Hey, everyone, this is Ben Norton, and you are watching or listening to the Multipolarista podcast. I am always privileged to be joined by one of my favorite guests, Michael Hudson, one of the greatest economists living today. We’re going to be talking about the inflation crisis. This is a crisis around the world, but especially in the United States, where inflation has been at over 8%. And it has caused a lot of political problems. It’s very likely going to cause the defeat, among other factors, of the Democrats in the mid-term elections in November. And we’ve seen that the response of the US government and top economists in the United States is basically to blame inflation on wages, on low levels of unemployment and on working people.
With mass unemployment on the cards, many are comparing the current crisis to the Great Depression of the 1930s. In both cases, however, these crises were not 'accidental', but a product of capitalism's insoluble contradictions. Capitalism is entering into what looks set to be its deepest crisis ever. Although COVID-19 provided the trigger, a deep slump has been in the making for many years. With the stock market in turmoil, mass unemployment, and the perspective of a global depression, parallels are being drawn to the Great Depression of the 1930s – although even that may fall short as a parallel.
The US economy at mid-year 2020 is at a critical juncture. What happens in the next three months will likely determine whether the current Great Recession 2.0 continues to follow a W-shape trajectory—or drifts over an economic precipice into an economic depression. With prompt and sufficient fiscal stimulus targeting US households, minimal political instability before the November 2020 elections, and no financial instability event, it may be contained. No worse than a prolonged W-shape recovery will occur. But should the fiscal stimulus be minimal (and poorly composed), should political instability grow significantly worse, and a major financial instability event erupt in the US (or globally), then it is highly likely a descent to a bona fide economic depression will occur.
It is increasingly likely that things are about to get worse in terms of US public health. And as that happens, so too will the US economy experience a further negative impact from the virus. A second wave now emerging means not just a further decline in public health, but an eventual second wave of problems for the US economy as well. What a second wave all but ensures is that the US economic recovery will not be ‘V-Shape’ but will be ‘W-Shape’; that is, a W shape recovery characterized by periods of short and shallow GDP growth, followed by brief periodic economic relapses thereafter. These short, shallow recoveries and relapses may repeat and continue for years to come. Following such a duration of economic stagnation, a major threat grows that could usher in an economic depression perhaps even worse than the 1930s: should the economic stress building from weak, short and shallow recoveries—i.e. an extended deep economic stagnation for years to come—result in an inevitable flood of business, local government, and household debt defaults and bankruptcies, it will eventually overwhelm the financial system.
The Bank of England has warned the UK economy could, in the midst of the coronavirus outbreak, shrink by as much as 14% this year, which would be the biggest slump in 300 years. In the current quarter, the contraction to the national output of GDP could be as deep as 25 percent. Britain was already in recession, having contracted, the Bank suggested, by 3% in the first quarter. Covid-19, it explained, was "dramatically reducing jobs and incomes in the UK". The unemployment rate is expected to double to around 9%. The predicted contraction would be the sharpest since the South Sea Bubble of 1720 when stocks crashed. However, the Bank also suggests the economy could bounce bank next year, growing by 15 percent. In what it calls an “illustrative scenario,” it says this “incorporates a very sharp fall in UK GDP in 2020 H1 and a substantial increase in unemployment in addition to those workers who are furloughed currently.
The spin is in! Trump administration economic ‘message bearers’, Steve Mnuchin, US Treasury Secretary, and Kevin Hasset, senior economic adviser to Trump, this past Sunday on the Washington TV talking heads circuit launched a coordinated effort to calm the growing public concern that the current economic contraction may be as bad (or worse) than the great depression of the 1930s. Various big bank research departments predicting a GDP contraction in the first quarter (January-March 2020) anywhere from -4% to -7.5%, and for the current second quarter, a further contraction from -30% to -40%: Morgan Stanley investment bank says 30%. The bond market investment behemoth, PIMCO, estimates a 30% fall in GDP. Even Congress’s Budget Office recently estimate the contraction in GDP could be as high as -40% in the 2nd quarter.
Thursday’s jobless claims leave no doubt that the country is in the grips of another severe recession. More than 6.6 million Americans filed for unemployment insurance in the last week. That number exceeds the gloomiest prediction of more than 40 economists and pushes the two-week total to an eye-watering 10 million claims. According to CNBC: “Those at the lower end of the wage scale have been especially hard-hit during a crisis that has seen businesses either cut staff outright or at best freeze any new hiring until there’s more visibility about how efforts to contain the coronavirus will work. “We’ve lived through the recession and 9/11. What we’re seeing with this decline is actually worse than both of those events,” said Irina Novoselsky, CEO of online jobs marketplace CareerBuilder.” (CNBC) According to New York Magazine: “Economists at the Federal Reserve Bank of St. Louisprojected Monday that job losses from the coronavirus recession would reach 47 million and push America’s unemployment rate to 32.1 percent — more than 7 points higher than its Great Depression–era peak.”
We have been forced to choose between two terrible options: 1. Lock ourselves down to prevent the spread of the virus, resulting in massive job loss —while many vulnerable workers are still forced to work in unsafe conditions, or 2. Maintain some business as usual, stemming the economic impact but putting tens of millions of people at risk. It didn’t have to be like this. We could not have prevented the virus itself, nor the resulting loss of life altogether. But imagine if: Instead of cutting public health budgets and access to health care for decades, we had expanded it by enacting a single-payer health care system—an improved Medicare for All. We had community health centers that did low-cost preventive care, giving people the education and resources to stay healthy to begin with and making a much smaller share of the population at risk for dangerous disease.
The western media has been hit with warnings of “financial Armageddon” and the need for a “global hegemonic synthetic currency” to replace the collapsing US dollar under a new system of green finance. These statements have been made by former and current Bank of England Governors Mark Carney and Mervyn King respectively and should not be ignored as the world sits atop the largest financial bubble in human history reminiscent of the 1929 bubble that was triggered on black Friday in the USA which unleashed a great depression across Europe and America. While I’m not arguing that a systemic change is not vital to protect people from the effects of a general meltdown of the $1.2 trillion derivatives bubble sometimes called “the western banking system”, what such central bankers are proposing is a poison more deadly than the disease they promise to cure.
I was very pleased to see the New York Times editorial on November 1, 2019, Suicide Has Been Deadlier than Combat for the Military. As a combat veteran myself and someone who has struggled with suicidality since the Iraq war I am grateful for such public attention to the issue of veteran suicides, particularly as I know many who have been lost to it. However, the Times editorial board made a serious error when it stated “Military officials note that the suicide rates for service members and veterans are comparable to the general population after adjusting for the military’s demographics...
Is another “Great Depression” on the horizon? It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary. The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.” Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?”
Depression can be ontologically (way of being) embraced as a natural expression of empathy; a rational response to the present conditions of psychopathic Earth “leadership.” Choosing to embrace rather than resist so-called “depressed” thoughts and feelings opens a pathway to possible proactive thoughts, speech, and actions to transform present conditions to unpredictable and even unimaginable virtues. That is, if a human being is going to participate in the transformation of present Earth conditions, then it seems normal for most people to have reactions that may include shock, horror, denial, sadness, fear, rage, depression, and anxiety in becoming responsible (response-able) to Earth conditions when factually embraced. This is a temporary stage that those of us with experience observe often, and almost all of us have gone through ourselves. Initially painful reactions is a transitory phase to discovering openings for action in this condition. It also opens real-world exercise of religious/spiritual/philosophical self-expression for ontological peace within this condition.
Edward Herman and Noam Chomsky’s book title Manufacturing Consent derives from presidential advisor and journalist Walter Lippmann’s phrase “the manufacture of consent”—a necessity for Lippmann, who believed that the general public is incompetent in discerning what’s truly best for them, and so their opinion must be molded by a benevolent elite who does know what’s best for them. Starting in the 1990s—despite research findings that levels of the neurotransmitter serotonin were unrelated to depression—Americans began to be exposed to highly effective television commercials for antidepressants that portrayed depression as caused by a “chemical imbalance” of low levels of serotonin and which could be treated with “chemically balancing” antidepressants such as Prozac, Zoloft, Paxil, and other selective serotonin reuptake inhibitors (SSRIs). Why has the American public not heard psychiatrists in positions of influence on the mass media debunking the chemical imbalance theory?