Must Watch: David Stockman Says The Fed Is Injecting High Grade Monetary Heroin Into The Financial System

Tyler Durden's picture

Today's absolutely must watch clip comes from David Stockman, director of the OMB under Ronald Reagan. "An independent Fed is what we had when I was in the government. Volcker was the head of it...Today the Fed is scared to death that the boys and girls and robots on Wall Street are going to have a hissy fit. And therefore these programs, one after another, are simply designed to somehow pacify the stock market, and hoping to keep the stock indexes going up, and that somehow that will fool the people into thinking they are wealthier and they will spend money. The people aren't buying that. Main Street is not stupid enough to believe that engineered rallies as a result of QE2 stimulus are making them wealthier and so they should go out and buy another Coach bag. This is really crazy stuff that I can't say enough negative about...The Fed is telling a lot of lies to the market... it is telling all the politicians on Capitol Hill you can issue unlimited debt cause it doesn't cost anything. We have $9 trillion of marketable debt. Upwards of 70% of that has maturities of 5 years or less down to 90 days. All of those maturities are 1% down to 10 basis points. So from the point of view of Congress, the cost of carrying the debt is essentially free. When you tell politicians they can issue $100 billion of debt a month for free, how do you expect them to do the right thing, and ask their constituents to sacrifice... I think the Fed is injecting high grade monetary heroin into the financial system of the world, and one of these days it is going to kill the patient."


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Ragnarok's picture

Healthy Banks May Be Allowed to Boost Dividends

The Federal Reserve may soon allow healthy banks to increase dividend payments to stockholders, according to a report from the Wall Street Journal Thursday.

Federal regulators, sources told the Journal, are likely to shortly announce the criteria, including specific capital standards, banks must meet for dividend increases.

Despite a seeming willingness to increase dividend payouts, many banks have had to delay such payments until they are cleared for compliance with a number of new financial regulations passed in the last year, including the United States's Dodd-Frank Act and a series of global capital rules known as "Basel III."

Clearances to up dividend payouts would likely be seen as a sign of improvement in the financial sector, sources told the Journal.

"It signals that the health of the system has improved and will continue to improve going forward," said Todd Hagerman, an analyst with Collins Stewart.

Perseid.Rocks's picture

> "It signals that the health of the system has improved and will continue to improve going forward,"

Meanwhile insiders continue selling versus buying at a ratio of what.. 1000 to 1 ? Those insiders apparently don't see anything healthy at all.

I'm reminded of that that old saying about the last desperate act of the leaders in a failed state is to loot any remaining wealth. This all looks like a looting operation to me.

Mako's picture

The job of the Fed is to try to get the max out of the system... to keep the Lemming march down the road to doom as long as possible. 

The Fed can only effect some of the rate of decline, when the system is over it's over and there isn't anything the Fed can do unless they have unlimited power. 

The helicopters are and were the myth that all the Lemmings believed.  No helicopters are coming to save anyone.... the system will collapse then liquidation of the non-performing liabilities (Lemmings) will start. 

The Fed will continue to beat the dying horse until he is dead and even then will probably beat the dead horse.... the job of the Fed is to beat the horse until nothing is left, then the horse has to be liquidated.

Ragnarok's picture

If you beat the horse long enough it will in fact become liquidated.  High protein Mush.  :)

Mako's picture

If you don't beat it... it will get instantly liquidated. 

All the Fed is doing is trying to get the max out of the system, the question whether it was going to collapse is a fact, just a matter of how big the system became before collapsing and exactly when it would collapse.

The helicopters are not coming, many Lemmings are going to get liquidated.

nmewn's picture

And here I thought one of the initial reactions to heroin was to puke ;-)

Sleepy Weasal's picture

On the local PBS station tonite they are airing a documentary:  QE2:  The last voyage  

MayIMommaDogFace2theBananaPatch's picture

Just one last big blowout -- and then WE'LL QUIT!

gookempucky's picture

Liquidation of the lemmings has been going on for many decades

Mako points out there really no blue or red pill-ALL pills have been swallowed.

Many snakes have slithered thru this system-end game event horizon.

Here is some history--

Dental Floss Tycoon's picture

Great little window on history gookempucky.  Thanks.

"embracing inflationism today in order to accommodate federal deficits, and bail out 

badly managed commercial banks and real estate developers, has its price 

tomorrow in terms of maintaining long-term price and financial market 

stability. "


merehuman's picture

helicopters, lemmings and horses. What? Nothing about Bears, elephants or donkeys?

Mako , you are such a fatalist. You will die, believe some day it will happen for you. Until then you are so stuck with us.

"Liquidation of non performing liabilities" meaning what? That may of us will be killed somehow? Do you know something we dont?

You repeatedly imply mass death on a grand scale. It does noe have to be but what we create. You are in fact helpig to create that by assuming it. And putting it repeatedly in our heads. If you are gonna say that anymore that justify the statement with your fears or suppositions.Or facts.

There is enuff fear and fear mongering as it is.Pretend its me telling you regularly that you are gonna die. It has a deleterious effect .

And yes i am aware of our ships in the ME and the pricks in DC.

Other wise i do look forward to your posts for the fearless truth. Thank you for that.

Seer's picture

"You repeatedly imply mass death on a grand scale. It does noe have to be but what we create. You are in fact helpig to create that by assuming it."

Wishing that it won't be so ain't going to make it so, either.

We've far too long ignored the realities of the physical world: much of this is programmed ignorance, meant to keep the ruling elite in power.

As sure as there is gravity there's human population overshoot.  That humans are somehow different than any other life form in this regard is sheer folly.

No, Mako is right, and this is why: there is ZERO evidence that growth can be maintained on a finite planet.  The ISSUE is in how one responds to the facts.  Many/most refuse to confront this because it's ultimate moral dilemma: those in power won't touch it lest some of Them be included in any voluntary "reduction" (that's why they champion such bullshit crap like nationalism, which allows them to start wars so that they can capture resources and reduce population sizes (of course, not theirs).

I don't really need to read Mako's stuff.  It's all pretty danged obvious once you look at the issue without having a sense of trying to "solve" it, or knee-jerk to any standard (programmed) labeling.

william.smith61's picture

The altar of central banks are littered with the blacked bones of countless millions who came to suckle and got cindered. Oil Pump

Buck Johnson's picture

It is a looting operation, they know the game is over and are trying to get out without allowing the market to go down with sellers.  If the market was allowed to go down with no buyers and people selling, then it would show without a doubt that nobody is investing but many of the insiders are selling.

Spigot's picture

I absolutely agree with you and also believe the "robo" trading ago's are a means of keeping the market prices high while insiders exit the theater. Once the big fish are out, they will find some way of letting it fall to zero...and it will because no one will be trading it then other than the robots.

Herd Redirection Committee's picture

It is pivotal that we stop pretending the Fed is 'injecting high grade monetary heroine' by accident, or without knowing what the result will be.  They are gunning for destruction of the US dollar.  A controlled demolition while possible, meanwhile the Oligarchy plans what will replace it as world reserve currency.  How about sound money?

steve from virginia's picture


Give da man a seegar!

It's the Bernanke Money Laundry.

theXman's picture

I agree with Stockman that the tax cut should not be extended if we are serious about cutting deficits.

As to today's rally, can you say Zimbabwe?

seadragonconquerer's picture

Can also say "stupid": give gov't a dollar, they'll spend $1.50. If tax increases cured deficits, we wouldn't have deficits. Only cure is to stop messing with the tax system. Altogether. Then ruthlessly cut all welfare/warfare spending.

New_Meat's picture


"I agree with Stockman that the tax cut should not be extended..."

Repeat after me: "1937, 1937, 1937."

Cleansing breath.

OK, so you want the next major crash.  Got it-understand your book.

- Ned

Money Squid's picture

The damage is total. Why charge me more in taxes now, the crooked congress will just hand it over to the banks. Let me keep what I can, it ain't much, so I can prepare the best I can for the collapse. I'll be one less looter/street thug if I have enough time to prepare myself and my family.

Stockman is already rich and can take care of himself and his family, he's go the money and the connections. The rest of us do not need to pay anymore in taxes.

Howard_Beale's picture

Stockman wrote a wonderful book "The Triumph of Politics" after he had been taken out to the woodshed and kicked out by Reagan for speaking the truth about trickle down economics. Yeah, he went on to the Street, but he is a snarky fellow with excellent insight. Highly recommend you pick up his book for a great look at the early Reagon years.

Seer's picture

"Let me keep what I can, it ain't much, so I can prepare the best I can for the collapse."

"For" the collapse, but what about "After?"

What "it" is, that you are looking to "keep," I don't know, but surely money (USD), metals, stocks, whatever, is all transient.  Continuing to just sit on a pile of something is NOT a smart strategy.  Things change, needs change.  If we all just pulled back into caves with our "stashes" I'm sure that the value of things that one sits on would more closely resemble a chair than wealth (if you're not trading, then it's only a temporary representation of value).  Knowing that property values would continue to fall I STILL went ahead and bought property (it's agricultural land, meaning that it can provide real returns [food]); but...) it's all relative, as property prices are dropping so too is the USD; however, not all things adjust at the same time, there are lags and differences in rates of change, in which case I was able to exchange a lot of devaluing USD for property that was much cheaper than it was only a couple of years ago.  Metals, well, I've got some diversification there but, I don't want to grow old sitting on a pile of it; and, it's not one of the three fundamental needs for life.

And this brings up  a very sincere question: just what do people think that all these money grabbers are going to do once they have "everything?"  They cannot build fortresses to protect themselve, indefinitely: sure, a few might be able to persist for a while before their compounds are breached by the angry mobs.

Separate to this, the "don't raise my taxes" response to his comment about NOT extending the tax cuts is no more than the wealthy programming the lemmings to continue to pay for their extortion practices.  They were, in essence, granted a temporary tax break, that was the deal.  Whether one thinks it a good thing or a bad thing isn't the point (I view things as being neutral, as that allows me to be less myopic and better able to repsond to situations), the point is that extending the tax cuts (wars and other such things) is very likely going to result in a quicker demise.  And should government fall?  Will we then be under the thumbs of the banksters?  And under such rule we probably wouldn't have even the appearance of democracy (currently we can pretend that we do, but with this other scenario it's almost a certainty that we wouldn't).

Pegasus Muse's picture

The Federal Reserve may soon allow healthy banks to increase dividend payments ...

Are there any healthy banks left in the United States?

Lucius Cornelius Sulla's picture

Congress told FASB to help them say they are solvent so they must be!  Come on, was it over when the German's bombed Pearl Harbor?  Hell no!

macholatte's picture

...when the German's bombed Pearl Harbor....


Hmmmmm. Uh Huh.


Every positive value has its price in negative terms... the genius of Einstein leads to Hiroshima.
Pablo Picasso


Goldilocks's picture

Another 'Animal House' anecdote ...

D-Day: Hey, quit your blubberin'. When I get through with this baby you won't even recognize it.
Otter: Flounder, you can't spend your whole life worrying about your mistakes! You fucked up... you trusted us! Hey, make the best of it! Maybe we can help.
Flounder: [crying] That's easy for you to say! What am I going to tell Fred?
Otter: I'll tell you what. We'll tell Fred you were doing a great job taking care of his car, but you parked it out back last night and this morning... it was gone. We report it as stolen to the police. D-Day takes care of the wreck. Your brother's insurance company buys him a new car.
Flounder: Will that work?
Otter: Hey, it's gotta work better than the truth.
Bluto: [thrusting six-pack into Flounder's hands] My advice to you is to start drinking heavily.
Otter: Better listen to him, Flounder, he's in pre-med.
D-Day: [firing up blow-torch] There you go now, just leave everything to me.

fxrxexexdxoxmx's picture

The sadistic treatment of prisoners of war and civilians by Japanese soldiers caused Hiroshima. Hiroshima was nothing more than karma.

New_Meat's picture

Nah, it was probably Guadalcanal (suppressed, then the news got out), Tarawa ... Okinawa, and Tokyo firebombing, casualty projections for (both sides on) Operation Olympic.  Ace a city or two (btw, much less than Tokyo or Dresden as far as total casualties/damage) but wake up the emperor in a "blinding instant".

U.S. was outta gas following Nagasaki.

Didn't really understand the treatment until >3 months later, some cases much longer.

- Ned

Rusty Shorts's picture

Bataan Death March, Philippine Islands.

Seer's picture

And Einstein was a socialist!

merehuman's picture

Lucius, please learn history. Japan bombed Pearl.

StychoKiller's picture

merehuman, please to watch "Animal House"

unum mountaineer's picture

ha ha RICO JPM and fraudclosure BAC leading the uptick in financials..fucking unreal. In america we use precision.

Cruel Aid's picture

"Do  not extend the tax cuts to the rich or anyone else"

He is calling for reality not irrationally exuberant consumption.

Cheyenne's picture

Thanks a lot, fucker. That ruined my pathetic day.

3ringmike's picture

cheyenne that was funny. spit wine all over my keyboard. thanks for a good chuckle

candyman's picture

Why not change mark to market first?

cindycheng's picture

I will get to know more new information. Even the website layouts and the designs impress me a lot.
oilseed presses

TradingJoe's picture

Saw it live! Good Man! Too bad we don't have more like him! It is too late anyways! I suggest everyone taking a refreshing course watching "MadMax", cause that's where we're heading!