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Listen to my Alternative Visions radio show of January 31, 2020 for my preliminary analysis of the (T)rump impeachment trial and the major economic event of the week–the rapid spread of the Coronavirus and the channels of economic contagion it is beginning to create.

TO Listen GO TO:

http://alternativevisions.podbean.com

    SHOW ANNOUNCEMENT

Dr. Rasmus provides his reflections on the Senate trial of Trump and the further crisis and decline of Democracy in America that it represents. How James Madison’s worst fears and warnings are being played out before our eyes historically in the (T)rump trial underway. How the outcome now will embolden Trump to engage in similar behavior and move further to ‘govern’ by bypassing Congress. The trial as the expansion of the Imperial presidency in domestic as well as foreign policy. How current events are very much like 1856 America. The potential impacts of the Coronavirus on the China, Asia and global economies are reviewed. The imminent big impact on stock and other financial markets. How consumer spending in the US has begun to slow appreciably since November already, and business investment and manufacturing continues to contract. The virus may be the factor yet to push the US economy into recession. Rasmus discusses the weaknesses of Trump’s China trade deal and the just signed NAFTA 2.0. Why Brexit plus virus now entering Europe will mean a ‘double’ hit to the Europe economy on both sides of the channel.

Read my quick takes and analyses from my January tweets on some of the key economic and political events of this past month.

#China

Virus spreading fast: watch India contagion especially. China mkts re-open today. Watch big stock contraction there, followed by accelerating world contagion: stocks, oil, commodities, EME currencies fall; $, bonds, gold rise. Brexit=EU/UK double hit.

#impeachment

4th swing vote Senator, Alexander, voting no to allow witnesses & evidence. Says Trump did it, was inappropriate, but not convictable. What’s to stop Trump now in rest of election year again soliciting (via buddy Guliani) foreign assistance in his election? Nothing.

#impeachment

If acquitted, will Trump govern bypassing Congress? With impeachment blocked, he can now divert funds as he pleases, spend on what he wants, govern by executive order. 2020=the dawn of the Imperial presidency in domestic affairs. Party loyalty trumps the Constitution

#impeachment

the fear of founders of US Constitution is now being played out: i.e. that party factions would undermine the Constitution. Trump acquittal will mean impeachment will only occur in rare cases, where one party controls both House & Senate and other party the executive

#USChinatradedeal

China cutting back on global oil/commodity imports due to expected impact of virus on economy. China’s Phase 1 trade deal with US has clause “except when mkt. conditions & demand” permit. China now won’t buy est. $76B US goods, esp. gas/oil in 2020 Predict $50b

#Coronavirus

Why are US returnees from China kept from departing US airports for only 72 hrs, when the virus gestation period is 2 weeks? Compare to Australia quarantine of returnees on remote Christmas Island for weeks. 8000 cases now in China. Forecasts to 190,000 in 2 weeks.

#impeachment

Just released Fox News poll show all voters favor Trump conviction & removal by 50%-44%. Some Republican Senators furious Trump-McConnell has put them in a box in election year. Meanwhile, Justice Dept. taking action to prevent Bolton book’s publication.

#impeachment

At start of trial Trump lawyers said US House should have gone to court to resolve Trump refusal to allow witnesses & docs. Same lawyers now say judiciary has no authority to settle impeachment disputes between Congress-President. (How much are they getting paid??)

#USstocks

Addendum to prior post: new int’l financial structure facilitating the excess demand for fin. assets: shadow banks; nonfin corps portfolio investing: comm. banks feeding shadow banks; dark pools; passive index funds; equity ETFs; fintech; AI enabled arbitraged trading

#BigPharma

Drug companies answer to runaway drug prices: pay by installment over 5 or 10 yrs for drugs like your car + ‘value-based contracts’: If drug doesn’t work, Pharma rebates part of cost…but to your employer not you. (Will Crispr gene tech end Pharma’s pill monopoly?)

#BigPharma

US consumers spend $1 trillion on hospital services & $335 billion on prescription drugs. But consumers pay out of pocket more than $12 billion more on drugs than on hospital services out of pocket. (Sources: Centers for Medicare-Medicaid Services, Drug Channels Inst.

#BigPharma

says it’s raising prices only 5.8%. How they do it: Keep thousands of drugs on their books marginally profitable & raise their prices $1T annual deficits for 2020s decade? While in the lair of billionaires, at Davos, Trump let’s it slip: cuts to social security & medicare that he says he’ll consider right after 2020 election. Then he immediately ‘walks it back’ next day. Too late

#Techtrends

Why US-China tech war over 5G? (now decoupled from US-China tariff war): Military dominance of 2020s. Military 5G=hypersonic missile guidance & detection avoidance; drone instant remote targeting; human-machine battlefield coordination. Goes with US space force plan

#Techtrends

What’s AI? Massive computing power+massive database instant processing+generative-adversarial neural nets teaching each other (deep machine learning), glued together by advanced stats + programming via python, R, or other=disaster of loss of millions low decision jobs

#Techtrends

Addendum to last post: What about projected destruction of 30% occupations (fewer jobs;fewer hrs work) by 2025 from AI, etc., per McKinsey Report? What will such massive loss of jobs & income mean for consumption & GDP? Watch for big social backlash to tech by 2025.

#TechTrends

Microsoft CEO Nadella says 42b connected devices+cloud+machine learning will mean big rise in productivity & economy 2020s. Myopic econ view. Massive corp. debt today + debt defaults, bankruptcies & no credit = little invest in nextgen tech by most Businesses in 2020s

#impeachment

Despite Sup. Ct. Justice, Roberts reading rules day #1 that all Senators must remain in chamber at all times (with no phones), today 19 Republican Senators have left the chamber on day #1 trial. But you can’t see that; McConnell rules now prevent TV view of chamber

#impeachment

McConnell’s announces rule: witnesses must be deposed first in secret. Then based on what they say, it will take 51 senators to allow witnesses in trial. That way McConnell screens beforehand what witness testimony is allowed–his fallback if he loses witnesses fight

#impeachment

US Constitutional convention of 1787 debates made it clear: executive privilege is not absolute. Need of evidence takes precedence over executive privilege. Founders then left out of actual Constitution all reference to executive privilege

#impeachment

Republicans’ main argument: House should not ask Senate to conduct trial with insufficient evidence House itself didn’t gather. But insufficient evidence due to Trump refusing to allow witnesses & docs to appear in House hearings. Transparent rhetoric. Circular logic

#Fed

announces will issue new 20 yr. T-bonds. Why? 3 reasons: 1)raise funds to cover>$1 trillion annual US budget deficits in 2020; 2)need for more liquidity for Repo mkt injections; 3)Fed can’t raise rates due to Trump threats. Thus 20yr T bonds alternative. Fed policy a mess

#Chinatradedeal

Trump says China has agreed to buy $40b farm goods in 2020. Fact: China’s Liu He says will buy “as consumer needs and market conditions determine” (read: as Trump reduces tariffs).

#Yuan

Trump declares China no longer a currency manipulator. A phony claim from the start. China has intervened in mkts to keep Yuan in stable range for years. Rising US $ has stoked global currency devaluations, not Yuan. But Trump claims trade deal cause of stable Yuan

#budgetdeficit

It’s official: US deficit 2019 at $1.02 trillion. (Add another $80-$100B if counting military ‘black budget’ on new weapons that doesn’t show up in print anywhere). Trump’s 2 yrs budget increases>20%/yr on ave. each yr. Causes? tax cuts (60%)+military-social prgms

#tradewar

Council on Foreign Relations on Trump’s China trade deal: “China is set to do little more than restore agric. purchases and offer some nice words on financial services and intellectual property…Trump could have had that two years ago” Wall St. Journal 1-13-20, page 1

#Tradewar

Trump says China will buy $50b in US agric. in each of next two years + another $50b/y in non-ag goods. And US will keep $370b in tariffs on China imports. China refuses to confirm. $200b will never happen if $370b tariffs remain. 1-15 trade deal signing will come & go

#jobsreport

Friday’s Dec. US jobs report showed 145,000 net new jobs created. But that should be reduced by thousands as 45,000 GM strikers still returning to work & thousands of US 2020 census workers (500,000 total) still being hired. Real Dec. jobs number closer to 100,000

#USstocks

Wonder why US equity mkts just keep powering ahead? Fed keeps flooding mkts with liquidity: $83B in repos 1-9-20 + $46b on 1-8-20. Add wall of money offshore coming to US+record profits+corp. bond finance+ institutional structure & indexing/ETFs=record demand for stocks

#repomarket

Fed injects another $77b into repo market in just its first week of January 2020. Who now believes the fiction any longer that the Fed only targets real GDP, 2% goods inflation (PCE), or employment? Since December 2018 Fed rates clearly targeting financial asset mkts

#repomarket

fter providing $255B to repos in 2019, Fed to continue same vol. thru Jan. & more at least thru April. Dealers now borrowing via Repo Mkt cheaper than from private mkt before Sept. TD Securities: “The repo operations are a band-aid, but the wound isnt’ fully healed”

#Neoliberalism

Read David Baker’s review of my just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Jan. 2020 at https://jackrasmus.com/2020/01/01/book-review-1-the-scourge-of-neoliberalism-us-economic-policy-from-reagan-to-trump-by-dr-jack-rasmus-reviewed-by-david-baker/Now available at 20% discount from my blog and on Amazon and elsewhere Jan. 15.

#USeconomy

US manufacturing index (PMI) contracts for 5th month in December, from 48.1 to 47.2. Worst since June 2009. Watch US real investment continue to fall 4Q19 as well, extending decline to 9 mos. US CEOs #1 fear: recession 2020, up from #3 last yr. Now same as world CEOs

#Repomarket

Fed reports it provided net $255 billion in Repos since Sept. That’s ‘net’. Many more billions rolled over. But no year end crisis emerged. What’s next? Permanent Fed Repo (& reverse Repo) facility, a 2nd channel & the sleuth NEW QE. Fed balance sheet now $4.17T again

#Trump

For my analysis of Trump’s economic policies, their deep historical origins since 1978, successes & failures to date, and future prospects, read my just published book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, now at my blog,

This past weekend a group best identified as ‘left liberal’ intellectuals posted an Open Letter’ to the Green Party charging that party with being responsible for Hillary Clinton’s loss in 2016. They then declared that the Green Party’s 2020 presidential candidate, Howie Hawkins, should not run in 2020, lest the Greens become responsible for getting Trump re-elected again. Everything should be done to ensure that a Democrat Party candidate, whomever that might be, should win in 2020. That includes even Joe Biden, they say. Left liberals like themselves should simply ‘hold their noses’ and vote for Biden, if necessary, if he gets the nomination.

For someone like yours truly who has been around and seen the same strategy of ‘lesser evilism’ repeated for a half century now–with devastating consequences even when the lesser evil (aka Democrats) won the presidency–it is not surprising to read and hear the ‘left liberals’ lament once again!

The coterie signatories of the ‘open letter’ include: Noam Chomsky, Barbara Ehrenreich, Bill Fletcher, Leslie Cagan, Ron Daniels, Kathy Kelly, Norman Solomon, Cynthia Peters and Michael Albert.

Their main argument, calling for Hawkins and the Greens to retreat from the 2020 electoral field (and for the record I am not a Green party member or a member of any other party), is that Hillary lost the swing states of Michigan, Wisconsin, Pennsylvania, etc. to Trump in 2016 but would have won them–and thus the electoral college vote–if only those who voted for the Greens presidential candidate, Jill Stein, in the swing states had not done so but voted instead for Hillary.

It’s really a logically weak argument that one would think such ‘power intellectuals on the left’ would be hesitant to pen their name to it out of concern they would have insulted themselves to their audience. But they have.

The argument fails not only on the facts but on the amateur assumptions on which it also rests.

First, logically it is juvenile in that it assumes that those who voted for the Greens in 2016 in these swing states would have voted for Hillary, had there not been a Green candidate on the ballot. Its hidden assumption is that all of those Green votes would have voted Hillary had Jill Stein not run. That these assumptions are nonsense is self evident.

Clearly those who voted Green did so because they couldn’t stand Hillary, or knew of her record, or understood that a vote for Hillary would have meant a vote for war as well as more of the same failed economic policies of the Bill Clinton-Obama era that created the real conditions that gave rise to Trump.

The Green vote in the swing states would not have gone to Hillary. Those who voted Green would have instead stayed home and not voted or would have written in some other candidate. Most Greens are Green because they’ve come to understand what the Democrats in the era of Neoliberalism really stand for, both in domestic and foreign policy: escalating income inequality, precarious jobs, stagnant wages, unaffordable healthcare, poverty in retirement, rising rents, continuous wars, incessant tax cuts for the rich and their corporations, indenture to student debt, etc. That’s the legacy of both Republican and Democrat regimes since the 1970s–i.e. the past 50 years now.

Apart from weak logic and absurd (not so hidden) assumptions of the Open Letter, there’s the voting evidence as well as Hillary’s own self-destructive arrogance that explain the Democrats loss of the swing states in 2016 and thus the rise of Trump.

First, the Left Liberal authors of the Open Letter in question fail to explain that in the swing states Libertarian and other independent voters cast three and four times the votes for Trump than the Green party cast for its candidate, Dr. Jill Stein, in 2016. SO was it the Greens’ fault? The Libertarians? Other third parties?

No, none of the above. Hillary herself lost the swing states and handed Trump the presidency when she refused to even bother to campaign in states like Michigan, Wisconsin, and barely showed up until the very end when it was already too late. Hillary thought she had the ‘blue collar’ vote in those states wrapped up and arrogantly ignored campaigning there. She ignored them. Took them for granted. And no one votes for someone who arrogantly ignores them and takes them for granted. Even if no Greens voted at all, Hillary would have lost the swing states. But the Open Letter would have us believe it was someone else’s fault, not Hillary’s.

If the Democrat leadership wants to win back swing state votes, it needs someone ‘not Hillary’. But Joe Biden is just another corporate moneybag wing Hillary clone. Not for nothing is he known as ‘bankers friend Joe’ from Delaware (where many big banks have their headquarters and politically own the state). Ditto for the corporate Dems backup candidate, Mike Bloomberg, a lifelong Republican billionaire only recently joined the corporate wing of the Dems.

The fundamental argument of the Left Liberals’ in their Open Letter is not just stop Trump by any means but, their argument behind the argument that there’s a fundamental difference in voting for a Democrat. (Or at least the corollary argument that the Democrat won’t screw us as badly as will the Republican).

But what does the historical evidence show? Have the Corporate Democrats been really any better over the past half century?

American voters, especially today’s Millenials, and now the GenZers, in polls are saying ‘a plague on both houses’ of Democrats and Republicans. They have lost hope of either party making a difference in their lives. They see both as contributing to their deteriorating conditions and near hopeless future, consisting of a lifetime of precarious, part time/temp jobs, with no benefits, working two and sometimes even three jobs to make ends meet, without affordable rents, and no chance of owning a home, living a life of indentured labor paying $1.6 trillion in student loans to the US government (at 6.8% interest, by the way, while bankers pay 1.6%), without affordable health insurance (including the soaring deductibles under Obamacare), unable to afford to even start a family. It’s a bleak prospect, created by both parties over recent decades.

It’s not coincidental that polls show, by well more than 50%, even as high as 70%, that the more than 50 million Millenials and GenZers prefer something called ‘socialism’ (although they’re probably not sure what that means except ‘none of the present’).

If the DLC-Corporate-moneybag wing of the Democrat leadership puts up a Biden or a Bloomberg–(i.e. latter their fallback at the Democrat party convention after no one gets the nomination on the first vote)–even more youth will not vote Democrat. And not just in the swing states. And if the Democrat leaders continue to scuttle the Sanders nomination–which they did in 2016 and show signs now of doing again in 2020–the Dems themselves, not a Green party candidacy, will once again have put Trump in office. It won’t be the Greens.

Of course Republican ‘red state’ control of electoral college votes is being ensured by voter suppression and gerrymandering. That will play a role as well. But here the Democrats’ loss of state legislatures and governorships under Obama, due to his ineffective economic policies in 2010 and after, have enabled that suppression and gerrymandering largely to happen as well. It made possible the Republican capture of two thirds of state legislatures, many of which have been pushing the voter suppression and gerrymandering.

It’s not for nothing that Obama is sometimes referred to by youth as ‘president Jello’–meaning he appears to move left and right but really is stuck in one place.

The Left Liberals’ Open Letter buys the Democrat moneybag wing’s argument that a Joe Biden (or Mike Bloomberg) argument that Corporate Democrat programs and policies are fundamentally better for average voters than would be Trump’s.

They think that the typical working class voter in the swing states, that abandoned Hillary in 2016 (or actually vice-versa), can’t figure out the game. Or that youth voters today can’t either. But they’re wrong.

Voters remember it was Bill Clinton had enabled NAFTA and sent millions of heartland American jobs offshore. It was Clinton that allowed hundreds of thousands of skilled tech workers into the US every year under H1-B/L-1 visas. It was Clinton that gave China preferred trading rights and allowed the shift of US manufacturing supply chains (and millions more good paying jobs) to China. It was Clinton that allowed corporations to ‘check the box’ on their tax forms and thereby not pay taxes on foreign profits. It was Clinton that permitted companies to divert funds from pension plans to pay for their corporations’ share of escalating health care costs. It was Clinton that allowed the deregulation of financial institutions that paved the way for subprime mortgages and the crash of 2008-09. The list is longer still.

And what about the corporate Democrats’ last minute hand picked candidate in 2008, Barack Obama? It was Obama that gave corporations $6 trillion in tax cuts from 2009-16, almost twice that even George W. Bush gave them. It was Obama who agreed to $1.5 trillion in social program spending cuts in 2011-13, thus taking back more than twice his 2009 recovery package of $878 billion. It was Obama who extended Bush’s tax cuts two years, 2010-12, and then made them permanent after 2013, amounting to another $5 trillion tax cuts for business and investors. It was Obama who continued Free Trade deals despite their obvious effects on jobs and wages, and then tried to push through the TPP trade deal. It was Obama who had the Federal Reserve bail out the banks and investors with the tune of at least $4.5 trillion, while he gave a mere $25 billion to bail out just a few of the 14 million who lost their homes. It was Obama who let Hillary start wars in Honduras to save the big landowners there, and then gave Hillary the green light in Libya to start another, creating that failed state there (as her hubby Bill did in Somalia). It was Obama that authorized and set the precedent for assassinations by drones (over 500 times on his watch). It was Obama who supported the US central bank, the Federal Reserve, to continue loaning banks free money, at an interest rate of 0.15% for seven years, long after the banks were bailed out, while charging millions of US students interest of 6.8% on their student loans to the government.

This is the decades long record that the Left Liberals want the US working class, students, and others to vote for again. Their argument is ‘anything but Trump’ will be better. But was it? Will it? Trump might give us war with Iran. But Democrats might with Russia. Both would give us invading Venezuela and continuing to rape South America.

I’m not talking here about Sanders, who the corporate wing will never allow as the Democrat party candidate in 2020. In fact, now that Sanders is rising in the polls and primaries, the corporate wing of the Democrats attack on him has intensified. Not just from Hillary, but from Warren, from the New York Times, and, as we’ll soon see, from all quarters of the Liberal Elite and their media and their grass roots operatives. Observing how Trump captured the Republican party, two years ago the Democrats’ leaders changed the rules of the game on how the party will run its convention this summer. They are prepared to scuttle Sanders by any means necessary.

But our Left Liberal intellectuals say we should vote for their candidate, Joe, if it comes down to that, just to beat Trump. But Trump will eat ‘ole Joe’ alive in a one on one competition, sad to say. They keep saying they want a candidate that can beat Trump. Then push one who cannot. And the Left Liberals want us to vote for Joe and not for a Green or anyone else. That’s the only way to win! It may be the sure way to lose!

Vote for Joe and hold your nose, they say. The Left Liberal intellectuals, who are mostly well ensconced in secure and decent paying academic jobs, won’t be impacted much by Joe’s or Mike’s or Pelosi’s or Shumer’s policies. But the rest who need a change will be.

The Open Letter represents just another form of ‘Liberal’ telling us to vote for another Liberal. Where has that gotten us?

It’s the old ‘shell game’: Republicans make their capitalists filthy rich and ruin the economy in the process. Corporate Democrats come in and make the same even richer while failing to solve the crisis. Their failure allows the Republicans to point to their failed recovery, again to lie to us, and get back in. The process starts all over. It’s been that way for at least 50 years.

And the Left Liberal intellectuals want us to buy into it for another 50?

I’d support Sanders, but he’ll never get the Democrat nomination. Even if he wins the primaries. For this isn’t the Democrat party of FDR any more, as much as Bernie would like it to be. It’s a corporate wing run party since Bill Clinton. And the Left Liberal intellectuals have bought into the corporate wing’s lie yet again, as they always have in a crisis.

One wonders if they’ll vote for Sanders, should he run as an independent after the Democrat leadership denies him the nomination at their convention this summer. But I bet they’d still vote for Joe. (Correct that: Mike).

Jack Rasmus
January 28, 2020

Listen to my two recent Alternative Visions radio shows where I sum up the 10 most important US and global economic events of last year, 2019 in the first post; and in the second the 10 most important US economic and political events for the last decade, 2010-19. Understanding the past helps understand the current juncture, 2020, as well as identifies possibilities for future decade, 2020-29, to come.

    For 2019 SHOW GO TO:

https://www.podbean.com/site/EpisodeDownload/PBCDB794684W6

    For 2010-2019 SHOW GO TO:

https://www.podbean.com/site/EpisodeDownload/PBD0EDD7K4WUG

    SHOW CONTENT ANNOUNCEMENTS FOR BOTH

2019 Alternative Visions Show:

Dr. Rasmus reviews the 10 most important US and global economic events of 2019. Topics include the Fed’s 2016-18 interest rate hike policy reversal and 2019 interest rate cuts; the 2019 Repo market crisis; Trump’s trade wars ( USMCA and China deals); the US 5 mo. manufacturing recession now worsening; the 9 mo. long 2019 contraction in US real investment; the stock market and bond boom of 2019 (and what’s driving it); Trump’s official budget deficit now >$1 trillion & continued tax cutting; and US debt—public and private—surpassing $60 trillion. Globally, the top 10 events include: global trade stagnation, global manufacturing recession, central banks’ shift again to QE, global stock market boom, $15 trillion in negative interest rates, >$10 trillion in global non-performing bank loans, emergence of initial alternatives to the US dominated SWIFT international payments system, Latin American economies’ currency crises, growing financial instability in India, and China’s economy slowing GDP and rising debt and emerging defaults.

2010-2019 Alternative Visions Show

Today’s show delves deeper and looks at the 10 most important US economic and political events of the past decade, since the great recession and financial crash of 2007-09. Topics covered include: Obama’s failed economic recovery program of 2009, Obama’s $6 trillion in extended Bush tax cuts for the rich and business, the $1T austerity program of 2011 cutting social programs, the Federal Reserve Bank’s $5T bailout of the banks and investors via QE and zero interest rates for banks for 7 years, the US debt acceleration for government, households and business, the financial asset market boom and bubbles (stocks, bonds, derivatives, etc.) still underway, $10 trillion in corporate stock buybacks and dividend payouts, the deregulation of the ACA and Dodd-Frank healthcare and bank Acts of 2010, and the rise of digital currencies like Bitcoin, Libra (proposed), and others. On the political side of the past decade, most important events include the Supreme Court passage of Citizens United, Obama’s failure to bail out Main St. in 2010 and Democrat party debacle in the 2010 midterm elections, the shift in the ‘Red’ states and consequent spread of voter suppression, gerrymandering, and red state dominance of the electoral college, Trump’s transformation of the Republican party into a sycophant base and personal following, the cultural decline of America witnessed in rising opioid addiction, gun killings, and suicides, the Muller Report and Democrats outmaneuvered by Trump, and the Impeachment of Trump in 2019.

Listen to my hour interview discussing the major themes and conclusions of my just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020′, with Guns & Butter radio show host, Bonnie Faulkner.

In this part 1 interview podcast, discussion focuses on Neoliberalism in Historical Practice, in contrast to most analyses of Neoliberalism as Idea. Themes include: the 3 major restructurings of US capitalism in the 20th century, with Neoliberalism as the 3rd such restructuring; the origins of Neoliberalism in the material and economic crisis of the 1970s; the evolution and change in Neoliberal policies in US capitalism from the late 1970s through George W Bush; the crisis in the Neoliberal policy regime with the global economic crash of 2008-09; the failure of the Obama administration to fully restore Neoliberalism momentum; how Trump policies have represented an effort to resurrect Neoliberalism in a new, more aggressive and virulent form; and why Trump’s policies to date represent only a partially successful restoration.

A follow up, Part 2 interview with host, Bonnie Faulkner, is forthcoming to be posted next week. Discussion will focus on the growing contradictions within the Neoliberal policy regime in the 21st century; the deep technological and material forces undermining driving the contradictions; and why the 2020s decade will require yet another, fourth restructuring of US capitalism that may fundamentally differ from the Neoliberal experience of the past four decades. Also discussed is how the material forces and Neoliberal policy are behind much of the decline and demise of US democracy form and political restructuring underway in the US since the mid 1990s.

TO LISTEN TO THE PART 1 Interview with Bonnie Faulkner GO TO:

http://gunsandbutter.org/blog/2020/01/23/neoliberalism-from-expansion-to-stagnation

Check out my tweets for December-January, providing a quick look, short analysis, data, and reports on impeachment, China-US trade deal, USMCA, US jobs reports, Trump’s continuing tax cuts 2019, the Fed, Repo Market instability, US stock markets, student debt, Trump’s $1T budget deficit, Brexit, UK election, pensions crisis, and more. Get my tweets immediately when posted by linking to my twitter at @drjackrasmus.

Jan 20
#impeachment

McConnell’s announces rule: witnesses must be deposed first in secret. Then based on what they say, it will take 51 senators to allow witnesses in trial. That way McConnell screens beforehand what witness testimony is allowed–his fallback if he loses witnesses fight

Jan 20
#impeachment

US Constitutional convention of 1787 debates made it clear: executive privilege is not absolute. Need of evidence takes precedence over executive privilege. Founders then left out of actual Constitution all reference to executive privilege

Jan 19
#impeachment

Republicans’ main argument: House should not ask Senate to conduct trial with insufficient evidence House itself didn’t gather. But insufficient evidence due to Trump refusing to allow witnesses & docs to appear in House hearings. Transparent rhetoric. Circular logic

Jan 18
#Fed

announces will issue new 20 yr. T-bonds. Why? 3 reasons: 1)raise funds to cover>$1 trillion annual US budget deficits in 2020; 2)need for more liquidity for Repo mkt injections; 3)Fed can’t raise rates due to Trump threats. Thus 20yr T bonds alternative. Fed policy a mess

Jan 16
#ChinaTradeDeal

For my more detailed summary and analysis of the just signed US-China Phase 1 Trade Deal, check out my latest blog post at jackrasmus.com

Jan 16
#Chinatradedeal

Trump says China has agreed to buy $40b farm goods in 2020. Fact: China’s Liu He says will buy “as consumer needs and market conditions determine” (read: as Trump reduces tariffs).

Jan 16
#ChinaTradeDeal

The spin is in, exaggerating China trade deal. After 22 mos. & $500b tariffs, US deficit with China down only $56B (Per WSJ today). Per Fed, tariffs cost US business $42B & reduced US households real spending by $806. China still won’t admit to buy $100B in 2020

Jan 15
#ChinaTradeDeal

Phase 1 Mini trade deal today. But ‘mini’ stands for ‘minimum’ gained not ‘small’. Trump keeps $370B tariffs. Says Phase 2 starts soon. China says no plans to start phase 2. China-US trade war now over; US-China tech war by other means than tariffs now escalates

Jan 15
#Yuan

Trump declares China no longer a currency manipulator. A phony claim from the start. China has intervened in mkts to keep Yuan in stable range for years. Rising US $ has stoked global currency devaluations, not Yuan. But Trump claims trade deal cause of stable Yuan

Jan 14
#budgetdeficit

It’s official: US deficit 2019 at $1.02 trillion. (Add another $80-$100B if counting military ‘black budget’ on new weapons that doesn’t show up in print anywhere). Trump’s 2 yrs budget increases>20%/yr on ave. each yr. Causes? tax cuts (60%)+military-social prgms

Jan 12
#jobsreport

Friday’s Dec. US jobs report showed 145,000 net new jobs created. But that should be reduced by thousands as 45,000 GM strikers still returning to work & thousands of US 2020 census workers (500,000 total) still being hired. Real Dec. jobs number closer to 100,000

Jan 10
#USstocks

Wonder why US equity mkts just keep powering ahead? Fed keeps flooding mkts with liquidity: $83B in repos 1-9-20 + $46b on 1-8-20. Add wall of money offshore coming to US+record profits+corp. bond finance+ institutional structure & indexing/ETFs=record demand for stocks

Jan 7
#repomarket

Fed injects another $77b into repo market in just its first week of January 2020. Who now believes the fiction any longer that the Fed only targets real GDP, 2% goods inflation (PCE), or employment? Since December 2018 Fed rates clearly targeting financial asset mkts

Jan 6
#repomarket

after providing $255B to repos in 2019, Fed to continue same vol. thru Jan. & more at least thru April. Dealers now borrowing via Repo Mkt cheaper than from private mkt before Sept. TD Securities: “The repo operations are a band-aid, but the wound isnt’ fully healed”

Jan 5
#Neoliberalism

Read David Baker’s review of my just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Jan. 2020 at https://jackrasmus.com/2020/01/01/book-review-1-the-scourge-of-neoliberalism-us-economic-policy-from-reagan-to-trump-by-dr-jack-rasmus-reviewed-by-david-baker/

Jan 3
#USeconomy

US manufacturing index (PMI) contracts for 5th month in December, from 48.1 to 47.2. Worst since June 2009. Watch US real investment continue to fall 4Q19 as well, extending decline to 9 mos. US CEOs #1 fear: recession 2020, up from #3 last yr. Now same as world CEOs

Jan 2
#Repomarket

Fed reports it provided net $255 billion in Repos since Sept. That’s ‘net’. Many more billions rolled over. But no year end crisis emerged. What’s next? Permanent Fed Repo (& reverse Repo) facility, a 2nd channel & the sleuth NEW QE. Fed balance sheet now $4.17T again

Jan 1
#Trump

For my analysis of Trump’s economic policies, their deep historical origins since 1978, successes & failures to date, and future prospects, read my just published book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, now at my blog,

Dec 31, 2019
#Taxcuts

NY Times is 2 yrs too late. In its 12-31-19 feature story admits Trump’s 2018 law cut taxes $5.5T for corps & wealthy. This writer estimated $4.5T at the time (see my blog http://jackrasmus.com). NYT & mainstream media said $1.5T for 2 yrs. Now 2 yrs late admit $5.5T

Dec 30, 2019
#S&P500

27% gain in 2018 refers to S&P profits. Prices were up about same for 9 months until major stock correction in 4Q that reduced stock prices by more than 20%. That loss was gained back immediately in 1Q19.

Dec 30, 2019
#stocks #2:

More reason for record S&P up 30% (& why US real asset investment & productivity now negative): Corp bond debt 2019>$1T and now $10T total. Most goes to stocks & fin. mkts. Gap real v. financial investment 2010 was $60B. Gap 2018 now $540B. Financial > real investment

Dec 30, 2019
#stocks

S&P500

up 30% 2019; after 27% 2018. Why: 1)$1.3 trillion stock buybacks+dividend payouts 2)Fed lower rates 3)US multinational corps record profit repatriation 4)foreign investors sending Wall of Money to US as recessions & global econ slow offshore 5)Fed pumps $ into Repos

Dec 26, 2019
#studentdebt

Now $1.5 trillion. US Govt charges 6.8% interest while banks charge half that to many businesses. Why is govt ripping off students? Sen. Rand Paul proposes 401ks withdrawal tax free to pay student debt. But more than 1/2 households have none & less than $400 savings.

Dec 24, 2019
#NorthKorea

China, Japan, So. Korea meet & ask Trump to restart discussions with Kim. Trump’s Neocon advisors opposed after scuttling last Trump-Kim meet. Don’t want new Trump-Kim meeting. Meanwhile, China playing mediator role re. So. Korea-Japan. What else are the 3 discussing?

Dec 22, 2019
#stockmarkets

Per Reuters, global stock markets’ value in 2019 rose by $10 trillion. US up 30%. Japan, Europe, China 20%. Wage incomes flat to declining for 90%. Income inequality accelerating at record pace. So why all the demonstrating from Hong Kong to France to So. America?

Dec 22, 2019
#tariffs

3 wks ago Trump announced tariffs on Brazil steel. Now he announces their repeal. After 20 mos. of 25% steel tariffs, higher prices, & $1B profits last yr, US steel buying competitors, not expanding output. Cuts pensions 40% & now jobs as USS shuts down mills. Thanks DJT

Dec 21, 2019
#PensionsCrisis

Congress passes SECURE ACT to annuitize 401ks (& let Insurance corps charge 3.6% fees instead of current 401k fees ave. of 0.25%). USA facing retirement system crisis: >half US popul. have no savings; retirees 401k ave. balance only $50k; real pensions collapsing

Dec 21, 2019
#USsanctions

US sanctions EU-Russia gas pipeline Co. Allseas. Why? Sen. Ted Cruz inserts sanctions rider in new US Defense bill for Texas oil buddies. Wants EU stop buying cheaper Russia gas & buy Texas gas now in excess supply glut. Germany won’t agree, so US sanctions Allseas

Dec 19, 2019
#impeachment

An addendum: Pelosi won’t send impeach articles to Senate, if McConnell refuses to allow witnesses in trial. Pelosi: Founding fathers feared a rogue president thus impeachment power. But McConnell also a ‘rogue Senate leader’. Not what Founders thought would happen.

Dec 19, 2019
#impeachment

Pelosi adopts McConnell stonewall strategy: refuse to send impeach articles to Senate unless McConnell lets witnesses testify. Leave impeachment hanging over Trump with new charges possible in 2020. US Constitut. crisis spreads, from Trump v. House to House v. Senate

Dec 18, 2019
#Pensions

French planning general strike to prevent govt raising retirement age. While in USA ave. 401k balance only $18k as real pensions disappear & $4T household savings from interest lost since 2009 due to Fed low rates. Fastest labor force growth=over 65yrs returning to work

Dec 18, 2019
#taxcuts

With US budget deficit set to exceed $1 trillion ($209b in November alone), Congress just voted to give special interests another $427 billion cut: i.e. brewers, winemakers, racehorse owners, health insurers, parking lot owners, etc. Add that to $4T in 2017-18 tax cuts

Dec 17, 2019
#USMCA

US says labor inspectors at Mexico plants are attaches who won’t inspect. Per Mexico’s demand, labor panels composed of US & Mexico reps come first. If panel can’t agree first, no inspector is sent to plant. It’s all a cover up to allow Dems to say they got a better deal

Dec 16, 2019
#USMCA

Are Trump & Democrats lying about final USMCA trade deal? US claims inspectors have access to Mexico factories; Mexico says no. Access rule is in an annex (side letter) not main doc. Was it ever signed by both? Did US make it up so Trump could claim deal? How much is real?

Dec 13, 2019
#Brexit

Check out my blog, http://jackrasmus.com, for my more detailed analysis of why Johnson & conservatives won overwhelming victory over Corbyn & Labour. Short run strategic-tactic reasons but also longer run reasons: rise of nationalism & decline of Social Democracy in EU

Dec 10, 2019
#tradewar

As I predicted weeks ago, US & Trump will put off Dec. 15 additional tariffs on China, per Wall St. Journal today. Which means China won’t buy more US farm goods unless US agrees to remove existing tariffs. Closer to the 2020 election, weaker Trump’s position becomes.

Dec 9, 2019
#Repomarket

Bus. media continues red flag on Repo Mkt. Bank of International Settlements (BIS), bank of central banks, warns again but no answer why Repos still in trouble: tech cause, Fed debt financing, big 4 banks, FX swaps, hedgies arbitraging derivatives? BIS warns of more trouble

Dec 8, 2019
#USjobs

For my take on the veracity of the US recent November jobs numbers, check out my just posted blog piece ‘On Those Questionable Jobs Numbers…Again!’

Dec 6, 2019
#USjobs

Official US jobs grow by 266,000 in Nov. Private sources (ADP) had estimated 67,000. Never in 50 yrs has the gap in forecast been so great. What’s going on? US reduced 2018 numbers by 500,000 earlier this yr; says another 500,000 reduction coming in Feb. Why so big adjust?

Dec 5, 2019
#impeachment For my analysis in depth of the forthcoming articles of impeachment of Trump in historical perspective, in relation to the continuing atrophy of Democracy in America, read my latest blog piece at my blog,

Dec 5, 2019
#USjobs

The largest private payroll processor, ADP, forecasts only 67,000 new jobs created in November. USDL/BLS official figures likely to be higher, as 50,000 GM workers return to work. But those 50,000 are not ‘new jobs’ created. Real number will be what BLS reports minus 50,000

Dec 4, 2019
#USjobs

Watch for possible shocking jobs report this friday. With US manuf. & construction contracting, and services slowing, & hiring of census workers & part time warehouse help now over, jobs may come in at around 90,000, as jobs data join other contracting econ indicators

Dec 4, 2019
#taxcuts

Trump’s Treasury Dept. (run by ex-Goldman banker Mnuchin) is changing rules taxing US multinational corps, cutting another $112B from minimum tax + $150B more allowing taxable US profits diverted to offshore subsidiaries where not taxed. All this after $4T 2018 tax cuts

Dec 3, 2019
#Brazil/Argentina.

Trump claims US tariffs needed cuz Brazil/Argentina manipulating their currencies. Wrong. Peso/real devaluing because $US rising due to US interest rates + offshore money flowing into US mkts. That due to Latin America recessions, provoked by Trump trade policy

Dec 3, 2019
#tradewar

Trump signals China mini-deal may not happen. Source of problem: US won’t agree to lower tariffs but wants China to buy more farm goods nonetheless. Trump ratchets up trade war elsewhere as cover: Brazil-Argentina, Europe farm goods, intensifying attacks on China corps

Dec 2, 2019
#Tariffwars

Trump reinstates tariffs on Brazil/Argentina steel. Why? USMCA trade deal frozen + China mini deal in trouble. So open trade wars elsewhere to divert attention from failing trade policy. Besides, how dare Brazil-Argentina dare cut deals on soybeans & wheat with China!

Dec 2, 2019
#Democrats

Wave of Bloomberg TV ads now hitting all sections of country as he launches his presidential bid. Details suggest he’s more ‘left’ than Warren and a flaming NY progressive. But billionaires say what they think folks want to hear, then deliver for the rich (aka Donald)

By
Dr. Jack Rasmus
Copyright 1-16-20

With the announcement today, January 16, 2020 of the signing of the US-China Phase 1 ‘mini’ trade deal, and the US Senate’s simultaneous ratification of the USMCA ‘NAFTA 2.0’ trade agreement, Trump’s so-called ‘trade wars’ are at an end. In election year 2020 nothing of additional significance will be achieved by Trump with regard to restructure US and global trade relations. While Trump himself will make further threats and claims, likely aimed at the Europeans, no country will agree to any changes this year when the possibility exists of Trump leaving the presidency next November 2020. To repeat once again, the Trump trade wars are over. As the comedian once said: ‘what you see is what you get, baby’.

And what do we see in the much-hyped and grossly exaggerated Phase 1 US-China trade deal?

China Phase 1 Deal: A Feeble Deal on Trade

Behind the typical Trump bombast, hyperbole, and outright lies, the China Phase 1 deal was perhaps best summed up in the front page of the Wall St. Journal on January 13, 2020, by the Ben Steil, Director for International Economics for the Council on Foreign Relations (i.e. the major think tank for the US capitalist class): “China is set to do little more than restore agriculture purchases and offer some nice words on financial services and intellectual property…Trump could have had that two years ago without the tariff damage”.

What’s really in the Phase 1 deal? What has Trump actually achieved through nearly two years of negotiations, tariffs, and threats and intimidation in the nearly two year long China trade negotiations? And what have been the consequent negative impacts on US households, businesses, farmers, and the US and global economy?

(51% Majority Ownership)

First, in Phase 1 there’s the claim that US business, especially US bankers, now have more access to China markets. They can have 51% ownership control of their operations in China. Trump claims he achieved that. But it’s just another Trump lie. The fact is China began implementing the 51% financial ownership rule back in 2018. European banks have already set up full ownership operations there. So has Goldman-Sachs, the premier US investment (shadow) bank. Trump didn’t get anything there China already offered and gave to others.

(Currency Manipulation)

Trump says the deal means China has agreed to no longer ‘manipulate’ its currency. Trump this past week then officially removed the US declaration that China was a currency manipulator. The importance of currency manipulation is that Trump wants to block China’s potential to devalue its currency, the Yuan, which would offset any US tariffs easily. But China has not been a currency manipulator at all. In fact, it has been entering global money markets to buy and sell its currency to ensure that it remains within a stable range of exchange to the US dollar no greater than 7.1 to the $. If anything China has committed significant resources to ensure the Yuan does not devalue. That’s the opposite of a currency manipulation to devalue and offset US tariffs. China could have easily done so throughout the last 22 months of trade negotiations with the US, but it didn’t. The claim of China as currency manipulator has been a lie from the beginning, used by Trump (and others before) to try to label China as the problem with the American media and public. It’s worth noting as well that while China has spent billions to ensure its currency does not devalue or rise, the US dollar has been allowed to rise significantly the past two years. That has caused other global currencies, especially those of emerging market economies like Latin America, to devalue dramatically and plunge those economies into recession. The US has been the great currency manipulator and destabilizer—not China.

(IP and Tech Transfer)

Trump also claims the China Phase 1 deal means new limits on China forcing technology transfer of US companies doing business in China and on intellectual property. (Protecting intellectual property mostly means for the US that US pharma companies will enjoy better patent protection—i.e. prevent competition).
But whether IP or tech transfer, there have been no details released by the Trump administration as to how this is so. In fact, as if January 15, 2020 the text of the Phase 1 deal is still not available in either English or Chinese, according to the New York Times.

All we’ve got in the Phase 1 deal, according to those who have had access to date, is China’s promise to punish China firms that obtain sensitive tech information via acquisitions; or stop requiring that foreign companies turn over technology to China as a condition of doing business in joint ventures in China.
But certainly in any joint venture tech information can be obtained by means other than formally turning it over to China government officials. And doesn’t a company that acquires another have legal right to all its product information? According to a Derek Scissors of the American Enterprise Institute, in the Phase 1 deal the Chinese “have committed to continue doing the same thing they have always been doing”. What China refused to agree to is to refrain from engaging in cybertheft of companies—since of course the US refused to agree to the same.
So forget about any big breakthrough in the Phase 1 deal associated with IP and/or tech transfer as well.

($100B in US Farm Goods Purchases?)

Trump’s big claim about Phase 1 is that China has agreed to buy $200b more in goods over the next two years, $100b a year roughly divided between $50b for farm and $50b nonfarm goods and services. But was this a new gain from negotiations and tariff intimidation? And will it be actually realized over the next two years? And is it really $50b a year more in farm purchases?

First, China had already offered in 2018 to increase its purchases of US goods and services by $1 trillion over the next five years. So it already put that number, $200b a year, on the negotiating table. But that was two years ago.

But most economists today doubt that China will buy anything near $50b a year in additional farm products from the US. According to the January 15, 2020 New York Times, those who have actually seen the agreement indicate China has actually agreed to buy only $16b more a year over two years. The $50b claim by Trump thus quickly lowered to $40B. Furthermore, the $40B was not new additional purchases.

That $40b is comprised of $24B/yr in farm goods bought by China in 2017, plus the $16B more commitment per yr. for 2020 and 2021. Farm purchases fell in 2018 and 2019. So the $32B just mostly makes up for the shortfall the last two years. At one point in spring 2019 China farm purchases were as low as $7B a year.

So the $16B more per yr. represents a restoration of what China was buying in 2017, adjusted to make for the declines while the trade war was underway, and it all expires after just two years. So Trump’s boast of $100B in farm goods reduces to $32B in fact, which mostly makes up for reduced purchases the past two years, and returns to the pre-trade war 2017 level of $24B! Nearly two years of trade war to return to the status quo ante of 2017!

Moreover, trade experts are also saying that even the $16b more in farm good purchases will be difficult to achieve. During the last two years China has diverted its purchases of soybeans and other farm goods to Brazil and other countries. And China has said the Phase 1 will not mean any change in its prior contracts with other countries. It won’t cancel Brazil in order to fulfill US commitments under Phase 1. So where’s the big surge in China purchases of US farm goods? It’s more like a restoration, with no commitment to increase after two years. And it leaves US farmers with a lot of uncertainty as to future sales plus not enough time, and thus greater risk, to invest in expanded production to meet China’s purchases.

Furthermore, China sees even Phase 1 farm purchases as a goal, not a firm absolute commitment. Its chief trade negotiator, Liu He, has been quoted as saying purchases will occur “according to the needs of the (Chinese) consumer and as market conditions determine”. Think of the latter phrase “as market conditions determine” as a code word that means China may purchase more depending on whether Trump reduces US tariffs more in tandem.

(Trump $370B Tariffs Remain)

Trump has declared he won’t reduce tariffs on China any further. It now stands as 7.5% on $120B and another 25% on $250B. Trump says he needs to retain the tariffs in order to ensure China abides by the other terms of the agreement. But he can’t have his cake and eat it—i.e. China purchases $100B more a year but Trump keeps $370B. China has made it clear, more purchases are linked to lower tariffs.

So long as Trump’s $370B tariffs remain, it will become increasingly clear that China intends to purchase far less than the $100B a year. It just won’t happen regardless what Phase 1 says. Farm purchases in particular won’t come anything near to even the $32B more ($16B/yr), reported January 15 in the New York Times, let alone to Trump’s inflated claim of $40-$50B.

Trump may believe he needs the continued tariffs to enforce the agreement’s terms by China. But China’s quid pro quo enforcement ‘tool’ is to simply slow or delay its official purchases “as consumer demand and market conditions” dictate. Its tariffs vs. not fulfilling purchase commitments due to ‘market conditions’.

(Manufacturing & Services)

In addition to the $32B more in farm purchases, reportedly Phase 1 calls for another $78B in manufacturing and $38B services purchases over next two years as part of the Phase 1 deal as well. But that too might not be realized. Most of China’s manufacturing purchases is for Boeing planes, now plagued with shipment cancellations worldwide due to the 737max; and the $38B in services purchases involve mostly Chinese purchase of US education services and tourism, both of which are being sharply cut back by Trump as the US policy now is to discourage Chinese students and research academics coming to the US, and as China tourism to the US slows as relations between the two countries continue to deteriorate.

US auto exports to China will not be affected much either. There’s a major slump in China auto sales, China is committed to rapidly building up its own auto industry, and US companies are racing to move production to China anyway, all of which would reduce the need for China to import autos from the US over the next two years.

Finally, there’s the commitment of China to buy $27B a year more in US energy products, oil and natural gas. The US benefits having an outlet for its rising glut of natural gas and oil, which it is betting on exporting in order to keep supply and prices high in the US market. But should a global recession occur in 2020 or after, China ‘market needs’ and demand for US oil and gas will certainly decline and the commitment to buy in this area will likely fall far short of the annual $27B as well.

(Nextgen Tech War)

Behind the trade was with China has always been the more important tech war between the two countries. The tech war is not be confused with IP or even with tech transfer by US companies in China. It’s much bigger. It’s about next generation technologies like Artificial Intelligence, Cybersecurity, and 5G wireless. These are the technologies of the industries of the next decade. They are also the military technologies of the future. Which country dominates these technologies achieves military hegemony by 2030. Both China and the US know it. And the ‘war’ between them has been occurring behind the cover of tariffs and trade war.
But with the Phase 1 trade deal it is clear that the tech war has been now decoupled from the trade war. It will be (and has continued to be) conducted by other means than tariffs. The US will continue to go after its allies with sanctions should they adopt China tech in these areas. The offensive against the giant China telecom company, Huawei, now the world leader in 5G, is the harbinger of a much greater, wider, and longer conflict between the US and China over nextgen tech.

The China-US tariff/trade war may be over, but the China-US tech war has just begun and will now accelerate.

Trump believes he can engage China over tech in Phase 2 negotiations. But Phase 2 is a fiction. It will not happen. Even if the two countries’ representatives meet it will be a fruitless discussion. Neither will ever come to an agreement. China will never trade next gen technology for tariff reduction. It won’t trade tech for anything the US can offer.

Artificially Intelligence and 5G are key to the development and functioning of next generation hypersonic missiles and hyper-smart torpedoes; for future military drone technology and targeting; and for future battlefield communication and coordination between machine and human. So far the US is ahead in AI but behind in 5G. It has no latter product of its own. Globally, its Huawei and Europe’s Ericsson that are leaders in the product development. The US once premier tech company, AT&T, is now preoccupied with investing in entertainment software and content, driven by its shadow bankers demanding more profits sooner than later. The US is thus forced to try to stop Huawei instead of out-competing it in tech development of 5G.

(Subsidizing State Owned Enterprises)

Not in the Phase 1 deal is the Trump-US complaint that China continues to subsidize its government owned enterprises by enabling low priced costs and inputs to production paid for by China government. But the US engages in massive subsidization of US companies worldwide as well. It does so by other means. Consider the massive $5.5 trillion tax cut of 2018 for corporations, businesses and investors. The US subsidizes and aids US corporate competitiveness worldwide by tax relief. It also subsidizes the cost of financing exports with the US Export-Import bank. It provides business virtually free R&D from US taxpayer financed technology developed by DARPA, the NSA, National Institutes of Health, and many other means. So it’s really a joke for the US to charge China is engaging in uncompetitive subsidization of its government owned companies.

The Cost of China-US Trade War

Any proper assessment of the Phase 1 deal requires consideration not only of what has been gained (or not gained) but also what has been the cost of the 22 month trade war to the US economy.

Has the trade war actually reduced the US trade deficit—with China and with the rest of the world? Not really.

The deficit in goods with China was just under $350b when Trump assumed office, according to the US Census Bureau. It surged to about $410B by end of 2018. It has since come down to about $350B again. So Trump has merely reduced the trade deficit with China equal to the amount of the deficit increase he oversaw in 2017-18! With the Phase 1 deal the deficit will almost certainly begin to rise once again.

On a global scale, as the deficit with China ballooned and then leveled off at pre-Trump levels, under Trump the US goods trade deficit with the rest of the world continued to accelerate rapidly under Trump and still continues to do so. From roughly $375B when Trump entered office in January 2017, the US deficit has surged beyond $500B by end of 2019. So much for Trump’s trade wars apart from China!

What was the cost of reducing the surge in the China trade deficit he created?
The US National Bureau of Economic Research estimated that Trump’s China tariffs were fully passed on to US companies in all industries except steel, where half were passed on. It cost US businesses $42 billion. And they passed most of it on to consumers and US households.

A study by the Federal Reserve Bank of New York (authors Weinstein and Redding), “found that approximately 100 percent of import taxes fell on American buyers” (New York Times, January 7, 2020, p. B4).

US farmers took a big hit. Trump provided $28B to the farm sector in new subsidies, the cost of which added to the US budget deficit (now more than $1 trillion) and rising national debt (now more than $23 trillion). Most of the subsidy went to large farmers and agribusiness, however. Farm income contracted throughout 2018-19. Farm loan delinquency rates have now risen to a six year high, per the FDIC, and Chapter 12 farm bankruptcy filings are highest since 2012.

The trade war devastated US business confidence with the result that business investment in the US contracted throughout 2019.

US consumer households experienced a reduction of $806 dollars in real income spending due to the tariffs.

And estimates are that Trump’s trade wars have reduced global investment and GDP by as much as $700 billion.

Concluding Remarks

Trump administration spokespersons—Larry Kudlow Trump’s Economic Advisor and Steve Mnuchin, Treasury Secretary—are, per latest report, peddling the prediction that the US economy will grow by up to 0.75% more in GDP terms in 2020 as a result of the Phase 1 China deal. But that is based on the absurd assumption that China will buy $100B-$150B more in US imports in 2020—a misrepresentation which, as was explained above, is as ridiculous as it is false.
No doubt the media will continue to spin the exaggerations, although nearly all economists’ estimates of the Phase 1 deal conclude ‘there’s no there there’, at best.

As minimal are the gains from the Phase 1 agreement with China, Trump’s ‘other’ trade wars and deals, including the also much heralded USMCA (NAFTA 2.0), produce even less in net terms. Whether the US-South Korea free trade agreement, the Trump tariffs on steel and aluminum worldwide, Trump’s recent tariffs on European wine and spirits, or his verbal understandings with Japan on trade—all represent even less achieved than the minimal recent agreement with China.

Dr. Jack Rasmus
January 16, 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, where chapter 8 addresses the origins and evolution of Trump’s trade wars in further detail. The book is now available at jackrasmus.com, Clarity Press, Amazon, and other locations. Dr. Rasmus hosts the Alternative Visions radio show on the Progressive Radio Network, blogs at jackrasmus.com, and tweets at @drjackrasmus. His website is http://kyklosproductions.com