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Guest Post: On Stockman & Liquidation

Tyler Durden's picture




 

Submitted by John Aziz of Azizonomics blog,

David Stockman’s New York Times Op-Ed has ruffled a lot of feathers. Paul Krugman dislikes it, saying Stockman sounds like a cranky old man, and criticising Stockman for throwing out a load of meaningless numbers that sound kind of scary, but are less scary in context. Krugman is right on both counts, but what Krugman overlooks is Stockman’s excellent criticism of crony capitalism, financialisation, systemic rot and Wall Street corruption of Washington, something Stockman has seen from the inside as part of the Reagan administration.

The important part:

Essentially there was a cleansing run on the wholesale funding market in the canyons of Wall Street going on. It would have worked its will, just like JP Morgan allowed it to happen in 1907 when we did not have the Fed getting in the way. Because they stopped it in its tracks after the AIG bailout and then all the alphabet soup of different lines that the Fed threw out, and then the enactment of TARP, the last two investment banks standing were rescued, Goldman and Morgan Stanley, and they should not have been.

 

As a result of being rescued and having the cleansing liquidation of rotten balance sheets stopped, within a few weeks and certainly months they were back to the same old games, such that Goldman Sachs got $10 billion dollars for the fiscal year that started three months later after that check went out, which was October 2008. For the fiscal 2009 year, Goldman Sachs generated what I call a $29 billion surplus – $13 billion of net income after tax, and on top of that $16 billion of salaries and bonuses, 95% of it which was bonuses.

 

Therefore, the idea that they were on death’s door does not stack up. Even if they had been, it would not make any difference to the health of the financial system. These firms are supposed to come and go, and if people make really bad bets, if they have a trillion dollar balance sheet with six, seven, eight hundred billion dollars worth of hot-money short-term funding, then they ought to take their just reward, because it would create lessons, it would create discipline. So all the new firms that would have been formed out of the remnants of Goldman Sachs where everybody lost their stock values – which for most of these partners is tens of millions, hundreds of millions – when they formed a new firm, I doubt whether they would have gone back to the old game. What happened was the Fed stopped everything in its tracks, kept Goldman Sachs intact, the reckless Goldman Sachs and the reckless Morgan Stanley, everyone quickly recovered their stock value and the game continues. This is one of the evils that comes from this kind of deep intervention in the capital and money markets.

There are plenty of other writers who have pointed to this problem of propping up casino finance, including myself. But very few of them are doing so on the pages of the New York Times. So while it’s rather disappointing to see Stockman railing against deficits when the evidence shows capital and labour markets are still very slack even with large deficits, and while it’s rather disappointing to see him making technically-incorrect claims about the United States being “bankrupt” — sovereign lenders controlling their own currency cannot go bankrupt — we should not throw the baby out with the bathwater. Stockman is a cranky old man — but when it comes to drawing attention to real-world problems with crony capitalism, he’s doing a fine job.

Many will say that just letting the banks liquidate was not an option. I tend to disagree — depositors could have been protected, and a new part-nationalised banking system could perhaps have been built and capitalised just as quickly as the old dinosaurs were bailed out — but even if we assume liquidation to be impossible there are plenty of other options to bring the financial sector to heel. It is extremely disappointing to see the Obama administration fail to go after the banks in any meaningful way. The administration could have tried to break up the TBTF megabanks, reimpose Glass-Steagall, impose the Volcker Rule, fire failed management. Perhaps even try to impose the Chicago Plan. Without Fed liquidity, the US banking sector is toast, so almost any reform is possible.

Instead the banks took their bailouts without any discipline, and guess what? We’ve had even more systemic corruption, carrying on in the same pre-2008 mould — the London Whale, Ina Drew, Kweku Adoboli, the theft of segregated deposits by MF Global, even while financial sector stocks have soared. Central banks have reinflated the markets, but with the same people who created the last bust still in charge, it looks much more like a reinflated bubble than a road to lasting prosperity. Papering over the cracks…

The result of that is soaring corporate profits while employment and wages remain depressed. Feast for Wall Street, famine for Main Street. Obama may deploy plenty of populist rhetoric, but outcomes speak for themselves:

fredgraph (19)

Stockman has actually gone further in the past, criticising the toothlessness of Dodd-Frank in dealing with the problem of Too Big To Fail, and even endorsing a return to Glass-Steagall and the banning of corporate campaign donations. This 30-minute video is really worth watching:

 

 

In the long run, I think it will become patently clear that throwing liquidity at the financial system won’t solve anything other than immediate liquidity concerns. The rot was too deep. The financial sector needed real reform in 2008. It still needs it today.

 

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Mon, 04/01/2013 - 11:21 | 3395937 natronic
natronic's picture

The financial system needs to be completely redone and a new fiat currency issued to replace the USD.

Mon, 04/01/2013 - 11:25 | 3395956 Pladizow
Pladizow's picture

Krusty the Krugman.

Mon, 04/01/2013 - 11:28 | 3395966 rajat_bhatia
rajat_bhatia's picture

NATIONALIZE GOLDMAN SACHS!!!! LOL

Mon, 04/01/2013 - 11:43 | 3396019 NotApplicable
NotApplicable's picture

Last I knew Stockman was still a drunk (read: statist), so technically he has zero solutions that won't merely recreate the problems in the future.

Wake me when he's waving a copy of Rothbard's "Man, Economy and State with Power and Market" around.

Mon, 04/01/2013 - 11:57 | 3396085 tarsubil
tarsubil's picture

It seems he is gung ho for the gold standard. You cannot fund a statist's dreams under the gold standard. It is literally impossible.

Mon, 04/01/2013 - 13:09 | 3396356 Cthonic
Cthonic's picture

Habsburg Spain.  Ah wait, that was primarily silver.

Mon, 04/01/2013 - 13:26 | 3396445 Richard Chesler
Richard Chesler's picture

Krugman overlooks crony capitalism, systemic rot and Wall Street corruption of Washington.


Ding! Ding! One Nobel prize coming up!

Mon, 04/01/2013 - 17:03 | 3397285 sgt_doom
sgt_doom's picture

And here's why we really deserve the Swedish Central Bank prize:

The Ultra-Monopoly

If history is ever once again even remotely accurate, it will record the Dodd-Frank legislation (supposedly financial reform written by two faux crats, but in actuality written by JPMorgan Chase, Goldman Sachs and Morgan Stanley) as the most onerous legislation in 21st century America, effectively putting the icing on the transnational elite's ultra-monopoly.

The main thrust of the act is to make future bailouts at the clearinghouse level, away from the public view and knowledge.

And who owns the clearinghouses (and financial exchanges)? The banks and oil companies, of course!

The act further concentrates the financial power at ICE, or InterContinental Exchange, the energy derivatives (and other substances) exchange registered in London and owned by Goldman Sachs, Morgan Stanley and the oil companies, which was the pivotal site of energy futures speculation by Goldman Sachs and Morgan Stanley back in 2007-2008, driving up the paper prices of oil/energy to 13.8 times the real physical market value.

They not only did this with energy futures, but also those substances involved in the oil refining process, thereby driving up the entire process, and also, at other exchanges, driving up the price of the transportation of oil by speculating upwards Freight Forward Futures, etc.

Due to this legislation, the clearinghouse assumes the risk of the counterparty, transferring all risk to the opaque clearinghouse level, or bankster level.

Furthermore, this legislation changes what some might refer to as the only real hedges, energy swaps, to energy futures, leading to ever greater potential for financial manipulation by the transnational elites.

With the interlocking ownership of the InterContinental Exchange, or ICE, and the premier clearinghouse for derivatives and stock, the DTCC, and the NYSE, and the Dodd-Frank legislation, their ultra-monopoly has now been fully realized with the ultimate financial controls in the hands of the select super-rich!

http://nealwolkoff.blogspot.com/2012/10/when-swaps-become-futures.html

Starting Monday, October 15, 2012 the Intercontinental Exchange (ICE) will begin to treat all of its energy swaps contracts as futures contracts. Ten years ago, NYMEX, now a subsidiary of the CME Group, started a service called Clearport in which energy swaps were converted to futures and cleared as futures. CME has also has announced a plan to start later this year that will list these various swaps contracts as futures.

What is the difference between accepting swaps and converting them to futures, as Clearport has done for a decade, or listing swaps as futures in the first instance as ICE will start doing on Monday? The answer lies in one of the traditional principles governing trading on futures exchanges (Designated Contracts Markets or DCMs). Core Principle 9, as it is known in Section 5(d)(9) of the Commodity Exchange Act, requires each DCM to meet a standard of "open and competitive trading" of futures contracts.

. . .

ICE announced that its swap contracts would be redesignated as futures contracts on October 15, 2012. The CME announced that it would do the same for its Clearport contracts, albeit about 60 days behind the ICE schedule.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2224305

http://www.realclearmarkets.com/articles/2013/03/13/dodd-frank_financial_stability_on_the_backs_of_taxpayers_100198.html

Once a swap transaction is executed, a central clearinghouse becomes the counterparty to both buyer and seller, thus terminating the relationship between them. That means if the party on one side of the transaction fails to meet its obligations, it will no longer be the other party's headache, but the central clearinghouse's problem. The clearinghouse protects itself by collecting margin from its counterparties when it first enters into transactions with them. Then, as necessary, it collects additional margin throughout the duration of the contract.

http://www.bloomberg.com/news/2012-09-10/big-banks-hide-risk-transforming-collateral-for-traders.html

 

Mon, 04/01/2013 - 14:22 | 3396618 Archduke
Archduke's picture

this article is misleading and is befuddling many issues.

 

at the time both GS and MS were purely investment banks, (note MS had

just liquidated their discovery credit card line) so talking about how they

could have been unwound whilst preserving depositor funds is bullshit.

 

next, liquidity has nothing to do with the first crisis.  liquidity is what you

need for day to day operations.  the first crisis was a ferocious and rapid

crash due to leverage and margin calls, where cash flow was demanded

urgently to post collateral, not to cover normal operations.

 

also, they weren't all necessarily going down because of bad bets.  The wiser of the

midtown investment banks (GS, MS) made sure they were winners on their trades,

generally to the detriment of the monolithic wall street retail banks like Citi, BoFA,

and foreign institutionals abroad.

 

rather what happened was a sacrifical cannibal orgy of epic proportion as theses

banks sniffed out each other's weak positions and let loose their prime brokerage

financed hedge fund bloodhounds, shamelessly exploiting deregulated otc markets

and laughable oversight, specifically through naked shorting, failure-to-deliveries,

CDS, CDOs, etc and basically picked each other off.  it was financial armageddon,

or WW1, in the sense that there were many parties involved, many alliances and

allegiances made and betrayed, and in the end the whole world was scorched and

commons wealth destroyed to the detriment of all.

 

We also have to note that the very first rescues and mergers (horizontal takeovers)

of Merril Lynch, Bear and Sterns, Lehman, were not the evil bailouts that are the new

normal.  they were aggressive liquidation buyouts by competitors, and thus we about

as true to pure market capitalism as can be (the govt sat as middleman, not as a backer).

 

it's post 2008 that the moral hazard of bailouts entered into the frame.

then again GS and MS were then operating under a retail banking charter.

 

 

Mon, 04/01/2013 - 12:21 | 3396153 Pegasus Muse
Pegasus Muse's picture

NATIONALIZE GOLDMAN SACHS!!!! LOL

The fact of the matter is the Federal Government has been Goldmanized/JP Morganized such that the only thing O'blamer controls anymore is his golf schedule (after clearing it with his Wall St Puppeteers first, of course).  

Mon, 04/01/2013 - 12:34 | 3396210 Urban Redneck
Urban Redneck's picture

Stop excusing his actions and treating him like some dumb nigger who isn't capable of better.  

He is the Presient of the United States of America.

 

Mon, 04/01/2013 - 14:42 | 3396691 ronaldawg
ronaldawg's picture

OUCH.

Mon, 04/01/2013 - 16:57 | 3397266 NihilistZero
NihilistZero's picture

Damn right!  he isn't as smart as they give him credit for, but if he had an ounce of integrity or gave a shit about the working people of all races that put him in office, he would fight to better their lives by getting the fascists out of them.  He is a GS, JPMorgan "House Nigger" of the highest order.  Samuel L Jackson could play the part no better!

Mon, 04/01/2013 - 11:46 | 3396009 McMolotov
McMolotov's picture

Paul Krugman dislikes it, saying Stockman sounds like a cranky old man...

I say Paul Krugman sounds like a statist cunt, as usual, but at least ZH got a back-handed shout-out.

Mon, 04/01/2013 - 11:47 | 3396038 NotApplicable
NotApplicable's picture

In my world the man never utters a sound, as his lips never move. Which is exactly the level of attention any sophist/troll deserves.

His name should be no more attached to serious economics as Weird Al Yankovic. Well, actually less so, as Al has to work for a living, and understands customer satisfaction.

Mon, 04/01/2013 - 12:35 | 3396223 Vooter
Vooter's picture

AND his band kicks ass...

Mon, 04/01/2013 - 12:00 | 3396100 Headbanger
Headbanger's picture

Just more proof of what Niall Ferguson said about Krugtard being abused as a child:

http://www.businessinsider.com/bloomberg-niall-ferguson-vs-paul-krugman-...

Mon, 04/01/2013 - 11:45 | 3396031 ServingMyKing
ServingMyKing's picture

I thought Krug was above ad-hominem attacks.  

Mon, 04/01/2013 - 11:51 | 3396063 LasVegasDave
LasVegasDave's picture

Ad hominem attacks are Krugman's "go-to pitch", sanctioned and used effectively by treasonist statists.

Lots of lamposts in NYC, not enuf rope to go around.

Mon, 04/01/2013 - 12:28 | 3396198 otto skorzeny
otto skorzeny's picture

that would entail taking out alot of fellow Tribesman-are you up for it?

Mon, 04/01/2013 - 14:44 | 3396704 ronaldawg
ronaldawg's picture

Why waste rope - use electrical cords.

Mon, 04/01/2013 - 13:49 | 3396524 valley chick
valley chick's picture

stockman on faux business varney show....krugman even referencing ZERO HEDGE. ;)

http://video.foxbusiness.com/v/2270022361001/stockman-people-at-fed-have-no-idea-what-theyre-doing/?playlist_id=937116503001

Mon, 04/01/2013 - 11:26 | 3395959 TeamDepends
TeamDepends's picture

"We can help you with that"-  Lord Rothschild

Mon, 04/01/2013 - 11:44 | 3396020 WTFx10
WTFx10's picture

Why a LORD in front of its name?

Because he is a very succesful criminal?

And another self proclaimed LORD?

"I do think there are certain times we should infringe on your freedom," Mr. Bloomberg said, during an appearance on NBC.

Mon, 04/01/2013 - 11:53 | 3396067 TeamDepends
TeamDepends's picture

That's Lord Bloomberg to you.

Mon, 04/01/2013 - 12:00 | 3396098 WTFx10
WTFx10's picture

We,being the "we" he is referencing should read that quote over and over again until its meaning finally sinks in.

One of them just admitted that they have more privilege than we. On the MSM no less!

Mon, 04/01/2013 - 12:03 | 3396108 TeamDepends
TeamDepends's picture

They do until they don't.

Mon, 04/01/2013 - 11:52 | 3396061 insanelysane
insanelysane's picture

On why all is lost:

My brother-in-law is always on anti-government rants which I like.  So we are together for Easter and I ask him about some rental property he has been trying to sell for 8 months now.  He says well we keep cutting the price but no takers and then says that he got in a heated argument with real estate agent because the market is getting good.  Agent tells him there is a "lag".

So I say, "don't you think that the numbers are just made up?"

and he says, "No, they have to be good."

I was shocked because I thought the brother-in-law was not one of the sheeple.  Apparently he became one when reality didn't fit his needs.

Stay strong fellow ZH-ers, stay strong.

Mon, 04/01/2013 - 12:41 | 3396236 PlausibleDenial
PlausibleDenial's picture

Ask your brother-in-law if he understands "recapture".  Once understood, he will likely become even moar angrier..... deprecation = tax deferral.

Poor soul

Mon, 04/01/2013 - 16:43 | 3397217 FreeNewEnergy
FreeNewEnergy's picture

Yep, Easter Sunday was a good time to catch up with all the sheeple relatives (we all have them), like my school teacher sister, who, when asked if she knew what happened in Cyprus the past two weeks, responded that she didn't want to know.

I believe that's what known as "willful ignorance," and alerted her to the fact. Didn't matter, her mind was closed. She has "too much going on" (such as her 150-mile round trip shopping excursion with three daughters and friends) to pay attention.

Poor sucker, doesn't even know that me and her husband discussed being the only two in the family who can handle a rifle or shotgun in a SHTF scenario.

The denial of America is expansive, I tells ya. 

Mon, 04/01/2013 - 18:23 | 3397528 victor82
victor82's picture

More fiat! More fiat! More fiat!

Mon, 04/01/2013 - 11:22 | 3395941 Shizzmoney
Shizzmoney's picture

RE:

Krugman is right on both counts, but what Krugman overlooks is Stockman’s excellent criticism of crony capitalism, financialisation, systemic rot and Wall Street corruption of Washington, something Stockman has seen from the inside as part of the Reagan administration.

That's the problem with Krugman.  This NeoKeynesian theory aside, which has its good and its bad - but he thinks this issue of the economies in crisis are brought on by policies, and not fraud.

This isn't a MACRO issue; it is a MICRO one. 

You don't fix this by just fixing policy; you fix this by eliminating and tackling FRAUD.

He continues to not admit this........he's either naive and dumb.  Or both.  And I'm starting to think both (when before I just thought he was dumb).

Mon, 04/01/2013 - 11:51 | 3396059 NotApplicable
NotApplicable's picture

I'm sorry, but you have absolutely NO IDEA what he thinks, as all you have to go on are his hollow, incoherent words.

Why does everyone think that nobody lies to them? Especially someone like Krugspam, who would likely literally implode if the truth ever tried to cross his lips.

Just once, it'd be nice to see people NOT get sucked into the charades.

*sigh*

Fuck this shit. you folks want to play argue with trolls...

Whatevah!

Mon, 04/01/2013 - 12:51 | 3396264 Shizzmoney
Shizzmoney's picture

RE:

Why does everyone think that nobody lies to them? Especially someone like Krugspam, who would likely literally implode if the truth ever tried to cross his lips.

Maybe the problem is, we don't know the difference between "the truth" and "the lies" anymore?

Granted, we are closer to Krugman, because we (unlike him) actually LIVE in the real world.  But the lines are so fucking blurred today - I guess that's how the financiers keep looting the system, by confusing the shit out of everyone (including each other).

The eCONomists, both Austrian and Keynesian, are the problem IMO. Both are propping up failed ideas, in a failed economic system, in a failed state, in a soon to be failed world.

Mon, 04/01/2013 - 11:24 | 3395949 Meat Hammer
Meat Hammer's picture

It is extremely disappointing to see the Obama administration fail to go after the banks in any meaningful way.

Doesn't anyone understand that the banks write the rules and hire the referees?  

Mon, 04/01/2013 - 18:25 | 3397537 victor82
victor82's picture

Good Christ! Please go back and tell this guy that the Banksters hired Obama to protect their ill-gotten gains.

Only suckers believe that the Progs haven't totally sold their souls to Lucifer to get a little power. Obama's a fucking whore.

Mon, 04/01/2013 - 11:30 | 3395973 JustObserving
JustObserving's picture

It's too late - Goldman and JP Morgan own the government.  You cannot root out corruption now without destroying the government - it is all cancerous.

Mon, 04/01/2013 - 11:36 | 3396000 kliguy38
kliguy38's picture

Just a small point of order.......GS and JPM do not own the gov....they are functionaries for a very small group of banking families that have controlled Wars, govs, presidents, and geopolitics for centuries...calling GS and JPM the owners is tantamount to saying President Obama or Bernanke are calling the shots. They are only operatives.....your true masters are well hidden.

Mon, 04/01/2013 - 12:16 | 3396146 NEOSERF
NEOSERF's picture

And even more un-nerving is that an overthrow of banks and gov occurred, the sheeple would simply re-elect them to rebuild.

Mon, 04/01/2013 - 11:31 | 3395976 CClarity
CClarity's picture

"Virulent political conflict" soon. A war YOU will actually be involved in real time. Prepare. It makes the "zero sum austerity" look like child's play.

Mon, 04/01/2013 - 11:33 | 3395993 orangegeek
orangegeek's picture

Obama wanted re-election so he spent $2-3B per day for four years to keep markets up.

 

How Keynesian of Obama to do this, right Krugman?

Mon, 04/01/2013 - 11:35 | 3395999 Cycle
Cycle's picture

It is not an issue of liquidity.  Banks have historically high levels of unborrowed reserves, yet monetary velocity is slowing down. It is a question of solvency.  The US is insolvent, and the "liquidity" injected by the Fed with its $85 billion paper swaps is simply a way to feed the maws of rising interest payments, so as to avoid default.

Mon, 04/01/2013 - 12:08 | 3396125 eatthebanksters
eatthebanksters's picture

Ask yourself why this is the case and then ask if printing money is the answer...

Mon, 04/01/2013 - 14:46 | 3396719 Pareto
Pareto's picture

Excellent. The most sensible explanation provided I've seen today.

Mon, 04/01/2013 - 11:38 | 3396007 NoDebt
NoDebt's picture

So, basically he's saying that things ARE sustainable in their current form, it's just kind of A SHAME that we have this crony-capitalizm thing going on and that we choose to go down this path.  But fortunately all paths generate sustainable outcomes, so we've got plenty of time to play footsies and argue about whether we went down a good path or a bad one.

Got it.  What could be more sustainable than that?

Mon, 04/01/2013 - 11:46 | 3396037 azzhatter
azzhatter's picture

Stockman- Cranky old man

Krugman- semi literate fucktard statist prick

 

Who to follow?

Mon, 04/01/2013 - 11:53 | 3396072 Oldwood
Oldwood's picture

Speaking as another cranky old man, I vote...Stockman!

Mon, 04/01/2013 - 11:48 | 3396042 disabledvet
disabledvet's picture

the Fed cannot reinflate the markets (USA in the 1930's, Japan since the 1990's)...only an economic recovery...or the perception of one...can do that. There is certainly a ridiculous amount of tax payer money going into projects that are actually bad for economic development...let alone the taxpayer...this has been true since World War II...good luck changing that. for the USA back in the 50's it was "poured reinforced concrete that would change the world." now i guess it's "healthcare and education." be good in the sack..."but safe"...what else do you need to know? we're a long way from getting beyond "the Great Deformation" of course. let's face it "the T-2000 economy got plugged by a rifle launched grenade gun in 2008 and he's not looking too good right now." shall we define looking bad?

Mon, 04/01/2013 - 11:49 | 3396054 The Invisible Foot
The Invisible Foot's picture

Money=debt debt=money. Say the truth old man. The delusion in the world continues.

Mon, 04/01/2013 - 11:53 | 3396056 Ted K
Ted K's picture

That David Stockman was on Ronald Reagan's economic team that was the first administration to double the national debt as a percentage of GDP during non-war times and Tyler Durden and his band of idiots masturbate to the sounds of every syllable from Stockman's larynx on budget issues pretty much explains most of what you need to know about ZH blog.

Oh yeah, don't forget to buy gold, Durden's portfolio looks like crap this year and he needs a "ramp up" bad.

 

Mon, 04/01/2013 - 11:57 | 3396082 Oldwood
Oldwood's picture

Why don't you tell us how you really feel? You must be setting on a real load of muppet money, cranking up those fees!

Mon, 04/01/2013 - 12:04 | 3396109 Meat Hammer
Meat Hammer's picture

One key difference is Reagan actually admitted that increasing the debt was one of the biggest mistakes of his presidency.

 

Obama? Debt? It's all good, dawg!  Where Beyonce at?

Mon, 04/01/2013 - 12:06 | 3396118 tarsubil
tarsubil's picture

Stockman quit Reagan's administration in protest of suppressing interest rates. He wrote a book 25 years ago titled, "The Triumph of Politics: [Reagan is full of crap]." Don't let these easily demonstrable facts get in the way of your knee jerk.

Mon, 04/01/2013 - 14:43 | 3396689 Pareto
Pareto's picture

Dbl

Mon, 04/01/2013 - 14:41 | 3396690 Pareto
Pareto's picture

What's the matter? Bank turn you down for a loan?

Tue, 04/02/2013 - 08:07 | 3398809 Stud Duck
Stud Duck's picture

Teddy K, I watched the Reganites shift all the money to the FSLIC insured institutions and then proceed to blow it all on large office towers out in the suburbs, while they cut off the American farmers off at the knees financially and watched them bleed out.

Then in the middle of Regan's 2nd term, and after all the wealth doctors and lawyers had bought up the land for a dime on the dollar provided a program call the CRP (Conservation Reserve Program) and paid those doctors and lawyers (oh also a lot of wealthy bankers too) $50 to $75 per acre on $300 per aces land over a 10 year period to do nothing with the land. As a matter of fact, they are still paying land owners to do nothing with the land. It is just not enough right now as it can be least to a young farmer willing to take a chance at farming it.

So I do agree, it was during the Regan era that we started this long sprial down the hole we are in, We got Nancy's 'just say no" anti drug war, suspended the 4th amemndment for anyone smoking pot and prowing their own.. With the Brady bill we got the suspension of the 2nd amendment, all with the neo con's. 

All while doubling th deficit while lining the pockets of the already wealth. 

I watch many WW 2 vets/farmers lose their family farms during that era, all because they answered Nixons call to farm fence row to fence row to pay for the increase in the cost of oil! I watched it happen with disgust and will never regard Regan as nothing more than a failure not matter what a neo con believer in Regan has for an opinion.

 

 

Mon, 04/01/2013 - 11:51 | 3396062 TaxSlave
TaxSlave's picture

a new part-nationalised banking system could perhaps have been built

<cough>

Mon, 04/01/2013 - 11:56 | 3396081 Decimus Lunius ...
Decimus Lunius Luvenalis's picture

Krugman criticizes the piece by calling it an unevidenced rant by issuing an unevidenced rant.  The fact that Krugman hates ZH makes me enjoy it that much more. 

Mon, 04/01/2013 - 11:58 | 3396089 kito
kito's picture

aziz, less scary in context???? are you KIDDING ME??? there is no CONTEXT here aziz..the numbers are scary...PERIOD.....i look at the numbers every day without needing stockman to lay it out..............

 

at this rate, this country is headed to a debt/gdp ratio of 135% with a debt of 22.2 trillion by 2017...NOT SCARY ENOUGH???? of course krugman cant SEE PAST HIS FUCKING NOSE which has always been the problem with our leaders and pundits..............

http://www.usdebtclock.org/current-rates.html

we have all time highs on welfare, disability......we have more housholds taking from the govt than giving.............................

we have americans whose income is flat to down, all the while oil and health care and education continues to skyrocket...........................

we have job growth for seniors because they HAVE TO WORK, yet no job growth for younger adults because THERE IS NO WORK FOR THEM...................

we have a fed that continues to pump 85 billion a month into the veins of america..... and manipulating interest rates to zirpinfinity.......................

it is PATHETIC to moderate stockmans views on how bad things are....because they are BAD regardless of your CONTEXT....................

AZIZ, SHAME ON YOU..........................

 

 

Mon, 04/01/2013 - 20:13 | 3397809 Diogenes
Diogenes's picture

If you were an employer and had to chose between today's seniors and today's young adults you would pick the seniors too.

Tue, 04/02/2013 - 04:55 | 3398621 e-recep
e-recep's picture

the young adults are like microwaved pizza.

at least, the oldies have a know-how and work hard as much as their old bodies allows.

Mon, 04/01/2013 - 12:00 | 3396092 WTFx10
WTFx10's picture

 

 

Mon, 04/01/2013 - 12:02 | 3396103 Mototard at Large
Mototard at Large's picture

Dave Stockman might be a cranky old man, but this does not make him wrong.

Krugman might have a Nobel Prize, but this does not make him right!.

Mon, 04/01/2013 - 12:17 | 3396129 El Hosel
El Hosel's picture

Truth is obsolete, if you don't like the Federal version of reality go fuck yourself.http://www.youtube.com/watch?v=fkEIrWSPKhk

 

Mon, 04/01/2013 - 12:24 | 3396180 Martin T
Martin T's picture

Professor Anat Admati and Martin Hellwig deserve praise as well for their latest book, a must read on bank regulations:

"The Bankers' New Clothes: What's Wrong with Banking and What to Do about It"

This book should be mandatory for all banking regulators around the world.

Mon, 04/01/2013 - 12:35 | 3396217 Oldwood
Oldwood's picture

For anyone to think that anything is fixed, much less the world headed in the right direction, you would have to seriously question where the hell they think we are going! Lemming off a cliff, or maybe just "grinding the crack"

http://www.youtube.com/watch?v=TWfph3iNC-k

Mon, 04/01/2013 - 12:36 | 3396220 q99x2
q99x2's picture

I'm listening to Paul Craig Roberts now. He is saying very much the same as Stockman.

We must have "Destruction."

With everybody talking destruction I'm turning over a new leaf and going to be positive from now on.

Lots of opportunity to be found in ashes. Somewhere.

Mon, 04/01/2013 - 12:41 | 3396235 Oldwood
Oldwood's picture

Even when an undertaker's business is stronger than usual, he has to wonder.....

Mon, 04/01/2013 - 12:49 | 3396259 malek
malek's picture

 incorrect claims about the United States being “bankrupt” — sovereign lenders controlling their own currency cannot go bankrupt

I'm sure this is great consolation for the people of Zimbabwe, for example.

Mon, 04/01/2013 - 17:32 | 3397375 Turin Turambar
Turin Turambar's picture

" incorrect claims about the United States being “bankrupt” — sovereign lenders controlling their own currency cannot go bankrupt"

Technically, the Fed is private, so I'm not quite sure how Aziz makes the leap to "sovereign."

Mon, 04/01/2013 - 13:05 | 3396293 earleflorida
earleflorida's picture

may, God Bless You... 'Julian Assange' and free you from the 'Tower of London', albeit "Project K" !!!

http://www.thisdayinwikileaks.org/

Mon, 04/01/2013 - 12:58 | 3396299 Benjamin Glutton
Benjamin Glutton's picture

Please forward a copy of the Whoreable Attorney General Eric Holder's response to Sen. Sherrod Brown and Chuck Grassley on why his hands are tied re. prosecutions and beheading to Mr. Stockman.

 

TIA...

http://www.grassley.senate.gov/about/upload/02-27-2013-DOJ_CriminalProse...

Mon, 04/01/2013 - 13:04 | 3396336 Pareto
Pareto's picture

This statement from Aziz:  So while it’s rather disappointing to see Stockman railing against deficits when the evidence shows capital and labour markets are still very slack even with large deficits, and while it’s rather disappointing to see him making technically-incorrect claims about the United States being “bankrupt” — sovereign lenders controlling their own currency cannot go bankrupt — we should not throw the baby out with the bathwater.....

Is every reason why psedo economists such as Aziz (and Krugman), ought to consider alternative careers since they no longer understand the theoretical constructs of their own discipline.  Stockman is totally correct, because from a balance sheet perspective, most of the G20 is insolvent!  Aziz wants to keep the bathwater.  WTFF?  Its not worth anything!  Thats the problem!  By supporting a price (value) that the market clearly has demonstrated, isn't there, does not change the fact that there is no value there.

Aziz has a habit of demonstrating ignorance, even when nobody asked him for it because, in the end Stockman will be right and Aziz will be wrong, thus confirming his diminishing relevance to the discussion and to the discipline.

Mon, 04/01/2013 - 13:40 | 3396492 Hedgetard55
Hedgetard55's picture

 "sovereign lenders controlling their own currency cannot go bankrupt "

 

     I stopped reading right there. Tell it to the Weimar Germans.

Mon, 04/01/2013 - 13:45 | 3396511 Ghordius
Ghordius's picture

technically, devaluation is not debt forgivance or theft, and hyperinflation is not bankruptcy

Mon, 04/01/2013 - 14:20 | 3396619 Thisson
Thisson's picture

Nevertheless, this trope implies that there is no limit to the printing power, when clearly printing is, in fact, limited by social unrest.

Mon, 04/01/2013 - 16:23 | 3397139 defencev
defencev's picture

Is every reason why psedo economists such as Aziz (and Krugman), ought to consider alternative careers since they no longer understand the theoretical constructs of their own discipline.  Stockman is totally correct, because from a balance sheet perspective, most of the G20 is insolvent!  Aziz wants to keep the bathwater.  WTFF?  Its not worth anything!  Thats the problem!  By supporting a price (value) that the market clearly has demonstrated, isn't there, does not change the fact that there is no value there.

Aziz has a habit of demonstrating ignorance, even when nobody asked him for it because, in the end Stockman will be right and Aziz will be wrong, thus confirming his diminishing relevance to the discussion and to the discipline.

 

 

There is a huge difference between Aziz and Krugman: Krugman is an intellectual while Aziz is a stupid ,ignorant jerk. Most of what is posted here is a total garbage both intellectually and from forecast viewpoint. If someone is stupid, ignorant idiot, what can he realistically forecast?

 I remember reading very well written article by Krugman in International Herald Tribune where he correctly indicated that there is no way to forecast when the level of US indebtment will lead to crash on US bond market. Couple of years later the very same Krugman states that US is safe for at least ten years. How can he make this statement? The best way to get Krugman is

to indicate the discrepencies in his own statements.

On the other hand, Aziz is just an intellectual fraud.

Mon, 04/01/2013 - 13:21 | 3396385 sbenard
sbenard's picture

Once again we see that "DR." Paul Crazy Krugman is incapable of civil dialog without condescending and dismissive language. It must be genetic predisposition for him to be a pompous cad!

(...and be glad that I thought of another three-letter word to describe Crazy Krugman rather than the first three-letter word I thought of! Perhaps the first one was more accurate!)

Mon, 04/01/2013 - 15:04 | 3396779 ebworthen
ebworthen's picture

You only need to look to the repeal of Glass-Steagal, the legislation passed after the last Banker engineered Depression, to see the roots of this legerdemain and skullduggery.

Once enough that remembered were dead or out of power and the myth of FDR's New Deal saving the country was inculcated in the minds of the sheeple; the roadblock to the rape of main street was clear.

This time around there are no farms to go back to, and little to no productive industries to restore employment.

What's left?  EBT/SNAP cards and nukes.

Mon, 04/01/2013 - 15:21 | 3396861 khakuda
khakuda's picture

2 things:

1st, Krugman always accuses people of attacking the person, not the argument and here he is attacking the person yet again.  I actually enjoy that he is so extreme in the opposite of my viewpoint, but wish he would address issues and not attack the person making the argument.  Krugman never addresses the capital misallocation and moral hazard of his policies, cronyism, the increasing wealth divide his policies foster and the fact that at some point there will be a tipping point with all the debt and an overt or stealth default will occur.  Just because it hasn't yet, doesn't mean it won't or can't.

2nd, at the very least, the equity values of many financials should have gone to zero, just like with Lehman.  The world would not have ended and the losses would have ended up with the equity and bond holders, where they belonged, not with the taxpayer.  The businesses could have gone into a managed wind down similar to the Lehman wind down still going on today.

Mon, 04/01/2013 - 15:40 | 3396940 alfbell
alfbell's picture

 

 

So what does the last chapter of Stockman's book forecast... inflationary collapse or deflationary collapse?

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