David Stockman: "It Will Take A Major Dislocation In The Bond Market" To Wake Up America

Tyler Durden's picture

It is no secret that David Stockman, former budget director in the Reagan administration, has long been a vocal opponent of the crash course America has found itself on courtesy of record debt. In this Bloomberg interview, he presents his latest take on U.S. fiscal policy and the outlook for agreement between Congress and the Obama administration on a deficit and spending reduction plan. Suffice to say, he is not a fan of either the republican or democrat plan, and is convinced both sides are playing nothing less than class warfare to promote their flawed programs. "I think the people would respond if they knew the fact, and if they'd been were told the truth, but they haven't been, they've been lied to for the last 10-20 years by both sides saying that we can live beyond our means, new entitlements, new tax cuts constantly, tax stimulus for everything that we could imagine, and as a result of that the country doesn't know that sacrifice is going to be required, and that everyone is going to have to give up something." On the recent "spending cut" much touted by Washington: "even this noisy $39 billion package cutback, that was all flimflam and swindle: there wasn't $39 billion in that, maybe there was $5 billion at best, and had anybody in the business community reported that they had $39 billion in a package that was this fraudulent they would have every prosecutor in the country and the SEC on their tail right now." And on the much endorsed by Zero Hedge Tobin tax: "We out to put a major tax on transactions on Wall Street, because Wall Street is turning into a high speed casino. We need to start thinking about new revenue sources and that is one of them." So what will finally awake America? "I think it's going to take a major dislocation in the bond market, a real conflaguration on the part of the people who have to buy this debt, before the country wakes up." Of course, if the Fed is able to sell virtually unlimited Long-Term Treasury puts, the synthetic push on sellers will never abate and the Fed can manipulate the curve virtually in perpetuity, or until such time as those buying Treasury vol protection, ironically, decide it makes no more sense to hedge against a curve yield surge.

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Hephasteus's picture

It's all very very simple. Hand out a few crumbs of wealth. Keep most of it for yourself. Then when it becomes clear that it's not going to work. Ask for permission from the crumbtards to do some hurting and stealing for the good of everybody.

Scottj88's picture

The new policy post-1971 was to expand monetary supply to spur growth.  Thus, from 1971-2008 America has experienced the “wealth affect,” as the strategy was to have economic growth to outpace the increasing monetary supply. Well, the “wealth affect” seems to now be over, as the price of gold since this new-found policy tells the story.

The end of the Federal Reserve Note is near, in my opinion within the next several years.


Sudden Debt's picture

Never gonna happen. The opposition against THE fed is just to weak.

Verstehen's picture

Not bad. Combine that with tanking consumer spending probably down to 65% over the next years. Tax receipts will fall further. Meanwhile paranoid bureaucracy is rising. It must shrink but does the opposite. Population is rising faster than jobs growth because consumer spending is falling which means growing gov spending to feed the population without jobs. The savings that are needed (to invest) are inflated away. The economy is overheating and collapsing at the same time. Inflationary Depression for 60% of the population is now inevitable. Watch socio-economics defeating macro-economics in slow motion. The long-term trend is even worse. The white population that is dying off will be replaced by low paid low-IQ uneducated Latinos. Sounds like an accident waiting to happen. The American Empire is already history (and its poodle Britain too). All the wars were useless in the end. Everyone with a brain cell left can see where the American experiment is heading. DECLINE. The tipping point was in the last decade. Never wake the sleeping giant China. Too late. The historical knowledge of American leaders is appalling. Throughout history the hegemon always favored liberal trade which in the end led to his downfall. Europe and China are part of a super-continent. How long can an isle force its will onto an super-continent? You will pay dearly.

JW n FL's picture

Tax Breaks.. or lets call it what it is.. $0 Fucking Taxes for the Top 1%(ish)..


Poor need to tighten thier belts, so Austerity Measures...


and the Middle will have to tighten thier belts becuase the Poor have already been robbed blind, given that the Poor has NO! LOBBY!


so the facts are.. No taxes for those with a Billion Dollar Lobby.

Poor, gets fucked as much as possible.

Middle, has to get fucked becuase the Poor has Nothing left to give.

and the worst.. is Absolute Return Fund types getting printed out of thier entitled tax bracket!


So, unless you are a Corporation! or Government Paid by a Corporation (thru the lobby of course, no bribes.. just lobby dollars) You! ALL!! of YOU(s)!!! are FUCKED!!!!


Senate Republicans blocked a Democratic Bill to End tax Breaks for Moving U.S. Jobs Offshore! http://goo.gl/6qhnK 


Republican Senate HIDEs! HUGE! Contribution Dollars from Government “Military” Contractors using “Free Speech” http://goo.gl/35V9l


Republican-controlled committee voted for a 18-month delay of regulations intended to reduce risk in OTC Derivatives. http://goo.gl/4IYGP

Much corporate political spending stays hidden http://www.latimes.com/news/nationworld/nation/la-na-money-politics-survey-20110424,0,1545345,full.story


http://goo.gl/cgg4O General Electric $14.2 Billion in Profits, Pays $0 in U.S. Taxes

$39M Dollar Lobby in 2010 $14B in Profits =’s NO TAXES PAID! http://goo.gl/rZLDY

$10 billion sale of F.D.I.C.-backed debt http://dealbook.nytimes.com/2009/01/06/ge-capital-begins-10-billion-debt-sale/


O ya! Social Security with its $2.5 Trillion Dollar in Slush Funds! LMFAO! GONE BITCHEZ!!! LONGGGGGGGGGGGGGGG GONE!!!


Social Security - Robbing The Middle Class http://goo.gl/m8QMq


Corporations OWN! America! Corporations OWN! Government!! “We the People” are OWNED!!! “Fall of the Republic” HQ Full Length Movie http://goo.gl/EwUsC



sun tzu's picture

So who pays the $2.2 trillion in federal taxes each year? It must be the poor because the rich aren't paying any taxes at all. The people on welfare are paying 99% of the taxes. Yeah, that's it.

Poor bitchez!!!

blunderdog's picture

The "middle class" pays all the taxes.

The rich pay a bit, sure, but there just aren't enough of them to matter.  The poor pay virtually nothing, because that's all they've got.

That leaves everyone between about the 35th and 99.9th percentile to pay all the taxes. 

They're all middle class.  Annual incomes between $30K and $1million or so.

Amish Hacker's picture

Beware the MSM claim that "the rich pay more income taxes than the poor." It's a statement deliberately intended to confuse "taxes" with "income taxes." Even those who earn too little to pay income tax pay plenty in FICA taxes on their income, not to mention sales taxes, SDI, etc. And many of the rich get most of their income from capital gains (taxed at just 15%), not earned income.


blunderdog's picture

I know all about it.  I'm actually fuckin' poor.

But despite the fact that the poor pay taxes, they still pay relatively *little* because they just don't have anything.  I pay sales tax on about 50% of my income, because that's everything left from my paycheck after rent, and I'm paying the ~5% payroll taxes, but comparing my current tax contribution to that of a decade ago when I was in the top quartile of income reveals that it would take about 8 of me "now" to pay the same that 1 of me paid back then, just looking at total amount of dollars given to the taxman.

DeadFred's picture

So if the guy is right as I suspect he is, how do we best do the altuistic thing and get the maximum exploitation of the meltdown for personal gain?  I've been looking for several weeks with this scenario in mind and haven't found anything better than inverse bond funds that would give a rather pathetic 50-100% rise in a meltdown situation.  Come on we should be able to milk a true conflag[u]ration for more than that!  If the Fed has puts on the 30 years they may not be the biggest movers.  The mid range bonds that have been affected most by QE2 might be good candidates but the ETFs I've looked at are scary because they have so little liquidity.  My research has been pretty much limited to ETFs because of my account limitations but what are the best tactics here? I hate sounding like a ghoul but this ship is headed for the rocks and I'm not at the helm.  If I/we make some profit from the inevitable crash we have better options to help the life-saving after the fact. But how??

blunderdog's picture

how do we best do the altuistic thing and get the maximum exploitation of the meltdown for personal gain?

Become a pimp who treats your hos well and implement a profit-sharing plan.  Everybody wins.

The Profit Prophet's picture

Your post smacks of an immoral individual filled with hubrous and driven by greed....the very qualities that have led us to the financial abyss. I was hoping for some indication of sarcasm, but you provided far too much detail in the level of analysis you have undertaken.  If you do indeed "hate sounding like a ghoul", then my best advice for you is to "stop thinking like a ghoul".  You may not be "at the helm", but I have no doubt (based on your post) that had you been "at the helm", you would have steered us in a similar direction.

Seek the true nature of charity and aspire to embrace it...it may be your only hope. That and keep buying physical....

T.E.I.N. everyone!

401DK's picture

TBT, but timing before the collapse is the tricky bit.

nah's picture

HAHAHAHAHAAAAAAAA thats hella funny haypushups

Oh regional Indian's picture

Crumbtards. Instant  classic. Adopted. Much better than Sheeple.



myshadow's picture

+1 on crumbtard.  Brilliantly pithy.

WmMcK's picture

Sheep may be shepherded.  Ignorance is not stupidity.

Rebuilding with only warriors will be slower and brutal.

Those that refuse to listen will suffer but it's not ultimately efficient to unnecessarily condemn/sacrifice. Fight club is OK, but we'll do better to cooperate when we can.

Survival should not be enough for humanity.

"Crumbtards" does make me hungry, though.


yabyum's picture

Crumbtard, A new ZH classic. I have met the enemy and it is us.

Ruffcut's picture

"Crumbtards" does make me hungry, though."

Crumbtards, never touch them. They have too much high fructose corn syrup in them.

Ignorance is often a choice. Stupidity is a gift that only gives poor results.

WmMcK's picture

Oh, I was thinking of crumb tarts (like crumb cake?)

Avoid the hf corn syrup at all costs.

Ignorance is often a choice but not always of the ignorant.

Too many are proud of it, though.


oh_bama's picture

This guy is WAY TOO NEGATIVE!!

"Wall Street is truned into a high speed casino!"

Is he in his right mind? What CASINO? SILVER MOVED A BIT but other markets are peaceful and VIX



Who is this guy? What a JOKE!!




takinthehighway's picture

Appropriate avatar for satire.

Alcoholic Native American's picture

Bondzilla doesn't exist.  It's all a matter of national security at this point.

narnia's picture

We woke up Kingflation Kong to fight Bondzilla.  In the end, they will not fight each other, they will be allies.

Ahmeexnal's picture


topcallingtroll's picture

As long as the music keeps playing we have to keep dancing. We dont have many other choices, at least not if you have kids to edumucate.

After that I drop out of the rat race.

WmMcK's picture

Please dance as close to the exit as possible to avoid the rush.

Teach your kids to invest, not to be a employee/slave.

topcallingtroll's picture

I am.

I do.

However being a small business owner can feel very slave-like too.

The cynical in me thinks that government jobs will always have the best working conditions. As caucasian males my boys will be hired quickly even with all the reverse discrimination because they are learning spanish. They will be the token white males hired to maintain diversity as long as they have a politically correct skill.

WmMcK's picture

Best working conditions until a crash, maybe.

We all need an exit plan when Uncle Sam becomes (even more) unreliable.

Espanol es muy bien.  Rusky khorosho.

Mandarin y otras idiomas, tambien.

Buena suerta.

sun tzu's picture

Their Spanish might be better used in South America. Conditions will be better there

sun tzu's picture

Their Spanish might be better used in South America. Conditions will be better there

WmMcK's picture

Maybe SA will even be able to mine some more Ag without the governments "nationalizing" it.  A few of the countries there make my potential relocation list.

jkruffin's picture

The day of reckoning is approaching!!!!! It will come within days..........look at that unsustainable deficit.  OUCH!

Ruffcut's picture

I reckon the day is already here. The deficit is an illusion that can exist til the counterparties say it can't.

downwiththebanks's picture

Bullshit:  Jubilee on the debt, with a nice middle-finger to the banker-gangsters.

The whole thing is a fractional reserve scam.

mynhair's picture

What is 'conflaguration'?

cosmictrainwreck's picture

LOL.... somebody junked you for implied diss of Tyler (probably illyia @ 13:16, who goes on record as "don't care" about typo) ha

ViewfromUndertheBridge's picture

he actually said that...kudos to Tyler for the phonetically correct transcript

Segestan's picture

Americas elite induced ' Deep sleep' has allowed the third world an even deeper dream. Reality won't just come to America.

Oh regional Indian's picture

Could not agree with you more Segestan. Here in India, deep sleep, eyes wide shut, is in a-bun-dance.


illyia's picture


I do not care if it was misspelled in the quote.


Slartebartfast's picture

Actually Tyler spelled it correctly, Stockman said, "conflaguration", which is a slang term.  It's an urban morph of conflagration, like using "axe", instead of "ask".  Makes me wonder who briefed Stockman on what to say in the interview.  Eh?

illyia's picture

Why not conflagurasian?

Sooner or later everyone will be speaking in a language only they, themselves, understand.

It will do wonders for international negotiations... as in: "why don't we axe him?"

Terminator: "Ax who?"

Sudden Debt's picture

Flight to safety?
Just buy THE 30 year than!

Safety my ass!

Number 156's picture

They know whats up. It keeps them awake at night. But they're already halfway across the Styx, and they've already paid the boatman,  and there's no turning back. All they can do is  lie lie lie, and pretend to be ignorant of the facts, because the day is coming when they will have to answer for it.