Writing on ZNet, Jack Rasmus, author of Obama’s Economy: Recovery for the Few, comments on the $2 billion loses suffered by JP Morgan and warns of a dangerous interaction between the European and US banking crises:
What happened with J.P. Morgan last week—and is still yet to happen further with J.P. as well as with other US banks—also shows how deeply the US banking system is integrated with the European. J.P’s losses are Euro-centered, speculation driven, and CDS and other derivatives based.
That means what’s been happening in Europe and its banking system is not isolated from the U.S. banks. Today’s emerging European bank crisis—the second globally since the first in 2007-09 centered in the U.S.—will have a significant impact on the U.S. And it follows that if a second banking crisis emerges on both sides of the Atlantic, a second general recession will follow on both sides as well. The European side has already begun. European economies are already well down the road of that recession. And there’s no way the U.S. economy, despite all the false hype about another recovery now occurring in the U.S. (the third such since 2009), cannot avoid a further downturn as well.
The Euro bank crisis has begun to spread its contagion to the U.S. banking system, as last week’s J.P. Morgan losses—centered in Europe and in the latter’s speculative markets—now clearly shows. Watch for more bad news to come on both sides of the Atlantic.
Rasmus sketches out an alternative economic vision to the current orthodoxy:
The real solutions to the parallel failures of fiscal and monetary policies in both the U.S. and in Europe today require basic restructuring of the banking systems in both economies. The solution to the banking crisis—whether in Europe or the U.S.—is not further free money, massive liquidity injections by central banks. The solution is to create a broad ‘utility banking system’ for consumer households and small businesses. The solution is a thorough restructuring of the mission and monetary tools of the central banks and their complete democratization. The solution is not to abolish the Federal Reserve, as simplistic conservative ideology now proposes, but to fully democratize the Fed in order to make it responsive to the needs of Main St. and not an appendage of Wall St.
On the fiscal side, massive fiscal spending is required—financed not from deficits but from a fundamental restructuring of the tax system. But unlike proposals from liberal mainstream economists, it is not sufficient simply to spend more on fiscal stimulus. It is not just a question of magnitude of spending. It is a question of the composition and timing of that spending, as well as measures to remove household debt and regenerate household real incomes once again.
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Recovery for the Few
Informed critical economist takes Obama to task for presiding over a failing and unequal US economy.
“Everybody else talked of the Lehman crisis as a blip, but Rasmus got it right: his concept of ‘epic recession’ describes what happened, in America and in the Western world. In this trenchant critique of Obama’s stimulus measures, he asks searching questions about the scale of the actions taken and the suitability of their design. With orthodox economics coming under strain, Rasmus’ unorthodox economics is a refreshing counter-argument to the mainstream.” – Paul Mason, BBC Newsnight Economics Editor and author of Meltdown
“Obama was elected because he represented hope and the expectation of change. But as Rasmus shows, little changed for tens of millions of unemployed, homeowners, and those dependant on government services. Rasmus describes in detail how Obama was the most conservative and business-oriented of the Democratic candidates in 2008, and how his first-term economic policies reflected that orientation.” – Chuck Mack, International Vice-President, International Brotherhood of Teamsters Union
Prelude to Global Depression
A fresh perspective on the economic crisis that argues that we are experiencing a recession on an unprecedented scale
“Extensive research, thoughtful analysis and articulate writing have created a great book. Jack Rasmus doesn’t just talk about the economic catastrophe of the last two years he identifies the problems, the root causes, and offers sound and insightful solutions. Epic Recesssion should be required reading for anyone who has a responsibility in formulating public policy.” – Chuck Mack, International Vice-President, International Brotherhood of Teamsters