Jack Rasmus

This morning, Monday, March 9, financial asset markets continue to implode: US stocks are further collapsing -6% (Dow down 1650, Nasdaq >500 mid-day). Ditto Asian and Europe stock markets -6%. They were already declining sharply last week due to coronavirus induced supply chain shocks (reducing production) and expanding demand shocks (consumer spending contraction in select industries like travel, hotels, entertainment)–all of which are being forecast by investors to whack corporate earnings in 2Q20 big time. But imposed on the equities market crash of the past 2 weeks now is the acceleration of the global oil price deflation that erupted yesterday as the Saudis deal with Russia last year to cut production and prop up prices fell apart. Collapsing oil & commodities futures prices are now feeding back up equities and other financial asset prices. Financial price deflation spreading, including to currency exchange rates. Money capital fleeing everywhere into ‘safe havens’ (gold, Treasuries, Yen). Historic decline of US Treasuries now below 1% (30 yr.) and .5% (10 yr).

Will the financial asset markets deflation soon spill over to the credit system (especially corporate bonds) and accelerate the decline of real economies worldwide in turn? Are traditional monetary & fiscal policy tools now less effective compared to 2008-09? If so, why? Is the global economy on the precipice of another ‘great recession’?

Financial Asset Markets Imploding

So we have oil futures market prices–i.e. another financial asset market–collapsing now and impacting the stock markets. In other words, a feedback contagion underway on stocks market prices in turn. Feedback is occurring as well on other industrial commodity futures prices that are following oil futures prices downward in tandem. But that’s not all the financial contagion and deflation underway.

The freefall in financial assets (stocks, oil, commodities) is also translating into currency exchange price deflation in turn, especially in emerging market economies in Latin America, Africa, Asia highly dependent on commodity sales with which to earn needed foreign exchange with which to finance their past debt (e.g. case of Argentina whose egotiations with IMF on how to restructure their debt will now break down, I predict).

Currency exchange rates are in sharp decline everywhere as a result. For emerging market economies that means money capital is more rapidly flowing out of their economy, toward safe havens globally like the US dollar, US Treasury bonds, gold, and the Japanese Yen currency.

In short, stocks, oil-commodity futures, and forex currency markets are all imploding and increasingly feeding back on each other in a general deflating downward spiral. This is a classic ‘cross-contagion effect’ that occurs in financial asset market crashes. And crashing financial markets eventually have the effect of contracting the real economy in turn, by freezing up what’s called the credit markets. Businesses can’t roll over their loans and refi their corporate bonds. Banks stop lending. The rest of the real economy then contracts sharply. It starts in the financial markets, spreads to credit markets (corporate junk bonds, BBB corporate bonds, then top grade bonds).

Coronavirus Effect as Precipitating Cause

But it even earlier begins in a slowing real US and global economy that precedes the markets crash. The global economy was already weakening seriously in 2019. The US economy at year end 2019 was also weak, held up only by household consumption. Business investment had already contracted nine months in a row in 2019 and inventories built up too much. And, of course, the Trump trade war took its toll throughout 2018-19.

Then came the Coronavirus which shut down supply chains in China, and then in So. Korea and Japan in turn. That then began impacting Europe, already weakened by the trade war (especially Germany) and Brexit concerns. The supply chain economic impact of the virus developed into a consumer demand economic impact as well, as travel spending was reduced (airlines, cruise ships, hotels, resorts, etc.) and now, in latest development, other areas of consumer spending too. Both supply chain (production cutbacks) and demand (consumption cutbacks) are interpreted by investors as leading soon to a big fall in corporate earnings–which translates in turn into stock price collapse we see now underway. Investors have decided the 11 year growth cycle is over. They’re cashing in and taking their money and running to the sidelines, moving it from stocks to cash or Treasuries or gold or other near liquid financial assets.

So the Coronavirus event is really a ‘precipitating cause’ of the current markets crash. The real economy weakness was already there. The virus just accelerated and exacerbated the process big time. (see my 2010 book, ‘Epic Recession’ for explanation how financial causation comes in different forms as precipitating causes, enabling causes, and fundamental causes. Book reviews are on my website). Again, worth repeating: global and US economies were weakening noticeably in late 2019. The virus further impacted supply chains (production) and demand (consumption), reduced corporate earnings in the near term and thereby simply pushed stock markets over the cliff.

Mutual Feedback Effects: Real & Financial Economies

But financial crashes have the effect of feeding back into the real economy as well, causing it to contract further in turn. What starts as a weakening of the real economy that translates into financial markets crashing, in turn feeds back into a further weakening of the real economy. Mainstream economists don’t understand this ‘mutual feedback effect’; don’t understand the various causal relationships between financial asset cycles and real investment cycles. (For my explanation of this relationship there’s my 2016 book, ‘Systemic Fragility in the Global Economy’ and specifically chapters on the need to distinguish between financial asset investing and real investing and how late capitalism’s financial structure has changed such that the inter-causal effects of financial-real investment have deepened and intensified.) Financial crashes accelerate and deepen the contraction of the real economy. Recessions turn into ‘Great Recessions’ as in 2008-09. They may even turn into bona fide ‘Depressions’ as in the 1930s should the banking system not get bailed out quickly.

Corporate Bonds & Credit Markets Next?

The feedback effect of the current financial asset price deflation–now underway in stocks, commodity futures, forex, (and derivatives)–on the real economy will soon emerge as the financial markets deflation affects the various credit markets. The key credit market is the corporate bond market. Bond markets are far more important to capitalism than equity-stock markets. The credit markets to watch now are the corporate junk bonds (sometimes called high yield corporates). Junk bonds are debt issued to companies that have been performing poorly for years. They are kept alive by banks helping them issue their bonds at high interest rates. Investors demand a high rate because the companies may not survive. In good times they do. But when markets and economies turn down, companies over loaded with junk financing typically default–i.e. can’t pay the interest or principal on their bonds. They go under. The investors that bought their risky bonds are then left holding their debt that becomes near worthless. The US junk bond market today is ‘worth’ more than $2 trillion. At least a third of that is oil & energy (fracking) companies. A large part of their bonds must be rolled over, refinanced, in 2021. But many of them will not be able to refinance. Why? Because global oil prices have just collapsed to $30 a barrel, perhaps falling further to $20 a barrel. At that price, the oil-energy junk bond laden companies will not be able to refinance. They will default. That will spread fear and contagion to other sectors of the $2 trillion junk bond sector–especially big box and other retail companies (e.g. JC Penneys, etc.) that also loaded up on junk financing in recent years. Investors will disgorge themselves of junk bonds in general.

The fear of a crash in junk bonds will almost certainly spread to other corporate bonds, first to what’s called BBB grade corporates. That’s another $3 trillion market. But most of BBBs are really also junk that’s been improperly reclassified as BBB, the lowest (unsafe) level of corporate Investment grade bonds (the safest). So at least $5 trillion in corporate credit is at risk for potential default. If even a part defaults, it will send shock waves throughout the corporate economy that will have very serious implications–for both the financial and real economies, US and global, which are increasingly fragile.

Is Another ‘Great Recession’ on the Horizon?

For example, Japan is already in recession as of late last year. Now it’s contracting, reportedly, by 7% more. Europe was stagnant at best, with Italy and Germany slipping into recession before the virus hit. So. Korea and Australia are in recession now, as other economies in Asia and Latin America are now contracting as well. China economy reportedly will come to a halt in terms of GDP this quarter, or even contract, according to some sources. Meanwhile, Goldman Sachs forecasts the US economy growth will stall to 0% in the second quarter 2020.

So a collapse in risky corporate bonds will occur overlaid on this already weak real economic scenario. Should that happen, then the recession could easily morph into another ‘great recession’ as in 2008-09; maybe even worse if the banking system freezes up and central banks cannot bail them out quickly enough. Or if banks in a major economy elsewhere experience a crash–as in India or even Europe or Japan where more than $10 trillion in non-performing bank loans exist–and the contagion spreads rapidly to banking systems elsewhere

Failed Monetary & Fiscal Policies, 2009-2019

Which leads to the question can central banks now do so? After the 2008-09 crash, the Fed bailed out the US banks by 2010. But it kept interest rates near zero under Obama for six more years. Banks could still get free money from the Fed at 0.15% interest. (The Fed then paid them 0.25% if they left the money with the Fed). The Fed bailed out other financial companies to the tune of $5 trillion more as it bought up bad loans and Treasuries from investors at above then market rates. That is, it subsidized them. And did so for six more years. All this free money flowed, mostly into financial markets in the US and worldwide, creating the stock bubbles that are now imploding. So the Fed and other central banks went on a binge subsidizing banks for years, and in the process broke their own interest rate tool needed for instances like the present crisis. The Fed tried desperately to raise interest rates in 2017-18 so it could have a cushion for times like this. But it then capitulated to Trump and began reducing interest rates again in 2019–as it had under Obama for six years.

The free money from the Fed artificially boosted stock prices. On top of this Trump added a further subsidization of banks and non-bank corporations, businesses, and investors with his $4.5 trillion 10 year tax cuts passed January 2018. Most of that went as a windfall to corporate-business bottom lines. 23% of the 27% rise in corporate profits in 2018 is attributable to the windfall tax cuts. And where did that go? It too was redirected to stock and other financial markets,further inflating the bubbles. Here’s the channel and proof: Fortune 500 corporations in the US alone spent $1.2 trillion in both 2018 and 2019 in stock buybacks and dividend payouts to their shareholders. The stock buybacks inflated the stock markets, and most of the dividend payouts did as well. (Buybacks+dividends under Obama were nearly as generous, averaging more than $800 billion a year for six years).

In other words, the 25% run up in US stock markets in 2017-19 under Trump was totally artificial, driven by the tax cuts and by the Fed capitulating to Trump and lowering rates again in 2019. Very little of the annual $1.2 trillion went into the real US economy. For the past year real investment in structures, plant, equipment, etc. actually contracted for nine months in 2019, and is now contracting even faster in 2020.

Just as the Fed has busted its own interest rate monetary tool as it continually subsidized banks and businesses with low interest rates for years, the chronic corporate-investor tax cutting has busted fiscal policy responses to recession as well. Since 2001 the US has provided $15 trillion in tax cuts, the vast majority of which have gone to corporations, banks, and wealthy investors. That has led to government deficits averaging more than $1 trillion a year since 2008. And accelerated the US federal debt to more than $22 trillion. Fiscal policy is now seriously constrained by the deficits and debt–just as monetary policy as interest rates is now constrained by virtually all Treasury bond rates below 1% in the US and negative rates in Europe and Japan.

Interest rate policy responses to today’s emerging crisis is thus dead in the water. (As this writer predicted it would become in 2016 in the book, ‘Central Bankers at the End of Their Rope: Monetary Policy and the Coming Depression’). After years of monetary policy used as a tool to subsidize banks, it is now ineffective as a tool to stabilize the economy. Ditto for fiscal policy as tax policy. Used by Obama and even more so by Trump to subsidize corporations, stock buybacks, and financial markets, it is confronted by massive annual US budget deficits and accelerating national debt.

The likely responses by politicians and policy makers to the current emerging financial crisis and recessions in the real economy will be to cut taxes even further for businesses. It will have little effect, however. But will exacerbate levels of deficit and debt. That means the follow up will be to attack and reduce government spending, especially targeting social security, medicare, healthcare and education in 2021. Trump has already publicly indicated his intent to do so. On the Fed side, expect more injection of money directly into the economy and failing businesses by means of another major round of ‘quantitative easing’ (QE). That’s coming soon. Ditto for Europe and Japan where negative rates already exist. Watch China too should its economy contract for the first time in 30 years. And watch India, where it’s banking system is already fracturing due to causes totally separate from the virus effect. A banking crash in India is on the agenda. It could result in yet another financial blow to the global economy, adding to the current Saudi-produced oil price shock and the virus effect on supply chains and demand.

Summary and Conclusions

In summary, the global capitalist economy is unraveling financially, and soon further in real terms. Massive job layoffs in coming months in the US are a growing possibility. That will drive the US economy deep in contraction as household consumption, the only area holding up the US economy in 2019, now joins the contraction. It remains to be seen how US monetary and fiscal policy can restore economic stability given its self-destruction by US politicians since 2008. Trump policies have been no different than Obama’s-just more generous to corporate America and investors. Trump’s policies are best described as ‘Neoliberalism 2.0’ or ‘Neoliberal on steroids’. (see my just published 2020 book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’).

The US and global economies are well on their way to a repeat of the ‘great recession’ (or worse) of 2008-09. Only this time traditional monetary-fiscal policy is much less effective. More radical policy responses will likely be developed to try to stabilize the capitalist economies both in USA and elsewhere (where problems are even more severe). Watch closely as the crisis on the financial side moves on from equity (stock), commodities, and forex financial markets into derivatives markets and credit markets–especially junk bond and other corporate bond markets. Watch as the Fed tries desperately to provide liquidity to business and markets via its Repo channel and QE since its traditional rate channels are now ineffective. And watch as US and global capitalist advanced economies try to coordinate new fiscal policy responses to the general dual crisis in financial and real economic sectors of global capital.

Dr. Jack Rasmus
March 9, 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. His website is http://kyklosproductions.com. He blogs at jackrasmus.com and tweets @drjackrasmus. Dr. Rasmus hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network, fridays, at 2pm eastern.

Here’s what’s happening right now: Oil prices falling to $30/bb. (were $45 on friday) US Dow futures down 1250 pts. US 30 yr Treasury now trading below $1 and 10 yr below $.50 A potential crash now worse than 2008 could occur tomorrow, Monday.Financial asset deflation contagion going worldwide. Asian markets plummeting. (Source Bloomberg Asian Mkts News, Sunday, 10pm eastern time).

US politicians and media are reporting approximately 500 cases of the virus in the US as of March 8. The actual number is almost certainly much higher, however. Perhaps as much as 10-fold that number, according to some sources. Why?

There’s the problem of reporting only tested cases so far, and there’s still a lack of available tests even to test and to verify all those infected without symptoms.. And even those showing symptoms may have been determined initially as not infected by the tests, since reportedly many of the early test kits were defective. Meanwhile, those without symptoms or pre-symptomatic are not being tested at all.

The Fiction of Voluntary Quarantine

Then there’s the policy of voluntary quarantining those who have come into contact with someone who was tested and found infected. It’s not working very well. Those who have come in contact with carriers of the virus are asked simply to stay home. But do they? There’s no way to know, or even enforce that. The case example why voluntary quarantining doesn’t work well is Italy.

Most of the northern Lombardy region, including the financial center of Milan in that country, is in ‘lock down’ right now. But all that means is voluntary quarantining. People are asked not to leave their town, or the larger region. But is that stopping them traveling around their town in public places? Or within the larger region? And spreading the virus there? Apparently not. Reportedly, infection for those tested have risen in just two weeks to more than 6,000 in Northern Italy. CNBC reports that, in just one day this weekend, that number increased by 1200! So much for voluntary quarantines. There’s no way, no sufficient personnel, not even accepted procedures, with which to daily check on those (in Italy that means hundreds of thousands) in voluntary quarantine.

The Real Costs to Workers

Average working class folks cannot afford to voluntary quarantine themselves. Or to stay home from work for any reason. Even if they have symptoms. They will continue going to work. They have to, in order to economically survive.

Consider the typical scenario in the US: there are literally tens of millions of workers who have no more than $400 for an emergency. As many perhaps as half of the work force of 165 million. They live paycheck to paycheck. They can’t afford to miss any days of work. Millions of them have no paid sick leave. The US is the worst of all advanced economies in terms of providing paid sick leave. Even union workers with some paid sick leave in their contracts have, at best, only six days on average. If they stay home sick, they’ll be asked by their employer the reason for doing so in order to collect that paid sick leave. And even when they don’t have sick leave. Paid leave or not, many will be required to provide a doctor’s slip indicating the nature of the illness. But doctors are refusing to hold office visits for patients who may have the virus. They can’t do anything about it, so they don’t want them to come in and possibly contaminate others or themselves. So a worker sick has to go to the hospital emergency room.

That raises another problem. A trip to the emergency room costs on average at least a $1,000. More if special tests are done. If the worker has no health insurance (30 million still don’t), that’s an out of pocket cost he/she can’t afford. They know it. So they don’t go to the hospital emergency room, and they can’t get an appointment at the doctor’s office. Result: they don’t get tested, refuse to go get tested, and they continue to go to work. The virus spreads.

Even if they have health insurance coverage, the deductible today is usually $500 to $2000. Most don’t have that kind of savings to spend either. Not to mention copays. So even those insured take a pass on going to the hospital to get tested, even if they have symptoms.

The media doesn’t help here either. Reports are typically that those who are young, middle age, and in reasonable good health and without other complicating conditions don’t die. It’s the older folks, retirees with Medicare, or with serious other conditions, that typically die from the virus. Workers hear this and that supports their decision not to go to the hospital or get tested as well.

Then there’s the further complication concerning employment if they do go to the hospital. The hospital will (soon) test them. If found infected, they will send them home…for voluntary quarantine for 14 days! Now the financial crises really begins. The hospital will inform their employer. Staying at home for 14 days will result in financial disaster, since the employer has no obligation to continue to pay them their wages while not at work, unless they have some minimal paid sick leave which, as noted, the vast majority don’t have. Nor does the employer have any obligation legally to even keep them employed for 14 days (or even less) if the employer determines they are not likely to return to work after 14 days (or even less). They therefore get fired if they go to the hospital after it reports to the employer they have the virus. Just another good reason not to go to the hospital.

In other words, here’s all kind of major economic disincentives to keep an illness confidential, to go to work, not go to the hospital (and can’t go to the doctor). That risks passing on the highly contagion bug to others–which has been happening and will continue to happen.

Here’s another financial hit for the working class: child care. Schools are beginning to shut down. Even where no cases are yet confirmed. Stanford University just decided to discontinue all in class sessions and revert to all online education. But what about K-6 and pre-school? Or even Jr. high schools? When they shut down, kids must stay at home. But most working class parents can’t afford nannys or baby-sitters. Not everyone works in an occupation or company where they can ‘work from home’. Do they send the young kids to grandma’s and grandpa’s, who are more susceptible to the virus? With their kids required to stay home, they must miss work, and risk even losing their jobs. We’re talking about millions of families with 6 to 12 year olds. And who knows how long the schools will remain shut down.

In short, wages lost due to self-quarantining, forced voluntary quarantining after hospital testing, the cost of hospital emergency room visits (whether insured or not), the unknown cost of the tests themselves (the government says it will reimburse them but they don’t have the $1,000 or more cash out of pocket in the first place), the cost of paying for nannys or baby-sitters for young school age children when schools shut down–i.e. all result in a massive out of pocket expense for most workers that they don’t have.

Workers figure all these possibilities of financial disaster pretty quick and know that the virus will mean a big financial hit if they miss a day’s work, or even if they don’t. So they keep working, hoping they’ll recover on their own, refusing to get tested because of the potential loss of work, wages, and income, and crossing their fingers that their kids’ school districts don’t shut down.

Economic Contagion Channels: Supply Chains, Demand, Asset Deflation, Defaults & Credit Crunch

What this all means for the US economy is obvious. Household consumption was already weakening at the end of last year. Most of consumption was driven by accelerating stock valuations, which affect those in the top 10% who own stocks; or by taking on more credit–credit cards, which affects the middle class and below.
Over $1 trillion in credit card debt is what has been largely driving middle income and below consumption. Mainstream economists argue that defaults on credit card debt are only 3% or so, and thus not a problem. But that’s a gross average across all 130 million households. When this data are broken down, middle income and below family credit card debt is around 9%, a very high number more like 2007 when the last economic recession began.

Then there’s auto debt. As of 2018, reportedly 7 million turned in their keys on their auto loans. As in the case of credit cards, auto debt defaults will rise as well in 2020. Then there’s student debt, over $1.6 Trillion now. Defaults there are much higher than reported as well, since actual defaults (defined as failure to pay either principal or interest) have been redefined to something else other than actual default.

Add to all this the likelihood is very high that job layoffs will now begin by April, as the global supply chain crisis due to virus-related cuts in production and trade. More job loss means less wage income and thus less household spending and more inability to deal with the costs of the virus for most working class families.
Let’s not also forget the price gouging for certain products that is beginning now to appear, both online and in stores. That reduces working class real incomes and thus consumption too. Meanwhile, certain industries are already taking a big hit and layoffs are looming in travel companies of all kinds (airlines, cruise ships, hotels, entertainment). In places where the virus effect is already large, a big decline in restaurant, sports and concerts, movies, etc. has also begun.

The two big economic contagion channels impacting employment thus far are supply chain production and distribution reductions, and local demand for certain services (travel, retail, hospitality, etc.).
But a third major channel has just begun to emerge: that’s financial asset deflation in stocks, oil & commodity futures, junk bonds & leveraged loans, and currency devaluations.

Stocks’ price collapse leads to business shelving investment and even cutting back production. That means more job loss, reduced wage incomes, less spending, and economic slowdown.

Oil and commodity prices now collapsing also lead to energy industry layoffs. More importantly, in turn that will lead to energy junk bond market collapse–potentially spreading to all junk bonds, leveraged loans, and even BBB grade corporate bonds (which are really redefined junk bonds not investment grade bonds).

In other words, the collapse of supply chains, production-distribution, and industry by industry demand in the US may become even worse should the financial markets price collapse can lead to a general credit crunch. And that translates into a general economic real contraction. That’s precisely what happened in 2008, in a similar chain reaction from financial crisis to real economic crisis.

Workers are aware of all this possibly leading to longer run economic stress. In the short run, they consider possible wages loss if they reveal or report they have the virus, or get tested: i.e. lost wage incomes: the cost of immediate medical care; the cost of child care, etc. Better to tough it through and continue to go to work is a typical, and rational, response.

This is already going on. Hundreds of thousands with, and without, symptoms are not being tested; nor will most of them volunteer to be. Except for those on cruise ships who are forced to be tested (and they’re mostly retirees and elderly), few workers can afford to allow themselves to be. The infection rate is thus already much higher and will continue to rise. Voluntary quarantining doesn’t work much (again just look at Italy, or even Germany, where in one week cases (tested) rose from 66 to more than 1000). So out of economic necessity and to avoid personal economic devastation, they continue to work. But that doesn’t have to be.

US Policy Response: No Help for Working Class

US policy has been, is, and will continue to be a disaster. Trump’s cuts to health and human services in the past seriously hampered the US initial response. Tests had to be sent to Atlanta and the CDC for processing. Early test kits often failed. Only now are they getting to the states–to late to have a positive initial effect on the spread. Those suspected of exposure to others confirmed infected were simply sent home for ‘voluntary quarantine’. Initial legislation of $8.3 billion just passed by Congress provides for ‘reimbursement’ for voluntary testing, with no clarification if that covers the $1,000 hospital visit as well or just the cost of the actual test!

There could be, however, a government response that financially supports workers and allows them to be properly tested and treated.

An Alternative Policy Response

Why doesn’t the government simply say ‘go get tested for free’ and the hospital will bill the government for the costs? Not the worker pay up front with money he/she likely doesn’t have. Why isn’t there emergency legislation by Congress or the states to require employers to provide at least 14 days of paid sick leave, like other countries? And law guaranteeing employers can’t fire a worker sick with the virus for any reason? Or tax credits to working class families for the full cost of child care–paid to a nanny or to the worker–if they have to stay home in the event of a school district shutdown?

While business-investor tax cuts will almost certainly be the official government response, few of the above measures for working class Americans are likely. In America working class folks always get the short end of the economic stick. Congress and presidents pass trillions of dollars in tax cut legislation ($15 trillion since 2001 to investors, businesses and the 1%), but have raised taxes on the working class. Companies with billions of dollars in annual profits pay nothing in taxes–and actually get a subsidy check from the government to boot. Just ask Amazon, IBM, many big banks, pharmaceutical companies and more!

It can be expected the virus will have a large negative impact the standard of living and wages of millions of working class families. They will have to bear the burden of the cost with little help from their government. Meanwhile, businesses and investors will get bailed out, ‘made whole’, once again. In the process Consumption spending–the only area holding up the economy in 2019–will take a big hit. That means recession starting next quarter is more than a 50-50 likelihood.

In fact, the investment bank, Goldman Sachs, has just forecast that the effect on the US economy in the coming second quarter of this year will be a collapse of GDP to 0% growth.

Dr. Jack Rasmus
March 8, 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. He blogs at jackrasmus.com, tweets at @drjackrasmus and his website is http://kyklosproductions.com where his various public talks and TV interviews are available. He hosts the Alternative Visions radio show on the Progressive Radio Network every friday at 2pm eastern time.

How will the current stock market and other financial asset markets’ collapse (e.g. oil & commodity futures, currencies, junk bond-leveraged loans, etc.) potentially lead to a financial crisis and credit crunch that produces a deep recession? What are the causation and transmission channels? Listen to my Alternative Visions radio show of March 6 and the discussion on how the global economic contagion effects of the virus could lead to the above scenario. (Also, listen to my summary analysis of the recent Democratic primaries from Nevada to South Carolina to Super Tuesday this past week & why the Democrat Party is in deep trouble).

TO LISTEN GO TO:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Dr. Rasmus comments on the continuing fall in financial markets and how that may prove a contagion channel to the real economy and recession. Why the Fed’s .5% rate drop earlier this week had no effect at all on the stock market implosion, continuing to this day. Worst since 2008. Why other financial asset markets (oil, commodities, currencies, etc.) are also contracting sharply. How financial asset deflation can translate into US junk bond, BBB bonds, leveraged loans, Repos, and derivatives financial problems. How the latter propagate then to the real economy via a credit crunch. Rasmus explains why monetary policy solutions are dead in the water. What’s coming possibly this weekend and next in fiscal (tax, spending) responses by US and other government. Rasmus reviews the 4 channels of coronavirus contagion to the real and financial economy (supply chains, demand, asset deflation, currency devaluations). The show concludes with an analysis of this week’s ‘Super Tuesday’ and the now more clearer evidence of Democrat Party leaders and financiers’ strategy to stop Sanders. How this may lead to an irrevocable split in the Democratic Party and defeat of Biden should he become the nominee (now likely). For analysis of the primaries, read Dr. Rasmus’ just published print piece, “Super Tuesday and the Irrevocable Split in the Democratic Party’ on this blog, jackrasmus.com).

Listen to my short interview today, Friday, March 6, with Loud & Clear radio on the virus impact on the US economy and the difficulties, loss of income, employment, etc. by many workers if they are told not to show up at work or can’t do so due to illness. If major quarantining starts in the US (as in China, So. Korea, Japan, Italy), the income impact on consumption and the economy will prove significant–adding to the negative economic impacts due to supply chain disruption and fall in demand for travel, hotels, restaurants, etc. already underway.

TO LISTEN TO THE INTERVIEW GO TO:

https://www.spreaker.com/episode/23578204

Listen to my 15 minute radio interview earlier this week on the Fed’s .5% interest rate cut flop and its failure to stop stock market collapse in the US. Why interest rate policy is ‘dead in the water’. Watch for fiscal policy as more tax cuts (with no effect on real economy either except housing). The virus as precipitating cause of the US current slide into recession, now around the corner.

TO LISTEN GO TO: https://mail.google.com/mail/u/0/#inbox/FMfcgxwHMGFhRBRhwtLtBmKxkLtmvmph

As the voting this evening, March 3, comes in from the fourteen states conducting Democrat Party primaries already the ‘takeaways’ are evident.

The first is that the last minute dropping out of the primary race by Pete Buttigieg and Amy Klobuchar—and their immediate endorsement of Joe Biden—has had its obvious strategic effect. Their votes clearly went to Biden. That was perhaps most evident in Klobuchar’s state, Minnesota, where Sanders was expected to win.

The Buttigieg-Klobuchar Maneuver

Both Buttigieg and Klobuchar entered the race, one might argue in retrospect, to test how far they could drag potential voters from Sanders. Buttigieg the youth and the gay vote. Klobuchar the female vote. Neither were able to chip away much, if any, of Sanders’ support. So when it was clear they had little chance of doing so, they quickly dropped out right before the Super Tuesday primaries and threw their endorsement, organizational support (and their financial backers’ funding?) to Biden.

If anyone believes their decisions were isolated and unrelated individual acts that had nothing to do with encouragement by the Democratic Party leadership, including Obama, Pelosi, Shumer and their own moneybag financiers, then they are deluding themselves. The timing, coordinated exits, and endorsements of Biden were not merely coincidental. Having done their ‘party duty’, they now will no doubt now be nicely rewarded in their future careers by the party’s organization and campaign contributors.

But you didn’t hear much of this kind of analysis if you listened to MSNBC, CNN, or the other media mouthpieces of the establishment, centrist leadership of the party. Why anyone continues to refer to the Democratic Party as ‘liberal’ or even as an independent party, is amazing. More accurately, it should be understood as the ‘globalist wing of the Corporate Party of America’. The other wing of the Corporate Party of America is the Republican. Correct that, today better called the ‘Trumpublican’ party. The policies of either wing of the Corporate Party of America for the past 40 years have been very similar and no less pro-business.

Warren Loses Massachusetts & Her Days Are Numbered

A second obvious takeaway from today’s Super Tuesday event is that Elizabeth Warren failed to win even her home state, Massachusetts, which went to Biden. Warren’s so-called progressive votes would have gone almost totally to Sanders, had she too dropped out. That would have easily given Sanders Massachusetts over Biden. Warren clearly has taken votes away from Sanders, not only in Massachusetts but everywhere on Super Tuesday.

To sum up in part then: Buttigieg-Klobuchar drop out and shift their centrist endorsements, support and votes to Biden; Warren stays in and diverts progressive votes from Sanders. Does anyone think this is all coincidental?

My prediction is that Warren will eventually drop out, but not before the Sanders-Biden contest concludes in the key swing states of Pennsylvania, Michigan, Wisconsin and a couple potential others. The dilution of Sanders’ progressive support full potential will have been achieved.

Biden Sweeps the South: So What!

A third takeaway is that Biden swept the southern states on Super Tuesday. No doubt about it. As in South Carolina, once again his vote margin was delivered by the over-35 black vote. The Democratic Party is so weak in the southern states that black voters comprise the largest plurality of their voting population in most of the states of the South. Older black voters went for Biden, while younger often went for Sanders. But the youth black vote was only a small percentage compared to the older black vote, typically around only 15% of the total black vote. Older black voters in the South tend to vote based on recommendations of their churches, community organizations, and black political leaders. In contrast, younger blacks are increasingly independent. But there weren’t as many of their numbers to offset, let alone overtake, the older black votes going to Biden. The youth black vote is there. But the Sanders organization still has much to do to organize, register, and turnout black youth to vote, and especially in the South.

Biden’s sweep of the South is largely irrelevant, however. These are states that Trump and the Republicans have solidly wrapped up. Decades of gerrymandering, voter suppression, and control of state legislatures and governorships in these states means no Democrat candidate, Sanders or Biden, is going to swing any of the ‘red states’ into the Democrat camp in the November 2020 election.

Thus Biden’s victories in the primaries in these states signifies nothing of import for the general election in November. But the party’s media wing make it sound like some great achievement that show Joe will sweep the South in the November election against Trump. Dream on.

The liberal, establishment media all night Tuesday have been hyping the story that Biden won in Virginia, in Tennessee, Arkansas and didn’t even show up to campaign there or spend money on TV ads. Doesn’t that show how strong a candidate Joe is, they echoed as if reading from the same tv monitor? No, it shows the Democrats are so weak in those states that the party organization’s recommendations mostly determine the outcomes.

Bloomberg’s New Choice: Fortune vs. Ego

What about Bloomberg? After spending more than $500 million of his own money (more than $70 million in California alone), he managed to gain voter support only in the mid-teens. Typically around 15% or so. Reportedly his own campaign manager has now urged him to drop out. Whether he does so will depend on whether he values more his ego or his dwindling fortune. He’s looks now more like the addicted gambler, chasing his money at the crap table or racetrack. IF one were to guess, however, it would be in favor of his ego. He could still accumulate enough votes of delegates to be a broker at the party’s convention.(Readers Note: A day after this publication Bloomberg dropped out and immediately endorsed Biden).

The Party’s Geographical-Generational Class Divide

Another takeaway is the Super Tuesday, 14-state contest shows the Democrat Party is divided geographically, as well as generationally and along class lines.

Sanders wins big in the west and northern New England. Biden in the South. But the most important geographically area—the area that will determine the electoral college outcome and thus the election—is yet to be contested. That’s the ‘swing states’ regional arc from Pennsylvania to Michigan to Wisconsin (and maybe a few ‘outliers’ like Arizona). As in 2016, that’s where the general presidential election will be determined. My guess is that Warren will stay in to continue to split the progressive vote there, to Sanders’ disadvantage, and drop out after. Bloomberg, on the other hand, may be convinced to drop out just before those primaries. Should he do so his votes will largely go to Biden. That will all but ensure Biden wins most of the delegates there, although that’s not foreordained either.

Sanders’ won big in the west, where the ‘older black voter’ factor and the Warren ‘split the progressive vote’ factor have not been significant. An interesting contest was the Texas vote. Sanders was slated to win by a small margin. However, the party establishment threw everything into Texas, including the political kitchen sink, as they say. They even got that once thought of left liberal, Beto O’Rourke, to endorse and stump for Biden. Like Buttigieg and Klobuchar, he too will no doubt be nicely rewarded by the party apparatus down the road for his next career political move. The lesson: beware of progressive sounding young political careerists on the make.

Movement vs. Party Apparatchiki

Sanders has rallied the youth vote, the Latino vote (youth and older), young black and other minorities, women and local unions to his banner. It’s a movement that’s growing. It hasn’t yet peaked. The question is will it peak sooner, or perhaps after the 2020 election cycle? In the west, the older crowd of voters still went for Biden. But unlike in the South, the youth vote-minority vote turnout in the west swamped the older voters. The movement there has arrived! Sanders’ movement more than offset Biden’s party apparatus. And the west, unlike the South, must be won by the Democratic Party in order to offset the electoral vote advantage of Trump and Republicans in their ‘red state’ bastions. It is futile strategy to try to retake the ‘red state’ South out from under Trump. Too late. Past Democratic Party timidity and meekness confronting voter suppression and gerrymandering has all but rendered that extremely unlikely. Better solidify the West, New England, maybe Atlantic States and win the swing states. But the latter will also take a movement. And without Sanders, the Democrats have none.

So Sanders wins the west, sections of New England, and the youth-Latino vote. Biden wins the South-older black vote. But the most important regional contest is yet to come: the swing states voting. That is determinative. And that will take more than Democrat leaders’ tired old strategies. And even tired old, same-o, same-o nominees.

When to Release the ‘Kraken’?

Sanders might have a fighting chance if the party’s nomination were determined by winning a simple majority of 1,991 delegates by means of winning caucuses and primaries. But it isn’t. The Democratic party leaders and financiers have made sure that their ‘ace in the hole’, should they need it, is their control over the 500+ so-called special delegates at their July nominating convention. The majority of these are Democrat members of Congress—representatives and Senators. And they will vote as the party recommends, with few exceptions. So even if Sanders wins in a sweep of the ‘swing states’ primaries coming up, even if he is far and away the holder of the largest plurality of delegates from the primaries, he will still be deprived of the party’s nomination in July at the convention, I predict, when the party leaders ‘release the Kraken’ (an ancient Norse sea-monster) of the 500 special delegates to vote for the party leaders’ favorite boy. And guess who that’ll be?

Why Biden Can’t Beat Trump

A final takeaway from Super Tuesday primaries is this: Biden’s win of the South is irrelevant, as was said. He can’t deliver those states’ electoral votes in the general election. Obama and the Democrats already lost that race back in 2010, when Obama’s failed economic recovery of Main St. resulted in an historic sweep by Republicans of the House & Senate, state governorships and state legislatures in dozens of ‘red states’ in 2010 and 2012-14. Gerrymandering and escalating voter suppression followed Republican capture of the red states. That now ensure that these states stay ‘red’. Second point: if Biden gets the nomination, Sanders movement supporters will not vote for him. They will stay home. The Democrats could lose several western states in that case, as well as the South. It then won’t matter if they win one or more northern ‘swing states’. Party leaders think all they have to do is hold the party together, convince everyone there’s no other choice but to vote for Biden (or Bloomberg). And just ‘turn’ the 70 electoral votes in the swing states that determined the electoral college win in 2016 for Trump. One must also add the strong likelihood that Trump will eat Biden’s lunch, as they say, in the TV debates before the general November election. Finally, one cannot discount Trump and Republican last minute dirty tricks. At the top of that list will be an ‘October Surprise’ in the week before the November election, in which something dramatic associated with Biden’s connection to the Ukraine—whether true or not—will be revealed by ‘Trumpublican’ dirty tricksters. The Democrat Party establishment will not be able to respond in time to negate the effect of the revelation.

The Party’s Coming Irrevocable Split

In short, a badly split Democrat Party, should Sanders be cheated out of the nomination (again), will undermine it during the last stage of the general election in November; Biden will almost certainly come off badly in the TV debates; and the ‘Trumpublican’ practice of winning by any means necessary, even if it means destroying what’s left of American Democracy, will together result in another failed strategy and attempt by the Democratic Party leadership to defeat Donald Trump.

Biden is not ‘more electable’ than Sanders (who by the way leads Trump in scores of independent polls). Biden’s electability is a gross myth peddled by the Democrat establishment’s media mouthpieces. Biden is maybe the least electable. Even Bloomberg would stand a better chance. (But then, there’s really little difference between Bloomberg and Trump, except for the latter’s foul mouth, bad manners, nasty tweets, and predilection to run roughshod over the US Constitution. Otherwise they’re both billionaires who in the end support billionaires).

So it seems the Democratic Party is at a real crossroads: Its corporate friendly leadership is doing all they can to maneuver on multiple fronts to deny Sanders the party’s nomination. Not just primary campaign maneuvers, convention delegate maneuvers, pushing fake messages like Sanders isn’t electable, or would lose ‘down ballot’ seats in Congress, and red-baiting Sanders’ FDR-like reforms (it’s not a revolution folks), labeling Sanders a radical ‘socialist’ (i.e. a Republican theme by the way), and raising trial balloons by some of the party’s major fundraisers who are declaring they would vote for Trump if Sanders were the nominee. (What they really mean is they would vote to keep the big investor tax cuts Trump gave them rather than let Sanders take their tax cut largesse away!).

The party’s leaders and strategists are so intent on denying Sanders the nomination that they would risk splitting the party and driving youth of all kind out of the party. If so, it could very well mean the beginning of the end of the Democratic party come November, a process by the way that would accelerate if Biden then loses the election.

Biden would be a replicant of Obama in terms of policy, albeit a tired and uninspiring version of the latter. But the outcome would be the same as under Obama for millennials, GenXers, and now GenZers. No solutions to their crises in employment, low pay, crunching student debt, unaffordable health care and cost of education, lack of decent housing, racial discrimination, indignation of the growing obscenity of super wealth accumulation by the few as they struggle for basics, and fear of a climate crisis out of control for them and their children. For the apparent generational divide within the Democratic Party is one and the same an economic divide—i.e. a matter of class.

It is unfortunate that Democrat leaders are so myopic they only see the coming general election with blinders on. Deny Sanders and they split the party, not just in November but after; allow Sanders as nominee and they give up their corporate-funded control of the party, its programs, and its policies they’ve had since 1992 with Bill Clinton. So they are talking themselves into the fiction that, even if they deny the nomination to Sanders, his supporters and movement will have ‘no where else to go’ but to fall in line behind Biden. But they do have somewhere to go: they’ll sit home. And then they’ll perhaps go out and organize a party independent of today’s Democratic Party.

Joe Biden’s nomination will not only mean failure to defeat Trump, but may mean an irrevocable split in the party itself.

Dr. Jack Rasmus
Copyright 2020
March 3, 2020

Dr. Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January, 2020. He blogs at jackrasmus.com. His website is http://kyklosproductions.com and twitter handle, @drjackrasmus, He hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network out of New York.

What are the political ‘takeaways’ from yesterday’s South Carolina primary?.

None that change the fundamental dynamics that have in play throughout the primaries in general thus far to date.

Biden bought himself some time, at the expense of Bloomberg and the other mainstream candidates like Klobuchar, Steyer, and Buttigieg.

Steyer & Buttigieg Drop Out

Although having come in third, Tom Steyer announced first thing next day that he’s dropping out of the race.

Then, in a bombshell of sorts, Buttigieg announced his departure from the race today as well. It was strange that he reaffirmed early in the day his intent to stay in the race to the end. Then, at day’s end, abruptly announced he was dropping out. What’s behind the about face? Most likely, the dozens of billionaires who began footing Buttigieg’s campaign bill in December decided to pull their funding at mid-day. Was it just because the boy wonder from Indiana had no chance of winning the nomination? That was true from the beginning. It’s always been hard to imagine how a small town Indiana mayor of 38 could ever be a real candidate.

Buttigieg was kept in the race this far, funded by the three dozen or so billionaires, in order to pull the youth vote from Sanders. Or so it was possibly reasoned. Having failed that, the moneybags today, a day after South Carolina, decided to stop writing him checks. It is likely their decision was also to refocus money to Biden, now that South Carolina injected some life support into his campaign.

The money moves around, as it bets on the next possible long shot, or as the strategy of the moneybag wing of the Democrat Party shifts from splitting Sanders delegate votes in the primaries to concentrating the money game on the horse they think best to beat Sanders. Bloomberg doesn’t need the funding…yet. So the money shifts from Buttigieg to Biden.

Klobuchar Next!

Expect the same to happen within days, perhaps hours, to the other ‘centrist’ female candidate intended to shift votes from Sanders based on gender, rather than youth. Amy Klobuchar will go next, and quickly. Not much else to say about that.

Biden Taken Off Political ‘Life Support’

Biden had to win by a large margin. He did, with around 48% to Sanders’ 21%. All the rest falling far behind, including Bloomberg and, even further, Warren.
Biden’s last minute surge can be attributed to the ‘pull out the stops’ by the Democratic party leadership and the moneybags behind them. On the surface this was reflected in the various last minute endorsements from the Party elite, from outside the state as well as within by leading black political leaders in state.
Older black voters in South Carolina (and true of much of the South) tend to follow the recommendations of their black politicians, community leaders, and churches. Younger black voters not so much. While that phenomenon is typical of the South, it is less so of other states. It won’t be repeated significantly in California, New York, and elsewhere. Biden won’t have any black vote in his pocket beyond South Carolina.

The important point about the South Carolina black vote, which comprises 60% of all Democrat voters in South Carolina yesterday, is that Biden won most of the over-35 black vote. But Sanders won a clear majority of the under-35 black vote. That youth black vote in South Carolina made up only 18% of the potential black vote. So it was an older generation of blacks that dominated the total black vote and voted for Biden. Sanders reportedly won the 18% under-30 black youth vote.
That divide within the black vote in the state may suggest that the churches, community organizations, and black political elite in the state may be losing hold on the younger voters. That may be the takeaway. (Latinos in the state make up only 3% of all Democrat eligible voters, so Sanders’ support there made little difference).

Another takeaway is that the analysis of the black vote and Biden’s margin of victory shows is that the main dynamic in play throughout the Democratic primary season continued in South Carolina despite Biden’s win: i.e. Sanders continued to rally the ‘youth’ vote behind him–including blacks, Latinos, and others; in contrast, Biden’s support derived from the older crowd. It’s reflective over all of a major youth-not youth division within the Democrat party that may, in the end, sink it. For the party leadership is clearly aligned with the older voter than the younger

Generation v. Class Divide (Or Both?)

On the other hand, that there is a major ‘generational divide’ within the Democratic Party may be more appearance than essence. The South Carolina black youth v. black elders split—a reflection of a similar generational divide elsewhere in the country—may actually be covering up something more fundamental. It may all appear generational, but the real divide is economic and class. Working class youth, students, and young adults vs. a mix of older, better well off middle age boomers-silent generation voters, many of whom are not working class unlike the youth who are virtually all so.

Black, Latino, or white, the youth movement behind Sanders is overwhelmingly working class: whether low-paid employed, underemployed working multiple jobs, or student.

They are the millennials, the GenXers, and now GenZers, who have been, and continue to be, devastated by economic policies that have been in effect from Obama through Trump, and now intensifying under the latter.

They carry most of the economic burden of low paid, no benefits, no job security service jobs. They are the vast majority of the uninsured, or trying to get by on bare bones Medicaid coverage, or who manage to obtain some lower cost ACA coverage (in some states) albeit with $1,000 or more deductibles. They are the new class of the indentured working class, with student debt totaling more than $1.6 trillion. They are the most heavily burdened with accelerating rental costs, having to triple and quadruple up together to share apartments, or else return home to parents, to secure accommodations. The thought of home ownership isn’t even on their imagination radar. They are the students who are sleeping in their cars, frequenting community food banks, or even ‘dumpster diving’ outside restaurants to make ends meet. They are the hundreds of thousands of ‘Dreamers’ who have virtually given up on either party allowing them US citizenship. They are inner-city youth hustling by whatever means necessary to get by day to day and week to week. They are the millions who have graduated from college and can’t find meaningful work that pays the bills—let alone the exorbitant interest charges on their student loans.

Formerly cynical or hopeless, they are the heart of those flocking to the Sanders movement. And it is not race or gender or other difference—easily manipulated by media and politicians—that drive their attraction to Sanders. It is economic. For them it is about someday maybe getting real affordable medical coverage, or relief from the crushing weight of student debt, or access to affordable education, or ending the prospect of being locked in for a lifetime of minimum or below-minimum wages, or being able to assume an independent adult existence. And Sanders’ ‘Green New Deal’ offers the hope at least of turning around the growing climate crisis and a world in which they and their children will almost certainly have to pay a high price in which to live.

That is the meaning of the fundamental dynamic behind the primaries, and indeed the election of 2020 in general. South Carolina’s primary and the win for Biden hasn’t changed that.

Hey, Red-Baiting Works!

Another immediate ‘takeaway’ from the South Carolina primary is that Democratic Party leadership will now conclude that bashing Sanders as ‘socialist’, unelectable, incapable of ensuring ‘down ballot’ Congressional victories, or similar scare tactics works. They’ll now conclude such charges helped put Biden over in South Carolina. And those big donors who threatened publicly to vote for Trump if Sanders was the nominee will also believe their threats worked. That means Sanders can expect even more intense bashing during Super Tuesday and after; and we can expect even more threats of big campaign donors bolting from the party in the general election from Super Tuesday contests to the Party convention in June.

Bloomberg Unfazed

Although the immediate fallout from South Carolina is Tom Steyer and Buttigieg, Bloomberg was only superficially wounded. Mike has billions of bucks to buy the best and quickest political medical repair to his campaign. He’ll conclude that South Carolina is an ‘outlier’ primary with little significance to other state Super Tuesday primaries coming up. In that he’s correct.

It remains to be seen this coming week, and Super Tuesday, how much South Carolina has impact the campaigns of Warren. For reasons having to do with the unique black vote in South Carolina noted previously, South Carolina’s outcome signifies little for her campaigns as well. However, if she doesn’t perform at or near Sanders’ totals—which is highly unlike—she’s the next to go sometime between Super Tuesday and June convention.

Warren vs. Bloomberg (Or Is Sanders?)

What became very apparent in the pre-South Carolina Primary debate last wing was Warren began attacking Sanders even as she continued her telling critique of Bloomberg. Warren can’t move ‘right’ and peel away votes from either Biden or Bloomberg. She may accrete some votes from Klobuchar but that’s insufficient to make a difference. Watch her therefore turn her critique more toward Sanders during Super Tuesday, especially in states like California. But her problem strategically is she’s like Poland—caught between Russia and Germany. And the battle between the two real contending forces will soon run her over. She may last longer than Pete, Amy and Tom. But not much.

South Carolina: All ‘Sound and Fury, Signifying Nothing’

The obvious takeaway always there is that South Carolina means next to nothing for the general election. The Democrats, whomever their nominate, stand no chance whatsoever in getting the electoral votes in Republican South Carolina.
The same applies to most of the other southern ‘red states’, which are now locked into the Republican camp due to years of successful gerrymandering and voter suppression that went un-confronted by Democratic Party leadership under Obama. And that means a lock-in for Trump in the electoral college from those states. A couple ‘long-shot’ possible exceptions may be Virginia or Florida (a longer shot). But Democrats can forget North Carolina and Texas where they’ve been dreaming of possible general election upsets.

The election will still come down, as in 2016, to the swing states of Pennsylvania, Michigan, Wisconsin, Minnesota, Iowa, and maybe Arizona. The general election will be determined there, as it was in 2016. And it was Hillary Clinton’s virtual abandonment of working class voters in these states that ‘turned’ the 70+ electoral votes to give Trump victory in 2016. To repeat that: working class votes.
So the story is who best—Biden, Bloomberg, or Sanders—can turn out enough youth, under-35 working class voters to offset older, more comfortable voters, non-working class and older working class, staying with Trump in 2020. I’m referring to those ‘comfortables’ who have benefitted from Trump’s massive $4 trillion plus business-investor tax cuts, from the record $1.2 trillion a year in stock buybacks and dividend payouts under Trump in both 2018 and 2019, those who shared some crumbs from the lion’s share subsidies from Trump’s $28 billion dollar direct subsidies to big Agribusiness, from Trump’s ‘green light’ to big Pharma to continue to gouge consumers, from the $300 billion increase in defense goods government purchases, and from the deregulation of bankers, insurance, coal, oil and other climate crisis contributing companies.

What matters is who can turn out the working class and youth vote in the swing states? Not in South Carolina. Is it Sanders, or the candidate of the Democrat Party leadership, big donors, and moneybags? That’s still likely Bloomberg, although Biden may surprise now that big money is flowing his way again as well. And the other ‘centrist’ candidates—Buttigieg, Klobuchar, Steyer—are being defunded and pushed out of the race to concentrate votes in favor of Biden or Bloomberg.

But Sanders may not even get the chance. Already pressuring is building within the party to commit the 500 plus Special Delegates held in reserve by the party leaders, to be released on the second ballot of the upcoming party convention in Milwaukee on behalf of the party leadership’s preferred (read: corporate) candidate. That’s still likely to be Bloomberg. Bets are Biden won’t replicate his ‘special case’ South Carolina victory. And, except for Sanders, the rest of the field are already ‘has beens’ and ‘also rans’. They’ll drop like flies, one after the other, in the wake of Super Tuesday and the run-up to the June party convention.
And, should Sanders’ momentum continue through Super Tuesday, don’t rule out the party releasing Super Delegates (who are mostly Congressional representatives and Senators) before the convention. But before that we’ll hear the party big guns come out against Sanders—Bill Clinton and Barack Obama and, if necessary, Pelosi and Shumer.

And that will be the death-knell of the Democratic Party as we know it.

So from this point on the race is Sanders vs. whoever prevails in the ‘race within the race’ between Biden-Bloomberg.

Dr. Jack Rasmus
Copyright March 1, 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. He blogs at jackrasmus.com. His website is http://kyklosproductions.com and twitter handle, @drjackrasmus.

Listen to my analysis of this week’s record collapse of US and global stock markets. What’s the impact on the global and US ‘real’ economy? Is the Recession here? (Globally yes, per Goldman Sachs research announced today).

TO LISTEN TO MY SHOW GO TO:

http://alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

The big news of the past week is the collapse of global stock markets, now having fallen by nearly 15% and continuing. Dr. Rasmus explains why, and why such a fast rate of contraction—comparable to what happened in 2008-09. Also, an update on the various ‘channels’ by which the virus impacts stock and other financial markets, and in turn how both propagate by means of various channels to the ‘real’ US and global economy. Discussion next examines the weak state of the US economy in fourth quarter 2019, driven by ‘weak’ indicators like inventory build up and faster fall in imports than in exports. Why business investment, manufacturing, commercial building are all falling, and why the household consumer spending picture is especially weak for the middle class and below. How the virus effect will depress the real US economy in coming weeks. A review of the rest of world economies’ markets and emerging recessions. Dr Rasmus concludes with a review of the lack of preparedness and reporting of actual virus cases in the US, especially in California. Why there are essentially no virus test kits now available. Will consumer panic buying in Hawaii soon spread to California and elsewhere?

Tonight, February 25, 2020 the Democrats held their 10th debate on the eve of the South Carolina primary this coming weekend. It’s also the last debate before next week’s Super Tuesday string of primaries held in 14 states.

A lot was riding for several candidates on stage tonight in South Carolina. Some of them will not be around for the debates to follow Super Tuesday, when 37% of the 1,991 delegates to the Democratic Party nominating convention will have been chosen. That 1,991 does not count, of course, the more than 500 special delegates the party’s leadership are holding in their back pocket until the convention. That number will decide the outcome and the party’s nominee for president—not all the trappings of democracy in the primaries—i.e. the debates, the primary voting, the multi-millions spent on ads, etc. That’s how democracy is and will be determined in the Democratic Party: the leaders will decide at the convention when they play their ‘special delegates’ card—none of whom will have been voted on by the party rank and file members in the primaries. Most of the 500 are Congressional Democrats and we know how they’ll vote when Pelosi and Shumer tell them.

Tonight’s debate showed the desperation of several of the candidates, especially Buttigieg, Klobuchar and Steyer. All will be gone, I predict, and drop out of the race before the convention in June in Milwaukee.

So too may Biden implode, should he under-perform against Sanders in the South Carolina primary this weekend. And that looks increasingly likely to happen, as Sanders’ support continues to grow amongst under-40 year old African-American voter group. Everything rides for Biden on the black vote in South Carolina, which comprises 60% of the eligible democrat voters. A close second by Sanders will spell the end of Biden’s campaign.

The eventual, and inevitable, departure of Buttigieg, Klobuchar and Steyer from the race by April will leave Sanders, Bloomberg, Warren (and maybe Biden) still in the race, up until the convention.

Buttigieg-Klobuchar Contra Sanders

So it wasn’t a surprise to watch Buttigieg-Klobucher (plus Bloomberg) go after Sanders with repeated slanders about his being a ‘Democratic Socialist’. The real emphasis was on Socialist, of course. Buttigieg and Klobuchar led the attack, especially the boy mayor from small town Indiana.

Buttigieg’s attack centered on the party leadership’s main talking point—now being spread wide and far in the party’s media wing (MSNBC, etc.): i.e. that a Sanders ticket would mean the loss of swing districts in the swing states in the House of Representatives and seats in the Senate. Without a Congress, even if Sanders won, he couldn’t achieve anything, Buttigieg argued.

This is an argument to bypass the fact that Sanders is polling ahead of Trump in 47 polls to date, and is clearly the strongest debater to take on Trump. Buttigieg may have had another motive in mind by making the defend Democrats in Congress point. He may have been pandering to the 500 special delegates, most of whom are seated House Reps and Senators. Or, maybe even laying some groundwork for a future run for a House seat. He and his billionaire backers certainly know that a 38 year old white boy mayor from Indiana could never become president! He’ll be well rewarded by the party in 2022 for leading the attack on Sanders.

In the post-debate CNN political commentary by so-called expert ‘talking heads’, even Van Jones, a black Democrat party activist and one of the more savvy and intelligent in the crowd, admitted Sanders would likely be the only candidate tough enough to debate toe to toe with Trump. Jones knows what’s going on in the grass roots in South Carolina. While he wouldn’t say it outright, he implied at times that the Sanders candidacy is the only one backed by a social movement and that shouldn’t be underestimated.

And can one even imagine a Bloomberg vs. Trump, or Biden vs. Trump, and, even more so a Buttigieg v. Trump debate before the election? Trump would eat the two ‘oldsters’ for lunch, given their timid debating skills. And Buttigieg? He’d have a field day, as they say, belittling and lecturing the kid from Indiana. It would look like a stern dad chastising his errant boy. Or how about Klobuchar debate going head to head with Trump? Really?

After raising the ‘down ballot’ talking point, Buttigieg then moved on to a standard red-baiting attack on Sanders. He accused Sanders of praising Fidel Castro and Cuba. Then ridiculed Sanders as being stuck in the past of ‘revolutionary politics of the 1960s’, of not being a real Democrat, and an extremist choice voters would reject. When the moderator then gave Sanders the opportunity to answer, Buttigieg continued to talk over him during Bernie’s entire response in an obvious cheap attempt to drown him out.

Klobuchar’s red-baiting of Sanders was more direct. She just flat out said that a socialist on the ticket would mean no choice for the ‘real’ Democrats in the middle. She repeated the socialist charge on several occasions. And attacked his Medicare for All plan which she grossly misrepresented by saying it would cost $60 trillion and thus three times the size of the entire US GDP.

Not to be outdone, Bloomberg early chimed in repeating the past week’s media message that Russia was again interfering in the election and undermining Democracy in America by supporting Sanders, since they (Russians) believed he, Sanders, would be the preferred candidate for Trump. That’s the line floated by an unknown ‘intelligence expert’ in the US bureaucracy, for which there was absolutely no evidence provided to back up the claim. Even the bureaucracy backed off from the line last week. But Bloomberg led with it.

It was disappointing that not one of the candidates, even Sanders, bothered to raise the point that the real threat to democracy in the US in recent years and today isn’t coming from abroad. It’s not the Russians or Putin. It’s not Xi and China. And certainly not Cuba. It’s home grown. It’s the massive and spreading voter suppression and gerrymandering going on at the state level, especially in Trump’s ‘red states’ political base. It’s what’s going on in Florida, Georgia, Arkansas, Ohio, Texas and elsewhere. And no one said a thing about it, drowned out by the media pushing more of the Russia and Putin somehow fooling us to vote for Trump!

Biden: Raises His Voice if Not His Chances

It wasn’t the only example of four candidates refusing to follow the time limits to comment, raising their voices, and talking over each other. There were similar shouting matches. For example Biden v. Steyer, when two old white men argued over who did more for imprisoned blacks.

Joe Biden’s performance was an improvement over his past dismal efforts, in volume of voice if not content. Joe talked it up, not saying much he hadn’t but perhaps saying it more loudly. How could he not do better? The bar of prior performance was quite low. At one point he complained to the moderator he wasn’t being called upon enough and perhaps he should be more aggressive in demanding time. But, he added, he was a gentleman, the only one on the stage. Yeah Joe, just what we need: a gentleman in the White House! That’ll make everything right.

Bloomberg: Warren’s Punching Bag (Again)

And what about Bloomberg’s performance, in his second debate? The bar was so low after his disastrous effort in his first debate last week that it wouldn’t take much to have ‘done better’. Some commentators thought he did marginally better, but still poorly. It was like a guy who got knocked out in the first round (last debate) and, this time, gets knocked around the ring several times but manages to stagger back from the ropes.

The slugger who pummeled Bloomberg was again Elizabeth Warren. She leveled a devastating ‘one-two’ punch by telling everyone how Bloomberg funded right wing Senator, Lindsay Graham’s (of South Carolina) last election; then how he helped elect the infamous governor of Michigan, who did nothing about lead poisoned drinking water in his state. Bloomberg gave him a $3 million donation. Warren added how Bloomberg had repeatedly financed other Republicans and right wingers. The message was clear: if anyone on the debate stage was not a Democrat, it wasn’t Sanders; it was Bloomberg.

If Bloomberg himself was a bad joke in his first debate, in this his second he was the repeated maker of bad jokes. What the hell did he mean about ‘naked cowboys’ in New York? I still don’t understand that one.

Bloomberg tried his best to explain his case in a repeated shout fest with Warren over his non-disclosure agreements with abused women in the past, reporting his tax returns (the only candidate not having done so yet), and his views on housing red-lining in New York. But what we got to hear, several times, was that he ran New York, which was bigger than most countries in the world; therefore he could run the USA. It was like an automaton: pushed the button and out came his New York mayor history and how New York was bigger than most of the world (an arrogance shared by many New Yorkers, by the way, including the Donald). His answer to Warren’s new charges was simply to brush them off as a “side show” and irrelevant. The only thing that mattered was he, Bloomberg, was the only candidate that could be Trump. And by implication, the rest of them were there as ‘show’—perhaps indirectly suggesting he knows something we don’t about eventual outcomes!

Warren Attacks Sanders’ Medicare Plan

When not attacking Bloomberg or Sanders, Warren once again tried to tug at our ‘heart strings’ with her constant stump story of her modest up-bringing, her family’s difficult fortunes, her three brothers in the military, and how she was discriminated against as a women in getting employment.

But her new ammunition was leveled at Sanders this time around, not just Bloomberg. She declared she had a better Medicare plan than Sanders since he has not explained how he would pay for it, which of course is not true. (Admittedly, in the debate Bernie did not have sufficient time to explain. What he therefore needs is a more simple, 3 or 4 point financing explanation that can be delivered in one minute). As others had done repeatedly during the debate, Warren kept talking way over her time limit and attempting to drown out Sanders’ attempt to explain. The moderators let her go on, to Sanders’ disadvantage.

Thus Warren, Klobuchar and Buttigieg thus now appear to have closed ranks attacking Sanders’ Medicare for All proposal.

If Buttigieg & Klobuchar appeared desperate and led the charge against Sanders’ socialism (with Bloomberg tagging along), Warren tacked left and right against Bloomberg then Sanders just as desperately trying to differentiate herself. But none of them will likely do well in South Carolina. Steyer was mostly the odd man out, except for his exchange with Biden, and his indirect plea that neither Bloomberg or Sanders can win. Like the other ‘centrists’ he wistfully suggested the extremes were not really ‘Democrats’ but he was. In that he echoed the centrist position, a position which none of those in the center understand is sliding away like loose sand beneath their feet. For the ranks of Democrat voters no longer want a ‘center’

Why Sanders is Leading the Race

Sanders understands this ‘disappearing center’ dynamic better than did the others on the stage. He held his ground. Like a slugger in a boxing ring, he took some hits but continued to punch away, left and right, at his long standing positions: tax the billionaires, ensure health care for all that only Medicare can deliver, free public college tuition, relieve student debt, raise minimum wages, pay living salaries to teachers, and so on.

He acknowledged his past comments on Cuba as only defending its obvious gains in literacy and healthcare, which was no more than Obama did, he argued. He did not back off from them or deny them. Even as he took swipes at China and Russia, arguing in effect he was more ‘democratic’ than ‘socialist’.

But there was no desperation in his delivery, unlike some. He did not shout out, trying to look tougher (like Biden). He did not talk over others (like Buttigieg, Klobuchar). He did not attack Warren in response. He did express his positions with feeling (unlike Bloomberg). He presented the picture of ‘what you see is what you get. I’m not backing off my positions’. And he repeated several times what the others still don’t understand: there’s a movement building. If we can organize and turn out more of the vote of the more than half of eligible voters in America who don’t vote because they see nothing in it for them—then he can win!

Sanders is the candidate that voters know what he stands for. He’s the candidate of programs and proposals. That’s his great, differentiating appeal. He’s not the candidate of critiquing and picking apart others’ proposals. Anyone having watched the debates sees that. In contrast, other candidates in the debate(s) spent more time talking about either what they had done in the past or directly attacking Sanders’ proposals. But what they stand FOR in the future is not always clear.

Except for Warren’s wealth tax and program for Medicare, it’s hard to recall from the debate what the other candidates actually propose for the future—apart from platitudes and ‘look what I did in the past’! Look what I did in New York (Bloomberg). What I did as VP under Obama (Biden). What I did as mayor (in South Bend). What I did as Senator from Minnesota (Klobuchar). What I did while a businessman (Steyer). But that doesn’t cut it any more with voters—especially youth, millennials, GenZ and even GenXers, with minority youth, and underpaid and nearly hopeless young workers.

American voters in this election cycle appear to want to know ‘what are you going to do for me’, now and in the future. Spell it out in detail. Millennials want to know how they can get out of low paying, dead end jobs and pay for their mountain of student debt; black and latino youth how to get the police and La Migra off their backs; all young people how they can afford an education; suburban moms whether their kids will come home safely from school ever again; the homeless where can they live besides on the streets; the retirees whether their social security and pensions will be taken away; the middle class why their incomes are not rising when the 1% are getting so rich; why they can’t afford prescription drugs and housing any more; and everyone is worried about the costs of hospitals, doctors, and dental care.

Sanders appears as the candidate most focused on these issues. Not on ‘what I did when’. Not on tearing down the (few) proposals of other candidates. Not on slandering them. Not on resurrecting what are, in fact, Trump-traditional Republican talking points—i.e. red-baiting, Cold war (Russians are coming) hysteria, and

While the Buttigiegs and Klobuchars turn to centrist Democrat party themes of the past; while Biden sleep walks in the present; and while Bloomberg resurrects Republican solutions for the future, Sanders appears authentic. Some may not want that authenticity—especially billionaires, corporations, and their media. But apparently youth, students, growing ranks of black and latino voters, and more and more rank and file union workers do. And that’s Sanders’ appeal and why they are flocking to him and creating a movement.

Jack Rasmus
Copyright February 2020

Dr. Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020. He blogs at jackrasmus.com and hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network. His twitter handle is @drjackrasmus and website: http://kyklosproductions.com