David Stockman On The Fed's Path Of Destruction

Tyler Durden's picture

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Sudden Debt's picture

Tyler, you had me at "Fed's Path Of Destruction"



redpill's picture

Slight Tangent:


Fed's Hoenig: U.S. banks are government-guaranteed enterprises

Was this posted on ZH yet?  I'd be surprised if not, but it's interesting.

cowdiddly's picture

Exactly, All they have done is take an implicit backing away from Fannie and Freddie and give it to ten times larger banking entities. Fixed. LOL

trav7777's picture

well it's true, ain't it?

The debtmoney system was at inevitable path to destruction upon inception.

ANY time you create a money base that requires more money on an ongoing basis to avoid complete (and I mean total) deflation, you have a growth ponzi animal.

When the Fed was chartered it lent X dollars into the system requiring X+iX dollars in the future to repay (i is interest).  The iX dollars did not exist at the time of X's creation.  The sole method of iX's coming into existence is further borrowing by some party in a rolling, geometrically growing credit animal.  If at any point there is nobody left or willing to borrow that additional iX, the system begins to implode.  There is never at any point sufficient money to repay the existing money plus interest owed on it.

baby_BLYTHE's picture

This is the easiest understanding of debt-based interest money in paragraph form that I have ever read.

Thanks Trav ;)

Do you have any good book recommendations on Peak Oil and its implications on Geo-politics/World Economy?

Popo's picture

> " One thing is certain, however, and that is that these behemoths are now truly too big to fail. At the end of 2006, the asset footings of the Big Six — J.P. Morgan, Bank of America , Wells Faro , Citigroup , Goldman Sachs and Morgan Stanley — were $7.1 trillion. Saving the system through shotgun marriages in the interim, our financial overloads have permitted the group to grow its assets by 30% to $9.2 trillion."


No. They are *not* too big to fail.  I'm ready for the pain.   Let the whole dismal edifice crumble into oblivion.  Yes, it'll hurt us all.  I'm completely okay with that.  


Careless Whisper's picture

don't invest in day old chickens in china.

YUII ooops

kito's picture

retail sales up today, job openings improve. cant fight the fed. time to buy s&p index fund and ride it to the moon. feds game has no end in sight. way too many powerful players with vested interests

topcallingtroll's picture

This guy faces reality even if he.doesnt like it.

baby_BLYTHE's picture

As a die hard fan of all things metal I cannot help it...

Argentina was in bad shape, thankfully Megadeth was there to help Argentinians...

...Sway to the Symphony of their IMF DESTRUCTION!


falak pema's picture

Argentina has good flesh as well as good metal. Example : argentinian beef, argentinian soccer, argentinian rugby, argentinian polo. As for the women I don't know but guess they are true "latina tangoistas"... Sway to the symphony of a argentinian tango and go 'contango' on its beautiful countryside.

sunkeye's picture

'tangoistas'  i surrender to the revolution

LFMayor's picture

From FerFals Surviving in Argentina blog it sounds like a slow decay socialist shithole.  A lot like we're experiencing, just smaller scale and further up the timeline.

RobotTrader's picture

The Bernanke Fed will go down in history as the greatest ever.

He's engineering another "crack up" boom, lifting up all boats.

Just like Argentina did after its currency and economy crashed and burned in 2001.

Ever since, then, the MerVal has skyrocketed, and an unheard of amount of wealth has been created ever since.

The market has risen from 200 to 3300, that's a 1700% gain in 10 years.

SheepDog-One's picture

No wealth has been created in anything but gold and silver physical holdings.

redpill's picture

Wealth hasn't been created there either, it's only been preserved.

trav7777's picture

need to look at price levels in Argentina to have any idea as to what this Merval number means in a real sense.

The truth is that if we are in such a crackup, your mandate is to lever to the fucking moon.  Those who lever in severe inflation end up at least paper rich.  Certainly those who do not will see their paper wealth migrate into the hands of those who do.  So in a relative sense, the levered become wealthier.

Caviar Emptor's picture

Sorry, nobody's equating Stock Market Indexes with the national report card anymore. Most people are voting with their feet, refusing or unable to participate. It's like padding your resume 

falak pema's picture

how can Merv have the nerve to contango that far up without coming to a cliff hanger situation. Makes you wonder if Jack and the beanstalk are not fairy tale but real argentinian beef dressed up with risotto and black squid sauce.

Internet Tough Guy's picture

You think hyperinflation creates wealth? Lulz...you are even dumber than I thought, and you have obviously never been to Argentina.

baby_BLYTHE's picture


You just admitted we are amidst a "Crack-Up-Boom" as Marc Faber and others have suggested. I have to ask, have you ever looked at what defines one?


Our dear ZH bullshitter, Robotraitor, has just admitted the United States will experience an Inflationary Depression!

SheepDog-One's picture

Well as long as his $9 burrito stocks, $75 towel stocks, and $300 leotard outfits stocks are up, RainbowTrader is in hog heaven.

topcallingtroll's picture

Robotroll is a fake.

I know a troll when i see one.

Post your trades in real time dude when you buy and sell.

Oh i forgot....you dont have any investments or.speculations going

Deep's picture

Wow to compare US to Argentina is just getting desperate. Ever hear of "reserve currency". Wow ROBO, you really have lost your touch.

samsara's picture

Yes, I was there in 2001ish.  All banks had corrugated steel windows.  Even if you had a 100,000 pesos in the bank, you could only withdraw 1000 per month.

Car Jackings,  Poor people trying to eek out a living.  Money nearly worthless to the average person.


But you are right Ramora,  The WEALTHY had a great time.

But since you scurry to pick up the food that they drop on the floor from their orgy,  I can see why you would think it was a great time.


Caviar Emptor's picture

Saving the system through shotgun marriages in the interim, our financial overloads have permitted the group to grow its assets by 30% 

A core belief of Supply-Siders is concentration of wealth and capital. So this is by design. They think that by creating very large, very powerful leaders within finance and industry you get more "efficient" capital allocation.

It's a top down approach, where money trickles down if the powerful elite are nurtured and the government stays out of their affairs. That's compared with the bottom-up approach where the belief is that spreading the wealth to the greatest number of people (the consumer class) grows the economy more effectively 

So it should be no surprise that the spawn of Milton Friedman would apply this philosophy given the opportunity to do so. But we've watched this movie before. And it doesn't end well.

trav7777's picture

our national heydays were during trickle up periods.  However, government does not accomplish that.  National Socialism just creates unassailable plutocracies.

Breaker's picture

"It's a top down approach, where money trickles down if the powerful elite are nurtured and the government stays out of their affairs. That's compared with the bottom-up approach where the belief is that spreading the wealth to the greatest number of people (the consumer class) grows the economy more effectively."

This mischaracterizes supply side completely. Generally speaking, supply siders are main-streeters' not wall-streeters. They have a fundamental belief in a FREE market, not the crony capitalist stuff of today's administration.

No supply sider I know thinks funding GE out of taxpayer money (or tax cuts) or Goldman or Bank of America has any real effect on real people's well being.

Nor do tax cuts on the "super wealthy" actually have much effect on THEIR taxes--they already have teams of accountants who have set up various tax dodges and generation skipping trusts and so on. Do you really think Teddy Kennedy, John Kerry, or Warren Buffet are affected much by increases in taxes on the wealthy? I don't.

OTOH, increasing taxes on the "wealthy" (> 250,000 a year equals wealthy, ha ha) hits main street and small companies like a ton of bricks. The burden of those taxes falls on the folks who are actually out there creating jobs and wealth (or in todays world, scratching not to lose more jobs and wealth).

So I agree with you that trickle down is ineffectual vis-a-vis general electric and goldman. But that's not really what supply side tax cuts are designed to accomplish. Of course, the political system will distort any good idea. And I have no doubt that congress and the administration will be able to direct tax cuts to their cronies, rather than to small businesses and main street--they have been incredibly effective in assuring that TARP and the stimulus do not get to the middle class and they have done that via giving away taxpayer money to the too big to fail--exactly the wrong people.

So you are attacking a straw man. The idea of supply side is NOT to finance a "powerful elite." It is to finance productive businesses. Whether that is possible given our corrupt political class is another question. But that indictment applies equally to the current "run up huge deficits and give the money away to large institutions" approach to kickstarting the economy. There is no evidence that our political class is able to make either approach work in reality.

So my solution is to take money and power away from the political class--I'm a small government conservative. Viewed over decades, it seems to me that the case for giving lots of money and power to a group of 535 politicians, a president, and a bunch of unaccountable guys in administrative agencies is VERY VERY weak. Better to give them big titles, fancy outfits and almost no power. Or as P.J. O'Rourke suggests, make their main mission capuring pirates. That will keep them busy and out of our hair.

Slim's picture

Worthwhile article and well composed and thought out comment.  I honestly have no idea why someone would junk you for it regardless of whether they agree or disagree. 

traderjoe's picture

Anyone that debates the actions of the Federal Reserve Corporation just doesn't get it. The Fed is a privately-held corporation DESiGNED to steal the wealth of Americans through inflation, fractional reserve banking, and loaning money created out of thin air to the government (and the people). It is performing exactly to plan.

silvertrain's picture

+1 They are going to keep on screwing around with the dxy and its going to get away from them...

trav7777's picture

in fact this is PRECISELY what Central Banking is supposed to be and do!

Its inception was the Bank of England whose charter members intended to PROFIT from lending to the sovereign and controlling issue of currency.  The original purpose of the BOE was to lend to the English to (surprise surprise) build war power.  The MIC is 400+ years old.

samsara's picture

Yes and Rothschild, I mean 'The City Of London'  I mean the BOE  is actually (the property) not even part of the UK.  The UK's laws don't apply and not enforceable to Gringotts,  I mean BOE.

Sudden Debt's picture

You should give them a call.

Or write them a angry E-mail.


forexskin's picture



the entire discussion shifts when we speak of the fed's actions as being by intention rather than by incompetence.

this article focuses on the latter, missing the point, but preserving the respectability of not having invoked the dreaded "C" word.


americanspirit's picture

everybody's got more dollars/pesos/euros - whatever. But just don't look too closely at the price of basics and please ignore all those unproductive families living under the highway underpasses.

newworldorder's picture

The exact date is open to debate, but the modern era in banking started around 1990. This era can be defined quite clearly by the debt is money mantra in the baking system, repeal of financial  regulations in place  since the great depression, design and sales of new debt based financial products and lastly the concept of globalization as championed by the financial and political classes.

People understand this or they dont. Those that don't tend to be older and in denial at what the USA has become. Denial is powerful tool, especially to Americans who measure the patriotism and loyalty to America and its institutions.

I am sorry to say that middle ground does not exist. We will continue on our current path for a long time, untill the system implodes.

markar's picture

OT but,can someone please explain how JPM reported a 67% surge in profits when their losses shorting silver alone have to be in the tens of $billions?

RobotTrader's picture

I assure you that massive wealth has been created by the stock market boom.

60 Minutes did a piece last night on "Living Large".

I guarantee that none of these guys accumulated wealth by hiding behind sandbags, shorting stocks, clutching gold coins and eating MRE's.


redpill's picture

I'd rather feed on MREs than on my fellow man.  But I shouldn't expect morality from an extremely-choosy chart whore like you, now should I?

akak's picture

This RobotLemming is as contemptible, amoral and venal a piece of human filth as Leo Kolivakis, who wisely (and thankfully) no longer dares foray into this forum, after having had his outrageously pro-corruption, pro-status-quo, pro-Establishment posts routinely junked into oblivion.  If only RoboMomoDodo would choose the same course, and exit gracefully after having thoroughly discredited himself here.

Internet Tough Guy's picture

You've got pigman envy, but you will always be a robopiker. Go mug a little old lady, every pigman-wanna be has to start somewhere.

topcallingtroll's picture

I post all my trades in real time.

I used to find you interesting but lieutenantjohn is right about you catfish mouth.

Post some trades in real time robotroll.

You are a fake and a wannabee.

Bastiat's picture

It's hard to imagine you could believe your own nonsense. 

Cdad's picture

I guarantee that none of these guys accumulated wealth by hiding behind sandbags, shorting stocks, clutching gold coins and eating MRE's.


LOL!  Good one Robo...you rolled me on that one.

However, I'm guessing 60 minutes did not spend much time on which of those "living large" fellas really needed to quit living large and report to federal prison.  So all I can do, really, is what I can do...which does not include defrauding everyone around me, building a Ponzi pyramid, throwing darts at a calendar to determine which day it all falls apart...and using a co located computer to make sure I'm out the door first.  I'm just a law abiding citizen.

So just as soon as Goldman is done crushing gold, and J. Dimon is done shorting more silver, I'm going to buy it all back.  My way, you could say, of taking shots at the criminal syndicate known as Wall Street...buying metals and not participating in their fake industry.

Oh...and Robo...prepare for some truly spectacular stock fails, especially Apple, in  5....4.....3....