Are world crude oil prices rising now due to lack of supply? Excess demand? Or is it something to do with professional financial speculators? Oil is not just a commodity; it’s a financial security. Its price tends to follow the rise of another financial asset–the US dollar. (Which rises in response to US interest rates and central bank policy). And the last time global oil prices began to escalate was 2008–on the eve of the last banking crash. Is history about to repeat itself–in whole or part? Listen to my short interview with Loud and Clear radio on global oil price movements and the broader significance of the shift to financial asset investing as a key characteristic of 21st century global capitalism

GO TO: https://www.spreaker.com/user/radiosputnik/opec-to-hold-summit-as-debate-over-globa


Listen to my analysis of what’s behind the Trump vs. Congress spat over China’s ZTE corp. allowed to do business in the US. Trump’s concession to China in trade negotiations vs. US intelligence-pentagon interest group’s attempt to reassert its role in US-China trade negotiations through its friends in US Senate.

To listen to the brief interview with ‘Loud and Clear’ radio on June 14, go to:


Emerging market economies are heading for an economic implosion. From South America to South Asia conditions are deteriorating rapidly and heading for an even more severe economic crisis in which many are already mired. At the head of this list is Brazil and Argentina. Others increasingly fragile, however, include Turkey, Indonesia, Malaysia, and even India, which has covered up its weak economic condition, and massive non-performing bank loan problem, by manipulating its GDP to falsely exaggerate its growth rate.

Business pundits, and even some commentators on the ‘left’, argue that emerging market economies, of which all the above are key members, now account for more than half of the world’s GDP. This suggests their vulnerability to US and G7 economies is less than it has been in the past. The so-called advanced economies–i.e. the USA, Japan, Canada, UK, France, Germany, Italy (the ‘G7–are increasingly irrelevant. But global GDP numbers are manipulated everywhere to show a stronger growth than actually has been occurring. Overnight, economies like India double their GDP numbers by redefining categories that compose their Gross Domestic Product, GDP, by manipulating price estimations that boost real GDP and by introducing statistical assumptions in their estimation of growth that are gross misrepresentations. GDP is thus not a good indicator of the condition of their economies. Even so, global GDP itself is now slowing this past year, as global trade also slows (even before USA precipitated ‘trade wars’ take effect). But this idea of declining vulnerability of economies like Brazil and Argentina is incorrect.

GDP numbers obscure the still significant vulnerability of emerging market economies (EMEs) to the advanced economies and their policy actions, especially the USA. This is true for even the largest EME’s like Brazil, Argentina, Turkey, Indonesia, India and others. More symptomatic economic indicators of the growing crisis in EMEs are their currency declines, money capital outflows, rising domestic interest rates, and rising import cost inflation.

USA Levers of Economic Power: Currency, Credit Access & Central Bank Rates

While the EME’s share of global GDP has risen in recent decades, the world economy is nevertheless still largely manipulated by the USA and other G7 economies. That manipulation is exercised by the USA in particular by several means: through its dominant currency, the US dollar; by control of the flow of much of global credit (and debt) by US banks and US shadow banks through capital markets; and by the influence of the US central bank, the Federal Reserve, over US interest rates and, in turn, rates by other central banks and banks elsewhere.

Recessions and crises in the EMEs are largely the consequence of USA policy shifts involving US interest rates, US dollar appreciation or depreciation, global crude oil price speculation that follow the dollar, or lending by US banks and US shadow banks (i.e. investment banks, hedge funds, private equity firms, etc.,) in what are called ‘capital (corporate debt) markets’ that function as alternative sources of credit from traditional bank loans.

In 2017 all these US policy levers began to shift to the disadvantage of emerging markets. That shift is accelerating in 2018. The result has been ‘made in the USA’ deepening recessions in the EMEs, collapse of their currencies, capital outflow from EMEs back to the USA and G7, accelerating EME domestic inflation, and increasing political unrest and instability.

Therefore, not GDP, but a more telling initial indicator of the growing fragility in emerging economies is the recent freefall of their currencies in relation to the US dollar, Euros, and Japanese Yen, as well as the capital flight from these countries that occurs in tandem with the collapse of their currencies. These in turn become the key drivers of EME domestic recession, mass unemployment, inflation, goods shortages, and growing political instability.

And at the head of the list of economies with currency instability today in South America are Brazil, Argentina, and Venezuela. But the same process is emerging rapidly elsewhere in the EMEs, in Turkey, Indonesia. Malaysia, and perhaps next even India. But no region of the global economy more strongly reflects the crisis today than Brazil and Argentina.

Destabilizing Argentina and Brazil

Argentina’s currency, the Peso, has fallen around 25% since the beginning of 2018. Turkey, Brazil and others are also falling at double digit rates in recent months. With the collapse of their currency, the value of investments held by capitalists in these countries–foreign and domestic alike–also fall in value. To protect the value of investors’ assets from collapsing with their currency (i.e. stocks, bonds, real estate, foreign currency holdings, derivatives, etc.) their governments (legislatures and central banks) respond by raising interest rates in their own economies, in the desperate attempt to stem the capital outflow set off by currency collapse. Investors’ investment values are propped up by raising domestic interest rates. But the the contradiction is that higher interest rates depress the real economy, throwing it into recession; or if recession already exists, into yet deeper recession and even depression. But investors don’t care about recession; they care foremost about protecting the value of their investments. Thus the pro-business, pro-investor EME governments opt for higher rates and accept mass unemployment as a cost.

EME currency collapse has another economic consequence. Since most of these countries import much of their basic goods (food, medical supplies, oil, raw materials for manufacturing, consumer goods, etc.), the collapsing currencies also raise inflation on these goods due to rising import costs. Thus stagnating and then declining real economy and mass unemployment is accompanied by rising prices. More workers are laid off because of the slowing economy, while the prices they must pay for basic goods and services simultaneously rise as well.

Argentina and Brazil are especially exposed to this scenario of US rising interest rates and dollar that precipitates collapse of their currencies, capital flight, rate hikes, mass unemployment and inflation.
Since the 2008 global crash they have borrowed heavily–especially in US dollars. The massive trillions of dollars of debt they accumulated since 2008 must be repaid in dollars. To get dollars they must export and sell more goods. But the slowing of global trade and other developments in China, Europe and China has reduced their ability to export more. They can’t raise sufficient dollars with which to pay their US dollar denominated debt (to US banks and shadow banks). In order to continue to pay their foreign debt principal and interest coming due (to US and G7 bankers) they are forced to borrow dollars from the International Monetary Fund, IMF–another key economic institution controlled by the US and G7.

Argentina recently borrowed another $50 billion from the IMF–to pay its debt to USA and G7 bankers. However, this doesn’t solve its problem. It only shifts debt payments from private bankers to the the IMF. The IMF never ‘bails out’ countries; it always bails out bankers that have loaned to these countries when the latter cannot make payments to their bankers (and bond investors, etc.).

While Argentina has turned to the IMF to temporarily buy time as its crisis deepens, Brazil has gone another route to deal with its ‘made in the USA’ crisis that has been ripening since 2015. It has borrowed even more from US bankers. And it has chosen to raise its interest rates to astronomical levels, in the vain hope of propping up the value of its currency will stem its capital outflow (and encourage continuing capital inflow to Brazil from USA and G7 investors as well).

Brazil’s central bank interest rate is currently around 40%–up from around 14% just a few years ago. That means businesses or consumers have to pay 40% on any loan or debt their incur to stay in business or maintain consumption levels. Interest rates that high virtually shut down wide areas of an economy. And that’s what’s been happening in Brazil. Mass unemployment has followed. As has accelerating inflation and cost of living as Brazil’s currency, the Real, has collapsed in relation to the dollar. Understandably, political unrest follows as jobless grows and prices for basic goods accelerate. That too is now underway.

Brazil’s crisis began in 2015. At that time its central bank interest rates were, as noted, around 14%. Since 2015 they have risen to the 40%. More than half of that acceleration has occurred in just the past year, and especially in 2018. But those 40% rates, and the unemployment and inflation, are the result currency collapse and capital flight–which in turn is a process that has its origins in the USA and rising US interest rates and dollar appreciation.

The error of the Brazilian Workers Party while still in government, led by Lula and then Rouseff, was to allow Brazil’s central bank to steadily raise interest rates since 2015 to current levels. Central banks are always controlled by the private bankers. And private bankers in EMEs like Brazil are dominated by US bankers and investors. And EME central bankers are in turn controlled by their domestic banking interests.
Furthermore, capitalists everywhere have cleverly engineered their central bank institutions to ensure the central banks are shielded from popular national legislatures, just in case popular democratic movements (like the Workers Party) democratically assume power over national governments. Political power remains shielded from economic power. Capitalists have many ways to sabotage democratically elected governments. Central bank interest rates are but one tool.

The Political Strategy Element

The Workers Party in Brazil should therefore have democratized (nationalized in the public interest and fundamentally restructured) the Brazilian central bank back in 2015-16, by opening its decision making process to include democratic forces and representatives. (For my view of how central banks can, and must, be democratized see the concluding chapter to my book, ‘Central Bankers at the End of Their Ropes’, Clarity Press, 2017).

In Argentina, the Kirchner government for years refused to repay the US hedge funds their billions of dollars in claims from the earlier debt crisis engineered by them. What it should have done was to pay the hedge funds in special issued and printed Argentine pesos, instead of dollars, and told them to get lost, they’ve been paid. Instead it fought them in global courts dominated by the US and G7.

As the Brazilian economy began to weaken after 2016, and conditions worsen, the USA, allied with domestic Brazil capitalists and pro-Business politicians in Brazil, developed a political strategy to accompany the US interest rate-dollar policies designed to undermine Brazil’s currency and destabilize its economy. This was the so-called ‘political corruption’ offensive, engineered in the USA and implemented in coordination with Brazilian business interests and pro-business political parties. By painting Workers Party leaders–Rouseff and then Lula himself–as corrupt, they drove them from office (or in the case of Lula jailed him to prevent him from running). An unapologetic pro-Business/pro-USA Temer government was put in place. A similar ‘political’ strategy was implemented against the Kirchner government in Argentina, to drive it from office and replace it with the current pro-business Macri government. Temer in Brazil and Macri in Argentina are mirror images of the USA-G7 economic-political strategy to remove populist governments in South America and replace them with pro-USA, pro investor governments.

The Special Case of Venezuela: When All Else Fails…Military Action

Destroy the currency is always at the forefront of USA imperialist strategy to drive out populist, democratic governments and re-install pro-Business, pro-US investor governments. USA policy toward Venezuela today is not dissimilar, and represents an extreme version of what has been rolled out in Brazil and Argentina. The USA embarked several years ago to destroy Venezuela’s currency, shut off access to US dollars with which to purchase needed food, medical and other imports, while launching another version of ‘government leaders are corrupt’ political-public opinion offensive. It has supported and financed domestic political opposition forces and parties to the Maduro government. Now it is talking about the final extreme alternative of military intervention. It is lining up other right wing governments in Latin America to take the lead in intervention if necessary. But the USA will plan, direct and finance the costs of military intervention using its proxies, if it comes to that. Recent elections in Venezuela that returned the Maduro government to office have signaled to Washington that the Brazil-Argentina strategy might not work in Venezuela. Thus the consideration of more direct military intervention is now on Washington’s agenda. Trump has as much as said so publicly.

But the USA’s strategies of economic destabilization by, initially, raising interest rates to generate capital flight and currency collapse, to have central banks escalate domestic interest rates in the countries to precipitate mass unemployment and recession, to cause accelerating import goods inflation of critical items–and to engage in ‘leaders are corrupt’ political offensives to depose democratically elected popular governments–may not prove successful in the longer term.

Resistance is Not Futile

Already democratic movements, unions, strike actions, mass demonstrations are emerging in Brazil and Argentina. And Venezuela holds out despite the desperate destruction of its economy by USA-business interests. Elections are set soon in Brazil. The results will be critical. What the USA-Temer government’s next moves might be are critical. How Brazil goes, so too will go Argentina, giving rise to further popular demonstrations and strikes should elections in Brazil throw out the Temer government. And should both countries restore democratic governments, USA policy toward direct intervention in Venezuela will stall temporarily.

But whatever the political outcomes, the more fundamental economic forces will still prevail: South American popular governments must find a way to prevent their central banks from acting ‘independently’ on behalf of pro-business, pro-US investors, interests; they must find a way to stabilize their currencies not based on the US dollar; and they must not fall into the debt trap offered by the IMF. Until these levers of US-G7 economic power and hegemony are eliminated, emerging market economics like Brazil, Argentina and Venezuela will always be susceptible and at the mercy of USA economic hegemony.

Jack Rasmus is author of the recently published ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017; ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, October 2016; and ‘Systemic Fragility in the Global Economy’, Clarity Press, January 2016. His website is: http://www.kyklosproductions.com and twitter handle, @drjackrasmus.

SPECIAL NOTE TO READERS: For my analysis of Emerging Markets instability in 2015-16, including Brazil at the time, see my chapter 3, ‘Emerging Markets Perfect Storm’, in my ‘Systemic Fragility in the Global Economy’ book, Clarity Press, January 2016. For reviews click on ‘reviews’ tab on my website, http://www.kyklosproductions.com.


My Twitter Handle: @drjackrasmus

May 29
#Italy Is Italy debt=Greek debt crisis writ large? Is 5-Star the new Syriza? Italy crisis is microcosm of continuing Eurozone crisis. Nonperforming loans still $2 trillion Eurozone wide. ECB bond buying benefits northern Europe not periphery. Money capital flowing to US mkts.

May 25
#Taxcuts Initial data on effect of Trump tax cuts on stock buybacks, dividend payouts, and M&A spending show for 1st quarter 2018, S&P stock buybacks at $178b, dividends at $113b, and M&A for full year at $840b. That’s more than $2 trillion combined for 2018 for S&P500 only!

May 24
#Korea-US Summit Collapse. What’s the relationship between the collapse of the June 12 US-No.Korea Summit, the US-China Trade war intensification, and splits within the US elite on trade and foreign policy? See my blog and Alternative Visions radio show.

May 20
#China US Treasury Secretary, Mnuchin, now controlling US trade negotiations, says tariffs ‘on hold’ and trade war now suspended. As in tax policy (Mnuchin-Cohn drafters of recent law), US bankers now running US trade policy. Trump left to tweet fantasies to his political base.

May 19
#China US trade war with China looking increasingly unlikely. Navarro is off the US team; Mnuchin is leading. US bankers and MNCs want market access. China will give it to them & buy more US goods. Tech transfer more difficult issue.

May 15
#globaleconomy Signs of weakness continue to appear: Japan economy contracting again. UK and Germany slowing. Rising US interest rates and the $ provoking capital flight and recessions in So. America. Trade war with China. Yield curve-best predictor of recession in US flattening.

May 14
#chinatrade After banning China telecom company, ZTE, from business in the US just weeks ago, Trump reverses course and offers to bail them out. Watch for China to approve US tech Qualcomm’s purchase of NXP, in quid pro quo agreement. Does this look like a trade war?

May 9
#tradewar For my latest analysis of US-China trade negotiations, and why a bonafide trade war with China may not occur, read my article, ‘Is a US-China Trade War for Real? at my blog,

May 6
#Irandeal My prediction re. Trump & the Iran deal: Trump likely (60-40) will pull out, but then do little more besides announcement. Europeans continue as if nothing changed. Trump & Europeans then propose addendum to the 2015 agreement and try to get Iran to the table again.

May 2
#TradeWar For my analysis of current Trump trade policy and view that the Trump administration is pursuing a ‘dual track’ policy–a potential trade war with China but a phony trade war with US allies–read my latest blog entry at http://jackrasmus.com (Trump’s Phony Trade War)

The US Government’s Labor Department today, June 7, 2018, released a report on the condition of what’s called ‘precarious’ jobs in the US. The meaning of precarious is generally assumed to be contingent labor, alternative work arrangements, and, most recently, ‘gig’ work. The Bureau of Labor Statistics’ survey concluded, however, that contingent-alternative work is not a serious problem in the US today; that its survey showed that only 3.8% of the US work force (5.9 million workers) were ‘contingent’ (meaning they didn’t have a permanent relationship of work with their employers). And only another 9.5% were in what’s called ‘alternative work’ arrangements, meaning independent contractors, on-call, or temp help agency employment (about 15.5 million). The BLS then further concluded these numbers showed a decline compared to its previous 2005 report on the topic. (There was no ‘gig’ work in 2005 and the BLS excluded ‘gig’ jobs from its just released report). So only 13-14% of the 165 million US work force were contingent-alternative (e.g. precarious) according to its (BLS) worst case estimate.

What follows is my initial criticism of the BLS supplement report just released today. My comments are in the form of a reply to a noted progressive radio show–blogger, Doug Henwood, who distributed his view on the Report earlier today as well. Doug basically agrees with the BLS report,that it shows precarious work is not a problem. To consider it is so is a distraction, according to Henwood, from the problems faced by the vast majority of US workers still in traditional forms of work.

In my comments below, I disagree with Henwood, and argue the BLS report represents a ‘low-balling’ of the problem of precarious work arrangements (contingent, alternative, gig) that is a consequence of a radical restructuring of labor markets in the US in recent decades–i.e. a restructuring that is destroying jobs, wages, benefits, and working conditions in general. The expansion and deepening of precarious employment is a serious symptom of that restructuring. Moreover, it reflects an intensification of exploitation of workers now accelerating–in both precarious and traditional work.

Here’s my comment-reply to Henwood:

“While I rarely comment on other blogs, I feel it is necessary to do so to Doug’s current commentary on the BLS contingent-alternative survey just released.

I certainly agree with Doug that US workers who are not employed in what’s called ‘precarious’ jobs are being exploited increasingly severely. But that fact is not a justification for arguing that addressing those in precarious employment is a distraction from the conditions of those still in traditional work, as Doug seems to suggest.

Nor do I think that just because the latest BLS supplement survey is not that different from the previously most recent 2005 survey, that it shows contingent-alternative work–which is almost always accompanied by lower pay, benefits, and working conditions–is not a critical issue. If non-contingent labor is being screwed more with every passing year, then contingent is being even more screwed. If American workers are being increasingly exploited (meaning wages stagnating, benefits being taken away or their costs shifting, employment security becoming even more tenuous, etc.) then workers in precarious jobs are super-exploited (wages even lower, benefits virtually non-existent for many, fired at any moment for any reason, exemption from rudimentary legal rights, etc.)

There are serious problems with the BLS supplement survey on contingency to which Henwood refers. One should not simply take the BLS ‘at face value’. What’s behind that ‘appearance’ is important. That’s not to say there’s a conspiracy by government to cook the numbers to reduce the magnitude of the precarious jobs growth problem. It’s all in the definitions, assumptions (overt and hidden), and statistical methodologies that underlay the BLS report.

First of all, the gig economy is excluded by the BLS own admittance (see the BLS Technical note on their website). No Uber, Lyft, Taskrabbit, AirBNB, etc. jobs are included in the BLS survey. They may add it later, but not in these numbers. So we’re talking about contingency and alternative work only. So what’s the definition of these terms, and is the BLS’s the best definition?

Moreover, according to the BLS study, all jobs (whether gig or contingent or alternative) that are second jobs are excluded. Only if the contingent-alternative jobs are the worker’s primary job are they included in the tally. But shouldn’t the BLS be estimating ‘jobs’ that are contingent-alternative, etc., whether primary or secondary, and not just if primary employment only?

Here’s another problem: Contingency refers to a condition that is not permanent in some way. The BLS defines lack of permanency by referring to time–i.e. hours of work and conditions of employment a year or less. A worker is contingent-alternative only if he expects to be employed less than a year. What about those who have been temp or on call or whatever for more than a year? But why the BLS definition based on a time limit? Shouldn’t contingency refer to the existence of a different set of conditions of work–i.e. a different wage structure, a second tiered benefits provisioning, restricted legal rights, other working conditions, or whatever may create a group of workers’ relationship to the employer that is second tier or ‘second class’? Why just time as the key definition; why not working conditions as the basis for defining contingent?

Given the BLS’s actual assumptions and definitions, there are significant problems in what the BLS includes and excludes. Here’s just a few:

First, BLS defines ‘temp’ workers as those employed by Temp Agencies. But there are hundreds of thousands, perhaps millions, who are hired direct by employers on a temp basis, not through agencies. The CPS has always ignored temps direct hired. Check out the auto industry where their numbers have been expanding for years.

What about public workers and higher ed teachers? I could not find any verification in the BLS study that they interviewed this sector? Many studies show that 70% of higher ed college teachers are now lecturers. (CHeck out the SEIU study). I suspect they aren’t adequately weighted in the BLS survey if at all. What about, as well, public home health workers, and the growing number of K-12 part timers, especially in charter schools.

And what about the company practice of hiring interns without pay for 3 to 6 months, then let them go and hire another cohort without pay. That’s a growing practice in tech. Aren’t they ‘super-contingent’? One could add the general practice in Tech of requiring skilled tech job candidates to solve a company problem, for which they aren’t paid, and then not hire them. Or the exploitation of young workers in so-called ‘coding academies’, where they do projects for companies in the hope of being hired, and then aren’t.

Another big problem with the BLS survey is it was conducted in May. That’s a big seasonality problem. Other studies. that Doug dismisses, were conducted in October-November. Obviously there would be far more ‘contingent’ workers in retail, wholesale, warehousing, etc. that would show up in November than in May. Remember, BLS findings are ‘statistics’, not raw data. They aren’t actual real numbers but estimates of real numbers (as is all BLS data). Seasonality issues are an important problem in the latest BLS survey.

And what about farm labor. They are certainly contingent. Many are undocumented and are not accurately surveyed (their numbers are plugged in based on assumptions about their numbers and employment). The same could be said for the huge underground economy in the US, now at least 12% of US GDP. Millions of inner city youth are not accurately weighted in CPS surveys in general. The CPS does a phone survey. That survey is biased toward workers who are not transient, who have a landline phone (and only most recently has the BLS been adding cell phones to that phone survey). Inner city youth and undocumented workers do not respond to government phone surveys, if they are even called upon in the first place. These are problems with the BLS-CPS general employment and wage surveys, which they ‘resolve’ by simply assuming an adjustment factor.

The BLS admits it excludes day labor. Does that mean also that the majority of longshore ‘B Men’, casual workers (who fit the BLS definition of contingent) are also not included? And why shouldn’t students working also be considered contingent? It fits the BLS definition. Why exclude that arbitrarily?

In short, there’s a lot of problems with the BLS survey, that in general results in a low balling of the magnitude and growth rate of contingent-alternative work. That low balling is baked into the definitions, assumptions, and methodologies it uses. (And of course the many important occupation categories it excludes). The truth is probably somewhere between the Princeton academics’ and freelancers’ union estimates, and the BLS study. But whatever the numbers, it makes no sense to say that precarious employment is not a growing problem in the US (and elsewhere in the advanced economies). Or that we should ignore it and focus on the ‘real problem’ with noncontingent work. They’re both a problem. We should not ignore the growing exploitation and destruction of noncontingent work; nor should we fall in line with government estimates of the precariate world by simply taking their (BLS) report at ‘face value’.

It’s no service to the US working classes, that have been beaten down in countless ways for more than three decades now, to say that the accelerating capitalist restructuring of labor markets creating gig, contingent, and alternative work (with less pay and benefits) is not a problem. The US government is minimizing the problem. Those who call themselves progressives should not join in.”

Dr. Jack Rasmus
at jackrasmus.com

This past week, as the Italian populist party, ‘5-Star’, began to form a government, suddenly the realities of the Italian debt (government and bank) and the 7 year stagnating Italian economy got the attention of media, investors and politicians. 5-Star and its parliamentary ally, the League, campaigned during the recent Italian election on a program to unilaterally stimulate the Italian economy by fiscal policy spending and tax cuts and, if necessary, to leave the Eurozone system in order to take back control of its own monetary policy. Under the Eurozone rules, Italy, like all Eurozone members, gave up independent control of its banking system to the European Central Bank and other pan-national European institutions like the European Commission. Under Eurozone rules, Italy was also limited to a tight cap on its fiscal spending.

With no independent monetary policy and strict limits on its fiscal policy, all Italy could do in a recession or financial crisis, such as 2008-2010, was borrow money from the ECB and the Euro Commission (with help from the IMF–together the three pan-European institutions called the ‘Troika’). As it borrowed its government and private debt escalated. When the Eurozone slipped into a double digit recession in 2011-13, Italy’s crisis deepened. It borrowed still more, to pay the interest on the debt it had previously borrowed–the interest payments going to the Troika, and from the Troika to the northern Europe banks (especially Germany) from which the Troika in turn raised funds with which to lend to Italy (and other economies during the debt crises in Europe 2010-2015).

By 2013 Italy’s real economy had collapsed by 10% below 2008 GDP levels, and unemployment rose to near 20%. Italy government’s debt to GDP has risen from 100% in 2008 to 130% by 2017, and its real economy has stagnated since 2013, today still at 5% below 2013. Italy thus has never recovered from the 2008-09 crash and subsequent 2011-13 double dip Europe recession.

To pay for the interest and principal on its rising debt load, Italy was required by the Troika to impose fiscal austerity on its populace. Successive Italian governments extracted the surplus with which to pay its rising debt, causing the Italian economy to stagnate. This vicious debt cycle since 2011 has locked Italy into a debt-imposed recession and stagnation–not unlike Greece and other Euro periphery economies.

Italy was not alone in this self-sustaining debt depression cycle. Greece, and indeed much of the rest of the European southern periphery, found itself in a similar situation. Greece was thrust into what is now a ten year economic depression, with severe austerity imposed on it by the Troika. That depression has still not ended, with Greece’s GDP still 20%-22% below 2008 levels.

The Troika imposed austerity extracted income from Greek society to pay the interest on the debt owed to the Troika, to northern Europe banks, and to international bond investors. The first Greek debt crisis in 2010 was followed by a second in 2012, as more Troika debt was provided to ‘roll over’ and pay the old 2010 debt. The crisis erupted again in 2015, as still more debt was provided to pay for the 2012 debt. Throughout the period, Greek workers, small businesses and consumer households were squeezed to acquire the money capital to pay the Troika-investors-bankers. Today Greek debt as a percent of GDP is virtually the same as it was in 2012. And another round of debt and austerity is now on the agenda starting August 2018, as the 2015 debt deal expires.
All that’s changed is that private bankers and investors will now ‘roll over’ the debt this time and repay the Troika (contrasted to Troika debt roll over that repaid the private investors and assumed their debt in 2012). Austerity continues nonetheless; only who gets paid the interest and principal on the Greek debt will change.

(For my book analyzing this history of the Greek debt crisis, see ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, October 2016), and my series of articles on Greece since 2015, including the updates on my blog, jackrasmus.com: ‘Still More Austerity Imposed on Greece’, January 2018 & ‘Greek Debt Crisis: Why Syriza Continues to Lose’, Sept. 2017. See also reviews of the ‘Looting Greece’ book by Seibert, van Maasaker, and Amaral on my kyklosproductions.com website)

What we’re witnessing in Italy now is a repeat of the Greek debt crisis, with a populist government (5-Star) attempting to extricate itself from the economic vice-grip of the Eurozone and its pan-national institutions (European Commission, European Central Bank, IMF) that have served as the institutions for extracting payments to cover the debt it has provided Italy since 2010 to stay afloat (i.e. stagnate) economically. Greece is a microcosm of a new kind of financial imperialism within the Eurozone. Italy is a larger expression of the same financial imperialism at work within the heart of the Eurozone.

Austerity was imposed on Italy as well as Greece beginning in 2010. But being a larger economy, with more sophisticated pro-Eurozone capitalist parties, Italy was kept within the Euro fold and the Italian debt crisis was contained–but no longer. This changed with the election of the populist 5-Star movement and its attempt to assume control of government fiscal and monetary policy.

The case of Italy is more dangerous to the Eurozone than was (and is) Greece. Italy’s government debt is 130% of GDP, but its private sector and bank debt is potentially more destabilizing for the Eurozone. No less than $500 billion in non-performing bank loans hang over the private economy in Italy (nearly $2 trillion still Europe wide). Europe never removed the bad debt from bank balance sheets after 2008. That’s why its economy continually stagnates and is unable to recover fully from the 2008 crash. Recoveries are short and shallow and stagnation (and goods price deflation) is a perpetual problem.

The Euro periphery is even more severely impacted. The European Central Bank’s ‘QE” free money injections since 2015 have not gone into real investment, and especially not been directed the southern periphery where it is most needed. Most of the ECB free money has gone to German, French and other northern Europe banks that didn’t need it, and they in turn have mostly loaned it to Euro financial investors who have sent a good part of it offshore to US markets. Europe stagnates as a consequence.

The crisis in Italy has just begun–and it is occurring as the Eurozone (and UK) economies are again beginning to stagnate, and possibly head for a ‘triple dip’ recession in 2019. The populist 5-Star party, should it be allowed to form a government, is declaring it will not abide by Eurozone rules limiting its fiscal stimulus spending; it is also raising the possibility of assuming independent control of its monetary policy. For the latter, however, it will have to leave the Euro and establish its own currency. Both these policy directions have the Troika and the northern Eurozone elites increasingly worried.

When the Greek populist party, Syriza, came to power in 2015 it also declared it would do the same as 5-Star is now advocating. Within six months, however, the Troika smashed Syriza. The ECB sabotaged Greek banks and drove the economy even deeper into depression by mid-2015 to put pressure on Syriza and get it to back off its policies. Syriza party leaders–Alex Tsipras and Yanis Varoufakis–caved in by the summer 2015. Varoufakis was sidelined in the Syriza by June and Tsipras ignored the Greek referendum he himself had called in July and cut a deal with the Troika to extend Greek debt and austerity measures in August 2015. Ever since August 2015, Syriza and Tsipras have gone along with whatever the Troika has demanded, as more and more austerity was proposed on Greek workers annually with every review of the Greek 2015 debt deal.

All the political parties in Greece have now lost legitimacy, including the once populist challenger, Syriza. Now Greeks are taking to the streets in widespread strikes and demonstrations, as another round of Troika-investor austerity and debt is coming up in August 2018.

The key question is whether the Italian populist party and challenger to the banker-Germany dominated Eurozone system will fall into the same trap as Syriza? The Eurozone elites will attempt to maneuver and put increasing pressure on 5-Star to bring it to heel; to drop its insistence on pursuing independent fiscal stimulus or moving toward re-establishing an independent Italian central bank (and private banking system) and eventual currency. With no fiscal of monetary independence, 5-Star and Italy are at the mercy of the Troika and Eurozone(Germany). What will be a 5-Star government’s fiscal stimulus policy once it forms a government? Will it back off its program to assert independent central bank control–or to leave the Euro if necessary?

The Troika and Eurozone elite will have a harder time taming Italy than it had with Greece. Italy’s private banking system is nearly insolvent. With a $500 billion nonperforming loan overhang, banks like Monte dei Pasche, Banco Populare, Banco BPM, and even Banco Intesa are fragile,if not technically insolvent (aka bankrupt). Efforts to pressure Italy’s new government by withholding lending to Italy’s central bank, and in turn private banks, will only exacerbate the crisis of the Italian banking system further. Moreover, northern Europe banks–especially French banks Credit Agricole and BNP Paribas–are deeply integrated and exposed to Italian banks. Contagion could easily spread from Italy to France and beyond. The Troika-Germany will therefore probably go softer with Italy than it did with Greece initially. It will likely allow Italy to exceed Eurozone fiscal spending caps, and the ECB will likely provide even more debt to Italy’s government and private sector.

This response is not assured, however. It may try to apply its ‘Greek Debt’ strategy to Italy as well. Popular resistance could then spread throughout the Eurozone southern periphery. And that instability will further ensure the Eurozone economy will slip into triple dip recession in 2019–just as this writer is predicting the US economy will do the same.

Dr. Jack Rasmus is author of his latest book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017; and the forthcoming late 2018 book, ‘Taxes, War & Austerity: Neoliberal Fiscal Policy from Reagan to Trump’, also by Clarity Press. He blogs at jackrasmus.com. His twitter handle is @drjackrasmus and his website is http://kyklosproductions.com.


In postings on this blog in recent months–and my recent exchange with Ben Leet–the topic of a financial transactions tax on banks, shadow banks, and financial speculators has come up. Such a tax could easily cover much of the coming $1 trillion a year US budget deficits now baked into the US economy as a consequence of Trump’s $5 trillion in tax cuts for businesses and investors passed in January 2018. I therefore thought it might be of some interest to readers of this blog to repost my April 2016 article on estimating how much a financial transactions tax could raise US revenues, offset the $1 trillion a year in US deficits, and allow a repeal of the Trump tax cut handout to business and speculators (who are using it to buyback stocks, raise dividends, and finance mergers and acquisitions to the tune of more than $2.1 trillion). Here’s my April 2016 post on the financial transactions tax reposted once again:

(The subject of a financial transactions tax is framed in the context of financing Medicare for All–i.e. single payer healthcare. For readers interested in going directly to my calculations of a financial transactions tax on just four security categories (stocks, bonds, derivatives, forex), see the bold type in the blog post below)

“How a Financial Transactions Tax Could Fund Single Payer Healthcare (Medicare for All)“, My April 2016 Post

As US presidential candidate, Bernie Sanders, gained momentum in the presidential primaries earlier this year (2016), the attack on his proposed economic programs have grown proportionally.

Leading the assault have been supporters of Hillary Clinton, especially Paul Krugman, and other ‘stars’ of the economics profession like Christine Romer, Laura Tyson, Alan Kreuger, and Austan Goolsbe—all of whom have served in past Democrat administrations and are no doubt looking to return again in some capacity in a Hillary Clinton administration. Sometimes referred to as the ‘gang of four’, this past month all have been aggressively attacking Sanders’ economic programs and reforms. However, the target of their attacks, which began in February and continue, is Sanders’ proposals for financing a single payer-universal health care program by means of a financial transactions tax.

The irony of the Krugman-Gang of Four attack is that Sanders’ proposals represent what were once Democratic Party positions and programs—positions that have been abandoned by the Democratic Party and its mouthpiece economists since the 1980s as that party has morphed into a wing of the neoliberal agenda.

The Krugman-Gang of Four have been especially agitated that their own economic models are being used to show that Sanders’ proposals would greatly benefit the vast majority in the US. But debating Krugman and his gang of four neoliberal colleagues on the ground of their faulty economic model—a model that failed miserably under Obama since 2009 to produce a sustained, real economic recovery in the US—is not necessary. Their model has been broken for some time. Some straight-forward historical facts and recent comparative studies are all that’s need to show that a real financial transaction tax can generate more revenue than is needed to fund a single-payer type program. Here’s how:


Let’s take four major financial securities: stocks, bonds, derivatives, and foreign currency purchases (forex).

A European study a few years ago involving just 11 countries, whose collective economies are about two-thirds the size of the US economy, concluded that a miniscule financial tax of 0.1% on stocks and bonds plus a virtually negligible 0.01% tax on derivatives results in an annual tax revenue of $47 billion. In an equivalent size US economy one third larger that would be abouit $70 billion in revenue a year.

Wealthy investors’ buying of stocks and bonds is essentially no different than average folks buying food, clothing or other real ‘goods and services’. Why shouldn’t investors pay a sales tax on financial securities purchases? In the US, average households pay a sales tax of 5% to 10% for retail purchases of goods and many services. So why shouldn’t wealthy investors pay a similar sales tax rate for their retail financial securities’ purchases?

A 10% ‘sales tax’ on stock and bond buying and a 1% tax on derivatives amounts to a 100x larger tax revenue take than estimated by the European study. The $70 billion estimated based on the European study’s 0.1% stock-bond tax and 0.01% derivatives tax yields $7 trillion in tax revenue with a 10% and 1% tax on stocks and bonds and derivatives.

Too high, Krugman and the Gang of Four would no doubt argue. Wealthy stock and bond buyers should not have to pay that much. It would stifle raising capital for companies. OK. So let’s lower it to half, to 5% tax on stocks and bonds and 0.5% on derivatives. That reduces the $7 trillion tax revenue to a still huge $3.5 trillion annually.

Still too high? Ok, half it again, to a 2.5% tax on stocks and bonds and a 0.25% on derivative trades. That certainly won’t discourage stock and bond trading by the rich (not that that is an all bad idea either). That 2.5% and 1% tax still produces $1.75 trillion a year in revenue.

But what about an additional financial tax on currency trading, like China is about to propose? Currency, or forex, trades amount to an astounding $400 billion each day! Not all that is US currency trading, of course. However, the US dollar is involved in 87% of the trading. A 1% tax on US currency trades conservatively yields approximately $3 billion a day. Assuming a conservative 220 trading days in a year, $3 billion a day produces $660 billion in financial tax revenue from US currency financial transactions in a year.

$1.75 trillion in revenue from stock, bonds, and derivatives trades, plus another $660 billion in forex trade tax revenue, amounts to $2.41 trillion in total revenue raised from a financial transaction tax of 2.5% on stocks and bonds, 0.25% on derivatives, and 1% on US dollar to other currency conversions.

Paying for Single Payer Health Care

Nearly every advanced economy in the world provides a version of single payer health care to its citizens—except the USA. On the other hand, no country spends as much on health care as the US. The UK spends 9% of GDP, Japan about 10%, France and Germany 11%, for example. The USA, in contrast, pays 17% plus of its GDP on health care. Given that the most recent US GDP is about $18 trillion a year, 17% of $18 trillion equals just over $3 trillion a year.

If the USA spent, like other advanced economies with single payer, about 10% of its GDP a year on health care, it would cost $1.8 trillion instead of $3 trillion a year. The US would save $1.2 trillion.

Where does that current $1.2 trillion go? Not for health services for its citizens. It goes to health insurance companies and other ‘middlemen’, who don’t deliver one iota of health care services. They are the ‘paper pushers’, who skim off $1.2 trillion a year in profits that average returns of 20% a year and more. They are economic parasites, or what economists refer to as ‘rentier capitalists’ who don’t produce anything but suck profits and wages from those who do actually produce something. They then used the $1.2 trillion a year to buy up each other, expand globally, and deliver record dividend and stock buybacks for their shareholders.

In other words, a true financial transactions tax, that is still quite reasonable at tax rates of 0.25% to 2.5% can pay for all of a Single Payer health care program in the US and still have hundreds of billions left over–$641 billion to be exact ($2.41 minus $1.8 trillion).

That $641 billion residual could then be used to better fund current Medicare programs. It could eliminate the current 20% charge for Medicare Part B physicians services and provide totally free Part D prescription drugs for everyone over 65 years. The savings for seniors over 65 years from this, and the tens of thousands of dollars saved every year by working families who now have to pay that amount for private company health insurance, would now be freed up with a single payer system, to be spent on other real goods and services.

A financial transaction tax and single payer program would consequently have the added positive effect of creating the greatest boost in real wages and household income, and therefore consumption, in US economic history. More consumer demand would mean more real investment.

Yes, there would be less spending by the wealth speculating in stocks, bonds, derivatives, forex and other financial securities. But so what? If rich and wealthy investors don’t like that, well then let them eat cake…or some other four letter word.