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13 July, 2017

Very unlikely to avoid another financial crisis during the next one or two years

'I see an American economy working its way into that kind of a dead end by its own mechanisms, and because it can't face that the system doesn't work, it has to keep going in a kind of zombie way towards its own end.'

Richard Wolff briefly explains the dead end in which the American economy has been trapped, and why it is unlikely to avoid another financial crisis soon:

If you try now to jack-up the interest rates in order to prepare for the next recession, you are admitting - which you should be doing and should be talking to the American people, that the next recession is something that leading policy makers know is on the horizon. It's not whether we are going to have one, it's only a question of when.

Over the last 200 years, capitalism, wherever it existed, has had economic downturns every four to seven years. Well, do the math: the last one was in 2008-9. We're due for one and it will be very unlikely that we don't have one in the next twelve, eighteen, twenty-four months.

Putting aside what that would do to Trump presidency, for the Federal Reserve, they can't lower the interest rates unless they first bring them up. But by bringing them up, they make houses more expensive, cars more expensive, all of us will be paying higher monthly payments on our credit cards, and that will constrict the economy, so they don't know which way to turn.

This is a sign of an economic system that isn't working very well because it literally does not give you an idea of which way to turn, if you want to avoid a catastrophe.

I see an American economy working its way into that kind of a dead end by its own mechanisms, and because it can't face that the system doesn't work, it has to keep going in a kind of zombie way towards its own end.

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