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TRUMP’s $34 TRILLION DEFICIT AND DEBT BOMB
https://www.globalresearch.ca/trumps-34-...mb/5671420
This week Trump released his latest budget for 2019-20 fiscal year. It calls for $2.7 trillion in various social spending cuts over the decade, including $872 billion in reductions in Medicare, Social Security, Disability spending; another $327 billion in food stamps, housing support, and Medicaid; a further $200 billion in student loan cuts; and hundreds of billions more in cuts to education, government workers’ pensions, and funds to operate the EPA and other government agencies.
Not surprising, the $2.7 trillion in social program spending cuts will finance spending for the military and defense related programs like Homeland Security, Border walls, veterans, police, and programs like school vouchers. Of course, the budget proposal is ‘dead on arrival’ with the US House of Representatives, which must approve all spending bills, according to the US Constitution. But don’t hold your breath. Trump may now have a back door to this Constitutional obstacle and eventually get his way on the budget, at least in part, to fund his military spending plans.
Trump’s National Emergency ‘Workaround’ & the Budget
It should not be forgotten, Trump just enacted his ‘national emergency ’ to build his Mexico border wall by diverting funds, without Congressional approval, from other sources in the US budget—i.e. a clear violation of the US Constitution. That ‘national emergency declaration’ will almost surely be approved by his current stacked US Supreme Court before the end of Trump’s first term. When approved, the precedent will allow Trump to repeat the action, perhaps on an even larger scale. So what’s to stop him from using the same national emergency precedent to shift other funds in the future from social programs to the military and defense, as he clearly proposes in this latest budget?
Some liberals and Democrats may declare he can never do that. But they said the same about his national emergency declaration to fund his wall, and he declared it anyway. He will continue to subvert and destroy long-standing rules and even Constitutional norms within the government. The national emergency declaration about funding his wall gave him his foot in the door. Will the Supreme Court eventually allow him to kick it open now in the future? One shouldn’t be too surprised with this President, who has little concern or respect for Democratic rights and institutions.
We now have a precedent in the national emergency declaration. So what’s to stop him from shifting even more funds from social programs to war, defense and the military? In other words, to spend a good part of his proposed additional $2.7 trillion for the Pentagon, and to simply divert the funds from Medicare, Social Security, Education, etc.? The Democrat Party majority’s control of the US House of Representatives’ may refuse to pass legislation to approve Trump’s $2.7 trillion budget shift to the military and defense. But the precedent now exists allowing him to do it. Trump is intent on getting what he wants, to pander to his right wing base, and get himself re-elected. He cares little for Democratic norms or civil liberties. Don’t underestimate his willingness to shred those liberties and subvert those norms.
As worrisome as the politics of the US budget process going forward may yet prove to be, however, the economics of Trump’s 2019-20 budget are more serious. It represents a trend that will continue whether or not the budget is passed, either in the short or the longer term by national emergency declaration.
The $34 Trillion National Debt
Whether Trump’s budget is passed or not, his fiscal policy (taxation and spending) already represents a faster escalation of US deficits and therefore Debt. During Trump’s first two years in office, US federal government deficits have driven the national debt up already by $3 trillion: At the end of 2016, when Trump entered office, the US national debt was $19.5 trillion. Today it is $22.5 trillion. He’s thus already added $3 trillion, a faster rate per year of debt accumulation than under even his predecessors, George Bush and Barack Obama.
The Treasury Advisory Committee, a long standing committee of private experts who regularly provide advice to the US Treasury, recently warned the US Treasury that it will have to sell $12 trillion more US Treasury bonds, bills and notes, over the next decade if the US is to fund the $1 trillion plus deficits every year that now coming over the next decade, 2018-2028. That’s $12 trillion on top of the current $22.5 trillion national debt! That’s a $34 trillion national debt by 2028! According to the Congressional Budget Office research, that $34 trillion national debt will translate into no less than $900 billion a year just in interest payments on the debt by 2028—a roughly tripling of interest payments that will have to come out of future US budgets as well, in addition to escalating tax cuts and war-defense spending.
How will the US government pay for such escalating interest—as it continues to cut taxes for business, investors and the wealthy while continuing to accelerate war and defense spending?
20 Years of Accelerating National Deficits & Debt
The US government’s growing Deficit-Debt problem did not begin with Trump, however. He just represents the further acceleration of the Deficit-Debt crisis. Trump’s escalating deficits and debt are driven by two main causes: tax cutting and defense-war spending increases. But this is just a continuation of the same under Bush-Obama.
Studies show tax revenue shortfall accounts for at least 60% of US deficits. Another 20% is due to escalating defense spending, especially the ‘off budget’, so called ‘Overseas Contingency Operations’ (OCO) budget expenditures that go for direct war spending. The OCO is in addition to the Pentagon’s official budget, now to rise to $750 billion under Trump’s latest budget proposal.
The US actual defense budget, therefore, includes the $750 billion Pentagon bill, plus the OCO direct war spending. Total defense-war spending also includes additional ‘defense’ spending for Homeland Security and for the CIA’s, NSA’s, and US State Department’s growing covert military spending for their ‘private’ armies and use of special forces. It further includes spending for Veterans benefits and military pensions, and for the costs of fuel used by the military which is indicated in the US Energy Dept. budget not the Pentagon’s. Add still more ‘defense’ spending on nuclear arms billed to the Atomic Energy Agency’s budget. And let’s not forget the $50-$75 billion a year in the US ‘black budget’ that fund’s future secret military arms and technology, which never appears in print anywhere in the official US budget document and which only a handful of Congressional leaders in both the Republican and Democrat parties are privy to know.
In short, the US ‘defense’ budget is well over $1 trillion a year and is rising by hundreds of billions a year more under Trump. US wars in the Middle East alone since 2001 have cost the US at minimum $6 trillion, according to various estimates. But contributing even more than wars to the now runaway national deficits and debt is the chronic and accelerating tax cutting that has been going on since 2001 under both Republican and Democrat presidents and Congresses alike—roughly 80% of which has gone to business, investors, and the wealthiest 1% households.
The Bush-Obama $14 Trillion Deficit-Debt Escalation
When George Bush took office in 2001 the national debt was $5.6 trillion. When he left it was approximately $10 trillion. A doubling. When Obama left office in 2016 it had risen to $19.6 trillion. Another doubling. (Under Trump’s first two years it has risen another $3 trillion). For a US national debt of $22.5 trillion today.
Under George W. Bush’s 8 years in office, the tax cutting amounted to more than $4 trillion. Defense and war spending accelerated by several trillions as well. The middle east wars represent the first time in US history that the US cut taxes while raising war spending. In all previous wars, taxation was raised to help pay for war spending. Not anymore.
Obama cut another $300 billion in taxes in 2009 as part of his initial 2009 economic recovery program. He then extended the Bush tax cuts, scheduled to expire in 2010, for two more years in 2011-12—at a cost of another $900 billion. He further proposed, and Congress passed, an additional $806 billion in tax cuts for business as the US economic recovery faltered in 2010. Obama then struck a deal with Republicans in January 2013 to extend the Bush tax cuts of 2001-08 for another entire decade—costing a further $2 trillion during Obama’s second term in office (and $5 trillion over the next ten years, 2013-2023). Thus $2 trillion of that further $5 trillion was paid out on Obama’s watch from 2013-16 as part of the 2013 ‘Fiscal Cliff’ deal he agreed to with the Republicans.
So both Bush and Obama cut taxes by approximately $4 trillion each, for $8 trillion total. And defense-war spending long term costs rose by $6 trillion under both.
Trump’s Deficit-Debt Contribution 2017-18
When added up, Bush-Obama 2001-2016 combined $6 trillion in war-defense spending hikes, plus their accumulated $8 trillion in tax cutting, roughly accounts for the US federal deficit-debt increase of $14 trillion, i.e. from $5.6 trillion in national debt in 2000 to $19.5 trillion by the end of 2016.
To this Trump has since added another $3 trillion during his first two years in office, which adds up to the current $22.5 trillion US national debt. Here’s how Trump has added the $3 trillion more in just two years:
In January 2018 the Trump tax cut provided a $4.5 trillion windfall tax reduction over the next decade, 2018-2028, targeting businesses, multinational corporations, wealthy households, and investors. US multinational corporations alone were allocated nearly half of that $4.5 trillion.
So where did the 2018 Trump (and continuing Bush-Obama tax cuts) go? Several bank research departments in 2018 estimate that in 2018 alone, the first year of Trump’s tax cuts, that the S&P 500 largest corporate profits were boosted by no less than 22% due to the tax cuts. Total S&P 500 profits rose 27% in 2018. So Trump’s tax cuts provided the biggest boost to their bottom line.
Not surprising, with $1.3 trillion in corporate stock buybacks and dividend payouts occurring in 2018 as well, US stock markets continued to rise and shrug off corrections in February and November that otherwise would have brought the stock market boom to an end. But starting this year, 2019, the middle class will begin paying for those corporate-wealthy reductions. Already tax refunds for the average household are down 17%, according to reports. The middle class will pay $1.5 trillion in higher taxes by 2028, as the tax hike bite starts in earnest by 2022.
Another $1.5 trillion in absurd assumptions by the Trump administration about US economic growth over the next decade supposedly reduces the Trump’s $4.5 trillion of tax cuts for the rich and their corporations by another $1.5 trillion. Thus we get the official reported cost of only $1.5 trillion for the 2018 Trump tax cuts. But the official, reported ‘only’ $1.5 trillion cost of Trump’s 2018 tax cuts is the ‘spin and cover-up’. Corporate America, investors and the wealthy 1% actually get $4.5 trillion, while the rest of us pay $1.5 trillion starting, now in 2019, and Trump spins the absurd economic growth estimations over the next decade.
The 2018 Trump tax cuts have reduced US government revenues by about $500 billion in 2018. Add another $.5 trillion per year in Bush-Obama era tax cuts carrying over for 2017-18, another $.4 trillion in Trump war and other spending hikes during his first two years and more than $.6 trillion in interest payments on the debt—and the total is a further $3 trillion added to the national debt during Trump’s first two years.
So Bush-Obama add $14 trillion to the $5.6 trillion debt in 2000. And Trump adds another $3 trillion so far. There’s the $17 trillion addition to the $5.6 trillion national debt.[1]
And now, according to the Treasury Advisory Committee, we can expect a further $12 trillion in debt to be added to the national debt over the coming decade—to give us the $34 trillion and $900 billion a year just in interest charges on that debt!
Total US Debt: 2019
But it gets worse than another $12 trillion. Today’s $22.5 trillion, rising to $34 trillion, is just the US national government debt. Total US debt includes state and local government debt, household debt, corporate bond and business commercial & industrial loan debt, central bank balance sheet debt, and government agencies (GSEs) debt.
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THE EMPIRE OF LIES : HOW WE ARE COLLAPSING IN THE SAME WAY AS THE ROMAN EMPIRE
https://cassandralegacy.blogspot.com/201...ow-we.html
The Devil is sometimes said to be "The Father of Lies." It is an apt definition for a creature that doesn't even exist except as a figment of human imagination. Satan is an evil egregore that we ourselves created, a creature that seems to loom larger and larger behind the current chronicles. The recent arrest of Julian Assange is just the latest deed of an Empire that seems bent on truly creating its own reality, something that, in itself, wouldn't necessarily be evil but that becomes so when it implies destroying all other realities, including the only true one.
Initially, I thought to comment the recent news about Assange by reproducing a post "The Empire of Lies" that I published here about one year ago, where I described how the transition from the Roman Empire to the Middle Ages had taken place, in large part, because people just couldn't trust their Imperial rulers anymore. The Roman Empire had become an empire of lies and it was left to Christianity to rebuild the trust that the old empire had squandered - the Middle Ages were far from being "Dark Ages." But, eventually, I thought to publish something I had in mind about how the Roman Empire and the modern Western Empire are following parallel trajectories in their habit of telling lies as they move toward their respective Seneca Cliffs.
So, here it is my assessment of the Roman Collapse, based on the excellent book by Dmitry Orlov, "The Five Stages of Collapse." Just one note: in the book, Orlov doesn't describe the post-collapse phase of the Soviet Union that ended with Russia becoming again as a prosperous and united country, as it is nowadays. It was a good example of the "Seneca Rebound" -- there is life after collapse and there will be new life after that the Evil Empire of lies will be gone.
The Five Stages of Collapse of The Roman Empire.
Ugo Bardi
Dmitry Orlov wrote "[i]The Five Stages of Collapse[/i]" as an article in 2008 and as a book in 2013. It was an original idea for that time that of comparing the fall of the Soviet Union with that of the United States. Being an American citizen born in Russia, Orlov could compare the two Empires in detail and note the many similarities that led both to follow the same trajectory, even though the cycle of the American Empire is not over, yet.
To strengthen Orlov's analysis I thought I could apply the same five stages to an older Empire, the Roman one. And, yes, the five stages apply well also to that ancient case. So, here is my take on this subject.
To start, a list of the five Stages of Collapse according to Orlov.
- Stage 1: Financial collapse.
- Stage 2: Commercial collapse.
- Stage 3: Political collapse.
- Stage 4: Social collapse.
- Stage 5: Cultural collapse.
Now, let's see how these five stages played out during the fall of the Roman Empire.
Stage 1 – Financial Collapse (3rd century AD). The Roman Empire’s financial system was not as sophisticated as ours, but, just like our civilization, the Empire was based on money. Money was the tool that kept together the state: it was used to pay the legions and the bureaucrats and to make the commercial system supply the cities with food. The Roman money was a physical commodity: it was based on silver and gold, and these metals needed to be mined. It was the Roman control over the rich gold mines of Northern Spain that had created the Empire, but these mines couldn’t last forever. Starting with the 1st century, the cost of mining from depleted veins became an increasingly heavy burden. By the 3rd century, the burden was too heavy for the Empire to carry. It was the financial collapse from which the Empire never could fully recover.
Stage 2 – Commercial Collapse (5th century AD). The Roman Empire had never really been a commercial empire nor a manufacturing society. It was specialized in military conquest and it preferred to import luxury items from abroad, some, such as silk, all the way from the other side of Eurasia, from China. In addition to legions, the Empire produced only two commodities in large amounts: grain and gold. Of these, only gold could be exported to long distances and it soon disappeared to China to pay for the expensive imports the Romans were used to buy. The other product, grain, couldn’t be exported and continued to be traded within the Empire’s border for some time – the supply of grain from the African and Near Eastern granaries was what kept the Roman cities alive, Rome in particular. After the financial collapse, the supply lines remained open because the grain producers had no other market than the Roman cities. But, by mid-5th-century, things got so bad that Rome was sacked first by the Visigoths in 410, and then by the Vandals in 450, It recovered from the 1st sack, but the second was terminal. The Romans had no more money left to pay for the grain they needed, the commercial sea lanes broke down completely, and the Romans starved. It was the end of the Roman commercial system.
Stage 3 – Political Collapse (late 5th century AD). The political collapse went in parallel with the commercial collapse. Already in the late 4th century, the Emperors had become unable to defend Rome from the Barbarian armies marching across the empire and they had retired to the safety of the fortified city of Ravenna. When Rome was sacked, the Emperors didn’t even try to do something to help. The last emperors disappeared by the late 5th century but, already decades before, most people in Europe had stopped caring about whether or not there was some pompous person in Ravenna who wore purple clothes and claimed to be a divine Emperor.
Stage 4 – Social Collapse (5th century AD). The social collapse of the Western Empire went in parallel with the disgregation of the political and commercial structures. Already during the early 5th century, we have evidence that the Roman Elites had gone in “escape mode" – it was not just the emperor who had fled Rome to take refuge in Ravenna, patricians and warlords were on the move with troops, money, and followers to establish feudal domains for themselves where they could. And they were leaving the commoners to fend off by themselves. By the 6th century, the Roman State was gone and most of Europe was in the hands of Germanic warlords.
Stage 5 - Cultural collapse (starting in the 6th century AD). It was very slow. The advent of Christianity, during the 3rd century, had not weakened the Empire's cultural structure, it had been an evolution rather than a break with the past. The collapse of the Empire as a political and military entity didn't change things so much and for centuries people in Europe still considered themselves as Romans, not unlike the Japanese soldiers stranded in remote islands after the end of the second world war .(in Greece, people would still define themselves as "Romans" well into the 19th century). Latin, the imperial language, disappeared as a vernacular language but it was kept alive by the Catholic clergy and it became an indispensable tool that kept Europe culturally united. Latin kept a certain cultural continuity with the ancient empire that was only very gradually lost. It was only with the 18th - 19th centuries that Latin disappeared as the language of the cultural elite, to be replaced by English nowadays.
As you see, Orlov’s list has a certain logic although it needs to be adapted a little to the collapse of the Western Roman Empire. The 5 stages didn’t come one after the other, There was more than a century lapse between the 3rd-century financial collapse (stage 1) and the three subsequent stages arriving together: commercial, political, and social collapse. The 5th stage, the cultural collapse, was a drawn-out story that came later and that lasted for centuries.
How about our civilization? The 1st stage, financial collapse is clearly ongoing, although it is masked by various accounting tricks. The 2nd stage, commercial collapse, instead, hasn't started yet, nor the political collapse: the Empire still maintains a giant and threatening military force, even though its actual efficiency may be doubted. Maybe we are already seeing signs of the 3rd stage, social collapse but, if the Roman case is a guide, these three stages will arrive together.
Then, how about the last stage, cultural collapse? That's a question for a relatively far future. For a while, English will surely remain the universal language, just as Latin used to be after the fall of Rome, while people may keep thinking they still live in a globalized world (maybe it is already an illusion). With English fading, anything may happen and when (and if) a new Empire will rise on the ashes of the American Empire it will be something completely different. We can only say that the universe goes in cycles and that's, evidently, the way things have to be.
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THE “DISINTEGRATION ” OF GLOBAL CAPITALISM COULD UNLEASH WORLD WAR 3 WARNS TOP EU ECONOMIST
Seeing the systemic roots of this risk can help us avert catastrophe and build resilience
Nafeez Ahmed
https://medium.com/insurge-intelligence/...9487210e8f
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AS GOLD IS CENTRAL TO THE SOLUTION OF CURRENCY AND MONETARY ISSUES. IT OFFERS A HISTORICALLY TRIED AND TESTED SOLUTION TO REPLACE FIAT DEBT BASED CURRENCIES AND IS A SAFE HAVEN FROM THE RIBA BASED BANKING SYSTEM. IT ALSO IS THE POINT AT WHICH ISLAMIC FINANCE AS WELL AS ETHICAL FINANCE AND INVESTMENT CONVERGE AND MEET. IT ALSO OFFERS THOSE SEEKING ALTERNATIVES TO MAMMON TO REACH OUT TO A DIVINELY ORDAINED SOLUTION WHICH MEETS THE NEEDS OF HUMANITY FOR A STABLE AND SECURE MEANS OF EXCHANGE AND VALUE . ACCORDINGLY MORE REGULAR FOCUS WILL BE PAID TO THIS AREA HEREAFTER. WATCH THIS SPACE OR WATCH THE VALUE OF YOUR PAPER MONEY EVAPORATE .
MAHATHIR URGES ASIA TO WORK ON GOLD AND ANOTHER DEVELOPMENT FOR TRADING
GLOBAL CURRENClES SINKING – GOLD TO EMERGE AS SAVIOR
http://www.birchgold.com/news/global-currencies-sinking-gold-to-emerge-as-savior/?msid=94970&utm_source=Birch+Gold+Group+Market+Update&utm_campaign=ca48a40a2a-market_update_email_052519&utm_medium=email&utm_term=0_f225c8b1ba-ca48a40a2a-76227377&goal=0_f225c8b1ba-ca48a40a2a-76227377
Gold Will Save Investors From Sinking Global Currencies
The relative stability of reserve currencies, along with their viability as a store of wealth, will soon be placed into question as governments around the world crumble under the weight of national debt. That is according to Sprott CEO Peter Grosskopf, who recently published a note warning investors of the impending crisis.
Although it rarely makes headlines, an article on Kitco reports the $184 trillion of global debt is perhaps the biggest threat to the world economy since the invention of fiat, and an ever-expanding one at that. While representing only a small portion of that figure, the article states the $22 trillion of U.S. debt should be of particular concern to domestic investors, along with the fast-approaching $1 trillion of federal deficit. Pundit projections state that a national debt of $24 trillion will mark the beginning of an economic catastrophe.
Although economists universally agree that there is no easy solution to the debt issue, Grosskopf warns that such a solution is precisely what central banks will opt for. He suggests this will likely come in the form of Modern Monetary Theory (MMT), a form of ultra-loose fiscal policy that will essentially give countries free reign to print as much money as needed to stimulate growth. Grosskopf, like others, believes that this will erode currencies even faster, as hyperinflation is one of MMT’s many issues. Not coincidentally, gold has historically acted as the premier hedge against currency debasement and all other forms of economic fallout. Grosskopf thinks that fiat could ultimately make way for gold’s return as a payment method. While it may not happen tomorrow, Grosskopf thinks investors don’t have time to waste when it comes to moving into gold, as MMT’s growing popularity means that we could soon see quantitative easing on an unprecedented scale.
Gold is the Winner of Trade Wars
A mere few weeks ago, the U.S.-China trade conflict gave off an optimistic look as both nations’ leaders met in order to reach a mutually-beneficial agreement. Since then, however, trade talks have deteriorated and most now agree that the two countries are in a full-fledged trade war.
Gold has not yet benefited from the looming crisis, as most investors are waiting to see which nation makes the next move and escalates the conflict further. Yet Gary Wagner, editor of TheGoldForecast.com, has little doubt that gold will be the true winner of the standoff. In an interview with Kitco, Wagner explained how the trade war will affect all markets and spread into each sector. Although the 25% increase in import tariffs is meant to detriment China, it’s the average American consumer that will ultimately pay the price for the conflict. As Wagner notes, the added tariffs will have a significant inflationary effect as domestic manufacturers ramp up prices, strengthening gold’s long-term bullish case. The erosion of other assets as a consequence of the trade war will act as another tailwind for the metal. “There will be an increase in inflation, and we could see continued pressure on U.S. equities, and we could see gold be a recipient in terms of a bullish move,” said Wagner.
Regarding short-term movements, the analyst pointed to $1,310 as a key resistance level to look out for, followed by the most recent high of $1,350 an ounce. To Wagner, either of these levels could be a signal that gold’s prolonged uptrend has begun.
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DEEP STATE POW -WOW: CHARLIE SKELTON LIVE FROM POMPEO & KUSHNER's BILDERBERG 2019 IN MONTREUX
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CHRIS HEDGES "FASCISM IN THE AGE OF TRUMP"
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ECUADOR UNDER PRESIDENT NEO- CONO MORENO:
THE IMF’s DEADLY “ECONOMIC MEDICINE”,
THE WEOPONISATION OF NEOLIBERAL REFORMS
https://www.globalresearch.ca/ecuador-un...ms/5691749
A popular insurrection is unfolding against the adoption of sweeping IMF reforms imposed by the “centre left” government of President Lenin Moreno. In March 2019, a 4.2 billion dollar IMF loan was granted to Ecuador. “We are here to help you” says the IMF. Our objective is to help Ecuador “modernize its economy and pave the way for strong, sustained, and equitable growth.” Nonsense This loan agreement initiates a process of economic and social destruction. What is at stake is an engineered economic depression. The Neocons in Washington are firmly behind the IMF’s deadly economic medicine.
Meanwhile, president Lenin Moreno, an alleged socialist and “Leninist” inspired by Russian Revolutionary Vladimir Lenin has fully endorsed the neoconservative agenda. While President Lenin Moreno leads the centre-left Movimiento Alianza PAIS (Patria Altiva I Soberana), he is a “Neocon” in disguise, a US proxy: nicknamed President NeoCon Moreno. in Spanish Señor presidente Neo-coño Moreno. Mike Pompeo and Moreno are buddies. In Quito in July, Secretary of State Pompeo welcomed “new” relations with Ecuador. ” A new era has begun”, not to mention the arrest of Julian Assange by British authorities in April.
The IMF’s Deadly Economic Medicine
It’s the standard IMF economic medicine, the so-called “economic package” (paquetazo) imposed on indebted countries. It sets the stage for a major dislocation of Ecuador’s national economy. Quite deliberately, the policies of the IMF are intended to impoverish an entire country, take over Ecuador’s oil economy. The IMF acts on behalf of Wall Street and the “Washington Consensus”. While the IMF policy conditionalities are couched in technical jargon, the objectives are crystal clear :
The authorities’ measures are geared towards strengthening the fiscal position and improving competitiveness and by so doing help lessen vulnerabilities, put dollarization on a stronger footing, and, over time, encourage growth and job creation.[Nonsensical statement]
“Achieving a robust fiscal position is at the core of the authorities’ program, which will be supported by a three-year extended arrangement from the IMF. The aim is to reduce debt-to- GDP ratio through a combination of a wage bill realignment, a careful and gradual optimization of fuel subsidies,”
What is the meaning of “A combination of a wage bill realignment, a careful and gradual optimization of fuel subsidies”
Answer: Massive layoffs in the public sector, dramatic hikes in fuel prices, reduction in real wages, the privatization of pension funds, the privatization of health and education. The price of diesel more than doubled overnight leading to the paralysis of public transportation. Gasoline prices increased by 29%. The media will say that gasoline was subsidized. This is a misleading statement. Ecuador is the largest oil economy in South America after Venezuela. It has ample surpluses of crude oil. It sells oil locally at a price which is lower than the export price also with a view to supporting local industries. This is a standard practice in many oil producing economies. These dramatic hikes in fuel prices contribute to destabilizing all major sectors of the national economy. They immediately trigger inflation and a collapse in purchasing power, the contribute to the paralysis of public transport as well as internal commodity trade.
Fake IMF Loan
The dollar denominated external debt of Ecuador has skyrocketed. The $4.2 billion loan does not contribute to an increase in financial resources for Ecuador. Quite the opposite. The IMF loan is tagged for the reimbursement of Ecuador’s external debt obligations. It comes in and it goes out. New loans to pay back old debts. It is fake loan. What it does is to “subsidise” Ecuador’s external creditors. We cannot pay our debt servicing obligations. No problem says the IMF: we will lend you the money and with that money you will pay us back, namely the IMF loan is a “safety net” for Ecuador’s external creditors, namely Wall Street. Ecuador no longer has control over its fiscal and monetary policy.
It’s central bank has been transformed into a colonial style currency board. The entire financial system is dollarised, namely the US Federal Reserve and Wall Street ultimately call the shots. In a dollarised economy, internal debts become external debts expressed in US dollars.
An entire nation has been impoverished.
The external debt goes fly hight. Macro-economic policies are controlled by the creditors.
click to read full report.
EXECUTIVE SUMMARY
Context: The authorities face a difficult situation. Wage increases have outpaced productivity growth [IMF calls for a reduction in real wages] over the past decade which, has led to a deterioration in competitiveness. This has been exacerbated by a strong U.S. dollar—Ecuador’s economy is fully dollarized—leaving the real exchange rate overvalued. [engineered by Wall Street] Public debt is high and rising, the government faces sizable gross financing needs, and international reserves are precariously low. The recent volatility in oil prices and tighter global financial conditions have exacerbated these strains.
Article IV: The Article IV discussions focused on diagnosing the nature of the imbalances facing Ecuador and the policy changes that will be needed to address them. At the center of the discussion was the proper calibration of the size, pace, and composition of the reduction in the fiscal deficit that will be needed in the coming years. [implementation of drastic austerity measures] In addition, there was broad agreement that fundamental supply-side efforts will be needed to foster competitiveness, create jobs, rebuild institutions, and make Ecuador a more attractive destination for private investment. Finally, improving the social safety net and increasing the effectiveness of public spending, particularly on health and education, will be essential to achieving strong, sustained, and socially equitable growth.
Program Objectives: Consistent with the findings of the Article IV, the authorities’ policy plan seeks to decisively address the systemic vulnerabilities facing Ecuador. The goals of these policies are to boost competitiveness and job creation, protect the poor and most vulnerable, fortify the institutional foundations for dollarization, [denies Ecuador to have an independent and sovereign monetary policy] and to improve transparency and good governance to public sector operations while strengthening the fight against corruption.
Program Modalities: The proposed program would be a 36-month Extended Fund Facility with access of US$4.209 billion (SDR 3.035 billion, 435 percent of quota) [New loans to pay back outstanding foreign debts, harsh policy conditionalities imposed by creditors]. The program has quarterly reviews and the full amount of Fund resources would be made available for direct budget support. Performance criteria have been established on the non-oil primary balance of the nonfinancial public sector (including fuel subsidies), net international reserves (excluding bank deposits held at the central bank), and on social assistance spending. There are continuous performance criteria to prevent new external payment arrears and to prohibit central bank financing of the nonfinancial public sector (both directly or indirectly through public banks). The program also includes a quarterly indicative target on the overall balance of the nonfinancial public sector.
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THE ECONOMIC CRASH SO FAR : A LOOK AT THE REAL NUMBERS
https://www.birchgold.com/news/the-economic-crash-so-far/?msid=94970&utm_source=icymi&utm_campaign=newsletter_111319&cmp=1&utm_medium=email
Brandon Smith
There are many problems when attempting to track a faltering economy. For one, the people in government generally do not want the public to know when the system is in decline because this looks bad for them. They prefer to rig statistical indicators as much as possible and hope that no one notices. When the crash occurs, they then claim that “no one saw it coming” and the disaster “came out of nowhere”, so how could they be to blame?
I have even heard it argued that political leaders, including the president, have a “duty” to lie about the state of the economy because once they admit to the decline they will cause a panic and perpetuate the crisis. This is stupidity. If an economic system is in disrepair and is built on a faulty foundation, then the problems should be identified and fixed immediately. The weak businesses should be culled, not bailed out. The wasteful government spending should be cut, not increased. The downturn should not be hidden and prolonged for years or decades. In most cases, this only makes the inevitable crash far worse and more damaging.
Another factor, which some people might call “conspiracy theory” – but it has been proven time and time again in history – is that the money elites have a tendency to engineer economic disasters while deliberately hiding the real statistics from the public. Why? Well, if the real data was widely disseminated, then a crash would not be much of a surprise and the populace could be prepared for it. I suspect the elites hide the data because they WANT the crash to be a surprise. The bigger the shock, the bigger the psychological effect on the masses. This fear and confusion allows them to make changes in the power structure of a nation or of the entire world that they would not be able to accomplish otherwise.
The most rigged statistics tend to be the least important overall in analysis, but this does not stop the mainstream media and investors from hyper focusing on them. How many times have you told friends and family about the collapse in manufacturing or the explosion in consumer and corporate debt, only to hear them say, “But the stock market is at all-time highs!” Yes, even though stock markets are a meaningless trailing indicator, even though GDP stats are a complete fallacy, and even though jobless numbers do not include tens of millions of people out of work, these are the stats that the average person takes mental note of when consuming their standard 15 minutes of news per day.
While the issue of rigged statistics makes analysis of a crash difficult, a willfully ignorant citizenry makes reporting on the real data almost impossible. It’s sad to say, but a large number of people do not want to hear about negative information. They want to believe that all is well, and will delude themselves with fantasies of blind optimism and endless summers. Like the tale of “The Ant And The Grasshopper”, they are grasshoppers and they see anyone who focuses on the negative as “chicken littles” and “doom mongers”. In their minds they have all the time in the world, until they freeze and starve when winter comes.
When I encounter people who actually believe the manipulated numbers or buy into the stock market farce or simply don’t want to accept that a crash could happen in their lifetime, I always ask them to consider these questions: [i]If the global economy is not on the verge of collapse, then why did central banks keep propping it up for the past ten years? And if central banks have been propping up the system, how much longer do you think they can do this? How much longer do you think they want to do it? What if one day they decide to let the entire house of cards tumble? What if such an event actually benefits them?[/i]
We’ve seen that a broken economy can be technically held together for a decade, but under the surface, the structure continues to rot. The bottom line is that even if the elites wanted to keep the system going for another ten years, and even if politicians continued to help them by pumping out false statistics, there is no way to hide the effects of crumbling fundamentals. We saw this during the crash of 2008, and now we’re seeing it again.
After nearly ten years of stimulus inflated the largest financial bubble in history (the Everything Bubble), the Federal Reserve and other central banks halted stimulus measures and tightened global liquidity. By the end of 2018, a new crash began, the implosion of the Everything Bubble had been triggered. All of this is still just an extension of the crash of 2008, which never really subsided; it was only slowed down through tens of trillions of dollars in central bank intervention. Now, the central banks have started an avalanche that cannot be stopped. But the fact of the matter is, they don’t really want to stop it.
Here are the indicators so far that prove a crash is happening in the U.S. while a majority of the public is oblivious:
GDP numbers are completely manipulated. Government spending of taxpayer dollars on a number of inflated programs, including continued spending on Obamacare, is added to GDP calculations. Without this fancy accounting, U.S. GDP growth would actually be negative, according to ShadowStats. But even with the juiced data, official GDP growth is still in decline, falling to 1.9% and well below the 3% growth we were supposed to see this year.
Official unemployment stats remain at all-time lows, which is commonly cited by the mainstream media, Donald Trump (he used to argue the opposite three years ago), and even the Federal Reserve in reference to the health and stability of the economy. What they do not mention much is the 95 million people not in the labor force and not counted because they have been unemployed for so long. When the media does mention this fact, they claim the number is “misleading”, that most of these people are students or retired, that the retirement age is decreasing and Baby Boomers are leaving the workforce sooner, and that the people who don’t have jobs are simply “not interested” in working. None of this is true.
The retirement age is increasing in the U.S., not decreasing, according the SS Administration. Current average retirement age is now 67, up from 65, almost the same as it was during the Great Depression. Baby Boomers are not retiring at rates similar to ten years ago, and are in fact attempting to stay in the workforce due to the poor economy. Many of them are trying to come OUT of retirement just to make ends meet.
The labor participation rate remains near record lows. Interestingly, the Bureau of Labor Statistics (BLS) house survey that is used to determine if people “want a job” assumes that if you are near retirement age and do not have a job, you are simply not interested in a job, and they count you as “non-participating”. However, if you DO have a job and you are near retirement age, they count you as participating. It’s a rather convenient assumption on the government’s part to claim that just because an unemployed person is near retirement age, that means they “don’t want a job”.
While there is surely a small percentage of the 95 million people not counted in the labor force that do not want a job, if unemployment stats counted U-6 measurements as they used to, the unemployment rate would be closer to 20%.
Another problem is the quality of jobs being created. U.S. manufacturing jobs, as well as higher wage jobs, are in steep decline. They have been replaced with low paying jobs in the service sector.
Real wages in the U.S. have not kept up with inflation. The average worker is now losing money overall as prices rise beyond the pace of their incomes.
As more and more Millennials say they cannot afford to buy a home, rental prices have skyrocketed in the past several years. The home ownership rate plunged starting in 2006 and has not recovered since.
U.S. manufacturing has fallen to levels not seen since the crash of 2008. U.S. factory orders have slumped in 2019.
U.S. Services PMI continues to falter since spring of this year. Job growth is now slowing and over 8,500 retail stores have been closed down already in 2019. Web-based retail is not picking up the slack, as online sellers like Amazon are suffering from falling profits.
Corporate profits overall have tumbled this year and projected future profits have been drastically adjusted to the downside.
Corporate debt, consumer debt and national debt are all at historic highs. Corporate cash flow is so tight that Federal Reserve repo purchases continue to run into high demand. This debt signal is one we saw in 2007, just before the credit crisis.
U.S. trucking and railroad freight continue to log steep declines in traffic and goods. This tells us what we already know: Even though consumer spending has increased recently, this does not mean people are buying more stuff or have more disposable income. What is really happening is inflation, or stagflation. Cost of living is going up. Debt payments are going up. Consumers are spending more on the same amount of stuff, or less stuff, and have less expendable income. U.S. consumers are being bled dry.
All of these factors and more show an economy in recession or depression (depending on what historic standards you use). In the darker corners of the investment world, the great hope is that the central banks will return to pumping trillions into the banking sector ($16 trillion during the TARP bailout dwarfs the $250 billion the Fed has recently pumped out in their repo markets). They hope that this will free up even more credit. Meaning, they believe only more debt will save the system from suffering.
I say, time is up on the debt party. More stimulus will not stall the crash that is already happening, and the Fed does not appear poised to print anywhere near what it did during the credit crisis, at least not in time to change the trend. The can has been kicked for the last time. The grasshopper mentality will not save people from the clear reality. Only preparation and planning will.
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WHY AREN’T AMERICANS RISING UP LIKE WE ARE SEEING ACROSS THE PLANET ?
Medea Benjamin and Nicolas J. S. Davies
November 16, 2019 "Information Clearing House" -
The waves of protests breaking out in country after country around the world beg the question: Why aren’t Americans rising up in peaceful protest like our neighbors? We live at the very heart of this neoliberal system that is force-feeding the systemic injustice and inequality of 19th-century laissez-faire capitalism to the people of the 21st century. So we are subject to many of the same abuses that have fueled mass protest movements in other countries, including high rents, stagnant wages, cradle-to-grave debt, ever-rising economic inequality, privatized health care, a shredded social safety net, abysmal public transportation, systemic political corruption and endless war.
We also have a corrupt, racist billionaire as president, who Congress may soon impeach, but where are the masses outside the White House, banging pots and pans to drive Trump out? Why aren’t people crashing the offices of their congresspeople, demanding that they represent the people or resign? If none of these conditions has so far provoked a new American revolution, what will it take to trigger one?
In the 1960s and 1970s, the senseless Vietnam War provoked a serious, well-organized antiwar movement. But today the U.S.’s endless wars just rage on in the background of our lives, as the U.S. and its allies kill and mutilate men, women and children in distant countries, day after day, year after year. Our history has also witnessed inspiring mass movements for civil rights, women’s rights and gay rights, but these movements are much tamer today.
The Occupy Movement in 2011 came closest to challenging the entire neoliberal system. It awakened a new generation to the reality of government of, by, and for the corrupt 1 percent, and built a powerful basis for solidarity among the marginalized 99 percent. But Occupy lost momentum because it failed to transition from a rallying point and a decentralized, democratic forum to a cohesive movement that could impact the existing power structure.
The climate movement is starting to mobilize a new generation, and groups like School Strike for the Climate and Extinction Rebellion take direct aim at this destructive economic system that prioritizes corporate growth and profits over the very survival of life on Earth. But while climate protests have shut down parts of London and other cities around the world, the scale of climate protests in the U.S. does not yet match the urgency of the crisis.
So why is the American public so passive?
Americans pour their energy and hopes into electoral campaigns. Election campaigns in most countries last only a few months, with strict limits on financing and advertising to try to ensure fair elections. But Americans pour millions of hours and billions of dollars into multi-year election campaigns run by an ever-growing sector of the commercial advertising industry, which even awarded Barack Obama its “Marketer of the Year” award for 2008. (The other finalists were not John McCain or the Republicans but Apple, Nike and Coors beer.)
When U.S. elections are finally over, thousands of exhausted volunteers sweep up the bunting and go home, believing their work is done. While electoral politics should be a vehicle for change, this neoliberal model of corporate “center-right” and “center-left” politics ensures that congresspeople and presidents of both parties are primarily accountable to the ruling 1 percent who “pay to play.” Former President Jimmy Carter has bluntly described what Americans euphemistically call “campaign finance” as a system of legalized bribery. Transparency International (TI) ranks the U.S. 22nd on its political corruption index, identifying it as more corrupt than any other wealthy, developed country.
Without a mass movement continually pushing and prodding for real change and holding politicians accountable—for their policies as well as their words—our neoliberal rulers assume that they can safely ignore the concerns and interests of ordinary people as they make the critical decisions that shape the world we live in. As Frederick Douglass observed in 1857, “Power concedes nothing without a demand. It never did and it never will.”
Millions of Americans have internalized the myth of the “American dream,” believing they have exceptional chances for social and economic mobility compared with their peers in other countries. If they aren’t successful, it must be their own fault—either they’re not smart enough or they don’t work hard enough.
The American Dream is not just elusive—it’s a complete fantasy. In reality, the U.S. has the greatest income inequality of any wealthy, developed country. Of the 39 developed countries in the Organization for Economic Co-operation and Development (OECD), only South Africa and Costa Rica exceed the U.S.’s 18 percent poverty rate. The United States is an anomaly: a very wealthy country suffering from exceptional poverty. To make matters worse, children born into poor families in the U.S. are more likely to remain poor as adults than poor children in other wealthy countries. But the American dream ideology keeps people struggling and competing to improve their lives on a strictly individual basis, instead of demanding a fairer society and the health care, education and public services we all need and deserve.
The corporate media keeps Americans uninformed and docile. The U.S.’s corporate media system is also unique, both in its consolidated corporate ownership and in its limited news coverage, endlessly downsized newsrooms and narrow range of viewpoints. Its economics reporting reflects the interests of its corporate owners and advertisers; its domestic reporting and debate are strictly framed and limited by the prevailing rhetoric of Democratic and Republican leaders; its anemic foreign policy coverage is editorially dictated by the State Department and Pentagon.
This closed media system wraps the public in a cocoon of myths, euphemisms and propaganda to leave us exceptionally ignorant about our own country and the world we live in. Reporters Without Borders ranks the U.S. 48th out of 180 countries on its Press Freedom Index, once again making the U.S. an exceptional outlier among wealthy countries.
It’s true that people can search for their own truth on social media to counter the corporate babble, but social media is itself a distraction. People spend countless hours on Facebook, Twitter, Instagram and other platforms venting their anger and frustration without getting up off the couch to actually do something—except perhaps sign a petition. “Clicktivism” will not change the world.
Add to this the endless distractions of Hollywood, video games, sports and consumerism, and the exhaustion that comes with working several jobs to make ends meet. The resulting political passivity of Americans is not some strange accident of American culture but the intended product of a mutually reinforcing web of economic, political and media systems that keep the American public confused, distracted and convinced of our own powerlessness.
The political docility of the American public does not mean that Americans are happy with the way things are, and the unique challenges this induced docility poses for American political activists and organizers surely cannot be more daunting than the life-threatening repression faced by activists in Chile, Haiti or Iraq.
So how can we liberate ourselves from our assigned roles as passive spectators and mindless cheerleaders for a venal ruling class that is laughing all the way to the bank and through the halls of power as it grabs ever more concentrated wealth and power at our expense?
Few expected a year ago that 2019 would be a year of global uprising against the neoliberal economic and political system that has dominated the world for 40 years. Few predicted new revolutions in Chile or Iraq or Algeria. But popular uprisings have a way of confounding conventional wisdom.
The catalysts for each of these uprisings have also been surprising. The protests in Chile began over an increase in subway fares. In Lebanon, the spark was a proposed tax on WhatsApp and other social media accounts. Hikes in fuel tax triggered the yellow vest protests in France, while the ending of fuel subsidies was a catalyst in both Ecuador and Sudan.
The common factor in all these movements is the outrage of ordinary people at systems and laws that reward corruption, oligarchy and plutocracy at the expense of their own quality of life. In each country, these catalysts were the final straws that broke the camel’s back, but once people were in the street, protests quickly turned into more general uprisings demanding the resignation of leaders and governments.
They have the guns but we have the numbers. State repression and violence have only fueled greater popular demands for more fundamental change, and millions of protesters in country after country have remained committed to non-violence and peaceful protest—in stark contrast to the rampant violence of the right-wing coup in Bolivia.
While these uprisings seem spontaneous, in every country where ordinary people have risen up in 2019, activists have been working for years to build the movements that eventually brought large numbers of people onto the streets and into the headlines. Erica Chenoweth’s research on the history of nonviolent protest movements found that whenever at least 3.5 percent of a population have taken to the streets to demand political change, governments have been unable to resist their demands. Here in the U.S., Transparency International found that the number of Americans who see “direct action,” including street protests, as the antidote to our corrupt political system has risen from 17 percent to 25 percent since Trump took office, far more than Chenoweth’s 3.5 percent. Only 28 percent still see simply “voting for a clean candidate” as the answer. So maybe we are just waiting for the right catalyst to strike a chord with the American public.
In fact, the work of progressive activists in the U.S. is already upsetting the neoliberal status quo. Without the movement-building work of thousands of Americans, Bernie Sanders would still be a little-known senator from Vermont, largely ignored by the corporate media and the Democratic Party. Sanders’ wildly successful first presidential campaign in 2016 pushed a new generation of American politicians to commit to real policy solutions to real problems instead of the vague promises and applause lines that serve as smokescreens for the corrupt agendas of neoliberal politicians like Trump and Biden.
We can’t predict exactly what catalyst will trigger a mass movement in the U.S. like the ones we are seeing overseas, but with more and more Americans, especially young people, demanding an alternative to a system that doesn’t serve their needs, the tinder for a revolutionary movement is everywhere. We just have to keep kicking up sparks until one catches fire.
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WATCH OUT FOR THE FORTHCOMING GLOBAL VISION 2000 EDITORIAL ON THE MISSING DIMENSION WHICH THE EXPERTS, GOVERNMENT AND MAINSTREAM MEDIA ARE NOT INFORMING YOU ABOUT. WE ARE NOT SURPRISED AS HOW CAN THE BLIND LEAD THE BLIND. THE DEAF DUMB AND BLIND ARE NOT DEALING HOLISTICALLY WITH THIS CORONA VIRUS PANDEMIC. WE WILL NOTIFY YOU ABOUT HOW YOU CAN DEAL WITH AND OVERCOME THE PERFECT STORM CREATED BY THE GLOBAL PANDEMIC AND BANKRUPT DEBT BASED FINANCIAL USURIOUS CAPITALIST SYSTEM. IF PANIC OR FEAR IS NOT THE SOLUTION WHAT IS?
THE VIRUS, THE LOCK DOWN, OIL, THE USD & GETTING OFF THE GRID
GREATER DEPRESSION IS UPON US, GOLD REMAINS STEADFAST AS REFUGE
DOUG CASEY
GLOBAL MARKET MELTDOWN IS ON ; IT’S SHEER HYSTERIA
GERALD CELENTE
ECONOMIC FREEZE IS HERE , GET GOLD , SILVER IF YOU CAN AND GET READY
JIM RICKARDS
‘THIS IS THE BEGINNING OF THE GREATEST FINANCIAL CRISIS IN US HISTORY’: PETER SCHIFF MAKES DIRE PREDICTIONS TO BOOM BUST
https://www.rt.com/business/483006-great...us-history
After suffering the worst stock market crash since 1987, the US Federal Reserve has announced a $1.5 trillion injection to ease strained capital markets. It is the biggest action by the Fed since the 2008 financial crisis.
RT’s Boom Bust is joined by the CEO of Euro Pacific Capital Peter Schiff to find out if the Fed’s actions are enough to stop the stock market bloodbath.
“The bull market is clearly over, just look at the numbers,” says the veteran stock broker.
“This is the beginning of the greatest financial crisis in US history,” Schiff says, adding “The financial crisis of US of 2008 will pale in comparison as with the severity of this recession. We are going to have a much greater recession than the one that we had in 2008.”
According to the expert, the difference is that “this one is actually going to have inflation; we are going to have rising consumer prices and a falling dollar which is going to make it so much worse than what we have experienced 10-12 years ago.” Schiff explains that the coronavirus is just a pin while the debt bubble is the problem. The virus has not only pricked the stock market bubble and the crypto bubble, but it has also punctured the bond market bubble. “So, now we have to deal with the consequences of the disease that the Fed inflicted us with. And unfortunately the Fed’s cure for the coronavirus is going to be fatal for the economy.” The strategist says that the fiscal stimulus is going to make the situation worse. “The US is broke, there is no money to stimulate the economy, and all we can do is print money… The bond market is imploding because there is too much debt.”
THE GLOBAL ECONOMY WAS DEATHLY SICK BEFORE NOW, BUT COVID 19 WILL TAKE THE BLAME IF IT CRASHES
Norman Lewis
https://www.rt.com/op-ed/483353-coronavirus-economic-downturn-predictions
As economists begin to predict what the global economic effects of Covid-19 will be, the danger is we play up the economic damage of the virus while hiding the deep-rooted sources of our contemporary financial doldrums.
It is inevitable that economic forecasts of the impact of Covid-19 on the global economy are being revised daily, if not hourly. It is right that economic forecasters should be updating their predictions. But we all need to keep in mind that these revised forecasts are little more than guesswork – however sophisticated their computer modelling might be.
This is not prejudice against economists, the experts Michael Gove in particular referred to when he said during the Brexit referendum that the British people had had enough of them –referring specifically to their shaky prediction track record. Economic predictions and forecasting are notoriously difficult. It is the reason why leading economist JK Galbraith once quipped that the only function of economists was “to make astrology look respectable.” We are going to see a proliferation of astrology in the days ahead. The biggest danger is going to be the battle to avoid economic alarmism.
The division of labour between health officials and economic experts is increasingly being blurred. Health officials are being asked about economic impacts, while economists are being called to make predictions about the impact of the disease. Health and economics are being conflated, which is confusing for all; what should be treated as a medical emergency is increasingly becoming a sphere for urgent government economic bailouts and politics aimed at alleviating the fall-out of lockdowns.
These confusions aside, predicting the economic costs of ill-health is very difficult. The Co-Operative Pharmacy reported in 2010, for example, that flu cost UK employers 7.6 million working days this year. It estimated that the cost to the economy was around £1.35 billion. But no-one even really knows the economic costs of these ‘normal’ diseases. Annual deaths precipitated by influenza are much higher than the deaths from coronavirus so far. According to Public Health England, in an average year about17,000 people in England die from flu complications, of which around four-fifths are over 65. But the numbers vary wildly from one year to the next. The relative effects on British gross domestic product (GDP) of a high flu death year compared to a low death year might keep economic modellers busy, but the actual effect gets lost in the longer-term influences and trends.
But there are things we know which should be at the forefront of our considerations. The world economy was already in deep ill-health before anyone had even heard of Covid-19. Losing sight of this means the remedies on offer might be good at stemming the symptoms of a problem, but they ignore the underlying cause, the real source of the malaise, which will remain untreated. This will be worse in the long run than any short-term dislocations we are forced to endure.
The world economy has been, if not on life-support, terminally ill for years. Global growth – and especially advanced-economy growth – this year was already dismal, and has been for many years. Forecasts for this year were already pretty downbeat before most people were aware of the word ‘coronavirus’. The illness is the result of years of diminishing business investment in new technologies and ways of operating, and the propping up by governments of companies that should have gone out of business. The end result? Almost stagnant productivity. People at work are no longer producing more in the same time. This is a significant break from the dominant pattern during the past two centuries of economic expansion. This waning in productivity growth – sinking to little more than flatlining in Britain – is what accounts for most people no longer benefiting from regular increases in living standards.
It is also what has led to the increased dependence on debt and financialisaton. The 2008 crash confirmed the fragility of economic systems that rely too much on borrowing and too little on creating new wealth. We are not in permanent recession, but we are stuck in a cycle of financial crises. Between the crashes, debt keeps things ticking along. The unstable dissonance between the financial and productive economies – reflected in the inflated stock markers – reveal that an adjustment was inevitable. The dramatic falls in global stock markets over the past two weeks were on the cards before the impact of Covid-19 panic set in.
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