Jack Rasmus takes an in-depth look at crashing financial assets in UK property funds and growing insolvent Italian banking system. Are these early signs of post-Brexit emerging financial instability? UK property funds are refusing investors their cash, Italian government is planning more ‘bail ins’ of depositors money to bail out its banks, now $400 billion in the red, UK and Euro currencies are falling, and financial asset prices are under growing pressure everywhere in Europe. Will (and how) might it spill over to the US economy? How political instability in Europe from ‘Brexit’ and spreading ‘Euroscepticism’ are being accelerated by growing financial and economic instability in the UK and Europe. Jack concludes with another take and critique of just released US jobs reports, showing how the two US jobs reports show dramatic different picture, how private job creation is being offset by public job losses, and why it’s impossible that involuntary part time jobs declined last month by 587,000. US jobs stats are increasingly unreliable, he concludes.
As Jack Rasmus predicted last week, the initial scenario for the Brexit vote is not an immediately global financial crash. The threat is more intermediate than short term. The analogy is not Brexit as a ‘Lehman Brothers’ event, the US bank collapse that ushered in the financial crash of 2008-09, but more similar to a ‘Bear Sterns’ event, the US bank that collapsed in the US early in 2008. Brexit is a warning shot fired across the bow of the global capitalist economy, not the precipitating event for another crash. Jack explains how global investors are waiting to see what happens next before dropping the other shoe. Jack reviews the likely intermediate effects of Brexit on global markets—currencies, bond rates, stocks, real investment, deflation, productivity, bank lending, consumption, and GDP. The relative effects of Brexit on economic regions are also covered: the UK, EU, US, China, EMEs. Recession in the UK will occur first, Jack explains. Europe will stagnate further. Japan’s recession will deepen, the US will enter recession in 2017 soon after the elections. China eventually will have to devaluate its currency with severe global consequences—i.e. the effects of Brexit on financial markets and real economies is just beginning. Political instability in the UK, in both conservative and labor parties is reviewed, with splits deepening in both. What Brexit also means for growing political instability for France, Spain, Netherlands, and Italy; how Brexit is penetrating the US election campaigns, as US elites and corporate push back on both candidates. Jack warns the weak spots of global capital today are Italy’s banks and Japan, where the most likely next ‘Bear Stearns’ event will emerge. Longer term, the UK currency and London as global financial center are finished as global players.
Jack discusses the consequences and likely developments from the historic vote yesterday for the UK to leave the European Union. The deep origins of the Brexit vote are first discussed, including rising discontent with neoliberal policies of free trade by working classes, small businesses, and local producers everywhere, the overlay of fiscal austerity policies compressing incomes, and the almost total reliance in advanced economies on central bank monetary policies that boost financial asset incomes and corporate profits (and capital gains of investors and the rich) since 2009. How UK prime minister Cameron struck a ‘Faustian’ bargain in 2015 to win the election and now had to repay the ‘devil’ with the Brexit vote he thought he could control, but did not. The consequences of the vote for UK politics in the near term, and for forces—political and economic—behind the potential break up of the EU itself. Political party realignments underway everywhere, including EU and US. Implications for US November elections. Jack concludes with an assessment and economic predictions for the UK and EU economies, for currency volatility worldwide, stock and bond markets, real estate prices, and global commodity prices. Impact on the US dollar, interest rates, FED policies, and US recession for 2017. Severe results for emerging markets, especially Latin America (markets, capital flight, recessions) and for China’s Yuan eventual currency devaluation.
Jack reviews in detail the upcoming UK vote to leave the European Union. Cameron’s ‘faustian’ bargain is coming. What will the ‘devil’ demand? The origins of the vote and likely consequences of a Brexit are considered, for the UK, for the EU and for the US and rest of the global economy. The likely effects on the real economy, as well as more volatility for global currencies, more central bank money injections, more negative interest rates, slowing real investment and declining productivity. Brexit as a proxy for discontent over the conditions in the UK economy, immigration effects, cultural and sovereignty issues. Brexit as a reflection of discontent with supra-national free trade agreements and cross-nation capitalist integration efforts by global financial and economic elites. Jack compares Greece efforts to reform the EU to current UK efforts to do the same and predicts UK will also fail. An alternative scenario post-Brexit: nothing happens for another two years under Article 50 of the EU treaty.
Jack discusses the global bond market conditions today, many times the size of the world’s stock markets and far more important. Bond guru, Bill Gross, this week forewarned of a ‘supernova’ explosion coming in global bond markets as a consequence of the $10 trillion (and growing) in government bond negative interest rates (not counting corporate bonds). Is there a ‘bubble’ in global bonds? Will it bust? When and Where? Jack agrees with Gross and explains why there is—located so far in Europe and Japan but spreading to the US and taking off in corporate bonds as well. How the bond bubble is the consequence of central banks’ (US, UK, Europe, Japan) monetary policies since 2008. How tens of trillions of dollars in money injections by the central banks—in quantitative easing and zero rate programs—have done little for stimulating real investment, jobs, incomes and consumption—and instead have pumped up global stock and other financial markets. The bond bubble as the latest consequence. Jack predicts why central banks’ NIRP policies fail to boost real investment and real growth, but are already having negative consequences for retirees’ and workers’ wage incomes, growing financial instability, and the slowing real economy. Central banks’ monetary policies have failed miserably. What’s next? Talk of ‘helicopter money’, ‘guaranteed income’, and bank ‘bail ins’ after the next bust. Jack warns of likely major global stock market correction coming soon—in the wake of likely Brexit, NIRP, global oil prices again falling, and US economic slowdown and predicts a US recession for 2017. NEXT WEEK: ‘Will There Be a BREXIT?’
Jack reviews today’s just released jobs numbers confirming his prior prediction jobs growth would slow in wake of US GDP slowdown last quarter. Plus an overview of US economy and a prediction of recession in early 2017. In the second half of the show, a review of latest developments in global economy–with commentary on how the IMF outmaneuvered the Syriza government in Greece again, the likelihood of UK ‘Brexit’ from the EU, $10 trillion in negative interest rates and more than $10 trillion in global non-performing bank loans, the recent G7 meeting in Japan and prime minister Abe’s warning of another ‘Lehman event’ on the horizon, the European Central Bank’s recent decision to now buy corporation bonds, like Japan, China’s rotating financial asset bubbles, eventual currency devaluation, capital flight, corporate bankruptcies, and out of control private sector debt acceleration. (see jackrasmus.com blog for recent articles, ‘Is US Economy Heading for Another Recession?’ and ‘How the IMF outmaneuvered Syriza—Again’)
Jack Rasmus interviews Alan Benjamin, eyewitness to developing events in France, where workers and students are protesting and striking against government attempts to impose by edict changes in France’s labor code that will allow corporations to fire and lay off workers more easily, undermine unions and collective bargaining, and privatize broad sectors of the French economy. Traveling to France on numerous occasions in recent months, and just returning from a week ago, Benjamin describes the growing opposition in France to the so-called ‘labor market reforms’ imposed by Presidential edict by the Hollande government there. Growing one day, rolling strikes, and spreading student-worker protests across the country are resulting in growing government violence against the protestors. Discussions are intensifying within France’s labor union federations to consider a general strike to get the government to back off of its proposed labor ‘reforms’. A recent country-wide poll in France shows 78% opposed to the reforms, as the government declares it will not back down. Jack explains how ‘labor market reform’ in France and Europe today is a reflection of similar changes in jobs occurring globally—including shift to part time, temp, contract work, offshoring and relocation of full time employment to emerging markets, shift to low pay/no benefits service work, and emerging trends like ‘gig’ economy, no pay internships, and privatization of social benefits.
Alan Benjamin is a delegate of the San Francisco Labor Council and member of the OPEIU, who works in Europe and the US. He is also a member of the US ‘Labor Fightback Network’ of unionists in the US. More information on events in France is available at www.laborfightbacknetwork.org and at www.socialistorganizer.org.
Jack Rasmus welcomes CWA Local 1400 president and union bargaining committee member, Don Trementozzi, to report the facts about the current Verizon strike, now in its fifth week, by 40,000 CWA union members, from New England to Virginia. Don explains the main issue, and union demand ,to save 20,000 union call center workers’ jobs that Verizon wants to offshore from the US to the Philippines and elsewhere, where the company pays workers only $1.78/hr., despite having made $18.6 billion in profits last year. Violence by replacement-scab workers hired by the company in the US and in the Philippines are described by Trementozzi. Jack notes the recent Pew Study showing incomes of middle class US workers now falling in 203 of 226 regions in the US, and how the ‘triple onslaught’ by companies—job offshoring, creating tens of millions of part time-temp-contract low pay jobs, and now the ‘gig’ economy—has been devastating US jobs and middle class incomes, that have been declining the past six years as companies like Verizon have been distributing $5 trillion in dividends and stock buybacks to their wealthy investors since 2010. Trementozzi describes the growing support for the strikers throughout the northeast and internationally, in this historic strike to save jobs and call a halt to the ‘triple onslaught’ destroying US middle class incomes.
Guest: Don Trementozzi is president of CWA local 1400 in New England and a member of the union’s regional bargaining committee. For more information about the strike and negotiations go to www.cwa.org or to www.cwalocal1400.org websites.
Jack comments on today’s US job creation numbers for April, which show a significant decline in new jobs created, to 160,000, compared to previous months. Some problems with how jobs are calculated are explained, including how new business creations, missing labor force, and the US labor department surveys often fail to account for jobs accurately or timely changes. Recent wage gains articles in the mainstream press are then challenged as well. Jack explains the differences in wages as a share of national income, total compensation, average hourly earnings, and average hourly wages all have their limits as indications of how American workers are actually doing in terms of take home pay after inflation. Economic Policy Institute studies show median worker real earnings in the US have been declining every year since 2010. Gains in wages have been skewed to the top 10%, pulling up ‘averages’ which are not an accurate indicator of wage income declines for the US working class. The show concludes with a review of global economic developments, including growing splits among economic elites in Europe and in Japan, as their economies continue to languish despite QE and negative rates. And how China continues to struggle with bringing its shadow banks and speculators under control.
Dr. Jack Rasmus dissects the latest report on US economic growth for first quarter 2016, showing a mere 0.5% annual GDP growth rate. The collapse confirms his prediction of early January 2016, and confirms the US economy remains on a ‘stop-go’ trajectory, having again slipped into a ‘stall speed’ that raises risks of US sliding into recession. Rasmus explains the longer term trends behind the 0.5%, and why the US 0.5% annual growth rate, when compared to the previous quarter, is an even lower 0.1% GDP or less. Averaging over 8+ years, the US economy has grown only 10.1%, or barely 1%, or even less per year after adjustments. Jack explains how the US and other countries have been redefining GDP to help the appearance of growth—including China, India and Europe as well as US. The more fundamental trends behind 1st quarter US GDP are then reviewed–including business investment, industrial production, exports, consumption, and prices, all of which suggest the US economy nearing the brink of another recession. Why the US economy keeps ‘relapsing’ periodically since 2009 is discussed, as well as the likely impact of the 1st quarter US slowdown on other global economies and markets. (For more information, listeners should read Jack’s recent Telesur media article on US GDP posted on the PRN network website—‘Is the US Economy Heading for Recession?’)