David Stockman: "The American Empire And The End Of Sound Money"

Tyler Durden's picture


In Chapter 12 of David Stockman's new book The Great Deformation, the outspoken truth-sayer discusses the realities of the end of the gold standard - from the the Bank of England's 'default' in 1931 to the 1960 London Gold panic (a shot across the Keynesian bow) and on to Nixon and Bretton Woods, Stockman explains how we are constantly deferring the day of reckoning...

"Richard Nixon soon found that meeting the nation’s obligation to pay its debts in gold and to uphold the Bretton Woods system were distinctly inconvenient to his own reason of state: reelection in 1972.


Moreover, he had found a polyglot of economic advisors who persuaded him to discard the essence of the old-time Republican financial doctrine.. and embrace the prosperity management model, turning fiscal policy into a hapless stepchild of the jobs count and the GDP measurements, and giving a public policy rationalization to endless raids on the Treasury by special interest groups and crony capitalists....


Worse still, severing the link to gold paved the way for the T-bill standard and a vast multi-decade spree of central bank debt monetization and money printing. Since a régime of floating-rate paper money had never been tried before on a global basis, the Keynesian professors and their Friedmanite collaborators can perhaps be excused for not foreseeing its destructive consequence.


The record of the next several decades, however, eliminated all doubt.


The combination of free markets and freely printed money gave rise to a toxic financial deformation; namely, the vast financialization of the world economy and the rise of endless carry trades, massive arrangements of speculative hedging, and monumental daisy chains of debts, owned by debts, owned by still more debts."


Stockman Ch12

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Wed, 05/15/2013 - 22:09 | 3567610 Doctor of Reality
Doctor of Reality's picture

I'm going to bed!

Wed, 05/15/2013 - 23:08 | 3567776 Silver Bug
Silver Bug's picture

Gold and Silver are true money.



Thu, 05/16/2013 - 00:05 | 3567897 markmotive
markmotive's picture

Sure, fiat money is sinking the Empire.

But the lax attitude of most American workers is definitely not helping.

Teacher gets busted by student:


Thu, 05/16/2013 - 03:29 | 3568069 bentaxle
bentaxle's picture

Yes, but we're printing money now. The day of reckoning will only happen when the printer fails, right?

Thu, 05/16/2013 - 06:22 | 3568153 LoneCapitalist
LoneCapitalist's picture

Or when the majority of people realize whats going on and reject fiat.  So.....  Yeah, when the printer fails.

Thu, 05/16/2013 - 09:54 | 3568727 Balanced Integer
Balanced Integer's picture

Yeah, sure. But where the hell can you even find one of those these days?

Wed, 05/15/2013 - 22:10 | 3567614 akak
akak's picture

"I am not a crook!  I am simply too big to fail!"

Wed, 05/15/2013 - 22:32 | 3567682 kito
kito's picture

Akak do you buy the comex gold shortage theory?

Wed, 05/15/2013 - 22:38 | 3567700 akak
akak's picture

I am no expert in such matters, but it does seem to me to be at the very least plausible.

If I were forced to make a bet on it, let's just say I would bet "yes" without too many qualms.

Wed, 05/15/2013 - 23:23 | 3567803 Dr. Engali
Dr. Engali's picture

Stopped by the dealer today and picked up some nice shiny gold and silver Eagles.

Wed, 05/15/2013 - 23:41 | 3567834 kito
kito's picture

Any shortage issues???

Wed, 05/15/2013 - 23:56 | 3567848 Dr. Engali
Dr. Engali's picture

I had to wait on the silver. The gold took two maybe three days and the silver took three weeks.

Thu, 05/16/2013 - 06:24 | 3568155 PiratePawpaw
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My experience with dealers is that they have some stock but are unwilling to sell "their" PM's at these prices. They are however willing to order you some from a supplier at whatever the price is and pass it on to you plus a fee.

Anecdotal I know; but it explains the waits and the premiums.

Thu, 05/16/2013 - 07:45 | 3568259 azzhatter
azzhatter's picture

I'm not too concerned with the premiums being up a little. Still better than fiat

Thu, 05/16/2013 - 07:44 | 3568258 azzhatter
azzhatter's picture

I buy silver weekly and last few orders have had delivery stretched out quite a bit but it's available.

Wed, 05/15/2013 - 22:43 | 3567714 wee-weed up
wee-weed up's picture

Nixon: "I am not a crook!"

Obama: "I am not a wuss!"

Wed, 05/15/2013 - 22:53 | 3567738 JLee2027
JLee2027's picture

[insert photo:Obama riding girls' bike]

Thu, 05/16/2013 - 00:14 | 3567913 Pure Evil
Wed, 05/15/2013 - 22:11 | 3567620 Charles Nelson ...
Charles Nelson Reilly's picture

NYT subsciber & Krugman Worshipper: But, but, but Paul Krugman thinks he's old and cranky and deficits don't matter because we owe the money to ourselves.

Wed, 05/15/2013 - 22:14 | 3567627 the Absurd
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Shortly after taking the Treasury post, Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar "is our currency, but your problem."

John Connally

Wed, 05/15/2013 - 22:19 | 3567640 A Lunatic
A Lunatic's picture

If Thomas Jefferson, Alexander Hamilton, Andrew Jackson et al could foresee the devastation of free range central banking, the fucking keynesian professors and their Friedmanite collaborators could too.........

Thu, 05/16/2013 - 03:34 | 3568072 Urban Redneck
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Jefferson & Jackson would have killed Hamilton themselves.

Thu, 05/16/2013 - 09:58 | 3568749 Balanced Integer
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Jackson, maybe. Jefferson at least respected Hamilton as an intellectual equal, just the two had honest intellectual disagreements about central banking.

Thu, 05/16/2013 - 11:24 | 3569217 A Lunatic
A Lunatic's picture

Hamilton knew full well both the rewards (for those in power) and the ramifications (for the rest of us) of central banking; which is my point. It is impossible for those involved with this abomination today (230 years later) to plead ignorance of the consequences. But yes, Hamilton would be on my hit list should time travel ever become a viable option..............

Wed, 05/15/2013 - 22:37 | 3567696 kito
kito's picture

What's with this scribd shit in every post.....

Wed, 05/15/2013 - 23:33 | 3567821 tmosley
tmosley's picture

I know right?

I, for one, am tired of all these "sources" and "reading".  Let's have some crayon pictures, Tyler!

Wed, 05/15/2013 - 23:38 | 3567830 kito
kito's picture

Haha tmos......I'm only bitching about the platform delivery that has become more prevalent and is annoying to work with on my notsosmart phone.....

Wed, 05/15/2013 - 23:55 | 3567876 Dr. Engali
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I hear you. It pisses me off that Apple won't freaking do something about flash. I can't watch half the videos that are posted.

Thu, 05/16/2013 - 02:22 | 3568026 tango
tango's picture

Go to the App Store and search for flash substitutes. Several are. Available

Thu, 05/16/2013 - 06:57 | 3568191 Dr. Engali
Dr. Engali's picture


Thu, 05/16/2013 - 07:02 | 3568198 koaj
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or you can buy an android device...

Thu, 05/16/2013 - 09:13 | 3568531 Sandmann
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Linux was developed for a reason

Wed, 05/15/2013 - 22:38 | 3567697 Atomizer
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A man seldom mentioned, but his ideology warnings have been coordinated openly from the White House.

Yuri Bezmenov

Wed, 05/15/2013 - 22:40 | 3567702 rustymason
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This doesn't explain why Hollywood and most of the MSM STILL hate Nixon so passionately.

Wed, 05/15/2013 - 22:51 | 3567730 Diogenes
Diogenes's picture

He was a conservative and he won the presidency by one of the biggest majorities in history.

He only became paranoid when he figured out they really were out to get him.

Wed, 05/15/2013 - 23:19 | 3567787 Dr. Engali
Dr. Engali's picture

Nixon was no conservative. Unless you consider price controls, wage freezes, the expansion of government through the EPA, calling for mandatory health insurance , plus a plethora of other government expansionist policies conservative issues.

Wed, 05/15/2013 - 23:42 | 3567837 LetThemEatRand
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Yes, but he said he was a conservative and that is all that matters to the vast majority.  Obama says he is a liberal.  Bush said he is a conservative.  And so forth.

Thu, 05/16/2013 - 09:17 | 3568550 Vendetta
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Thu, 05/16/2013 - 08:04 | 3568289 DanDaley
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The sine qua non of determining if someone is a statist or not is how they view guns; Nixon hated guns, expecially handguns, in the hands of free citizens.  End of story.

Thu, 05/16/2013 - 10:03 | 3568774 Balanced Integer
Balanced Integer's picture

Nixon was a die-hard conservative during his years in Congress. But true power corrupted him, beginning with his 8 year stint as VP, and culminating in his improbable ascension to the presidency. Power corrupts...it's a cliche only because it is so damned truthy.

Thu, 05/16/2013 - 07:34 | 3568238 DanDaley
DanDaley's picture

The reason they hated him is because he was in power and they weren't.  Plus, he created the EPA, one of the most intrusive, big government, control mechanisms ever conceived...how dare he...that's THEIR job!

Wed, 05/15/2013 - 22:41 | 3567711 JustObserving
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The American Empire and its money is enforced by the bomb and the drone.  What will bankrupt it is hubris and excessive spending.  The cost of the wars in Afghanistan and Iraq is estimated to be $4 trillion  to $6 trillion.   The Vietnam war cost only $738 billion in 2011 dollars and yet forced the US off the gold standard on August 15, 1971.  

Besides, US debt and unfunded liabilities are $450,000 per citizen and growing at $26,000 per citizen per year.  There is no way to handle this debt except by default or hyperinflation.


Costs to U.S. taxpayers of the wars in Iraq and Afghanistan will run between four and six trillion dollars, making them the most expensive conflicts in U.S. history, according to a new report by a prominent Harvard University researcher.

While Washington has already spent close to two trillion dollars in direct costs related to its military campaigns in the two countries, that total “represents only a fraction of the total war costs”, according to the report by former Bill Clinton administration official Linda Bilmes.

“The single largest accrued liability of the wars in Iraq and Afghanistan is the cost of providing medical care and disability benefits to war veterans,” she wrote in the 21-page report, ‘The Financial Legacy of Iraq and Afghanistan: How Wartime Spending Decisions Will Constrain Future National Security Budgets’.

Bilmes, who since 2008 has co-authored a number of analyses on war costs with the World Bank’s former chief economist, Joseph Stiglitz, noted that more than half of the more than 1.5 million troops who have been discharged from active duty since 9/11 have received medical treatment at veterans’ hospitals and have been granted benefits for the rest of their lives. More than 253,000 troops have suffered a traumatic brain injury.



Thu, 05/16/2013 - 08:09 | 3568301 Quinvarius
Quinvarius's picture

I submit that debt default historically causes hyperinflation.

Thu, 05/16/2013 - 09:15 | 3568540 Sandmann
Sandmann's picture

Israel will destroy the USA just as Austria-Hungary destroyed Germany in 1914

Wed, 05/15/2013 - 22:42 | 3567713 ebworthen
ebworthen's picture

"The combination of free markets and freely printed money gave rise to a toxic financial deformation; namely, the vast financialization of the world economy and the rise of endless carry trades, massive arrangements of speculative hedging, and monumental daisy chains of debts, owned by debts, owned by still more debts."

Precisely, absolutely, exactly.

Thu, 05/16/2013 - 02:05 | 3568014 Indrid Cold
Indrid Cold's picture

I keep looking for free markets but haven't found one yet. Please, enlighten me: where are all these free markets of which I hear so much lately?

Where in the U.S. of A. can I and a few of my fatcat free-market-loving capitalist pig friends set up and operate our own bank, investment house, or insurance company without the blessing of our beneficent regulators in the state or federal houses?

Or is it crony-capitalist insured-deposit backstopped-by-taxpayers freedom-from-suffering-losses markets we're mistaking for free markets these days?

We seem to be overlooking one of the partners in this dance.

I suppose it all depends on how you define free.

Thu, 05/16/2013 - 02:31 | 3568033 ebworthen
ebworthen's picture

"...crony-capitalist insured-deposit backstopped-by-taxpayers freedom-from-suffering-losses markets..."

You are right.

What were relatively free real markets in 1972 have devolved with every passing year into crony-capitalist playgrounds increasingly levitated by FED jizz, algo robot trading, ETF's, "vaporizing" of investor funds, LIBOR rigging, repeal of Glass-Steagall, bailouts, end of rule-of-law, shadow banking, derivatives, swaps, rehypothecation - all the wonderful inventions of modern finance.

All of these were essentially jump-started by leaving the gold standard and beginning the fiat debt fantasy bubbles.

But yes, you are right, no "free" markets anymore.

Thu, 05/16/2013 - 09:53 | 3568718 Graph
Graph's picture


Life is not fair and not that I know the answer.

People with money tend to keep comfortable professions for themselves and guard it from "outsiders" with considerable success. Heavy toil is "free" for others to take.


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