by German-core northern Euro alliance countries, the German coalition also successfully prevented efforts to promote fiscal stimulus by the EC as well. The Troika-German coalition had been, and continues to be, successful in preventing even much stronger members states in France and Italy from exceeding Eurozone fiscal stimulus rules. The dominant Troika German faction was not about to let Greece prevail and restore fiscal stimulus, therefore, when France and Italy were not. Greece was not only blocked from launching a Euro-wide fiscal investment spending policy; it was forced to introduce ‘reverse fiscal spending’ in the form of austerity.

Syriza’s insistence on remaining in the Euro system meant Grexit was never an option. That in turn meant Greece would not have an independent central bank providing liquidity when needed to its banking system. With ECB control over the currency and therefore liquidity, the ECB could reduce or turn on or off the money flow to Greece’s central bank and thus its entire private banking system at will—which it did repeatedly at key moments during the 2015 debt crisis to influence negotiations.

As one member of the Syriza party’s central committee reflected on the weeks leading up to the July 5 capitulation, “The European Central Bank had already begun to carry out its threats, closing down the country’s banking system”.

The ECB had actually begun turning the economic screws on Syriza well before the final weeks preceding the referendum: It refused to release interest on Greek bonds it owed under the old debt agreement to Greece from the outset of negotiations. It refused to accept Greek government bonds as collateral necessary for Greek central bank support of Greece’s private banks. It doled out Emergency Lending Assistance, ELA, funds in amounts just enough to keep Greek banks from imploding from March to June and constantly threatened to withhold those same ELA funds when Troika negotiators periodically demanded more austerity concessions from Greece. And it pressured Greece not to impose meaningful controls on bank withdrawals and capital flight during negotiations, even as those withdrawals and money flowing out of the country was creating a slow motion train wreck of the banking system itself. The ECB, in other words, was engineering a staged collapse of Greece’s banking system, and yet Syriza refused to implement any possible policy or strategy for preventing or impeding it.

For a more detailed analysis of the respective strategies and tactics of Syriza and the Troika in 2015 and after, and the role played by individual leaders and organizations, see the concluding chapter of Jack Rasmus, ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, October 2016, pp. 231-57. Dr. Rasmus is also author of the recently published, ‘Central Bankers at the End of Their Ropes?: Monetary Policy and the Coming Depression’, Clarity Press, August 2017.

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The following is a review of Dr. Jack Rasmus, ‘Central Bankers at the End of Their Ropes?: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, by David Baker, which will appear in the October 1, issue of Z Magazine.

“Jack Rasmus has written a series of important books about the global economy; the critical question is, important or not, why would the general reader make the effort required to read any of them? The best answer comes from Noam Chomsky who tells us that we face two existential threats, nuclear holocaust and the environmental collapse called climate change. Those threats to tens of millions of people worldwide can only be mitigated by bringing back real democracy from the shadow of the empty political theater which we currently endure; but to bring back real democracy, we need to understand what destroyed it and what destroyed it is the collection of economic engines called neoliberalism. The most reliable guide to understanding neoliberalism is Jack Rasmus; his book, Central Bankers on the Ropes, examines the fundamental role of central banks in our new, savage global economy.

The word savage would puzzle Volker, Greenspan, Bernake, Yellen et al but it accurately describes neoliberalism’s impact on the world; the lower 90% are collateral damage in the service of the 1%. But the central banks have always served rulings elites; kings and princes historically have financed their endless wars with the help of the institutional ancestors of central banks; in more modern times, central banks provide trillions of dollars in cash, in various forms, to the financial industry which in turn have been used to prop up the stock and bond markets world wide; offshore jobs, gamble in financial instruments, and pour out dividends. The central banks are in effect a conduit straight to the one percent; as fast as legal tender is electronically printed, it ends up hoarded in their accounts, where it stays.

Jack Rasmus is excellent at peeling away the layers of economic deceit to demonstrate that the rivers of cash pouring out of the central banks does not bring prosperity to the lower 90%; the idea that prosperity is even trickling down is empty ideology. The way in which he peels away the layers of deceit is by examining each of the central banks, in turn, The Fed, The Bank of Japan, the EU Central Bank, and the Central Bank of China, and determines which if any is actually achieving their publicly announced goals. These goals include inflation at 2%; interest rate stabilization; money supply stabilization; bailing out major financial institutions during economic downturns, and increasing GDP.

With the exception of China, each central bank has failed in all of their stated goals. Since their publicly stated goals are not being achieved, we have to examine their actual outcomes to determine what their real goals are and ultimately after peeling away all the layers of deception, their real goal to help the one per cent, by propping up stocks and bonds, providing capital to offshore jobs as well as gamble in financial assets.

The case of China is of particular importance because prior to the 2008 collapse, China pulled out of economic downturns relatively quickly and easily and did achieve its announced goal of significant increases in GDP. What happened after 2008, is that China changed its mix of monetary and fiscal policy, conventional banking, and strict restrictions on capital flows. But because China wanted its currency used as a major trading currency, it was pushed by the rest of the world banking community to open up its economy to capital flows and allow non conventional banking, i.e. shadow banking to operate within in its borders. This was a huge mistake; once China made this shift in policy, it could no longer pull itself out of downturns easily and it is finding it harder and harder to maintain its GDP goals. It has fallen into the chronic subsidization trap of financial institutions.

It is this paradigm shift, the chronic subsidization of financial institutions by central banks world wide that is the key finding; it is why central bankers are “on the ropes.” Historically, one of the major roles of central banks has been to bail out large financial institutions when they fail. Which is exactly what the Fed and others did during the 2008-2009 collapse. But by 2010, the financial institutions were stabilized but the trillions of liquidity injections, quantitative easing and low or no interest loans, continued. Why? Because the banking industry and the one per cent were making so much money from what became chronic subsidization, a subsidization that continues to this day. And here is the problem. The central banks know that a serious downturn is coming; if they continue to generate trillions of dollars in world wide debt through the extension of credit then the inevitable collapse becomes greater; but if they stop, they also risk a huge collapse since the rise in financial assets worldwide has nothing to do with the real economy but is propped up by the central banks.

Rasmus also documents another element of the central banks dilemma; they can’t raise interest rates. The central banks want to raise interest rates, for many reasons but one important reason is because it allows them to lower rates when the inevitable financial bust comes. If they can’t raise rates now, they can’t lower them when the bust comes; likewise, if they can’t stop the cash distributions now, they have nothing left in their monetary weapons to use when the crash comes. Over and over again, throughout history, it was the raising of interest rates by central banks that plunged the world into either recession or depression. So we are truly looking at the abyss since the coming collapse will be more violent, due to the rising oceans of debt [over $20 trillion] and the central banks have no monetary weapons left, either cash or lowering interest rates.

Which brings me to the heart of the debate, what in the austere language of economics is called Fiscal Policy versus Monetary Policy. Progressive fiscal policy is what finally dragged the US out of the Great Depression; it is what Ronald Regan sneered at as “Tax and Spend”. For a progressive, you tax based upon ability and spend based upon need; and, during the 1950’s and 1960’s, the progressive tax and spend policies produced prosperity for all. If you think about it, taxes are the only way to generate capital without falling into the credit/debt trap. Not so with monetary policy.

Monetary policy is economic policy driven by the central banks who in turn serve the one percent. There are many tools that can be used in Monetary Policy, the most well known of which are electronically printing low or interest free loans as well as direct buys of stocks and bonds and raising and lowering interest rates. What Jack Rasmus provides is the insight that the one percent are not willing to wait for prosperity to “trickle up” from the lower 90%; they want instant cash now, as fast as the Fed can electronically print it. Even if it brings down the entire world economy. The lower 90% can wait, apparently forever.

Once again, China did provide an interesting contrast prior to 2008; it had a true fiscal policy, not the fiscal austerity that monetary policy demands. China made and continues to make enormous expenditures on infrastructure, on a scale close to the fiscal policies of the US during WWII. In sharp contrast, none of the other central banks or economies examined engage in this kind of fiscal policy; the case of the EU is quite extreme; they are prohibited by their enabling legislation from engaging in any fiscal policy other than fiscal austerity.

Extraordinary dangers require extraordinary measures. Jack Rasmus concludes with a proposed US constitutional amendment that would place The Fed under strict democratic controls such as nationalizing all banking, prohibiting shadow banking and casino capitalism, placing strict controls on capital flows, and making the explicit goal of The Fed the raising of household disposable incomes. There is a body of scholarly work that demonstrates that the US Constitution was designed to protect investor rights [see e.g. An Economic Interpretation of the US Constitution] so why not amend it and finally give the people control over their economy? One criticism of this proposal is that it really doesn’t go far enough; doesn’t global capitalism require global controls? Thomas Piketty in his groundbreaking work, Capital, proposes just that.

David Baker

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The Gayle McLaughlin Campaign for Lt. Governor of California—Progressive Local Politics In Action – 09.08.17

To Listen to the podcast of the show go to:

http://prn.fm/alternative-visions-gayle-mclaughlin-campaign-lt-governor-california-progressive-local-politics-action-09-08-17/

Or go to: http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT

Jack Rasmus interviews Gayle McLaughlin, founding organizer of the successful grass roots independent political action movement in Richmond, California, former mayor of Richmond and current city council member. McLaughlin explains how the Richmond Political Alliance, RPA, has been able to take over city government despite intense opposition from oil giant, Chevron Corp., that previously ran the city. How the RPA’s strategy and tactics enabled real political action, outside the two wings of the corporate party of America (aka Democrats and Republicans), to become successful. Gayle describes the progressive improvements the RPA has achieved, how it started, its organizational innovations and direct community ties and how electoral action and direct action tactics were melded successfully. McLaughlin and the RPA are now undertaking efforts to extend progressive politics to the state level with her candidacy for Lt. Governor of California. For more information about her Lt. Governor campaign, go to her website http://www.GayleforCalifornia.org . For how the RPA became a successful grass roots movement, its strategy, organization structure and tactics, see http://www.RichmondProgressiveAlliance.net. And for local San Francisco bay area residents, check out her campaign’s next meeting at 747 Lobos St., Richmond, Calif., this Sunday, September 10 at 2-5pm.

(For a full history of the RPA from origin to present, Dr. Rasmus also recommends reading RPA member, Steve Early’s book, Refinery Town: Big Oil, Big Money, and the Remaking of An American City, Beacon Press, 2017. )

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To listen to my assessment of the status and condition of the US working class this labor day, September 4, 2017, go to my Alternative Visions radio show on the progressive radio network…

GO TO

http://prn.fm/?s=Alternative+Visions

OR GO TO:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Dr. Rasmus takes stock of the condition of the US working class today. Discussed are the true condition of jobs and employment and how official government statistics underestimate contingent jobs, discouraged and missing labor force jobs, how labor force participation fails to account for millions, how government surveys of jobs underestimates, and how ‘hidden unemployment’ means jobless today is still 15-20 million. Working class wage stagnation the past decade, 2007 to 2017, is estimated with effects of contingent labor, gig labor, free trade, capital substitution, de-unionization, and privatization of healthcare and pension benefits; how workers real wages are less than reported due to housing-medical-education cost inflation, shifting tax burdens, and rising debt interest payments. The show concludes with discussion of new employer offensives against unions, focusing on open shop (right to work) Koch brothers offensives and new initiatives to outlaw agency shop and dues check off provisions in union contracts. Acknowledging the dismal scenario, Rasmus concludes that instead of stepping up defense of unions and workers’ interests, the Democratic party continues to retreat further into the morass of identity politics.

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My just published book, ‘Central Bankers at the End of Their Rope?: Monetary Policy and the Coming Depression’, Clarity Press, July 2017, is now available for immediate purchase on Amazon.com, as well as from this blog. (see book icon)

The following article, ‘Central Banks As Engines of Income Inequality and Financial Crisis’, summarizing some of the book’s themes, appeared in Z Magazine, September 1, 2017:

“This September 2017 marks the ninth year since the last major financial crisis erupted in 2008. In that crisis, investment banks Bear Stearns and Lehman Brothers collapsed. So did Fannie Mae and Freddie Mac, the quasi-government mortgage agencies that were then bailed out at the last minute by a $300 billion U.S. Treasury money injection. Washington Mutual and Indymac banks, the brokerage Merrill Lynch, and scores of other banks and shadow banks went under, were forced-merged by the government, or were consolidated or restructured. The finance arms of General Motors and General Electric were also bailed out, as were the auto companies themselves, to the tune of more than $100 billion. Then there was the insurance giant, AIG, that speculated in derivatives and ultimately required more than $200 billion in bailout funds. The “too big too fail” mega banks—Citigroup and Bank of America—were technically bankrupt in 2008 but were bailed out at a cost of more than $300 billion. And all that was only in the U.S. Banks in Europe and elsewhere also imploded or recorded huge losses. The U.S. central bank, the Federal Reserve, helped bail them out as well by providing more than a trillion U.S. dollars in loans and swaps to Europe’s banking system.

Although the crisis at the time was deeply influenced by the crash of residential housing in the U.S., few U.S. homeowners were bailed out. A mere $25 billion was provided to rescue homeowners, and most of that went to bank mortgage servicing companies who were supposed to refinance their mortgages but didn’t. More than $10 trillion, conservatively was provided to financial institutions, banks and shadow banks, and big corporations, and foreign banks by U.S. policy makers in the government and at the U.S. central bank, the Federal Reserve.
The Federal Reserve Bank as Bailout Manager

A common misunderstanding is that the banking system bailouts were managed by Congress passing what was called the Trouble Asset Relief Program, TARP. Introduced in October 2008, TARP provided the U.S. Treasury a $750 billion blank check with which to bail out the banks. But less than half of the $750 billion was actually spent. By early 2009 the remainder was returned to the U.S. Treasury. So Congress didn’t actually bail out the big banks. The bailout was engineered by the U.S. central bank, the Federal Reserve, in coordination with the main European central banks—the Bank of England, European Central Bank, and the Bank of Japan.

The central banks bailed out the big banks. That has always been the primary function of central banks. That’s why they were created in the first place. It’s called the lender of last resort function. Whenever there’s a general banking crisis, which occurs periodically in all capitalist economies, the central bank simply prints the money (electronically today) and injects it free of charge into the failing private banks, to fill up and restore the private banks’ massive losses that occur in the case of banking crashes. Having a central bank, with operations little understood by the general public, is a convenient way for capitalism to rescue its banks without having to have capitalist politicians—i.e. in Congress and the Executive—do so more directly and more publicly.

From Bailouts to Perpetual Bank Subsidization

But central banks since 2008 have evolved toward a new primary function, no longer just bailing out the banks when they get in trouble, but providing a permanent regime of subsidization of the banks even when they’re not in trouble. The latter function has become a permanent feature of capitalist global banking.

With the Fed in the lead, in 2008-09 the central banks of the advanced capitalist economies simply created money—i.e. dollars, pounds, euros and yen—and allowed banks and investors to borrow it virtually free. But free money, in the form of near zero interest, was still not the full picture. The Fed and other central banks as well as other institutional and even private investors, said: “We will also buy up your bad assets that virtually collapsed in price as a result of the 2008-09 crash.” This direct buying of bad mortgage and government bonds—and in Europe and Japan also buying of corporate bonds and even company stocks—was called “quantitative easing,” or QE for short. And what did the central banks pay for the assets they bought from banks and investors, many of which were worth as low as 15 cents on the dollar? No one knows, because the Fed to this day has kept secret how much they overpaid for the bad assets. But the QE and the near zero interest rates have continued for nine years in the U.S. and the UK; and, in 2015 QE was accelerated even faster in Europe; and since 2014 faster still in Japan. And even in China after 2015, when its stock market bubble burst, its central bank began providing trillions to prop up financial markets.

In the course of the past nine years, the private capitalist banking system globally has become addicted to the free money provided by central banks.

Private banks cannot earn profits on their own any longer, it appears. They are increasingly dependent on the virtually free money from their central bankers. This is a fundamental change in the global capitalist economic system in the past decade—a change which is having historic implications for growing income inequality worldwide in the advanced economies as well as for another inevitable global financial crisis that will almost certainly erupt within the next decade.

The $25 Trillion Banking System Bailout

In the U.S., the Fed’s QE officially purchased $4.5 trillion in bad assets between 2009 and 2014. But it was actually more, perhaps as much as $7 trillion, because, as some of the Fed-purchased bonds matured and were paid off, the Fed reinvested the money once again to maintain the $4.5 trillion. The 2008-09 crash was global, so the Fed was not the only central bank player doing this. The European Central Bank, as of 2017, has bailed out European banks to the tune of $4.9 trillion so far. The Bank of England, another $.7 trillion. And the Bank of Japan, as of mid-2017, more than $5 trillion. The People’s Bank of China, PBOC, did not institute formal QE programs, but after 2011 it too started injecting trillions of dollar in equivalent yuan, to prevent its private sector from defaulting on bank loans, to bail out its local governments that over invested in real estate, and to stop the collapse of its stock markets in 2015-16. PBOC bailouts to date amount to around $6 trillion. And the totals today continue to rise for all, as the UK, Europe, Japan, and China continue their central bank engineered bailout binge, with Europe and Japan actually accelerating their QE programs.

Contrary to many critiques of rising debt levels since 2009, it is not the level of debt itself that is the problem and the harbinger of the next financial crash. It is the inability to pay for the debt, the principal and interest on it, when the next recession occurs. As long as economies are growing, businesses and households and even government can finance the debt, i.e. continue to pay the principal and interest some way. But when recessions occur, which they always do under capitalism, that ability to keep paying the debt collapses. Business revenues and profits fall, employment rises and wages decline, and government tax collections slow. So the income with which to pay the principal and interest collapses. Unable to make payments on principal and or interest, defaults on past-incurred debt occur. Prices for financial assets—stocks, bonds, etc.—then collapse even faster and further. Businesses and banks go bankrupt, and the crisis deepens, accelerating on itself in a vicious downward spiral as the financial system collapses and drags the non-financial economy down with it—and as the latter in turn exacerbates the financial crisis even further.

In other words, the private corporate debt at the heart of the last crisis in 2007-08 has not been removed from the global economy. It has only been shifted—from the business sector to the central banks. And this central bank debt has nothing to do with national governments’ total debt. That’s a completely additional amount of government debt. So too is consumer household debt additional, which, in the U.S, is more than $1 trillion each for student loans, auto loans, credit cards, and multi-trillions more for mortgage loans. Moreover, in recent months defaults on student, auto and credit card debt have begun to rise again, already the highest in the last four years in the U.S.

It’s also not quite correct to say that the $25 trillion central banks’ injection of money into the banking system since 2008 has successfully bailed out the private banks globally. Despite the total, there are still more than $10-$15 trillion in what are called non-performing bank loans worldwide. Most is concentrated in Europe and Asia—both of which are likely the locus of the next global financial crisis. And that next crisis is coming.

In the interim, the central banks’ free money and bank subsidization machine is generating a fundamental dual problem within the global economy. It is feeding the trend toward income inequality and it is helping fuel financial asset bubbles worldwide that will eventually converge and then burst, precipitating the next global financial crash.

The Fed as Engine of Income Inequality

In the U.S., the central bank’s $4.5 trillion (really $7 trillion) balance sheet—and the 9 years of free money at 0.1% to 0.25% rates provided to banks by the Fed— have been at the heart of a massive income shift to U.S. investors, businesses, and the wealthiest 1% households.

Where did all this money go? The lie fed to the public by politicians, businesses, and the media was that this massive free money injection was necessary to get the economy going again. The trillions would jump-start real investment that would create jobs, incomes consumption, and consequently, economic growth or GDP. But that’s not where it went, and the U.S. economy experienced the weakest nine-year post-recession recovery on record. Little of the money injection financed real investment—i.e. in equipment, buildings, structures, machinery, inventories, etc. that creates jobs and wage incomes. Instead, investors got QE bailouts and banks borrowed the free money from the Fed and then loaned it out at higher interest rates to U.S. multinational companies who invested it abroad in emerging markets; or they loaned it to shadow bankers and foreign bankers who speculated in financial asset markets like stocks, junk bonds, derivatives, foreign exchange, etc.; or the banks borrowed and invested it themselves in financial securities markets; or they just hoarded the cash on their own bank balance sheets; or the banks borrowed the money at 0.1 and then redeposited it at the central bank, which paid them 0.25%, for a 0.15% profit for doing nothing.

This massive money injection, in other words, was then put to work in financial markets. Behind the 9- year bubbles in stock and bond markets (and derivatives and currency exchange markets as well) is the massive $7 to $10 trillion Federal Reserve bank money injections. And how high have the stock-bond bubbles grown? The Dow Jones U.S. stock market has risen from a low in 2009 of 6,500 to almost 22,000 today. The U.S. Nasdaq tech-heavy market has surpassed the 2001 peak 5,000 before the tech bust, now more than 6,000. The S&P 500 has also more than tripled. Business profits have also tripled, Bond market prices have similarly accelerated. Free money in the trillions $ from the central bank and trillions more in profits from financial speculation. But that’s not all. The 9- year near-zero rates from the Fed have also enabled corporations to issue corporate bonds by more than $5 trillion in just the last 5 years.

So how do these financial asset market bubbles translate into historic levels of income inequality, one might ask? The wealthiest 1%—i.e. the investor class—cash in their stocks and bonds when the bubbles escalate. The corporations that have raised $5 trillion in new bonds and seen their profits triple in value then take that massive $6 to $9 trillion cash hoard to buy back their stocks and to issue record level of dividends to their shareholders. Nearly $6 trillion of the profits-bond raised cash was redistributed in the U.S. alone since 2010 to shareholders in the form of stock buybacks and dividends payouts. The 1% get $6 trillion or more distributed to them and the corporations and banks sit on the rest in the form of retained cash. Or send it offshore into their foreign subsidiaries in order to avoid paying taxes in the US.

Congress and Presidents play a role in the process, as well. Shareholders get to keep more of the $6 trillion plus distributed to them by passing tax cut legislation that sharply cuts capital gains and dividend income. Corporations also gain by keeping more profits after-tax, as a result of corporate tax cuts—which they then distribute to their shareholders via the buybacks and dividends.

The Congress and President sit near the end of the distribution chain, enabling through tax cuts the 1% and shareholders to keep more of their distributed income. But it is the central bank, the Fed, which sits at the beginning of the process. It provides the initial free money that, when borrowed and reinvested in stock markets, becomes the major driver of the stock price bubble. The Fed’s free money also drives down interest rates to near zero, allowing corporations to raise the $5 trillion more from issuing new corporate bonds. Without the Fed and the near zero rates, there would be nowhere near $5 trillion raised from new corporate bonds, to distribute to shareholders as a consequence of buybacks and dividends. Furthermore, without the Fed and QE programs, investors would not have the excess money to invest in stocks and bonds (and derivatives and currencies) that drive up stock and bond prices to bubble levels before investors cash in on those bubble level prices.

The Fed, as well as other central banks, are therefore the originating source of the runaway income inequality that has plagued the U.S. since late 1970s.

Income inequality is a function of two things. On the one hand, accelerating capital incomes of the wealthiest 1% households are largely a result of buybacks and dividend payouts. Such capital gains incomes constitute nearly 100 percent of the wealthiest 1%’s total income. On the other, income inequality is also a consequence of stagnating or declining wage incomes of non-investor households. Inequality may therefore rise if capital gains drive capital incomes higher; or may rise if wage incomes stagnate or decline; or may rise doubly fast if capital incomes rise while wage incomes stagnate or decline. Since 2000 both forces have been in effect: capital incomes of the 1% have escalated while wage incomes for 80 % of households have stagnated or declined.
Mainstream economists tend to focus on the stagnation of wage incomes, which are due to multiple causes like de-unionization, the rise of temp-part-time-contract employment, free trade treaties’ wage depressing effects, failure to adjust minimum wages, high wage manufacturing and tech industries offshoring of investment and jobs, cost shifting of healthcare from employers to workers, reduction in retirement benefits, shifting tax burdens to working and middle classes, etc. But economists don’t adequately explain why capital incomes have been accelerating so fast. Perhaps it is because mainstream economists simply don’t understand financial markets and investment very well; or perhaps some do, and just don’t want to go there and criticize runaway capital incomes.

Central Banks as Source of Financial Instability

As a result of Fed and other central banks’ money injections, underway now for decades, and especially since 2008, there is a mountain of cash—virtually trillions of dollars—sitting on the sidelines globally in the hands of professional investors and their shadow bank institutions. That money is looking for quick, speculative capital gains profit opportunities. That means seeking reinvestment short term in financial asset markets worldwide. The mountain of cash moves in and out of these global financial markets, creating and bursting bubbles as its shifts and moves. Periodically a major bubble bursts—like China’s stock market in 2015. Or a housing speculation bubble here or there. Or junk bonds or consumer debt in the U.S. Or the bubble in U.S. stocks which is nearing its limit.

A new global finance capital elite has arisen in recent decades, having directly benefited from and controlling this mountain of cash. There are about 200,000 of them worldwide, mostly concentrated in the U.S. and UK, some in Europe, but with numbers rising rapidly in Asia as well. They now control more investible assets than all the traditional commercial banks combined. Their preferred institutional investment vehicles are the global shadow banking system and their preferred investment targets are the global system of highly liquid financial asset markets. This system of new finance capitalists, their institutions, and their preferred markets is the real definition of what is meant by the financialization of the global economy. That financialization is generating ever more instability in the global capitalist system as it increasingly diverts trillions of dollars, euros, etc., from investing in job creating real things to investing in financial assets worldwide. That’s why global productivity and growth are progressively slowing, putting even more downward pressure on wage incomes. And central bank policies are a major contributor to this new trend in global capitalism in the 21st century.

Will the Central Banks Retreat?

In 2017, a minority of policymakers in the Fed and other central banks have begun to recognize the fundamental danger to their capitalist system itself from their providing free money and QE bond and stock buying money injections. So, led by the Fed, the central banks of the major economies are together now considering raising interest rates from the zero floor and trying to reverse their QE buying. Western central bankers met in late August 2017 at their annual Jackson Hole, Wyoming gathering, with the main topic of discussion being raising rates and reducing their QE bloated, $15 trillion official balance sheets. (China’s PBOC was absent or the total balance sheets would have amounted to more than $21 trillion.)

As I have argued, however, the Fed and other central banks will fail in both raising rates and selling off their balance sheets in 2017-18 and beyond—just as they failed in generating normal levels of real economic recovery since 2009. For the global capitalist banking system has become addicted and dependent on their central banks’ free money injections and their firehose of central bank bond-stock buying QE programs. Should the central banks attempt to retreat and raise rates or sell off their balance sheets to any meaningful extent, they will precipitate a serious credit contraction and provoke yet another financial and economic crisis. In other words, the global capitalist system has become dependent on the permanent subsidization of the banking system by their central banks after 2008. That is its new fundamental contradiction.

Jack Rasmus is the author of the just published book, Central Bankers at the End of Their Ropes?: Monetary Policy and the Coming Depressions, Clarity Press, August 2017. For information, see http://claritypress.com/RasmusIII.html. To purchase, go to Amazon.com or to author’s website: http://kyklosproductions.com which is accessible from this blog (see the blogroll to get to the website)

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For my analysis of the Fed and other central bankers gathering at Jackson Hole, Wyoming, expressing their growing concern for financial stability, listen to my Alternative Visions radio show of August 25, 2017.

Go to:

http://prn.fm/?s=Alternative+Visions

Or go to:

http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT

The Fed and other central bank leaders gathering at Jackson Hole Wyoming today express concern for financial instability. Fed chair, Janet Yellen, warns of the Trump administration’s current fast tracking of financial deregulation, driven by the Goldman Sachs-driven US Treasury Secretary, Steve Mnuchin. Dr. Rasmus explains how shadow bankers, like Goldman Sachs, now have almost complete dominance over Trump economic policy, with former Goldman Sachers Mnuchin at the Treasury, Bill Dudley in charge of the NY Fed, and Gary Cohn aschair of Trump’s Economic Council (and soon to replace Janet Yellen next February as head of the Fed). Rasmus explains how the Fed and other major central banks have provided bankers and investors $25 trillion in free money since 2008, but have still not bailed out the banking system leaving a residue of financial problems. More than $15 trillion in non-performing bank loans still exist, not counting trillions more added to corporate bond debt, 3 trillion more in US consumer loans, and $12 trillion more in US government debt just since 2008. Globally, the capitalist system has added more than $50 trillion in debt above its 2008 levels. Where did the $25 trillion go is explained. Why the Fed and other central banks can’t (and won’t) raise interest rates without precipitating another financial crisis. How a new global finance capital elite now control the central banks and economic policies of the governments of the advanced capitalist countries.

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Today the chairs of the world’s major central banks are meeting in Jackson Hole, Wyoming, to discuss their planned big changes in interest rates and QE policies that have injected more than $20 trillion into the coffers of bankers and investors since 2008. That massive injection of virtually free money for 9 years has produced a doubling and tripling of stock and bond markets and boosted capital gains income to unheard of levels in modern history. It produced tepid improvements in jobs and wage incomes, a weak economic recovery that is now about to end, and set the stage for the next financial crisis within the next 2-3 years.

What follows is an excerpt from my just published book, ‘Central Bankers at the End of Their Rope: Monetary Policy and the Coming Depression’, Clarity Press, July 2017, which documents how the Federal Reserve and other central banks have failed and have set the stage for the next crisis. (For more information on the book, go to the publisher, Claritypress.com/RasmusIII.html). Books may be purchased at discount from this blog and my website through Paypal.

EXCERPT FROM CHAPTER ONE:

Why Central Banks Are Failing

Central banks are failing because their ability to perform their primary tasks of lender of last resort, money supply management and bank supervision is in decline. The question then is what are the causes of that decline? What developments and forces in the global economy are disrupting central banks efforts to carry out their primary tasks? The following is a brief introductory overview of the key problems and fundamental contradictions with which central banks today are confronted.

a. Globalization and integration rendering central bank targets and tools ineffective

First, there’s the problem of the rapid globalization and integration of financial institutions and markets that emerged in the 1970s and 1980s which has grown ever since. Central banks are basically national economic institutions. The global financial system is beyond their mandate. Not only that, there is no single central bank capable of bailing out the global banking system during the next inevitable global financial crash. In 2008 it didn’t even happen. The US Federal Reserve and the Bank of England bailed out their respective banking systems, providing more than $10 trillion in direct liquidity injections, loans, guarantees, tax reductions and direct subsidies. The Federal Reserve even provided a loan in the form of a currency swap of $1 trillion to the European Central Bank and its affiliated national central banks. But the Euro banking system has not been effectively bailed out to this day. Nor has Japan’s. Together both have the equivalent of trillions of dollars in non-performing bank loans. Total liquidity injected into the private banking system by the world’s major central banks was in excess of $25 trillion. But non-performing bank loans today are also still more than $15 trillion. So much for the alleged ‘bailout’ of the banking system since 2008. While China’s banks and central bank, the Peoples Bank of China, was not involved in the 2008 banking crash and subsequent bailout, it almost certainly will be involved in the next financial crisis. In fact, China’s financial system may be at the center of it.

The fact that the financial-banking system today is highly integrated and globalized raises another problem for central banks. With today’s banking system composed not only of traditional commercial banks, but of shadow banks, hybrid shadow-commercial banks, non-bank companies engaging increasingly in financial investing, and financial institutions in various new forms serving capital markets in general, no national central bank’s operational tools or policies can control the global money supply or ensure stability in goods and services prices.

The global 21st century financial system is also well beyond the reach of central bank supervision. How does a single central bank supervise banks that operate simultaneously in scores of countries and economies? Or banks that operate solely on the internet, or with a formal headquarters located on some remote island nation? Massive sets of real time data are required for effective supervision by any single central bank. But access may be denied by national political boundaries, or significantly delayed and obscured by the same. To be able to bailout in the event of a crash, to effectively control the global money supply, or to reasonably supervise, national central banks would have to integrate and coordinate their policies and actions across their respective national economies. But they are far from being able to achieve such coordination at present, and in fact appear increasingly fragmented and going in different, and at times, even opposite directions. As the capitalist banking system becomes more complex, more integrated and more globalized, central banking has become less coordinated across national economies, not more.

Even the most influential central bank, the US Federal Reserve, is unable to globally coordinate national central bank actions with regard either to bailout, money supply management, or bank risk activity supervision. As of 2017, the Fed appears even more intent on going its separate way, independent of other major national central banks in Europe and Asia.

b. Technological changes generating instability

A second area of major problems is associated with technological change. Apart from technology enabling the rapid globalization and integration of finance, and the problems that has created for central banks, technology is also changing the very nature of money itself, creating new forms that are difficult to measure and monitor. A gap is also growing between forms of money and forms of credit. Money may be used to provide credit, but credit is increasingly made available without central bank and traditional forms of money. Credit is increasingly issued by banks (and non-banks) independent of money supply provision policies and goals of central banks. Hence, central banks are losing control over the creation of credit regardless of efforts to influence it through money supply manipulation. And credit means debt and debt is critical to instability.

Twenty-first century technology is also upending the manipulation of the supply of money by central banks as well. By various means, technology is accelerating the movement of money capital, speeding up the ‘velocity of money’ flow, both cross-borders and in and out of markets. Technology has also enabled fast trading, split micro-second arbitrage, and is contributing to an increasing frequency of ‘flash crashes’ in recent years, in both stock and bond markets, that are capable of precipitating broader financial instability and crashes. Technology also accelerates the contagion effect across markets and financial institutions when an instability event erupts. Not least, technology makes it possible for banks to avoid central bank general supervision. It is easier to hide data on a server in the internet cloud than it is to store paper records in filing cabinets away from central bank inspectors. Central banks, with relatively small numbers of supervision staff and inspectors, simply cannot compete with banks with technical staffs and leading edge technical knowledge.

c. Loss of control of money supply and declining effect of interest rates

Technology is broadening the very definition and meaning of money, beyond the scope of influence available to central banks’ via the traditional tools they have used to influence money supply. That is one reason why central banks since 2008 have been experimenting so aggressively (and even recklessly) inventing new tools, like quantitative easing (QE), to try desperately to reassert control and influence. But other forces minimizing central bank control over money are at work as well, among them the rise and expansion of shadow banking (see section d. to follow).

Another related source of loss of control is associated with non-bank multinational corporations, which invest on a global scale. Should the US central bank, the Fed, seek to reduce the national money supply by raising national interest rates, multinational corporations can and do simply borrow elsewhere in the world, ignoring US central bank’s efforts. They can even borrow in dollars offshore, since dollar markets exist in Europe, Asia and elsewhere as a consequence of the Federal Reserve having flooding the world with liquidity in dollars for more than a half century.

Since their earliest development in the ‘middle’ period of banking, central banks have attempted to stimulate (or discourage) real investment in construction, factories, mines, transport infrastructure, machinery, etc. by raising (or lowering) benchmark interest rates. Interest rates are simply the ‘price of using or borrowing money’. But the price of money—i.e. the interest rate—is not determined solely by the supply of money; it is also determined by the demand for money and by the velocity of money as well. Both supply and demand
determine price fundamentally. . But central banks have never had much, if any, influence over money determinants of interest rates. Money demand is determined by general economic conditions at large, not by central bank actions.

Furthermore, both the supply and the demand for money (and thus interest rates) are determined also by the velocity of money. The velocity of money, however, is increasingly determined by technology developments.
Both money demand and money velocity are drifting further from central banks’ influence. And to the extent they do so, central banks may be said to be steadily losing control over interest rates since interest rates are determined by all three: money supply, money demand, and money velocity. Central banks are left with trying to influence just one element—money supply—as a means to control interest rates, but their influence here is diminishing as well, as the globalization of financial markets accelerates and multinational companies grow,enabling access to a multitude of forms and sources of credit.

Central banks thus have decreasing influence over even the money supply determinants of interest rates, let alone influence over both money demand and the velocity of money which are equally important determinants of rates. Central banks are steadily losing control of their key operational lever, the interest rate, as the means by which to influence economic activity. As will be addressed in subsequent chapters, this general fact is perhaps why central banks have abandoned the manipulation of interest rates as the means by which they
attempt to influence real economic activity in a given economy.

d. The rise and expansion of shadow banking

Shadow banks constitute a particular problem for central banks along a number of fronts. Shadow banks engage in high risk/high return investing and are thus often at the center of financial crises requiring central bank bailout. Shadow banks exacerbate the decline in central banks’ ability to determine money supply and in turn interest rates. And shadow banks are mostly beyond the scope of central banks’ supervisory activities, although some very minimal central bank supervision has been extended to some segments of the shadow banking world (e.g. mutual funds in the US) since 2008.

A body of academic and central bank literature has developed since 2008 on whether and how central banks (and governments in general) should increase their regulation of shadow banks. Standard financial regulation legislation and agencies’ rules address financial regulation of traditional banks. The new area addressing shadow banks is sometimes referred to as Macroprudential Regulation. But to quote Rubin—a former shadow banker himself—once again, central banks today are still light years away from being able to regulate the
shadow banking world. This is because “no one comes close to having identified the full reach of shadow banking or the systemic risks it poses”, which “would be a monumental undertaking for the United States alone” but “it becomes even more daunting once shadow banking outside of our borders is considered.”

As this writer has previously concluded, thinking that central banks can macro-prudentially regulate or effectively supervise shadow banks—given the magnitude and global scope of operations and growing political influence of shadow banking—is delusional. “Technology, geographic coordination requirements, opacity, bureaucracy, the massive money corruption of lobbying and elections by financial institutions, fragmented regulatory responsibilities, the sorry track record to date of Fed and other agencies’ regulatory efforts, and the multiple interlocking ties involving credit and debt between private banking forms—all point to the futility of regulating shadow banks in the reasonably near future.”

e. The magnitude and frequency of financial asset price bubbles

Central banks are failing to prevent or contain financial asset price bubbles. This particular failure is not just that they lack the tools, but that they lack the will to do so. This is in part political. There’s a lot of money to be made by capitalist investors and institutions when financial bubbles are growing. To intervene when the financial elite is ‘making money’ is to court the ire and intervention in turn by government supporters, political friends, and the corporate media.

As the former head of a major US bank during the 2008-09 crash, Charlie Prince, admitted when interviewed after the crash and asked did he not know the banking system was headed for financial Armageddon? Why did he not stop the excessive and risky investing practices at the time? Prince simply replied, ‘when you come to the dance, you have to dance’. What he meant was he (and likely other banker CEOs) knew the system was headed for a crash. But he couldn’t buck the trend without his shareholders, demanding to participate with other banks in the great profits and returns from the risky speculation in subprime bonds and derivatives. If Prince had swum against the tide, he undoubtedly would have been sacked by his Board and shareholders.

A similar powerful opposition would likely have descended on the Federal Reserve officials at the time in 2007-08, had they acted to ‘prick the asset bubble’ before it burst. But burst it did, causing trillions of dollars in bailouts in its wake. Central banks would rather try to clean up the mess from a bubble and crash than try to prevent it, or even slow it down. They and supporters in the media and academia therefore raise excuses and arguments justifying their non-intervention to prevent destabilizing financial asset price bubbles.

The main arguments include it is not possible to determine whether a bubble is in progress or not, until after the fact. Or it is too difficult to know if it’s a de facto bubble or just a normal financial market price escalation.Or, to deflate a financial bubble in progress is likely to set off a financial panic prematurely, and thus provoke the very condition that it was supposed to prevent. Or, central banks’ monetary tools aren’t designed to stop excessive asset price inflation in any event. Nor is responding to asset price bubbles part of the ‘mission’ of central banking. The mission is to prevent excessive price instability in real goods and services; to stabilize the price of money (e.g. interest rates), or maybe even to modestly encourage wage (factor prices) growth in order to support their mission of encouraging economic growth and employment (through consumption). But ‘hands off’ preventing on financial asset inflation or instability. Without saying it in such direct terms, what is meant is regulating financial asset prices and preventing bubbles is de facto directly regulating the rate of profit realization from financial asset market capital gains!

Nearly fifteen years ago, when just a member of the board of governors of the US Federal Reserve, for example, Ben Bernanke addressed in a formal speech the subject of financial asset bubbles intervention. He made it clear, leaving no doubt as to the policy of the central bank at the time, that it was neither desirable nor
possible to intervene to prevent financial asset bubbles. All a central bank was mandated to do was set a target for inflation, by which he meant a target for inflation in goods and services prices, not financial asset prices. Stabilizing goods prices would eventually stabilize financial asset prices in turn, it was assumed. But: to quote Bernanke at the time, before he was made chair of the US central bank in 2006, “an aggressive inflation-targeting rule [say 2% ?] stabilizes output and inflation when asset prices are volatile, whether the volatility is due to bubbles or to technological shocks…there is no significant additional benefit to responding to asset prices.” Years later, in 2012, as Federal Reserve chair, well after the crash of 2008-09, Bernanke held to the same view: “policy should not respond to changes in asset prices…trying to stabilize asset prices per se is problematic for a variety of reasons”…and it runs the “risk that a bubble, once ‘pricked’, can easily degenerate into a panic.”

What this mistaken view represents, however, is a denial that asset price bubbles are always followed by asset price bust and deflation, and that collapsing asset prices can and do have significant negative effects on the real economy and therefore on production, unemployment, decline in consumer spending and on prices of goods and services. The Bernanke view was simply wrong. But it served as a logical economic justification to not address financial price bubbles. And not a word about how monetary policies depressing interest rates for years, might cause central bank-provided liquidity to flow into financial asset markets and create the very bubbles that, according to Bernanke, the Fed and central banks should do nothing about!

Since Japan’s early financial crash in 1990-91, and its subsequent banking crash in 1997, scores and perhaps hundreds of academic journal articles and books have been written on the futility of doing anything about financial bubbles. Most echo the same logic: just target reasonable inflation for real goods and services and the rest will take care of itself. This traditional central bank view refusing to address financial bubbles continues to this day.

f. The growing political power of the global finance capital elite

Central banks both facilitate and are confronted with the rising political influence and power of the new global finance capital elite. The elite constitute the human agency driving the restructuring of the global economy in the 21st century that is responsible for creating most of the problems and contradictions confronting central banking today. Symptoms of their political influence include the successful deregulation of financial activities by governments, their corralling of an accelerating share of income and financial wealth from financial investing and speculation, and the absence of any prosecution and incarceration of their members when their practices precipitate financial crashes and their disastrous consequences on the public at large. Central banks have been unable thus far to ‘tame’ this new, aggressive, and ultimately destabilizing form of capitalist investment.

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To listen to this show, go to:

http://prn.fm/?s=Alternative+Visions

Or go to:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT

Alternative Visions radio welcomes guest, Pablo Vivanco, of Telesur Media in Latin America to explain what’s really going on in Venezuela as the Trump administration raises the spectre of possible military intervention in the democratic revolution in that country. Dr. Rasmus describes the measures by which US elites and its deep state since the 1950s typically engineer an overthrow of governments, by wrecking first the economy of the country (precipitating recessions, inflation, food-medical shortages,etc.), funding political opposition parties and groups, then taking over government institutions, generating domestic unrest and conflict, and ultimately counterrevolution regime change. Rasmus argues the US since 2015 has been ‘pivoting’ from the middle east to Latin America, as well as to Asia. Venezuela is now at the point of the US regime change spear in the western hemisphere. Journalist Pablo Vivanco is interviewed at length and explains what’s going on today with the recent election of a new Constituent Assembly in Venezuela and what it aims to accomplish as it blunts counter-revolution and regime change efforts by US and domestic business interests in Venezuela. The popular support for the Constituent Assembly, structured on grass roots organizations, is described by Vivanco and where events may be next leading.

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Now publicly available for order from the publisher, Claritypress/RasmusIII.html, from public bookstores, and from this blog, the following is the synopsis of the book, ‘Central Bankers at the End of Their Rope?: Monetary Policy and the Coming Depression’.

BOOK SYNOPSIS

“Central banks of the advanced economies—despite having been
designated by their respective economic and political elites as
their states’ primary economic policy institution—have failed
since 2008 to permanently stabilize the world’s banking systems or
restore pre-2008 economic growth.

Rather, central bank liquidity injections since the 1970s not only
produced the 2008-09 crisis, but they then became the central
banks’ solution to that crisis; and now promise to cause of the
next one, as a further tens of trillions of dollars of liquidity-
enabled debt has since 2008 been piled on the original trillions
before 2008.

Fed policy since 2010 has represented an historically
unprecedented subsidization of the financial system by the State,
implemented via the institutional vehicle of the central bank.
Central banks’ function of lender of last resort, originally
designed to provide excess liquidity in instances of banking
crises, has been transformed into the subsidization of the private
banking system, which today is addicted to, and increasingly
dependent upon, significant continuing infusions of liquidity by
central banks.

Taking away this central bank artificial subsidization of the private
sector, especially the financial side of the private sector, would
almost certainly lead to a financial and real collapse of the global
economy. It is thus highly unlikely that the Fed, Bank of England,
Bank of Japan or European Central Bank will be able any time
soon to retreat much from their massive liquidity injections that
have been the hallmark of central bank policy since 2008. Nor will
they find it possible to raise their interest rates much beyond
brief token adjustments. Nor exit easily from their bloated
balance sheets and extraordinary historic policies of liquidity
provisioning. That liquidity not only bailed out the banks and
financial system in 2007-09, but has been subsidizing the system
ever since in order to prevent a re-collapse.

Truly, as this book addresses in painstaking detail, central
bankers are at the end of their rope. Wrought by various growing
contradictions, central banks, as currently structured, have failed
to keep pace with the more rapid restructuring and change in the
private capitalist banking system. As a result, they have been
failing to perform effectively even their most basic functions, or
to achieve their own declared targets of price stability and
employment.

Official excuses for that failure are critiqued and rejected.
Alternative reasons are offered, including:
• the declining effects of interest rates on investment,
• the relative shift to financial asset investing at the expense
of real investment,
• failure of central banks to intervene and prevent financial
asset bubbles,
• the purposeful fragmentation of bank supervision across
regulatory institutions,
• mismanagement of the traditional money supply,
• rapid technological changes transforming the very nature of
money, credit and financial institutions and markets worldwide,
• monetary tools ineffectiveness and incorrect targets, and
• central bankers’ continuing adherence to ideological
notions of the mid-20th century that no longer hold true in the
21st—like the Taylor Rule, Phillips curves, and, in the case of ZIRP(zero interest rates) and NIRP (negative interest rates), the idea that the cost of borrowing is what first and foremost determines real investment.

Central banks must undergo fundamental restructuring and
change. That restructuring must include the democratization of
decision making and a redirecting of central banks toward a
greater direct service in the public interest. A Constitutional
Amendment is therefore proposed, along with 20 articles of
enabling legislation, addressing what reforms and restructuring
of central banks’ decision making processes, tools, targets,
functions, as well as their very mission and objectives, are
necessary if central banks are to become useful institutions for
society in general. The proposed amendment and legislation
defines a new mission and general goals for the Fed—as well as
new targets, tools and new functions—to create a new kind of
public interest Federal Reserve for the 21st century.

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Jack interviews Labor Fightback Network representatives on their recent conference in Cleveland on the Alternative Visions Radio Show, and discusses recent grass roots worker-community movements and debates how to resurrect the US union movement.

To Listen Go To:

http://prn.fm/?s=Alternative+Visions

or to:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT

Host Jack Rasmus interviews guest members of the Labor Fightback Network and their recent conference held in Cleveland. The Network is an organization of local union activists, elected officers, and select union representatives attempting to return the US union movement to a tradition of independent political action, progressive economic demands like ‘Medicare for All/Single Payer’, and labor community alliances. Jack interviews Alan Benjamin, a member of the LFN steering committee, on the program of the organization. A lively discussion follows on the need to resurrect the labor movement in the US, now at a nadir, and restore it to the role it once had. Discussion ranged from new forms of independent political action occurring, movements for $15 minimum wage, single payer, efforts to draft Bernie Sanders as a candidate for a Peoples Party, the accelerating rise of membership in the Democratic Socialists of America, DSA, grass roots electoral efforts like the Richmond Alliance, and others. Rasmus argues union resurrection in US history were always associated with new organizational forms—from the Knights of Labor to the AFofL to the industrial union CIO—and today a new organizational form of struggle will be required once again, not just the traditional union structure that remains. Benjamin differs and sees a resurrection and lead by the union movement itself. Both agree new resistance from below, led by young workers, is beginning to occur. (For more information on the Labor Fightback Network and its program, go to the website, http://laborfightback.org.

(Next week’s August 18 Alternative Visions radio show will feature activists from inside Venezuela and a first hand report on what’s really happening there not available in the US mainstream media)

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