Twenty-First Century Neoliberalism Is Failing – Where Do We Go From Here?
Stock markets around the world have become very volatile over the past few weeks with record losses. We are in a global recession, which could become a depression in the United States. Panic over the coronavirus and falling oil prices triggered the crisis, but economists have predicted this for some time due to high levels of corporate debt and artificial propping up of Wall Street. It was just a question of when. We speak with economist Jack Rasmus, author of “The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump,” about the current state of the economy and what we can expect from here. Rasmus posits that twenty-first-century neoliberalism is doomed to be highly unstable with rapid crashes and long recovery times. The system is going to change, but the direction it takes depends on what people do to demand a system that puts people before profits.
Jack Rasmus Ph.D Political Economy, teaches economics at St. Mary’s College in California. He is the author and producer of the various nonfiction and fictional workers, including the books The Scourge of Neoliberalism: US Economic Policy From Reagan to Bush, Clarity Press, October 2019; Alexander Hamilton & The Origins of the Fed, Lexington books, March 2019; Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression, Clarity Press, August 2018; Looting Greece: A New Financial Imperialism Emerges, Clarity Press, Sept. 2016; Systemic Fragility in the Global Economy, Clarity Press, January 2016; ‘Obama’s Economy: Recovery for the Few‘, Pluto Press, 2012, ‘Epic Recession: Prelude to Global Depression‘, Pluto Press, 2010, and ‘The War at Home: The Corporate Offensive from Ronald Reagan to George W. Bush‘, Kyklosproductions, 2006. He has written and produced several stage plays, including ‘Fire on Pier 32‘ and ‘1934‘. Jack is the host of the weekly radio show, Alternative Visions, on the Progressive Radio Network, and a journalist writing on economic, political and labor issues for various magazines, including European Financial Review, World Financial Review, World Review of Political Economy, ‘Z‘ magazine, and others. Before his current roles as author, journalist and radio host, Jack was an economist and market analyst for several global companies for 18 years and, for more than a decade, a local union president, vice-president, contract negotiator, and organizer for several labor unions, including the UAW, CWA, SEIU, and HERE. Jack’s website is www.kyklosproductions.com where his published articles, radio-tv interviews, plays and book reviews are available for download. He blogs at jackrasmus.com, where weekly commentaries on US and global economic matters are available. His twitter handle is @drjackrasmus.
Margaret Flowers (MF): You’re listening to Clearing The FOG, speaking truth to expose the forces of greed with Margaret flowers and Kevin Zeese. Clearing The FOG is a project of PopularResistance.org. You can subscribe to us on Apple, SoundCloud, Mixcloud Stitcher and Google Play. You can also find us at PopularResistance.org, and while you’re there check out the store where you’ll find Clearing The FOG gear like bumper stickers, t-shirts, tote bags and water bottles.
This week we interviewed Jack Rasmus, who’s a labor economist.
Kevin Zeeze (KZ): Yeah. Jack writes constantly on the economy. He’s predicted recessions accurately with a long record of that. It’s an earlier interview because we wanted to talk to him about this current recession, which was triggered by the coronavirus and the oil and gas war, but as you’ll hear it took us half the conversation before he even mentions those two things, and that’s because the fundamentals of the US economy are not sound.
MF: And so this week the stock market continues to be in huge trouble with sharp declines, requiring them to stop trading, you know, to halt it for 15 minutes using the circuit breaker to try to stem the panic.
KZ: It’s a tremendous drop and the FED is pouring money into the markets. It’s interesting that each time it’s done it’s led to a further decline because people are in panic. They don’t know what is going to happen next and they see the economy unraveling, and I think most of these people who are economic elites, you know, the investor class, realize that our economy is really a fake economy.
MF: And I think that people see that again who’s getting bailed out is the people at the top. Student debt has been a crushing problem in the United States for a while now. It’s up to 1.6 trillion dollars and is keeping people from being able to buy homes, by a vehicle, start of family… all the things that people would typically do to participate in the economy after college. And so people have been calling for that debt to be relieved knowing that It would be an economic stimulus from the bottom up. The government has not done that. But then what does the Fed do? They inject about the equivalent of all the student debt into the market last week and it still didn’t really solve the problem.
KZ: You give that 1.5 trillion to the students who are in debt, the whole generation. That would have any economic impact building the economy. And that’s really what we talked about in our newsletter this week at PopularResistance.org. We go into the economy and look at key aspects of it… consumer spending, ending corporate oil and gas, the shale oil and gas industry, the stock market, the financial markets. We look at all those and each one. Then what we point to is that we were heading to recession already because each one of those are artificially built up. Those are four major drivers of the economy, and they’re all flaws. When you hear political leaders say the fundamentals of the economy are sound, you gotta just shake your head and see these guys are lying to us. Or they’re ignorant. I think they’re lying to us and they know it, and that’s why the stock market is failing despite record amounts of money going into the financial markets. The FED is really spending incredible amounts of money despite that they know that their economy is flawed and was already fragile on multiple fronts.
MF: Right and the coronavirus is a big unknown right now. Of course, the United States failed to take the necessary steps early on to be able to contain the virus. If we had acted as China did and immediately started testing everybody, you know, screening people for fevers, testing anybody who had symptoms, isolating them, following their contacts, all the things that you do from a public health standpoint to try to contain infections… If we had done that we might be in a very different place, but it looks like the United States, where the number of cases is rising rapidly… I know last week when we did this show there were around 700. Now we’re well over 4,000 cases in the United States and those are just the ones that we know about. Testing is still a big problem. The Italians are warning us that we are just a few weeks behind where they are, and they’re in a situation now where their healthcare system, and they actually have a healthcare system in Italy, unlike the United States. We don’t have a real coherent system. . . . They’re having to make some very difficult decisions about how to best use their limited resources and not giving the resources to elderly people.
MF: They’re having to make that decision. And the United States doesn’t have enough hospital beds. We don’t have enough intensive care beds to handle things if this coronavirus peaks out the way that people are predicting that we may. You know… have forty to seventy percent of the US population infected, and that could be up to two million people dying from coronavirus in the United States.
KZ: And this could last more than a year. Can you imagine that? More than a year of convincing people… being told to stay home and not go to restaurants not go to movies, not go to sports events. But I’ll tell you one of the most interesting articles I read was an article in the Boston Globe by someone from Italy what he said what not to do. He told people about the horrible choices that the healthcare system is having to make, life and death decisions. Don’t do what we did, he said. And what was that? We went out. He says stay home. Take this virus seriously, because otherwise you will be like us. I think that’s really important to mention on the air because if there’s any independent or investigative journalists listening. This is the question. Why did the US decide not to take the World Health Organization testing system, the WHO testing system that was available? It’s been used in China and Italy. The US chose not to take it. Who made that decision, and why was that the decision? Was this a decision to help a corporation profit?
MF: Well, that’s what it sounds like. People are accusing it’s coming from the White House because Jared kushner’s brother, Joshua Kushner, is now making and selling the coronavirus test kits. So that’s a possibility about why that decision was made. It was definitely a criminal decision, just like President Trump trying to buy out scientists. My God. They are creating a coronavirus vaccine and [the Trump administration] is trying to buy them out… to come to United States, and Germany took action to try to prevent that from happening. Why? Because other countries know that if the United States gets its hands on something like that, they won’t share it, unlike countries like China [who have] actually been sharing the Information, sharing resources, sending resources.
KZ: You can’t say good things about China in this country. It’s not allowed. Look at look how Bernie Sanders is being attaches for saying anything positive about China or Cuba or Nicaragua, even though all these, everything he said is true. You can’t [say anything positive about] authoritarian China. I mean, it’s such nonsense in this country.
MF: Well, let’s not perpetuate those myths. I know it’s a different kind of governing system and it’s working pretty well. It actually is working very well for them compared to the United States.
A couple of things I wanted to mention. Kids are being sent home from school. Schools are going online. This is exacerbating or exposing another problem that we have in the United States where many students don’t have access to the internet at home because they can’t afford it in our monopoly internet society
KZ: It also exposes the reality that a lot of children and youth need to go to school to get fed, right? I mean, so the lack of food is going to be a problem of these schools closing.
MF: I know that places are setting up food centers where students can go to get food during this time. Also in Los Angeles a group of homeless mothers took it upon themselves with activists to take over an abandoned house that is owned by the state. They’re saying that in this time of crisis, the state has hundreds of houses in the Los Angeles area that they should be handing over to homeless families. So they have a place to be inside and to quarantine themselves.
KZ: And that’s a reality across the country. So I hope that those Los Angeles mothers become a symbol for other people to take action to protect families and their communities because there are more vacant houses in many cities than there are homeless people. It’s one of the absurdities of capitalism because those houses stay vacant, because developers aren’t ready to develop them yet to make a profit.
MF: Right and another piece of interesting news related to the coronavirus. fFederal district judge Barrel Howell…
KZ: … who’s our judge and our federal prosecution and in the Venezuelan Embassy case.
MF: That’s right. She ruled to put an injunction on a decision to withhold food stamps to more than 700,000 people. This was a requirement that was supposed to take effect on April 1st, that adults without children would need to prove that they’re working 20 hours a week or more in order to get their food stamps. In considering that we’re in a recession and we don’t know how long this is going to last or how bad this is going to be, Judge Howell ruled that that decision was likely not a legal decision, and she put an injunction on it, but there is still a case going forward to try to get those cuts to food stamps. And so it is not a done thing yet.
KZ: She’s a lower level, district court judge, which is the first tier trial judge. And then of course the DC court of appeals is more conservative, and she’s one of the less conservative judges on that DC Court, even though we’ve had some challenges with her in our case. And then the court of appeals and the Supreme Court are even more conservative, as it goes up the chain of courts. It could be more and more difficult for that to be stopped. So we did, this week, this analysis of the economic situation and the coming recession next week. We plan to talk about solutions because what this coronavirus and recession are showing, are highlighting, are the flaws in our economy and how they only serve the wealthy and not the rest of us. And so we’re going to be putting forward a column next week on solutions, of people who have ideas on that.
We have our own ideas in fact. We start to draft it this week, but made the article too long. So we decided make two articles out of it. We have our own ideas on that, but we’d love to hear from other people. So if you have ideas on that, contact us at email@example.com and let us know. Because we’re happy to hear other people’s thoughts and views. There’s lots of great ideas out there. So that’s what we’re working on this week.
MF: When it comes to the economy it’s the solutions, and this past weekend was a weekend when people around the country, are trying to raise awareness of sanctions and the impact of US imposed sanctions on over 30 countries around the world. A third of the world’s population has been directly impacted by what are referred to as sanctions, but technically they’re unilateral coercive economic measures, which violate the United Nations Charter and another conventions. And so the coronavirus pandemic has really again exposed how damaging these sanctions are. In Iran, whose economy has been really crippled by the sanctions, they’re having very high death rates. They don’t have the resources even though, you know, leaders always say, “oh but the sanctions don’t include food and medicine.” But in reality they do, because the banks refuse to do the transactions with the countries so they can purchase food and medicine because the don’t want to be targeted if they violate the economic sanctions.
KZ: Well, these sanctions are already illegal, and in my view criminal. You’re killing tens of thousands of people just in Venezuela alone. The center for economic and policy research found that forty thousand people’s lives were shortened by the US economic war and that was just over a two-year period. We saw the same thing in the Iraq build-up to the war in Iraq. We instituted very aggressive sanctions that killed hundreds of thousands of children. And Madeline Albright famous saying that it was good idea, that it was worth it. Idiotic criminal comments… are sanctions on Cuba, are sanctions on Iran. And now that you have this global recession—that’s what we’re in a global recession—it may not be up in the data yet. I’ll take a couple months to catch up. But we’re in a global recession and it makes these sanctions even more criminal. I hope that the US will revisit that in the light of the recession, reconsider that. I hope they don’t see this as an opportunity for maximum pressure. I saw an article about US officials saying if enough of Iranian leaders have died from the virus that they could have more assistance in changing the government. I mean that’s kind of sick thinking by our foreign policy pursuers. I was part of the panel via small computer this week in Wisconsin and it was on this sanctions issue, because it’s part of the sanctions weekend of actions, many of which were canceled because of the virus. But on the panel with me was a Cuba expert, an Iraq expert, and we all talked about how sanctions are illegal and how they’re resulting in death and destruction of people in these countries. They are not effectively changing the government as the US hopes. That almost never works, but they end up doing actually the opposite. They end up rallying people around the leader because they see that the leader, the government, is trying to combat the sanctions. In Venezuela president Maduro has done incredible work providing housing ,social housing units, to more than three million, and providing basic food and Essentials for kitchens. The housing program covers 12 million out of 30 million Venezuelans. The food program gives 24 million out of 30 million Venezuelans. And so when these programs are happening, the government is responding the sanctions. This happens in each country that the US targets .It actually strengthens the government, even though it causes great hardship for the people.
MF: Well, in Iran it is actually driving anti-US sentiment and uplifting the the right-wing hardliners in Iran.
KZ: He’s gotten more conservative because of Trump policies
MF: … and I think another thing that the coronavirus exposes is the lack of a healthcare system in the United States. It’s interesting that Norway recently recommended that students return home, especially from countries that have poor health infrastructure like the United States. One of the wealthiest countries in the world was listed.
KZ: It’s not safe for Norwegians to be here because our healthcare system is so bad. Please come home. They’re saying.
MF: Right. And then you have Biden on Sunday night trying to say, “oh well. Medicare-for-all wouldn’t change things,” and that was just completely ridiculous. It just shows that he really doesn’t have a grasp on health policy. I mean for one thing he kept saying well, “how are you going to pay for Medicare for all Senator Sanders?” But what Biden doesn’t understand is that his proposal, which is basically status quo, doing in a public option, is actually a more expensive proposal that will cover fewer. A National improved Medicare for all program would be completely universal, and it would save money, and people would be able to make decisions over what’s best for their health.
KZ: Under Medicare for all hospital’s wouldn’t be closing, because you’d have a global budgeting system for hospitals. Hospitals would be funded to provide services to those communities, whether it be hospitals or community centers or clinics. It depends on the community. But they would have health services. That’s just one example, and when you have a universal health system like an improved medicare for all, then people are all in the system and we all have a stake in making that system better. So you will see more support for investing in healthcare, rather than, right now, it’s up to a corporation and it’s a question of profit. Do I make money by doing that even though some other hospital has the same machine? How can I make money on that machine? Let me get that. So this redundancy of stuff we don’t need. And lack of access to health services… It’s so ignorant of Biden. It’s just amazing, on these issues… He just plays political rhetoric games. The reality is, every study shows, whether it’s a libertarian conservative or liberal progressive researcher, economists… They all show medicare-for-all saves money. So whenever Sanders is asked how you can pay for it, Sanders never gives us the answer. The answer should be, “well, how are you going to pay for your system? It’s more expensive Joe.”
MF: That’s the question what we have right now. Let’s talk about a few more stories. A fourth whistleblower has come forward from the organization for the prevention of chemical weapons (OPCW).
KZ: Whistleblowers are coming out for that organization as quickly as the economy is going down.
MF: But it’s interesting because, you know, there were the two investigators who are part of looking at the alleged chemical weapons attack in Syria who said that it looked like it was a staged event, that it wasn’t an actual chemical attack. And of course their credibility was attacked for saying that. This whistleblower has declined to make their identity known and they say that there are many people at the OPCW who would like to come forward but there’s such a culture of fear there that they literally feel like their lives and their families lives could be threatened if they come forward. So that sounds like an institution that really needs to have some sunlight shine on it and to be changed.
KZ: And this really all stems from United States. The US has sought regime change in Syria since 1948. They’ve tried to control Syria for a very many reasons. Its location on the map is very important right now. It’s location is even more important because of the Belt and Road initiative of China linking with with Europe, and so Syria has been a target for a long time in these chemical attacks, were part of the process of escalating the US war, that Obama war, against it. It wasn’t a civil war. It was the Obama war against Syria trying to do regime change. When regime change failed, Biden suggested… which is what Trump is doing… Let’s divide Syria into parts. We’ll take the oil area. Well Trump has actually kept the troops in the oil area. And so this is foreign policy of the bipartisan Wall Street and war parties. That’s what this OPCW thing stems from. The US is the dominating foreign policy with that kind of aggressiveness.
MF: And well, it’s not making the news. There’s been a lot of activity of the US In Iraq. Yes. And so that’s very sad that last week a base was attacked just north of Baghdad. Two US soldiers were killed. Some others were killed and wounded. And so the US retaliated the next day by bombing militia bases. They’re just actually Iraqi militias, part of the Iraqi military. And so then that led to another attack on a US base. So this is a situation over there that’s dangerously escalating and people need to be aware of it.
KZ: It’s evolving into another occupation. The US has been asked to leave by the Prime Minister and by the Parliament and the US has refused. The US really has a choice to make. Are we going to occupy Iraq, or are we going to have an orderly and rapid exit? Of course, the exit was needed and I think it’d be very smart for Trump to do that in an election year because the public ,the US public, is tired of these never-ending wars. We are going to continue to do more damage than good in Iraq. Why are we there? And the reality is we’re partly in Iraq because we can’t be in Syria without having bases for our troops in Iraq. And so it’s all connected. It’s time for the US to get out of Iraq, out of Syria, out of the Middle East.
MF: Let’s just touch on a couple of other stories. One is that a new study that came out of Columbia, a school in New York City, their Justice lab, looked at parole policies and found that they distinctly disadvantaged black and brown people. Black and brown people are 12 times more likely to be detained for technical parole violation than a white person and they show how you know, just this whole parole policy is really hurting black and brown families and that it really needs to be reformed.
KZ: And that’s the reality of the so-called criminal justice system in the United States. I’ve been working on these issues since I graduated from Law School in 1980. I can tell you research has constantly shown that at every stage of the criminal process from police to prosecutors to judges to probation to parole, every stage is a racially unfair impact. You have to call it a racist system because that’s what its impact is. If you go to a courtroom or a prison you’ll see black and brown people, very few white people. It’s not because black and brown people commit more crimes. It’s because that’s where police and prosecution efforts are focused. We have a criminal justice system that is out of control when it comes to racism.
MF: Another sector of our society that’s really struggling is actually the farmers and USA Today did a story on farmer suicides, particularly in the Midwest and even before the economic crash, falling commodity prices the amount of debt, debt that farmers have. They were particularly hurt by the trade war with China and a severe reduction in the export of soybeans. And then on top of that you have the climate crisis and flooding and droughts that are preventing farmers from being able to plant their crops. And so there’s been a 40% increase in farmer suicides over the last two decades
KZ: Well, these corporate trade agreements are designed for agribusiness. Not for the small farmers. That’s who has the influence over the US Government, the big corporate agribusiness. This really undermines the small farmer and this reliance now on Roundup and herbicides and pesticides is a very expensive process that. In fact, when I read this story it reminds me of India, where there’s a hundred thousand-plus suicides of farmers, and it’s because they’ve moved in these fertilizers and they lost control of their seeds and the fertilizer and you have to keep using more and more and it. It just makes it impossible for farmers in India to survive. And the same thing here if we go deeper into this, where we could probably find that the use of fertilizers and GMO crops is one of the causes of these debts that are leading to suicides.
MF: Right. Well, farmers can’t even keep their own seeds. They have to buy new seeds every year and then the pesticides go along with that.
And then finally an interesting situation with Google. Google has been sued a number of times for manipulating its search engines. Tulsi Gabbard has a case against a Google, saying that it suppressed her just as she was rising early in the presidential campaign, and a judge ruled that her case could not go forward.
KZ: Because Google is not the government and therefore your constitutional right to freedom of speech protections provided by the Bill of Rights do not apply to a non-government actor, a corporation. This just shows how out of date our constitution is. People who drafted the Constitution may have been cutting edge at the time. But now it’s outdated, and one of the areas where it’s outdated is they didn’t see the Corporate State coming. Now, we have corporations and government essentially hand in glove almost as one entity. And so corporations need to be held to freedom of speech Bill of Rights protections. Really Google should not be allowed to be using its ability to impact speech to curtail candidates they don’t like.
MF: It’s interesting because one of the arguments that people are making is that Google receives so much government money that really it should be subject to the First Amendment.
KZ: Well, that’s the test. If a corporation gets so entrenched, intertwined with the government. it becomes a government actor. I don’t see it going far enough to overcome that level but that’s what we need to see… these big communications corporations need to be controlled by the constitution.
MF: That’s all the news that we have for today. Let’s take a short musical break and then we’ll come back with our interview with Jack Rasmus. You’re listening to Clearing the FOG, speaking truth to expose the Forces Of Greed with Margaret Flowers…
KZ: and Kevin zeese.
MF: And now we turn to our guest, Jack Rasmus. Jack is an economist. He’s an author/ You can follow his regular columns at JackRasmus.com and find his new book, “Scourge of Neoliberalism: US Economic Policy from Reagan to Trump” on Clarity Press. He’s the host of Alternative Visions on progressive radio network. Thank you for taking time to join us Jack
Jack Rasmus (JR): Glad to join you.
KZ: So Jack, I read your website regularly, and you’ve been seeing problems in the economy for a long time as far as corporate debt and consumer debt, and an inflated stock market, and stagnant wages. And so you were predicting that in 2020 or maybe 2021 there would be some kind of a financial collapse but then events happened and on Sunday night you said the collapse is happening. What happened? What’s going on right now?
JR: Well, if you look at financial asset markets in general, not just the stock market… the stock market in a record time, just a matter of weeks, has lost over twenty percent, maybe 25%, of value. This is the total run up that occurred during Trump, which was artificially boosted by his policies. And I see it unraveling very fast, but it’s not just equity markets, stock markets. Not just in the US but globally we’re seeing all financial asset markets falling over one by one like tenpins. Of course, you’ve got the oil and commodity futures markets, which is a financial market, and you’ve got the price of oil now at $30 a barrel, going into the 20s, and when that happens, of course, you’re going to have big defaults, which are already happening to junk bonds markets in the US, and energy retail and so forth. That’s already beginning. We can talk about that. You got currency, foreign exchange markets, you know devaluing across the board everywhere. You got the new Bond Market in trouble in the United States. It’s, you know, derivative markets. We don’t know because they Shield those but those are in trouble too, except those that ensure against financial asset collapse cdss credit default swaps. They’re rising at record levels. In other words, predicting that these asset markets are going to collapse.
So we got this global synchronous financial asset market collapse going on and when this happens in general ,and it’s synchronized across credit markets and across countries, and you overlay that on top of an already weak real economy, both globally slowing down last year, the US slowing down. And by the way, I predicted for a year that you’re going to see a recession in the US fourth quarter 2019. Of course I missed it by about a month because we are in a real economy recession right now. You know six months from now the National Bureau of Economic Research, the economists who officially predict and say whether we’re in or out of a recession, you know this summer they’re going to rule that we entered a recession.
I believe that Goldman Sachs Investment Bank is forecasting now in the second quarter zero US growth. Zero, which is a polite way of not saying that we’re going to contract at the same time. You got China, which forecasts now, an independent forecast range, next quarter or this quarter even, between a 2% growth and a minus 2% growth,. You know, that’s not the official GDP you’ll get from China, but that’s the reality. So half of the world economy, US and China, is either flat or going to decline and at the same time.
You’ve got two economies like Japan already in deep recession, contrasting 7% of Europe in recession. Italy, Germany and others. Latin America tripping over, one after one. Australia. So the global economy is in a recession now. No doubt about it, and you’ve got all these financial asset markets overlaid on top of it. And what happens when that happens is financial deflation. The financial market crash exacerbates the real economic contraction and vice versa, and that’s when both of them start spiraling downward, which is exactly what happened in 2008. Of course, back then the financial market problem was housing, you know, subprime mortgages and derivatives. But you know, I’ve been predicting that the similarity is going to occur now in non-financial corporations, and it’s going to be the junk bond market and it’s going to be the triple D corporate Market. In other words corporate bonds are going to be the driver here. And the corporate bond market is far more important than the stock market to the stability of the capitalist economy. And that is beginning to crack we can already see it, and that’s why the Federal Reserve has decided to pump a hundred billion dollars into what’s called the repo market and others, to provide liquidity to the banks. 500 billion dollars in one month repo and another 500 billion in three months to repo. A trillion dollars. The FED, in a kind of a QE, is injecting now into the economy into the banks. Why? Because non-bank companies are rushing to cash. They are drawing down their credit lines. Banks, no was taken all the cash. They can get and hoarding it and being told to do. So even by Shadow Banks like Carlyle Group and BlackRock and so forth. It’s a rush to cash and that’s a real sign of a financial crisis when that’s happening. Especially when the FED pumps a trillion dollars into the market so that the banks can borrow that money so that they can then allow the credit credit line, you know, grabbing… It’s going on right now. These are the tell-tale signs that that what we got is a financial crisis brewing here, on top of a global and US real economy downturn.
MF: Well, yeah, it seems like the Federal Reserve has been pumping money into the economy for a while now and and I guess trying to find out how to stabilize the repo market since last fall. Is that really going to make a difference in terms of just kind of staving things off or is that going to fix the problem?
JR: No, it’s nothing. It can’t fix the problem. What it’s all about is giving businesses investors hard cash so they can continue making the principal and interest payments on their debt. That doesn’t mean that they’re going to spend this money to invest. That means that they’re going to hoard it and use it as a safety valve so they don’t have to default on their debt payments and go under. You see it’s not going to result in any real new investments. In other words, spending on plant and equipment structures and so forth in the US contracted nine months in a row last year. 9 months in a row. And of course it’s really contracting now and that occurred after Trump had cut taxes for investors and businesses.
And growth of multinational corporations by four and a half trillion dollars in 2018 over a decade, of course, four and a half trillion. Not the phony one and a half that they’re telling you in the media. It was four and a half trillion. You get to one and a half trillion by not saying the fact that you’re raising taxes on households by one and a half trillion, and by assuming economic growth, which is occurring by another one and a half trillion. That’s how you get to one and a half trillion, a phony number, but it’s really four and a half trillion.
And what did we get for that? We got a little bit of a bump in real investment and the economy and early 2018. And in 2019 we got a contraction. So all these business tax cuts giving more money to businesses do not result in real economic growth, or very little anymore. So where does all that money go? From the tax cuts to businesses and investors, and from lowering interest rates, which Trump has forced the FED to do once again last year? Where does it go? Well, I’ll tell you where it goes. It goes into corporate profits. And from there it goes to corporations distributing all this artificial excess profits to their shareholders last year. 1.2 trillion dollars, corporations gave to the shareholders, and stock buy-backs and dividend payouts the year before 1.2 trillion.
How about under Obama? Well, $800 billion a year on average for six years. So corporations have taken all this free money. Money from the fed and all these big tax cuts, and they shuffled it out to their shareholders. And by the way, the shareholders in the tech industry, for example, are really the senior managers. 70%, for example, of Apple’s buy-backs, which is tens tens of billions of dollars, go to their senior managers. It doesn’t go to the general public holding that stock, in other words. So they’re enriching themselves at a tremendous rate. And that’s of course why we got this runaway income inequality largely going on.
But what they do is, when they get all this excess cash, they call it back into investing in the stock market and in other financial markets, and that’s why we got these bubbles. We got these bubbles under Obama, you know. The banks were bailed out by 2010, but the Federal Reserve continued subsidizing the banks with one tenth of one percent interest rates. In other words, I could borrow money from the FED at one-tenth of one percent. And by the way, if they wanted to leave it with the FED the FED would pay them .25%. So you can borrow money and the FED will pay you, and you won’t even have to use it. You see that was the game going on. Monetary policy and fiscal policy today are not about stabilizing the economy. You know, that’s the old mainstream economic argument, right? That’s why you use interest rates and tax cuts. That does not exist anymore. Fiscal policy, monetary policy, and 21st century capitalism is about subsidizing the banks and subsidizing investors. And that’s why both of those tools are now broken.
KZ: And they’re just shoveling money into the hands of the wealthy. It’s incredibly and yet when we talked about Medicare for all, we can’t pay for it. We talk about college education. We can’t pay for it. Amazing.
MF: It sounds like they’re stealing the money to me.
KZ: It really sounds like stealing. You know, what’s so interesting about your discussion, Jack? So far the one-two punch that has been kind of the trigger to this collapse, the coronavirus and the oil war between Saudi Arabia and Russia. You haven’t even mentioned those yet. So I think it’s important for listeners to hear. There’s so many underlying problems in the economy that the coronavirus and the oil war are just triggers to. This current collapse… talk about what the impact of those are.
JR: I call it precipitating causes. So you got to distinguish between fundamental causes and precipitating causes. The virus is a precipitating cause. Here, in other words, it triggered and accelerated the whole downturn that was grinding and slowly approaching. That’s why a year ago I was predicting this, but ever since the virus hit, it just accelerated everything. Why did it do that? How did it do that? Well, first of all, it broke all the supply chains. Multinational corporations have moved everything offshore, particularly to Asia, right? And now the parts weren’t forthcoming, not only from China but from Japan and Korea and so forth. So that reduced production and reduced the corporate earnings forecast. But then we got a demand problem on top of that supply problem, and we can see that all around us deepening, and that is people just stopped traveling, spending on travel, spending on hotels… Restaurants, spending on entertainment and social gatherings and so forth.
And the auto industry and so forth. The demand is slowly ratcheting down on top of the supply problem, which exacerbates everything, and now you also have the channel of collapsing financial asset prices, which is going to cause a credit crunch and then freeze up production even more. And people not going to work. Okay, they’re not going to earn income. They’re not going to earn wages. I think they’re going to go to work anyway They can’t afford it. Half of the people in this country don’t have four hundred dollars for an emergency. You think if they are sick and they don’t have sick leave, you know.
Basically, we’re the only country in the world that has minimal paid sick leave. Only in Union contracts, and then only six days may be right. You think they’re going to stop going to work? They can’t afford to. It would be financial crisis crash for them individually. So even if they have symptoms or don’t have symptoms, are they going to continue going to work unless their employer says you can’t go to work anymore, at which the working class now has a big financial problem. And of course Trump’s proposals didn’t say anything about that. What did he say about the goals which were working class in his speech yesterday? Nothing. Oh, he said relief is coming soon. In other words. He said nothing nothing. That was a quote. That’s a quote. It was coming soon. And what did he propose for businesses? Oh, he’s going to give fifty billion dollars to small businesses. And he’s gonna let them spend their tax payments maybe and then he wants to cut the payroll tax. In other words. He’s got an ulterior motive here, cutting the payroll tax. And that is… he’s gonna cause a further crisis in Social Security funding because that’s what he wants. He said so. At a forum in January people asked him, you know, what are you going to do about social security, entitlements, and he says “well, I got a plan to cut that right after the election.” So he’s softening up the payroll tax and Social Security to help him justify cuts. Now Obama did the payroll tax cut and it had no effect, No effect on consumption, you know, when you got people in such a dire straight economically and you cut their taxes, whether the business or consumers, what is that going to do? They’re going to hoard the cash and checks.
KZ: What does a payroll tax cut do for someone who’s lost their job? Absolutely nothing. They lose their job taxes.
JR: That’s right. And of course the unemployment rate is far higher than the 3.7%. My estimates are is it still around nine or ten percent.
MF: Wow, and it sounds like, to me, that this pumping this cash in is basically despite pumping that cash incorporation still have record debt and now they’re pumping cash in to try to keep them from defaulting and going underwear. Lots of people will lose their jobs. What can we expect, you know, in real impacts from this current financial situation.
JR:I’ve believe in a couple of months you’re going to see even even these biased numbers about unemployment rising dramatically here, starting, you know, probably in April. This a lag. Employment always lags unemployment, always lags the real economy, and I see a lack of one to two months here, but certainly by the end of the string we’re going to see some I believe some Significant jobless numbers Rising rapidly. So that’s one of one affect. The other fact is what about people who have to stay home? You know, the employer says work at home, right? Not everybody, you know can telecommute their jobs are such that you know, they have to be on a site or something and if they have to work at home are the employer is going to pay them or they going to have to go on unemployment insurance which is like one-third maybe of what you need to One and you know, what do they do? What are working class families do when does the school shut down? Right and the kids if they’re K through 6, you know, they can’t afford and they can’t find Manny’s and babysitter’s right. What are you going to do? They’re going to have to take a leave from work. Is it an unpaid leave? This is a half-time leave while it matter that’s clear. You know, I don’t think employers are going to when they tell most people to work from home or go home or lay them off are Going to pay them full wages, you know unless there’s legislation that requires that I don’t think you know, that’s going to make much difference and then what if they have to go and get a test here who’s going to pay for not just the test. But you know Margaret you’re a doctor, you know, if you go even if you have insurance you go to an emergency room at the hospital cost you over thousand dollars just to walk in the damn door. That’s right. That’s not counting all the tests and other lab tests that may have to occur. And if you even if you got insurance, you know most people 30 million people have no insurance. First of all, another 87 million people have in their bones insurance with 500 a thousand two thousand dollar deductible and that’s not even counting co-pays, you know working folks know this then that’s stupid and they’re not going to go and get tested. They’re not going to go and you know, you can walk around if you’re very relatively healthy and young and have the virus and spread it around and have no see symptoms, you know, but they’re only testing people with symptoms, you know, an anecdotal case here is in California at the Port of Oakland where the Grand Princess cruise ship docked. I know some reporters who were down there when it was Doc and they were only testing people 2500 is the came off that ship who showed symptoms. How many were telling everybody else who showed? No symptoms go home. Why were they doing that?
MF: Even people with symptoms are having hard time being tested because if you haven’t been to Wuhan or been in contact with someone who has it, that in various places the criteria are so severe… so restricted that even people who are symptomatic can’t get tested.
JR: Yeah, and then California governor Newsom said that 8200, I think it was, test kits sent to him, had no reactive agents in them.
KZ: We still haven’t talked about the oil war. It went down to $25 a barrel, which, I think is very likely, $25 about. What’s that going to do to these shale oil markets in the United States, and the impact on jobs and bankruptcies?
JR: Look, you know, a lot of employment growth has been in Shale industry and what little investment real investment has been in oil and energy even at today’s price between 30 $35 on what I’m reading is a Out of these Shale producers are already in the process of default already and if it drops to 25 dollars per barrel even more are going to default and when they default of course is layoffs and it affects communities and spending in all kinds of ways and it sends the message to other investors. Oh if the junk Bonds in the oil patch of defaulting well gee, what about the junk Bonds in retail, you know? Big box companies like pennies and so forth or hotel chains. Oh what so, you know, we better pull our money in or let’s raise our credit lines. This is first thing they do these companies which means they’re going to default soon eventually and then of course you have what’s called Triple B corporate bonds, which is supposed to be safer than junk bonds. By the way. The junk bond is were talking about two trillion dollars in the US market here triple B’s are about three trillion, but half of the triple B’s are really Junk also, so the confidence effect can spread from junk bonds to from oil junk bonds to retail and other junk bonds to trip will be bonds. That’s five trillion dollars a good part of which may be entering a kind of a default process when that happens. The whole corporate bond market is is really shaky and who knows what will happen. The corporate bond market is far more important than the equity Market in the United States. And I see that’s the trajectory where we’re headed. It’s not guaranteed. But that’s where we are headed on the financial side. So for Trump to say in the speech yesterday, so it’s not a financial crisis. You know, that’s just another BS statement by this guy, you know in the same category of you said, oh the Europeans have seeded crisis here, you know, it’s Europeans that caused the crisis last week. It was a Chinese or Wuhan crisis. Now I guess it’;s the the Italian crisis.
MF: So when there’s a crisis like this, it offers an opportunity and you know, we see that the administration’s response has been cutting taxes, feeding more money to the banks, cutting interest rates. None of that is really going to have a real effect. What types of policies should people be pushing for right now to fix the situation in a way that protects people not just the wealthy.
JR: Okay? Well, I just wrote an article today. Will appear on my blog jackrabbits. Let me just give you the outlines of that. First of all paid medical leave 14 days, paid medical leave, until vaccines are generally available for all. Those who are tested with the virus, all those who have symptoms, and parents of K through 8 students that are forced to remain home due to school closures, and that 14-day paid medical. Call it not sick leave, paid medical leave, whether you’re sick or not. You see that’s the difference from sick leave. It could be renewable. like State legislatures, company reimbursements for paid medical leave. If it’s a small business, they should be reimbursed by the federal government. If it’s a large business, well, maybe half reimbursed or something like that, but that’s not in lieu of maybe a Union contract of paid sick leave. Provisions that may exist in other words, that will remain a crude.
This is a special six month or one year paid medical leave provision. There should be guarantees that employees who are laid off because of this. They may not be sick and maybe just because of the economic hits, you know, everybody here. There should be employment guarantees. Anybody who is on paid medical leave returns to their formal position pay and benefits and other benefits should have crew for these workers while they’re still unpaid leave. As far as hospital testing and cost. Why are we asking individuals to pay out of pocket when they can’t afford it to get tested? Why don’t we just say, “Okay go get a test.” If you feel you need it.” And clinics or hospitals, doctors, bill the government. That’s all you got to do. Just bill the government for it.
You know, that’s how people will go get tested. Because they can’t afford to take the risk of paying a huge out of pocket, but they don’t have cash flow to get tested even if they’re sick. They can’t afford to miss a day’s work. So provide other associated costs, not just the testing. You see, all the other labs and emergency rooms charge patients, whatever. Just bill it to the government, and any follow-up visits, if needed, that are directly related, to health insurance companies. Okay, if their worker is ensured the health benefits company will waive all deductibles and waive all co-pays for services related to the virus here, right if they’re uninsured right the Should pay for it. This is where medicare-for-all would solve all these details. You see if we had Medicare for all you just use your Medicare, right? But now you had a talk about reimbursing you this company and this insurance company and this hospital and all that nonsense right premiums and deductibles and co-pays should remain Frozen by these insurance companies for other other employees until the crisis is declared over by state legislatures. In other words. You don’t want these insurance companies. He’s charging others and making other other insured pay for the cost here associated with those who may have the virus or who may get sick. Right unemployment benefits. The government should immediately aesthetic extend unemployment benefits for all layoffs for an additional six months. Now, it’s only six months. There should be a guaranteed one year we’ve done this in recessions before right companies should be required to pay continue to pay unemployment. Benefit taxes and there should be no suspension of the Social Security and payroll tax for companies and or for those workers who are still working and federal student loans what our students are working as well and they lose their job. Well then and many of them are millions are by the way would then we should suspend the payments for student loans and this is very important. The interest should not accrue and add to the principal. You know right now the way they work it if you’re a student and and you don’t have work and they go you go into forbearance and the words. You don’t have to pay your loan. You still continue to accumulate interest and when you find a job and you go back they make you pay all that interest first before that back interest before you start paying down into your principal. I mean that’s userís that that’s a criminal criminal government policy that there’s no reason it shouldn’t change. There’s no reason why Students should pay anything more than the equivalent of the 10-year treasury pain note, you know, if it’s a now one percent that’s all the interest. They should be paying and the government can do that immediately overnight. You don’t even need to have legislation to do that, but they’re ripping off students and student loans are putting people into indenture ship but there’s got to be some provision here for accommodating that in this current crisis. So, you know, there’s a lot you could do.
KZ: That list is dramatic as it is dealing with health education debts. I mean, it’s so much less than the FED has been putting into saving the banks already. It’s a low-cost program. And the second thing is that if we were to face up the shortcomings in our economic system, you mentioned medicare-for-all, if we had improved Medicare for all we would have a much more coordinated response. And a lot of the issues you just raised would be taken care of as part of Medicare for all. If we had a decent rights for workers. As far as sick leave goes, decent unemployment program… These are all things that are shortcomings in the economy. If we just would face up to these shortcomings, your list wouldn’t be needed.
JR: Yeah. Well, you know as I said earlier, you know a trillion dollars in liquid injection into the bank occurring right now as we talk another trillion. dollars in this repo Market in other words, and that’s only the beginning that’s not counting their proposals for payroll tax cuts and their proposals for 50 billion more for small businesses and other tax cuts and floor going, you know, the tax payments and so forth, you know, but this is capitalist America corporations and investors are taking care of first always and then maybe if you complain enough and demonstrate enough and strike enough to throw a few Comes your way and that’s the way it works under Trump. Of course, there’s no crumbs being thrown under Obama. There were a few crumbs thrown here and there but you know, the vast majority of was the bailout of the banks the Federal Reserve spent four and a half trillion dollars bailing out the bank’s did they bail out Main Street what happened to the 14 million people who watch their homes under Obama, you know, they just lost their homes period right it took us six years to get back to the job level that we Had when the last recession under under Obama in 2007-8 began took a six years and the jobs we got back. We’re low paid service jobs. We lost the high-paying jobs and we turned out into low paid service their service jobs, and that’s why we got 60 million people cobbling together part-time temp jobs in order to make a living.
MF: Yeah, and we become a renter economy. So just finally I want to get your opinion on whether this is just, you know, people say well capitalism just typically has periods of recession and this is to be expected and it’s normal. But do you see this one this way is this just a typical normal recession and people will suffer for a little bit and then things will return to normal and everybody will be good again. Or what are we really looking at as a financial future here? Is this a long recession? What are we looking at here?
JR: Well in my earlier publications in 2010 about a buck epic procession Prelude to Global depression and then in 2060 and Road systemic fragility in the global economy and the main argument there was that 21st century us and global capitalism has become significantly financialized and by financialized I mean that there is a a surge money of money Capital going into financial asset Markets instead of going into real investment markets and you have this group of about 200,000 Global new Finance Capital Elite as I call them and identify them at my 2016 book and what they do is they move their money around now because technological you can do it and it’s a Global Financial as the economy under neoliberalism. They move the money around between these various highly liquid financial asset markets derivatives, you know stocks and Bonds and foreign exchange and so forth and those financial markets and those new financial instruments and this new Finance Capital Elites are the defining characteristic of 21st century capitalism, I believe and it’s slowing down the real growth that people need to have real jobs and it’s exacerbating the instability of global capitalism and what we’re getting now instead of in the 50s and 60s these recessions that were normal. Last six to eight months right downturn and Recovery now, we got the financial instability overlaid on the real economy. And it exacerbates the real economy downturn meaning it collapses faster and it takes longer to recover. That’s the defining nature of 21st century capitalism. You got to understand so we are more prone now to collapses like 2008-9 and I truly believe we are headed in that direction. Section here now something very similar not exactly the same. It’s not subprimes not the housing market. It’s not cbs’s and derivatives at AIG and so forth. What it is now is I said non-financial corporations up to their elbows in junk bonds and Triple B debt and defaulting and the collapse of the global oil Market, which is really about US Fracking companies versus the Saudis versus the Russians as a three-way. Fight between all three of them. You see we could talk about that if you had time, but that’s driving everything down as well. So it’s a different capitalism capitalism does not stay constant. It’s totally evolving and it’s evolving. I believe towards a more financial system as I defined it in the shadow banks are at the center of it and it’s becoming more unstable more unstable and now we are getting these contractions that are far more. Dias than the normal recessions that we saw in previous decades, but this is kind of neoliberalism at its latest stage. You see in my book The scourging the elitism. I predicted that what you see what Trump is me ilysm 2.0 a more aggressive virulent form, but neoliberalism policies broke down under Obama and the last crisis Trump is trying to restore it. He’s going to fail and what’s coming in the next decade is Totally different is not going to be neoliberalism. It’s going to be either something more proto-fascist corporate or it’s going to be something more Progressive but that fight is on the political level and it’s evolving.
KZ: It’s an evolving situation and that’s why I really appreciate your work Jack and why I read Jack Rasmus.com because it’s a great place to keep up to date on this constantly changing scene. So we’re unfortunately out of time, but I you know, that’s a good snapshot. Got a where we are and urge people if you want to stay on top of this Jack is a great resource and check out his books and check out Jack Rasmus.com. I thank so much Jack for taking the time to talk with us about this. It’s a very complicated situation in a crisis situation right now. So we
JR: appreciate ya and if listeners want to follow me day by day hour by hour, tell him to join me on my Twitter feed which is at no a @dr jack Rasmus where I just report on what’s happening almost still several times a day that crash was.com or the longer articles
MF: Great. Thank you so much Jack.
JR: Okay, my pleasure.