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David Stockman Explains The Keynesian State-Wreck Ahead - Sundown In America

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David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank... What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut... He calls this condition "Sundown in America".


Remarks of David A. Stockman at the Edmond J. Safra Center for Ethics, Harvard University, September  26, 2013

The median U.S. household income in 2012 was $51,000, but that’s nothing to crow about. That same figure was first reached way back in 1989--- meaning that the living standard of Main Street America has gone nowhere for the last quarter century. Since there was no prior span in U.S. history when real household incomes remained dead-in-the-water for 25 years, it cannot be gainsaid that the great American prosperity machine has stalled out.

Even worse, the bottom of the socio-economic ladder has actually slipped lower and, by some measures, significantly so. The current poverty rate of 15 percent was only 12.8 percent back in 1989; there are now 48 million people on food stamps compared to 18 million then; and more than 16 million children lived poverty households last year or one-third more than a quarter century back.

Likewise, last year the bottom quintile of households struggled to make ends meet on $11,500 annually ----a level 20 percent lower than the $14,000 of constant dollar income the bottom 20 million households had available on average twenty-five years ago. 

Then, again, not all of the vectors have pointed south. Back in 1989 the Dow-Jones index was at 3,000, and by 2012 it was up five-fold to 15,000.  Likewise, the aggregate wealth of the Forbes 400 clocked in at $300 billion back then, and now stands at more than $2 trillion---a gain of 7X.

 And the big gains were not just limited to the 400 billionaires. We have had a share the wealth movement of sorts--- at least among the top rungs of the ladder. By contrast to the plight of the lower ranks, there has been nothing dead-in-the-water about the incomes of the 5 million U.S. households which comprise the top five percent. They enjoyed an average income of $320,000 last year, representing a sprightly 33 percent gain from the $240,000 inflation-adjusted level of 1989.

The same top tier of households had combined net worth of about $10 trillion back at the end of Ronald Reagan’s second term.  And by the beginning of Barrack Obama’s second term that had grown to $50 trillion, meaning that just the $40 trillion gain among the very top 5 percent rung is nearly double the entire current net worth of the remaining 95 percent of American households.

So, no, Sean Hannity need not have fretted about the alleged left-wing disciple of Saul Alinsky and Bill Ayers who ascended to the oval office in early 2009. During Obama’s initial four years, in fact, 95 percent of the entire gain in household income in America was captured by the top 1 percent. 

Some other things were rising smartly during the last quarter century, too. The Pentagon budget was $450 billion in today’s dollars during the year in which the Berlin Wall came tumbling down.

Now we have no industrial state enemies left on the planet: Russia has become a kleptocracy led by a thief who prefers stealing from his own people rather than his neighbors; and China, as the Sneakers and Apple factory of the world, would collapse into economic chaos almost instantly---if it were actually foolish enough to bomb its 4,000 Wal-Mart outlets in America.

Still, facing no serious military threat to the homeland, the defense budget has risen to $650 billion----that is, it has ballooned by more than 40 percent in constant dollars since the Cold War ended 25 year ago. Washington obviously didn’t get the memo, nor did the Harvard “peace” candidate elected in 2008, who promptly re-hired the Bush national security team and then beat his mandate for plough shares into an even mightier sword than the one bequeathed him by the statesman from Yale he replaced.

Banks have been heading skyward, as well.  The top six Wall Street banks in 1989 had combined balance sheet footings of $0.6 trillion, representing 30 percent of the industry total. Today their combined asset footings are 17 times larger, amounting to $10 trillion and account for 65 percent of the industry.

 The fact that the big banks led by JPMorgan and Bank America have been assessed the incredible sum of $100 billion in fines, settlements and penalties since the 2008 financial crisis suggests that in bulking up their girth they have hardly become any more safe, sound or stable.

Then there’s the Washington DC metropolitan area where a rising tide did indeed lift a lot of boats. Whereas the nationwide real median income, as we have seen, has been stagnant for two-and-one-half decades, the DC metro area’s median income actually surged from $48,000 to $66,000 during that same interval or by nearly 40 percent in constant dollars.

Finally, we have the leading growth category among all others----namely, debt and the cheap central bank money that enables it. Notwithstanding the eight years of giant Reagan deficits, the national debt was just $3 trillion or 35 percent of GDP in 1989. Today, of course, it is $17 trillion, where it weighs in at 105 percent of GDP and is gaining heft more rapidly than Jonah Hill prepping for a Hollywood casting call.

Likewise, total US credit market debt---including that of households, business, financial institutions and government--- was $13 trillion or 2.3X national income in 1989. Even back then the national leverage ratio had already reached a new historic record, exceeding the World War II peak of 2.0X national income.

Nevertheless, since 1989 total US credit market debt has simply gone parabolic. Today it is nearly $58 trillion or 3.6X GDP and represents a leverage ratio far above the historic trend line of 1.6X national income---a level that held for most of the century prior to 1980.  In fact, owing to the madness of our rolling national LBO over the last quarter century, the American economy is now lugging a financial albatross which amounts to two extra turns of debt or about $30 trillion.

In due course we will identify the major villainous forces behind these lamentable trends, but note this in passing: The Federal Reserve was created in 1913, and during its first 73 years it grew its balance sheet in turtle-like fashion at a few billion dollars a year, reaching $250 billion by 1987---at which time Alan Greenspan, the lapsed gold bug disciple of Ayn Rand, took over the Fed and chanced to discover the printing press in the basement of the Eccles Building.

Alas, the Fed’s balance sheet is now nearly $4 trillion, meaning that it exploded by sixteen hundred percent in the last 25 years, and is currently emitting $4 billion of make-believe money each and every business day.

So we can summarize the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government which are domiciled there---that is, the warfare state, the welfare state and the central bank.

What is flailing, by contrast, is the vast expanse of the Main Street economy where the great majority has experienced stagnant living standards, rising job insecurity, failure to accumulate any material savings, rapidly approaching old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut.

 And what is positively falling is the lower ranks of society whose prospects for jobs, income and a decent living standard have been steadily darkening.

I call this condition “Sundown in America”.  It marks the arrival of a dystopic “new normal” where historic notions of perpetual progress and robust economic growth no longer pertain. Even more crucially, these baleful realities are being dangerously obfuscated by the ideological nostrums of both Left and Right.

Contrary to their respective talking points, what needs fixing is not the remnants of our private capitalist economy ---which both parties propose to artificially goose, stimulate, incentivize and otherwise levitate by means of one or another beltway originated policy interventions.

Instead, what is failing is the American state itself----a floundering leviathan which has been given one assignment after another over the past eight decades to manage the business cycle, even out the regions, roll out a giant social insurance blanket, end poverty, save the cities, house the nation, flood higher education with hundreds of billions, massively subsidize medical care, prop-up old industries like wheat and the merchant marine, foster new ones like wind turbines and electric cars, and most especially, police the world and bring the blessings of Coca Cola, the ballot box and satellite TV to the backward peoples of the earth.

In the fullness of time, therefore, the Federal government has become corpulent and distended---a Savior State which can no longer save the economy and society because it has fallen victim to its own inherent short-comings and inefficacies.

 Taking on too many functions and missions, it has become paralyzed by political conflict and decision overload. Swamped with insatiable demand on the public purse and deepening taxpayer resistance, it has become unable to maintain even a semblance of balance between its income and outgo.

Exposed to constant raids by powerful organized lobby groups, it has lost all pretenses that the public interest is distinguishable from private looting. Indeed, the fact that Goldman Sachs got a $1.5 billion tax break to subsidize its new headquarters in the New Year’s eve fiscal cliff bill--- legislation allegedly to save the middle class from tax hikes--- is just the most recent striking albeit odorous case.

Now the American state----the agency which was supposed to save capitalism from its inherent flaws and imperfections----careens wildly into dysfunction and incoherence. One week Washington proposes to bomb a nation that can’t possibly harm us and the next week its floods Wall Street speculators, who can’t possibly help us, with continued flows of maniacal monetary stimulus.

Meanwhile, the White House pompously eschews the first responsibility of government---that is, to make an honest budget, which is the essence of what the Tea Party is demanding in return for yet another debilitating increase in the national debt.

To be sure, the mainstream press is pleased to dismiss this latest outburst of fiscal mayhem as evidence of partisan irresponsibility---that is, a dearth of “statesmanship” which presumably could be cured by stiffer backbones and greater enlightenment.  Well, to use a phrase I learned from Daniel Patrick Moynihan during my school days here, “would that it were”.

What is really happening is that Washington’s machinery of national governance is literally melting-down.  It is the victim of 80 years of Keynesian error---much of it nurtured in the environs of Harvard Yard---- about the nature of the business cycle and the capacity of the state---especially its central banking branch--- to ameliorate the alleged imperfections of free market capitalism.

As to the proof, we need look no further than last week’s unaccountable decision by the Fed to keep Wall Street on its monetary heroin addiction by continuing to purchase $85 billion per month of government and GSE debt.

Never mind that the first $2.5 trillion of QE has done virtually nothing for jobs and the Main Street economy or that we are now in month number 51 of the current economic recovery--- a milestone that approximates the average total duration of all ten business cycle expansions since 1950. So why does the Fed have the stimulus accelerator pressed to the floor board when the business cycle is already so long in the tooth----and when it is evident that the problem is structural, not cyclical?

The answer is capture by its clients, that is, it is doing the bidding of Wall Street and the vast machinery of hedge funds and speculation that have built-up during decades of cheap money and financial market coddling by the Greenspan and Bernanke regimes.  The truth is that the monetary politburo of 12 men and women holed up in the Eccles Building is terrified that Wall Street will have a hissy fit if it tapers its daily injections of dope.

So we now have the spectacle of the state’s central banking branch blindly adhering to a policy that has but one principal effect: namely, the massive and continuous transfer of income and wealth from the middle and lower ranks of American society to the 1 percent.

The great hedge fund industry founder and legendary trader who broke the Bank of England in 1992, Stanley Druckenmiller, summed-up the case succinctly after Bernanke’s abject capitulation last week. “I love this stuff”, he said, “…. (Its) fantastic for every rich person. It’s the biggest redistribution of wealth from the poor and middles classes to the rich ever”.

Indeed, a zero Federal funds rate and a rigged market for short-term repo finance is the mother’s milk of the carry trade: speculators can buy anything with a yield----such as treasuries notes, Fannie Mae MBS, Turkish debt, junk bonds and even busted commercial real estate securities--- and fund them 90 cents or better on the dollar with overnight repo loans costing hardly ten basis points.

 Not only do speculators laugh all the way to the bank collecting this huge spread, but they sleep like babies at night because the central banking branch of the state has incessantly promised that it will prop up bond prices and other assets values come hell or high water, while keeping the cost of repo funding at essentially zero for years to come.

If this sounds like the next best thing to legalized bank robbery, it is. And dubious economics is only the half of it.

 This reverse Robin Hood policy is also an open affront to the essence of political democracy.  After all, the other side of the virtually free money being manufactured by the Fed on behalf of speculators is massive thievery from savers. Tens of millions of the latter are earning infinitesimal returns on upwards of $8 trillion of bank deposits not because the free market in the supply and demand for saving produces bank account yields of 0.4 percent, but because price controllers at the Fed have decreed it.

For all intents and purposes, in fact, the Fed is conducting a massive fiscal transfer from the have nots to the haves without so much as a House vote or even a Senate filibuster. The scale of the transfer---upwards of $300 billion per year----causes most other Capitol Hill pursuits to pale into insignificance, and, in any event, would be shouted down in a hail of thunderous outrage were it ever to actually be put to the people’s representatives for a vote.

To be sure, all of this madness is justified by our out-of-control monetary politburo in terms of a specious claim that Humphrey-Hawkins makes them do it---that is, print money until unemployment virtually disappears or at least hits some target rate which is arbitrary, ever-changing and impossible to consistently measure over time.

 In fact, however, this ballyhooed statute is a wholly elastic and content-free expression of Congressional sentiment.  In their wisdom, our legislators essentially said that less inflation and more jobs would be a swell thing. So the act contains no quantitative targets for unemployment, inflation or anything else and was no less open-ended when Paul Volcker chose to crush the speculators of his day than it was last week when Bernanke elected (once again) to pander obsequiously to them.

In truth, the Fed’s entire macro-economic management enterprise is a stunning case of bureaucratic mission creep that has virtually no statutory mandate. Certainly the author of the Federal Reserve Act, the incomparable Carter Glass of Glass-Steagall fame, abhorred the notion that the central bank would become a tool of Wall Street.

To that end, the Fed originally had no authority to own government debt or to conduct open market operations buying and selling treasury securities on Wall Street. And Carter Glass would be rolling in his grave upon discovery that the Fed was rigging interest rates, manipulating the yield curve, providing succor to financial speculators by propping-up risk asset markets, placing a Put under the S&P 500 or bragging, as Bubbles Ben did recently, that he had levitated an ultra-speculative stock index called the Russell 2000.

Summing up a wholly opposite Congressional intent in the early 1920s, Senator Glass was almost lyrical:  “We cured this financial cancer by making the regional reserve banks, not Wall Street, the custodian of the nation’s reserve funds… (And) by making them minister to commerce and industry rather than the schemes of speculative adventure. The country banks were made free. Business was unshackled. Aspiration and enterprise were loosened. Never again would there be a money panic.”

Except…except….except that the Fed eventually strayed from its original modest mandate to be a “banker’s bank”----and in due course we got the crashes of 1929, 1974, 1987, 1998, 2000, and 2008,  to name those so far. In the original formulation, however, these cycles of bubble and bust would not have happened: the Federal Reserve’s only job was the humble matter of passively supplying cash to member banks at a penalty spread above the free market interest rate.

In this modality, the Fed was to function as a redoubt of green-eyeshades, not the committee to save the world. Central bankers would dispense cash at the Fed’s discount window only upon the presentation of good collateral. Moreover, eligible collateral was to originate in trade receivables and other short-term paper arising out of the ebb and flow of free enterprise commerce throughout the hinterlands, not the push and pull of confusion and double-talk among monetary central planners domiciled in the nation’s political capital.

Accordingly, the Federal Reserve that Carter Glass built could not have become a serial bubble machine like the rogue central banks of today. The primary reason is that under the Glassian scheme the free market set the interest rate, not price controllers in Washington.

This meant, in turn, that any sustained outbreak of speculative excess---- what Alan Greenspan once warned was “irrational exuberance” and then promptly hit the delete button when Wall Street objected---would be crushed in the bud by soaring money market interest rates. In effect, leveraged speculators would cure their own euphoria and greed by pushing carry trades---that is, buying long and borrowing short---to the point where they would turn upside down. When spreads went negative, the bubble would promptly stop inflating as overly exuberant speculators were carried off to meet their financial maker---or at least their banker.

And, yes, Carter Glass’ Fed did function under the ancient regime of the gold standard, but there was nothing especially “barbarous” about it----J. M. Keynes to the contrary notwithstanding.  It merely insured that if the central bank was ever tempted to violate its own rules and repress interest rates in order to accommodate speculators and debtors, more prudent members of the financial community could dump dollar deposits for gold, thereby bringing bank credit expansion up short and aborting incipient financial bubbles before they swelled-up.

Needless to say, a central bank which could not create credit-fueled financial bubbles could not have become today’s monetary central planning agency, either. Indeed, the remit of the Glassian banker’s bank did not include managing the business cycle, levitating the GDP, targeting the unemployment rate, goosing the housing market or fretting over the rate of monthly consumer spending.

 Certainly it did not involve worrying whether the inflation rate was coming in below 2 percent---the current inexplicable target of the Fed which Paul Volcker has rightly pointed out amounts to robbing the typical laboring man of half the value of his savings over a working lifetime of 30 years.

In short, in the Glassian world the state had no dog in the GDP hunt: whether it grew at an annual rate of 4 percent, 1 percent or went backwards was up to millions of producers, consumers, savers, investors, entrepreneurs and, yes, even speculators interacting on the free market. Indeed, the so-called macroeconomic aggregates----such as national income, total employment, credit outstanding and money supply----were passive outcomes on the market, not active targets of state policy.

Needless to say, no Glassian central banker would have ever dreamed of levitating the macro-economic aggregates through the Fed’s current radical, anti-democratic doctrine called “wealth effects”.

 Under the latter, the 10 percent of the population which owns 85 percent of the financial assets---and especially the 1 percent which owns most of the so-called “risk assets” managed by hedge funds and fast money speculators---are induced to feel richer by the deliberate and wholly artificial inflation of financial asset values.

In the case of the Russell 2000 which is Bernanke’s favorite wealth effects tool, for instance, the index gain from 350 in March 2009 to 1080 at present amounts to 200 percent and that is for un-leveraged holdings; the Fed engineered windfall actually amounts to a 400 or 500 percent gain under typical options, leverage and timing based strategies employed by the fast money.

 In any event, feeling wealthier, the rich are supposed to spend more on high end restaurants, gardeners and Pilate’s instructors, thereby causing a “trickle-down” jolt to aggregate demand and eliciting a virtuous circle of rising output, incomes and consumption----indeed,  always more consumption.

Having been involved in another radical experiment in “trickle down”----the giant Reagan tax cuts of 1981----I no longer believe in Voodoo economics. But at least the Gipper’s tax cuts were voted through by a democratic legislature. The Greenspan-Bernanke-Yellen version of “trickle-down”, by contrast, is a pure gift from a handful of central bank apparatchiks to the super-rich.

Nevertheless, the more virulent form of “trickle-down” being practiced in 2013 is rooted in the same erroneous predicate as the mistake of 1981----namely, the Keynesian gospel that the free enterprise economy is inherently prone to business cycle instability and perennially under-performs its so-called “potential” full employment growth rate.  Accordingly, enlightened intervention---if that is not an oxymoron--- by the fiscal and monetary branches of the state is claimed to be necessary to cure these existential disabilities.

The truth of the matter, however, is that Keynesian monetary and fiscal stimulus has never really been needed in the post-war world. Among the ten business cycle contractions since 1950, two of them were unavoidable, self-correcting dislocations resulting from the abrupt cooling down of hot wars in Korea and Vietnam.

The other eight downturns were actually caused by the Federal Reserve, not cured by it.  After the Fed first got carried away with too much stimulus and credit creation in 1971-1974, for example, it had to trigger a short-lived inventory correction to halt the resulting inflation and speculative excesses in financial, labor and commodity markets. But once these necessary inventory corrections ran their course, the economy rebounded on its own each and every time.

To be sure, the Reagan tax cut intervention of 1981 came in a quasi-libertarian guise. By getting the tax-man out of the way, GDP growth was supposed to be unleashed throughout the economic hinterlands, rising by something crazy like 5 percent annually--- forever and ever, world without end.

But in practice, “supply-side” was just Keynesian economics for the prosperous classes---that is, it ended-up being a scheme to goose the GDP aggregates by drawing down Uncle Sam’s credit card and then passing along the borrowings to so-called “job creators” thru tax cuts rather than to dim-witted bureaucrats thru spending schemes.

Indeed, the circumstances of my own ex-communication from the supply-side church underscore the Reaganite embrace of the Keynesian gospel. The true-believers---led by Art Laffer, an economist with a Magic Napkin, and Jude Wanniski, an ex-Wall Street Journal agit-prop man who chanced to stuff said napkin into his pocket--- were militantly opposed to spending cuts designed to offset the revenue loss from the Reagan tax reductions.

They called this “root canal” economics and insisted that the Republican Party could never compete with the Keynesian Democrats unless it abandoned its historic commitment to balanced budgets and fiscal rectitude, and instead, campaigned on tax cuts everywhere and always and a fiscal free lunch owing to a purported cornucopia of economic growth.

So supply-side became just another campaign slogan---a competitive entry in the Washington beltway enterprise of running-up the national debt in order to perfect and improve upon the otherwise inferior results of the free market economy. In the fullness of time, of course, supply-side economics degenerated into Dick Cheney’s fatuous claim that Reagan proved “deficits don’t matter”.

From there came two giant unfinanced tax cuts and two pointless unfinanced wars under George W. Bush. And then there arose, finally, the GOP’s descent into fiscal know-nothingism during the Obama era--- wherein it refused to cut defense, law enforcement, veterans, farm subsidies, the border patrol, middle class student loans, social security, Medicare, the SBA and export-import bank loans to Boeing and General Electric, among countless others--- while insisting that no tax-payer should suffer the inconvenience of higher taxes to pay Uncle Sam’s bloated bills.  

We thus ended up with the New Year’s Day Folly of 2013. Save for the top 2 percent of taxpayers who were being generously taken care of by the Fed already, all of America got a huge permanent tax cut----amounting to $2 trillion over the coming decade alone.

Never mind that the Democrats had spent the entire prior decade denouncing the Bush tax cuts as fiscal madness. Now, the tax bidding war which had started in the Reagan White House in May 1981 became institutionalized in the Oval Office.

The so-called Progressive Left was in charge of the veto pen, of course, but the latter was found wanting for ink and in that outcome the nation’s fiscal demise was sealed. There was no progressive case whatsoever for extending the Bush tax cuts because, as Willard M. Romney had so inartfully taught the nation during the Presidential campaign, the bottom 47 percent of households don’t pay any income tax in the first place!

In short, the most left-wing President ever elected in America was showering the upper middle-class with trillions in extra spending loot for no reason of policy----except to ensure that they would buy more Coach Bags and flat screen TVs.

The fiscal end game---policy paralysis and the eventual bankruptcy of the state---thus became visible.  All of the beltway players----Republican, Democrats and central bankers alike----are now so hooked on the Keynesian cool-aid that they cannot imagine the Main Street economy standing on its own two feet without continuous, massive injections of state largesse.

Indeed, the lunacy of the Fed’s trickle-down-to- the-rich was justified last week by Bernanke himself on the grounds that the minor fiscal pinprick owing to the budget sequester was keeping the GDP from growing at its appointed rate.

Based on the same logic the GOP’s most fearsome fiscal hawk, Congressman Paul Ryan, proposed a budget which actually increased the deficit by $200 billion over the next three years on the grounds that the economy was too weak to tolerate fiscal rectitude in the here and now.  In the manner of St. Augustine, the Ryan budget got to balance in the by-in-by---that is, in 2037 to be exact--- pleading “Lord, make me chaste--- but not just now”.

In other words, the entire fiscal and monetary apparatus of the state has become a jobs program. Progressives pleasure households earning a quarter million dollars annually with tax cuts so that they will hire another gardener; conservatives support modernization of our already lethal fleet of 10,000 M-1 tanks to keep the production line open in Lima, Ohio----notwithstanding that no nation in the world can invade the US homeland and that the American people are tired of invading the homelands of innocent peoples abroad.

In the same vein, by all accounts the US income tax code is a disgrace--- a milk-cow for the K-street lobbies, a briar patch of screaming inequities and the leakiest revenue raising system ever concocted.

But it also amounts to 70,000 pages of jobs programs. None of these can be spared, according to the beltway consensus, so long as GDP and job growth is not up to snuff---that is, as long as they fall short of the American economy’s so-called full employment potential. The latter is an ethereal number known only to the Keynesian priesthood, led by the great thinker’s current vicar on earth, professor Larry Summers, who during his tenure in the White House turned Art Laffer’s napkin upside down and wrote “$800 billion” on the back.

That was the magic number which, when multiplied by another magic number called the fiscal multiplier, would generate an amount of incremental GDP exactly equal to the gap between actual GDP in early 2009 and potential GDP, as calibrated by the vicar.

This might be called the bath-tub theory of macroeconomics because according to Summers and the White House, it didn’t matter much what  was in the $800 billion package----the urgent matter was to get Washington’s fiscal pumping machinery operating at full-tilt.

 Accordingly, once the magic number had been scribbled on the White House napkin, the nation’s check-writing pen was handed off to Speaker Nancy Pelosi and Harry Reid, who conducted the most gluttonous  feeding frenzy every witnessed along the corridors of K-Street.

In exactly twenty-two days from the inauguration, the new administration conceived, drafted, circulated, legislated and signed into law an $800 billion omnibus package of spending and tax cutting that amounted to nearly 6 percent of GDP.  I had been part of a new administration that moved way too fast on a grand plan and had seen the peril first hand. But the Reagan fiscal mishap did not even remotely compare to the reckless, unspeakable folly conducted by the Obama White House.

In fact, the stimulus bill was not a rational economic plan at all; it was a spasmodic eruption of beltway larceny that has now become our standard form of governance.

 Stated differently, the stimulus bill was a Noah’s ark which had welcomed aboard every single pet project of any organization domiciled in the nation’s capital with a K-street address. Most items were boarded without any policy review or adult supervision, reflecting a rank exercise in political log-rolling that proceeded straight down the gang planks to the bulging decks below.

Indeed, the true calamity of the Obama stimulus was not merely its massive girth, but the cynical, helter-skelter process by which the public purse was raided. At the end of the day, it was a startling demonstration that the power of a bad idea----the Keynesian predicate----when coupled with the massive money power of the PACs and K-Street lobbies, has rendered the nation fiscally incontinent.

This unhinged modus operandi undoubtedly accounts for the plethora of sordid deals that an allegedly “progressive” White House waived through. Thus, the homebuilders were given “refunds” of $15 billion for taxes they had paid during the bubble years; manufacturers got 100 percent first year tax write-offs for equipment that should have been written off over a decade or longer; and crony capitalist investors got $90 billion for uneconomic solar, wind and electric vehicle projects under the fig leaf of “green energy”.

Likewise, insulation suppliers got a $10 billion hand-out via tax credits to homeowners to improve the thermal efficiency of their own properties; congressman on the public works committees got $10 billion earmarked for pork barrel water and reclamation projects in the home districts; and the already corpulent budget of the Pentagon was handed another $10 billion for base construction it most definitely didn’t need---to say nothing of a new headquarters for the insanely bloated  and incompetent Homeland Security Department

Moreover, the big ticket stuff was far worse. Nearly $50 billion was allocated to highway construction---much of it for repaving highways that didn’t need it or building interchanges where the traffic didn’t warrant it; and, in any event, it should have been paid for with user gasoline taxes, not permanent debt on the general public.

Still, the real pyramid building gambit was the $30 billion or so for transit and high speed rail. Forty-five years of mucking around with the abomination know as Amtrak proves unequivocally that cross-country rail can never be viable in the US because it cannot compete with air travel among the overwhelming majority of city-pairs.

Presently, every single ticket sold on the Sunset Limited from New Orleans to Los Angeles, for example, requires a subsidy that is nearly double the cost of an airline ticket, and is indicative of why we pour $1 billion down the drain each year subsidizing the public transit myth ---a boondoggle that will become all the greater owing to the distribution of billions of high speed rail “stimulus” funds which were not subject to even a single hour of hearings.

Then there was $80 billion for education but the only rhyme or reason to it was the list of K-Street lobbies that had lined-up outside Speaker Pelosi’s door: to wit, the National Education Association, the school superintendents lobby, the textbook publishers, the school construction industry, the special education complex, the pre-school providers association, and dozens more.

 In a similar manner, the nursing home lobby, home health providers, the hospital association, the knee and hip replacement manufactures, the scooter chair hawkers and the Medicaid mills were all delighted to pocket an extra $80 billion of Federal funding, thereby relieving pressures for reimbursement reductions from the regular state Medicaid programs.

Finally, there was the Obama “money drop” whereby $250 billion was dispersed in helicopter fashion to 140 million tax filers and 65 million citizens who receive social security, veterans and other benefit checks. But there was virtually no relationship to need: tax filers with incomes up to $200,000 were eligible, or about 95 percent of the population.

And among the beneficiary population receiving a $250 stimulus check, less than 10 percent were actually means-tested--- while millions of these checks went to affluent social security retirees happy to have Uncle Sam pay for an extra round or two of golf.

Indeed, there was no public policy purpose at all to Obama’s quarter trillion dollar money drop except filling the Keynesian bath-tub with make believe income, hoping that citizens would use it to buy a new lawnmower , a goose-down comforter, dinner at the Red Lobster or a new pair of shoes.

 Yet ensnared in the Keynesian delusion that society can create wealth by mortgaging its future, the stimulus-besotted denizens of the beltway blew it entirely on the one true domestic function of the state---even under the regime of crony capitalism that now prevails. That imperative is to maintain and adequately fund a sturdy safety net to support citizens who cannot work due to age or health, and to supplement the incomes of families whose marketplace earnings fall below a minimum standard of living.

Yet notwithstanding the feeding frenzy on K-Street to fill-in the Keynesian vicar’s $800 billion blank  check in a record twenty-two days, only 3.8 percent of the total----a mere $30 billion---was allocated to means-tested cash benefits which actually fund the safety net for the needy. Yet with $17 trillion of national debt on the books already, and the certainty that will double or triple in the decades immediately ahead, indiscriminately filling the Keynesian bathtub with borrowed money is not only reckless, but also a cruel insult to any reasonable standard of equitable justice.

The fiscal madness of the Obama era cannot be excused on the grounds that the nation was faced with Great Depression 2.0. We weren’t and the widespread belief that we were so threatened is almost entirely attributable to Ben Bernanke’s faulty scholarship about the Fed’s alleged mistake of not undertaking a massive government debt buying spree to counter-act the Great Depression.

The latter, in turn, was borrowed almost entirely from Milton Friedman’s primitive quantity theory of money which was wrong in 1930 and ridiculously irrelevant to the circumstances of 2008. Nevertheless, it was the basis for Bernanke’s panicked flooding of Wall Street with indiscriminate bailouts and endless free liquidity after the Lehman event.

But what was actually happening was that the giant credit and housing bubble, which had been created by the Greenspan-Bernanke Fed in the wake of the bursting dotcom bubble, which it had also created, was being liquidated. Most of the carnage was happening within the gambling halls of Wall Street because it was the wholesale money market and the shadow banking system that was experiencing a run, not the retail banks of main street America.

The so-called financial crisis, therefore, consisted first and foremost of a violent mark-down of hugely leveraged, multi-trillion Wall Street balance sheets that were loaded with toxic securities--- that is, the residue of speculative trading books and undistributed underwritings of sub-prime CDOs, junk bonds, commercial real estate securitizations, hung LBO bridge loans, CDOs squared---- and which had been recklessly funded with massive dollops of overnight repo and other short-term wholesale money.

 This was just one more iteration of the speculator’s age old folly of investing long and illiquid and funding short and hot.

By the time of the frenzied bailout of AIG on September 16th, led by Bernanke and Hank Paulson, the most dangerous unguided missile every to rain down on the free market from the third floor of the Treasury building, it was nearly all over except for the shouting.  Bear Stearns, Lehman and Merrill Lynch were already gone because they were insolvent and should have been liquidated----including the bondholders who have foolishly invested in their junior capital for a few basis points of extra yield. 

Likewise, Morgan Stanley was bankrupt, too----propped up ultimately by $100 billion of Fed loans and guarantees that accomplished no public purpose whatsoever, except to keep a gambling house alive that the nation doesn’t need, and to rescue the value of stock held by insiders and bonds owned by money manager who had feasted for years on its reckless bets and rickety balance sheet.

 Indeed, at the end of the day the only real purpose of the September 2008 bailouts was to rescue Goldman Sachs from short-sellers who would have taken it down, had not Paulson and Bernanke bailed out Morgan Stanley first, and then outlawed the right of free citizens to sell short the stock of any financial company s until the crisis had passed.

The case for bailing out AIG was even more sketchy.  It had around $800 billion of mostly solid assets in the form of blue chip stocks, bonds, governments, GSE securities and long-term, secured aircraft leases, among others.

 So the great global empire of dozens of insurance and leasing companies that Hank Greenburg had built over the decades wasn’t really insolvent: the problem was that its holding company, which had written hundreds of billions of credit default swaps, was illiquid.

 It couldn’t met margin calls against the CDS it had written because state insurance commissioners in their wisdom had imposed capital requirements and dividend stoppers on AIG’s far flung insurance subsidiaries----precisely so that policy-holders couldn’t be fleeced by holding company executives and Boards needing to fund their gambling debts.

In short, virtually none of the AIG subsidiaries would have failed; millions of life insurance policies and retirement annuities would have been money good, and the fire insurance on factories in Peoria would have remained in force.

 The only thing that really happened was that something like twelve gunslingers based in London, who sold massive amounts of loss insurance on sub-prime mortgage bonds to about a dozen multi-trillion global banks, would have had to hire protection on their lives in the absence of the bailout. These CDS policies issued by the AIG holding company, in fact, were almost completely bogus and would have generated about $60 billion in losses among Goldman, JPMorgan, Barclays, Deutsche Bank, SocGen, BNP-Paribas, Citi bank and a handful other giants with combined balance sheet footings of $20 trillion.

So the loss would have been less than one-half of one percent of the aggregate balance sheet of the global banks impacted---that is, a London Whale or two, and nothing more

 But by dishing out around $15 billion of bailout money to each of the above named institutions, the American taxpayer kindly protected the P&L of these banks from a modest one-time hit, and kept executive bonuses in the money, too.   It also left AIG under the care of unreconstructed princes of Wall Street whose claims to entitlement know no bounds, as exemplified by Mr. Benmosche’s recent stupefying inability to distinguish between a lynching and the loss of undeserved bonuses.

But as they say on late night TV, there’s more. We were told that ATMs would go dark, big companies would miss payrolls for want of cash and the $3.8 trillion money market fund industry would go down the tubes.

 All of these legends are refuted in the section of my book called the Blackberry Panic of 2008----the title being a metaphor for the fact that the Treasury Department of the US government was in the hands of Wall Street plenipotentiaries who could not keep their eyes off the swooning price charts for the S&P 500 and Goldman Sachs flickering red on their blackberry screens.

But just consider this. Fully $1.8 trillion or 50 percent of total money market industry was in the form of so-called “government only” funds or Treasury paper. Not a single net dime left these funds during the panic and for the good reason that treasury interest payments were never in doubt.

 Likewise, the other half of the industry consisted of so-called “prime” funds which included modest amounts of commercial paper along with governments and bank obligations. About $400 billion or 20 percent of these holdings did leave these “prime” funds.

 Yet, the overwhelming share of these withdrawals---upwards of 85 percent---simply migrated within money fund companies from slightly risky “prime” funds to virtually riskless “government only” funds.  In effect, the much ballyhooed flight from the money market funds consisted of professional investors hitting the “transfer” button on their account pages.

Worse still, the only significant investor loss in this $4 trillion sector, which was supposedly ground zero of the meltdown, was on about $800 million of Lehman commercial paper held by the industry’s largest operation called the Reserve Prime Fund.  The loss amounted to 0.002 percent of the money market industry’s holdings on the eve of the crisis.

In a similar vein, the $2 trillion commercial paper market was said to be melting down, but this too is an urban legend fostered by the nation’s leading crony capitalist, Jeff Imelt of GE. Unaccountably, the latter did manage to secure $30 billion of Fed guarantees for General Electric’s AAA balance sheet, thereby obviating any need to do the right free market thing---that is, to make a dilutive issue of stock or long-term debt to pay down some cheap commercial paper that could not be rolled during the crisis.

Accordingly, GE Capital’s practice of funding long-term, sticky assets with short-term hot money should have caused shareholders to take a hit, and the company’s executives to be brought up short on the bonus front.

Instead, the bailout of GE’s commercial paper gave rise to the urban legend that companies could not fund their payrolls, when the truth is that every single industrial company that had a commercial paper facility also had back-up lines at their commercial bank, and not a single bank refused to fund, meaning no payroll disbursement was every in jeopardy.

 What actually shrank, and deservedly so, was the $1 trillion asset-backed commercial paper market---a place where banks go to refinance credit card and auto loan receivables so that they can book the lifetime profits on these loans upfront---literally the instant your card is swiped--- under the “gain-on-sale” accounting scam.

 Consequently, the subsequent sharp decline of the ABCP market has been entirely a matter of bank profit timing. It never prevented a single consumer from swiping a credit card or obtaining an auto loan.

In short, by the time of TARP and the massive liquidity injections into Wall Street by the Fed------when it doubled its 94 year-old balance sheet in seven weeks thru October 25, 2008---the meltdown in the canyons of Wall Street had pretty much burned itself out.

 Had Mr. Market been allowed to have his way with the street, a healthy purge of decades’ worth of speculative excesses would have occurred. Indeed, the main effect would be that perhaps a half-dozen “sons of Goldman” would be operating today, not the vampire squid which remains----and they would be run by chastened people who would have lost their stake during the free market’s cleansing interlude.

In a similar manner, the one-time hit to GDP and jobs which resulted from economically warranted collapse of the housing, commercial real estate and the consumer credit bubbles was actually over within nine months.

The ensuring rebound that incepted in June 2009 reflected the regenerative powers of the free market, and not the Fed’s mad-cap money printing or the Obama fiscal stimulus.  The Fed did lower interest rates to zero, and thereby it revived the speculative juices on Wall Street. But the plain fact is that household and business credit continued to contract on Main Street long after the June 2009 bottom, and for good reason:  both sectors were massively over-leveraged after three decades of continuous, pell mell credit expansion. 

The household sector, for example, had $13 trillion of debt which represented 205 percent of wage and salary income---compared to the historic ratio of under 90 percent which had prevailed during healthier times prior to 1980. So the Fed’s massive balance sheet expansion did nothing to cause higher borrowing, spending, output or employment on Main Street, even as it put the hedge funds back into the carry-trade business---now with essentially zero cost of funds.

By the time the rebound began in June 2009 not even $75 billion of the stimulus bill—that is, one-half of one percent of GDP---- had hit the spending stream, meaning, again, that the recovery already  underway was self-generating.

 As it happened, the initial wave of business inventory liquidation and labor-shedding triggered by the Wall Street meltdown had burned itself out quickly during the first nine months after the Lehman crisis. Thus, business inventories totaled $1.54 trillion in August 2008, and dropped by a total of $215 billion or 14 percent during the course of the recession. Yet fully $185 billion of that liquidation occurred before June 2009, and inventories started to actually rebuild a few months later.

The story was similar for non-farm payrolls. Nearly 7.6 million jobs were shed during the Great Recession but fully 6.6 million or 90 percent of the adjustment was completed by June 2009. Indeed, the idea that this short but sharp recession had anything to do with the Great Depression is essentially ludicrous, and fails completely to note the vast structural differences between the two eras.

 During the early 1930, the US was the great creditor and exporter to the world, with 70 percent of GDP accounted for by primary production industries----agriculture, mining and manufacturing--- which have long pipelines of crude, intermediate and finished inventory.

 By the time of the 2008 Wall Street meltdown, however, the primary production sector had become a mere shadow of its former self, accounting for only 17 percent of GDP. Accordingly, when recession hit the American economy this time, the downward spiral of inventory liquidation was muted----with the total inventory liquidation amounting to 2 percent of GDP in 2008-09 compared to 20 percent in the early 1930s.

Indeed, the inherent recession dynamics of the contemporary US service economy--- with its massive built-in stabilizers in the form of transfer payment and huge government payrolls--- militated against the entire scare story of a Great Depression 2.0.

 During the nine months thru June 2009, for example, government transfer payments for foods stamps, unemployment insurance, Medicaid, cash assistance and social security disability soared at a $300 billion annual rate, thereby more than off-setting the $275 billion drop in total wage and salary income.

 Likewise, government wages and salaries actually rose during the period, and the vast US service sector payrolls were tapered back modestly, rather than going dark in the form of traditional factory shutdowns. Aerobics class instructors, for example, experienced modestly reduced paid hours, but unlike factories and mines, fitness centers did not go dark in order to burn off excess inventories; they stuck to burning off calories at a modestly reduced rate.

In fact, by 2008 China, Australia and Brazil had become the world’s new mining and manufacturing economy---that is, the US economy of the 1930s. When upwards of 50 million Chinese migrant workers were sent home from idle Chinese export factors, the villages of China’s vast interior became the “Hoovervilles “of the present era.

 In short, Bernanke’s depression call was reckless and uninformed. The real challenge facing the American economy was to get off the massive credit binge which had bloated and inflated output, jobs and incomes for more than two decades.

Instead, Washington poured gasoline on the fire, thereby re-igniting an even great bubble that will ultimately end in state-wreck—that is, in the thundering collapse of the financial markets. Indeed, the nation’s rogue central bank will eventually be engulfed in the Wall Street hissy fit it fears---undone by waves of relentless selling when the monetary politburo finally loses control of panicked day traders and raging robo trading machines.

Likewise, the Federal budget has become a doomsday machine because the processes of fiscal governance are paralyzed and broken. There will be recurrent debt ceiling and shutdown crises like the carnage scheduled for next week, as far as the eye can see.

Indeed, notwithstanding the assurances of debt deniers like professor Krugman, the honest structural deficit is $1-2 trillion annually for the next decade and then it will get far worse. In fact, when you set aside the Rosy Scenario used by CBO and its preposterous Keynesian assumption that we will reach full employment in 2017 and never fall short of potential GDP ever again for all eternity, the fiscal equation is irremediable.

Under these conditions what remains of our free enterprise economy will be buckle under the weight of taxes and crisis.  Sundown in America is well-nigh unavoidable.


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Sat, 10/05/2013 - 18:40 | 4026566 lolmao500
lolmao500's picture

Maths are too complicated for most people. Forget it. Better to run on make-believe scenarios of a happy ending. Saying otherwise is just being a pessimist, I am told.

Sat, 10/05/2013 - 18:48 | 4026583 ZippyBananaPants
ZippyBananaPants's picture

are we expected to actually read all this?


Edit:  I like the simple posts, like "Obama is an asshat and wants to change Redskins name" 

Sat, 10/05/2013 - 19:22 | 4026643 Al Huxley
Al Huxley's picture

And it's that attitude and mentality - attention span of a hummingbird, don't confuse me with complex arguments, say it in 10 words, or better yet with a picture, and maybe serve it with a quadruple bacon-and-egg cheeseburger, fries, gravy and an extra large shake, washed down with some zantac and maybe a handful of prozac and viagra, that's keepin' USA on top of the fuckin' heap.

Sat, 10/05/2013 - 19:38 | 4026673 VD
VD's picture

an incredible post that is vital in its insight and comprehension; Stockman is the antithesis of Washington precisely bc he understands the untenable mechanics of ill-formed fiscal and monetary policies as captured by Wall St. this will end very badly and the longer this goes on the greater the pain will be.


and the humilty and honesty exhibited by Stockman for condemning his very own supply-side mishaps and misunderstanding is as rare as it is refreshing. 

Sat, 10/05/2013 - 19:56 | 4026709 Pure Evil
Pure Evil's picture

"Sundown in America", or

How to kill off the Baby Boom generation in two easy steps,

1.) Obamacare,

2.) Destruction of life savings.

Sat, 10/05/2013 - 21:20 | 4026837 Anusocracy
Anusocracy's picture

The cause of our economic woes and loss of freedom isn't the Fed, or the income tax, or even the government itself, but rather the wiring in the heads of most people.

Most people get by with an operating system that developed millions of years ago, that had some minor updates about 10,000 years ago, and doesn't function worth shit in a modern technological world that is vastly different from the world of it's origin.

People are stupid and destined for hard times when surrendering control of their lives and fortunes to those who are their inferiors.

At least they have an excuse: their brain made them do it.

Sat, 10/05/2013 - 21:58 | 4026882 James_Cole
James_Cole's picture



More old losers like David Stockman (he, among the class of people both most responsible and having benefited the most from America's spiral down the drain in the last 30 yrs) whining about how America is fucked and yeah, it's a self-fulfilling prophecy. 

How about fuck the David Stockman's of the world and ignore their dire predictions and instead be pro-active and start working toward something better. Actually working, not sitting around whining about everything. 

To the dumbasses down-voting me, how do you explain the hypocrisy of a man who doubled the national debt yet now whines endlessly about it?



Sat, 10/05/2013 - 22:05 | 4026914 Pegasus Muse
Pegasus Muse's picture

"Hi, my name is Barrack Hussein O'Blamer and I am an unrepentant Ass Wipe and gifted teabagger of Wall St Bankster sacs."


Friday, October 4, 2013
The Saga Of How JP Morgan/Jamie Dimon Ripped Off America With Barack Obama's Full Endorsement
JP Morgan is one of the best managed banks there is.  Jamie Dimon, the head of it, is one of the smartest bankers we got.   - Barack Obama on "The View," May 14, 2012
Read that quote a few times to let the full force of the absurdity of it sink in.  It actually took me a few minutes get over the glaring and pathetic grammatical error.  I'm guessing there wasn't a teleprompter set up in front of the El Hefe when he was snuggled up on that couch with the group of cackling moronic ladies of "The View."  There's a lot of questions that still persist about exactly who Barack is and where that rock is from under which he crawled into politics, but for now don't let your kids see that statement from the President unless you intend to give them a grammar lesson. ... continued:
Sat, 10/05/2013 - 23:33 | 4027031 kito
kito's picture

It's not just Obama. What about all of the imaginary words created by georgie boy? Most of America assumed they were actually in the dictionary. Sign of the times man. All part of the dumbing down of America.

Sun, 10/06/2013 - 00:24 | 4027097 WonderDawg
WonderDawg's picture

True in 1972, even moreso today...


Sun, 10/06/2013 - 03:16 | 4027225 Big Slick
Big Slick's picture

Stockman is spot on!

But before anyone loses their fudge, I quote Kyle Bass...

"It’s not the end of the world, it just means a lot of people are going to lose a lot of money."

Sun, 10/06/2013 - 09:02 | 4027402 clymer
clymer's picture

“In a closed society where everybody’s guilty, the only crime is getting caught. In a world of thieves, the only final sin is stupidity.”

Sun, 10/06/2013 - 09:34 | 4027433 SWRichmond
SWRichmond's picture

Mr. Stockman's piece is well worth the read.

Sun, 10/06/2013 - 13:34 | 4027826 fockewulf190
fockewulf190's picture

For those who will be starved to death in the upcoming Great Reset, it will surely be the EOTW for them.

Sun, 10/06/2013 - 10:43 | 4027505 Zadok
Zadok's picture

Good point on Kyle Bass, true yes that it is not the end of the world and most will (already have lost) lose lots of money but it is the actions of people in desperate circumstances that may well cause it to be lights out for many souls.
Edit: For them it will be the end of the world.

Sun, 10/06/2013 - 12:23 | 4027670 DaddyO
DaddyO's picture

Sorry, it's not just about "money" but what money represents!

When said people lose a lot of money or what money they had to some bankster or system that empowers them, things are gonna get dicey to say the least.

Stockman may have been part of the system at one point, but is it possible for even an insider to wake up at some point and realize the error of one's ways?

Heck, I was once the biggest neocon on the planet, until I realized all my production just built things that killed people.

There's hope for everyone and the take no prisoners attitude that leads to comments decrying Stockman as the antithesis of what he is currently writing is BS...


Sun, 10/06/2013 - 12:44 | 4027694 Big Slick
Big Slick's picture

Great point by Zaddock.  I feel it is impossible for people to insulate themselves from those who will lose their wits and behave irrationally (i.e., dangerously) around the rest of us.  Case in point this poor SUV driver in NY amongst the rogue bikers... caught in the wrong time at the wrong place.  

It amazes me that people are not focusing on safely arming themselves (literally) during these times.  Black swans will also be leading-tail crazies who meltdown next to you in line at the Apple store.  You owe it your family to come home at night.  And that's on you, not the police.

Sun, 10/06/2013 - 14:19 | 4027891 James_Cole
James_Cole's picture

Stockman may have been part of the system at one point, but is it possible for even an insider to wake up at some point and realize the error of one's ways?

There's hope for everyone and the take no prisoners attitude that leads to comments decrying Stockman as the antithesis of what he is currently writing is BS...

If he took responsibility for his part in this mess and offered tangible solutions to work toward, rather than complaints, it would be different. Otherwise he's just sour grapes with nothing to offer. 

Like I said before, supposed to be the can-do nation not the 'omg we're all screwed give up now!' nation. Especially this attitude coming from someone like Stockman who's failed continuously in practically every endeavor he's touched. 

How about this instead: "People seeing things that need to be done, and doing them"

Sun, 10/06/2013 - 14:48 | 4028001 DaddyO
DaddyO's picture

So if your traveling down a road and you encounter someone who is saying that the bridge ahead has been washed away and you proceed anyway because you're a can do guy, nothing bad will happen to you?

Did you even read the article?

Do you know how to read a road map?

sheesh...just saying

BTW, there is plenty to do, but the place isn't Vichy DC, Berry's interview just gave more credence to my argument to shift our focus from DC to your Statehouse and city hall.


Sun, 10/06/2013 - 15:59 | 4028171 James_Cole
James_Cole's picture

So if your traveling down a road and you encounter someone who is saying that the bridge ahead has been washed away and you proceed anyway because you're a can do guy, nothing bad will happen to you?

A more apt metaphor is a guy goes and (accidentally?) blows up the only bridge to your town, then comes to everyone explaining that the bridge is blown up and complains that the town is screwed now and proceeds to list endless facts why.

Meanwhile the 'can-do' folks in town begin planning how to fix the bridge. 

Stuff like this: "What is really happening is that Washington’s machinery of national governance is literally melting-down.  It is the victim of 80 years of Keynesian error---much of it nurtured in the environs of Harvard Yard---- about the nature of the business cycle and the capacity of the state---especially its central banking branch--- to ameliorate the alleged imperfections of free market capitalism."

OMG it's all melting down! Yet, that's a good thing?? Or wait? It's bad? Is it all Harvard's fault? Should the US just ban Harvard and be done with it?

That's the thing with rants - they don't get anywhere. 

Stockman is a very typical bureaucrat, his main career (basically only career) was as a .gov worker. He believed he had all the solutions and tried to enact them at the federal level, and then this happened:

Sun, 10/06/2013 - 17:48 | 4028440 All Risk No Reward
All Risk No Reward's picture

Stockman comes off to me as a controlled opposition shill selling a false narrative that protects the Biggest Finance Capital criminals who obviously engineered this crisis beginning all the way back in the set up to 1913.

Debt money is FRAUD. 

If the international banking cartel (IBC) lends $2 trillion to society @ 5%, in one year, society owes the IBC $2.1 trillion because a $0.1 trillion double entry bookkeeping interest liability adjustment was made to society's balance sheet and a $0.1 trillion double entry bookkeeping interest asset adjustment was made to the IBC's balance sheet.


IOW, society can't pay back its debt UNLESS the IBC ALLOWS it to pay it back - and the only way the IBC can allow society to pay back its debt IS TO IMPOVERISH ITSELF!!!

Do you see the mega banks and their owners and controllers impoverishing themselves?

Stockman will never talk about and he puts forth the false narrative that the Fed is blind and errant in its ways when it KNOWS FULL WELL WHAT IT IS DOING AND WHAT IT MEANS.

Those criminals put the artifical debt money constraint on us in order to bankrupt us...  and yield the fruits of financial hell that Stockman chronicles...  WHILE DECEIVING THE READER AS THE ROOT CAUSE!

>>What is really happening is that Washington’s machinery of national governance is literally melting-down.  It is the victim of 80 years of Keynesian error---much of it nurtured in the environs of Harvard Yard---- about the nature of the business cycle and the capacity of the state---especially its central banking branch--- to ameliorate the alleged imperfections of free market capitalism.<<

Deception is not spelled "error."  They know what they are doing.  Stockman is a shill protecting these criminals.  Classic controlled opposition.

>>The great hedge fund industry founder and legendary trader who broke the Bank of England in 1992, Stanley Druckenmiller, summed-up the case succinctly after Bernanke’s abject capitulation last week. “I love this stuff”, he said, “…. (Its) fantastic for every rich person. It’s the biggest redistribution of wealth from the poor and middles classes to the rich ever”.<<

Hey, I thought it was all error?  Stockman also doesn't explain the power structure...  how the Biggest Finance Capital (BFC) owners of the mega banks control the mega banks that control the Federal Reserve.  Stockman wants the reader to think most of these decisions aren't the result of insider criminal collusion, rather, they are reached independently and with the intent of the greater good.

What complete crap.

>>After all, the other side of the virtually free money being manufactured by the Fed on behalf of speculators is massive thievery from savers.<<

No, the other side of the free money given to these criminals by institutions controlled by these criminals IS THE DEBT USED TO GENERATE THOSE DOLLARS AND FOISTED OFF ON SOCIETY.

BFC waterboy Stockman isn't allowed to tell you this in public.

Back to the original $2 trillion example...

A $2 trillion "bailout" is when BFC orchestrates the creation of $2 trillion which it directs into it corporate fronts and, after 1 years, society is given a bill for the full $2.1 trillion.  Remember, society didn't receive the $2 trillion, but they have to pay back $2.1 trillion THEY NEVER RECEIVED.  AND PEOPLE WANDER WHY MAINSTREET IS GETTING REAMED?  IT IS ON PURPOSE, PEOPLE!  STOCKMAN IS A DISTRACTION TO THE REAL ART OF WAR OPERATION DESTROYING THIS COUNTRY AND THE WORLD!

>>For all intents and purposes, in fact, the Fed is conducting a massive fiscal transfer from the have nots to the haves without so much as a House vote or even a Senate filibuster. The scale of the transfer---upwards of $300 billion per year----causes most other Capitol Hill pursuits to pale into insignificance, and, in any event, would be shouted down in a hail of thunderous outrage were it ever to actually be put to the people’s representatives for a vote.<<

All blindly and by accident, right, Waterboy Stockman?

>>To be sure, all of this madness is justified by our out-of-control monetary politburo in terms of a specious claim that Humphrey-Hawkins makes them do it---that is, print money until unemployment virtually disappears or at least hits some target rate which is arbitrary, ever-changing and impossible to consistently measure over time.

In fact, however, this ballyhooed statute is a wholly elastic and content-free expression of Congressional sentiment.  In their wisdom, our legislators essentially said that less inflation and more jobs would be a swell thing. So the act contains no quantitative targets for unemployment, inflation or anything else and was no less open-ended when Paul Volcker chose to crush the speculators of his day than it was last week when Bernanke elected (once again) to pander obsequiously to them.<<

That's not only not sure, it isn't true.  Stockman is lying about the statute.  This is critical because it proves criminal intent.  Thisis the relevent law:

Federal Reserve Act
Section 2A. Monetary policy objectives
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
[12 USC 225a. As added by act of November 16, 1977 (91 Stat. 1387) and amended by acts of October 27, 1978 (92 Stat. 1897); Aug. 23, 1988 (102 Stat. 1375); and Dec. 27, 2000 (114 Stat. 3028).]

I underlined the actual statute that Waterboy Stockman misrepresents.  Employment and stable prices (another lie as they inflate prices) are a desired effect of FOLLOWING THE LAW and keeping monetary and credit aggregates commensurate with GDP increases.

Of course, the crime syndicate that employed their Stockman Waterboy blew that law to hell and back when they did this....

Weapons of Mass Debt

>>In short, Bernanke’s depression call was reckless and uninformed. The real challenge facing the American economy was to get off the massive credit binge which had bloated and inflated output, jobs and incomes for more than two decades.<<

Bernanke is neither reckless nor uninformed, you false narrative pushing Decipticon.  He's running an operations - and part of that operation is putting out false narratives like the one Stockman is peddling.  Getting off the massive credit binge WILL CAUSE A DEPRESSION FOR MOST AMERICANS.  Not the criminals who hired Stockman and now use him to peddle false narratives, but I doubt many on ZH are in the BFC Club.

>>Under these conditions what remains of our free enterprise economy will be buckle under the weight of taxes and crisis.  Sundown in America is well-nigh unavoidable.<<

Except for the Biggest Finance Capital corporate fronts that have engineered this Art of War operation to lay financial seige and/or military seige to the world and take it over by proclaiming themselves TBTF&Jail and wiping out their competition as you've described.

Nice job trying to conceal the real culprits.

Oh, and offshoring to dictator controlled, slave labor China was a "mistake," too, right?

Stockman, you are a schmuck.  Take your controlled opposition 30 sheckels of silver and begone!

Sun, 10/06/2013 - 13:51 | 4027871 IndyPat
IndyPat's picture

3 weeks of front page coverage for "new-kuew-lar" barely a blip about "courpseman".
Yeah sides of the same coin. I get that. However, there is no denying a Vichy Official Propaganda Organ preference for blue.

Mon, 10/07/2013 - 01:08 | 4029507 All Risk No Reward
All Risk No Reward's picture

There is a reason for this.

The Blue team's followers are easy dupes.  They want to empower the criminals because they are suckers that believe the bull chit.  They are the equivalent of National Socialist German Worker Party members that actually believed "the party" was going to set up socialism for the good of the masses!  Chumps.

The Red team has problems.  For various reasons, their followers aren't dupes, hence the name RINO is applied to almost every Republican that cons them and gets into office.

Of course, the Red team folks aren't too bright either.  They still believe the bull chit going in, scratch their heads when their own boys and girls spend like a drunken sailor and work overtime to prop open those borders, just to name two items of frustration.

The Democrat Party is the main bankster organization.  The Republican establishment is the false opposition.  Both are run by Biggest Finance Capital (politicians are created through financing and media promotion), but the Democrats actually enjoy their servitude...  at least until they realize they've been chained to a financial table and the financial r*ping is about to begin.

But that won't be until well after the financial r*ping has begun.  As I said, they aren't too bright when it comes to politics.

Sun, 10/06/2013 - 15:32 | 4028110 roadhazard
roadhazard's picture

I miss that uncouth moron.

Sat, 10/05/2013 - 23:36 | 4027034 TruthInSunshine
TruthInSunshine's picture

The alternate/parallel economic universe that The Bernank & his fellow fiat printers have created will save us all---NOT:

Oh look, here's a 1963 TdF Ferrari GTO that just sold for a record fifty-two million dollars (this same car MIGHT have fetched $100,000 a decade ago, so easy-peasy central bank fiat doled out to their Criminal Cronies & sloshing around has only driven its price up by a factor of 52,000% in 10 years).

Sat, 10/05/2013 - 23:41 | 4027043 kito
kito's picture

Man I wish somebody would use just a fraction of that cash to buy my house which is still valued less than when I bought it in 2004. I need to get out of Dodge.

Sat, 10/05/2013 - 23:46 | 4027052 NoDebt
NoDebt's picture

I think Stockman's starting to get it.  We're fucked.

There will be no "great awakening".  DC will not come to it's senses and realize the error of their ways.  This empire, like all before it, will slowly crumble under it's own weight.  Just THIS SAME CRAP until we all wake up one day and wonder "how did we get so poor?"   

Sun, 10/06/2013 - 00:17 | 4027089 Bay of Pigs
Bay of Pigs's picture

Stockman:  “The upside for gold is unfathomable. If the monetary system really unwinds because the central banks take it to the edge, and over, there’s no telling how far gold could rise.”

Sun, 10/06/2013 - 08:07 | 4027349 Notarocketscientist
Notarocketscientist's picture

Fuck off.  

Sun, 10/06/2013 - 19:45 | 4028752 ClassicalLib17
ClassicalLib17's picture

I think James Cole is MDB's drunken, angry, alter ego. 

Sun, 10/06/2013 - 22:52 | 4029285 TheReplacement
TheReplacement's picture

I'm with Cole on this one.  We can't just blame "them" unless we take responsibility and do something.  IMO, down voting that sentiment is a sign of denial.

Mon, 10/07/2013 - 13:21 | 4030923 fallout11
fallout11's picture

Such as? Simple fact is the ship already has a 100 foot gash in the side and 1000 tons of icy seawater in the hold. Rearranging the deck chairs or choosing between cognac or bourbon in the first class saloon isn't going to change that now. 

Sat, 10/05/2013 - 21:41 | 4026879 RafterManFMJ
RafterManFMJ's picture

Yep Pure Evil you nailed it.

Those with wealth and knowledge are a threat; therefore their wealth will be STOLEN and the Educational Establishment will turn out a more moronic product every year.

Sun, 10/06/2013 - 12:41 | 4027691 DaddyO
DaddyO's picture

The author even stated it more succinctly...

So we now have the spectacle of the state’s central banking branch blindly adhering to a policy that has but one principal effect: namely, the massive and continuous transfer of income and wealth from the middle and lower ranks of American society to the 1 percent.


Sun, 10/06/2013 - 08:06 | 4027347 Notarocketscientist
Notarocketscientist's picture

Nah - the baby boom generation killed themselves by voting in cunts who offshored their jobs - by pushing for massive pensions - by apathetically standing by allowing politicians to fuck them.

A better thesis:  How the baby boomers fucked future generations by living beyond their means - by standing by while 17 trillion in debt was run up UNDER THEIR WATCH.

Fuck you baby boomers - I hope you fucking assholes work till you fall dead in your graves.  You have totally fucked the country for good.



Sun, 10/06/2013 - 10:18 | 4027478 Henry Hub
Henry Hub's picture

***I hope you fucking assholes work till you fall dead in your graves.***


And what's going to be your excuse when you hit retirement age? How are you going to explain why you didn't do something to change things.

"WAAAA, I'm not responsible, the baby boomers fucked me!!"

Sun, 10/06/2013 - 10:49 | 4027517 Zadok
Zadok's picture

Good example of eating our own. Divide and conquer, let us not criticize those who did the deed, just excoriate fellow victims. Are some (many) utter morons, yes, perhaps they can help fertilize the tree of liberty?
Disclosure: NOT a boomer.

Sun, 10/06/2013 - 10:29 | 4027491 jal
jal's picture



Your Pension Is Under Attack From All Sides. Here's 10.

Sat, 10/05/2013 - 20:46 | 4026781 tao400
tao400's picture

he was in the room with these people under reagan. he knows exactly what they are doing. The amazing thing is that it has outstripped even his wildest imagination. The biggest takeaway is that it is a runaway locamotive. 

Sat, 10/05/2013 - 22:29 | 4026952 rbg81
rbg81's picture

Stockman's message is clear:  we must destroy the State in order to save the State.  We must starve the Beast to keep it from devouring us.

Sun, 10/06/2013 - 16:32 | 4028250 Kirk2NCC1701
Kirk2NCC1701's picture

Agreed.  I arrive at the same conclusion via a different path...


Every expert in psychological marketing will tell you that the vast majority of humans make purchasing and other vital decisions that are dominated by their emotions and habits, rather than intellect.  It is only after they’ve made the emotional decision (within first 1-2 minutes), that their intellect fully engages – but only to justify their decision already made.  A minority of humans – the really successful ones – do it the other way around:  Only after they have made an intellectual/clinical decision, do they attach their emotions to the decision made.

It is similar for political views.  Even here on ZH – and I’ll l prove it:

1.      Most ZHers agree that the US has reached the reached the Point of No Return on the national debt, even though technically we haven’t.  They think that D-Day/Reset is unavoidable.

2.      Many/most ZHers just want D-Day/Reset (“Judgment Day”) to arrive

3.      Most ZHers also realize that the Top 1% is only using the remaining time to swap their “out-of-thin-air” paper/confetti assets into real assets, thus leading to the largest transfer of wealth in human history.

You with me so far?  Good.

4.      Most ZHers are also Fiscal Conservatives, i.e., they think and believe deep inside that one should “honor” one’s debt obligation – given decades of conditioning.

Here is where the internal conflict (Cognitive Dissonance) gets resolved emotionally, rather than rationally for most ZHers:

Notwithstanding their intellectual views #1-3 above, their emotional view (#4) will cause them to want to “fix” the Federal Budget and National Debt – by trying to make Budgets cuts, here or there.

And here is my point:  You can NOT have it both ways.  You either think it’s fixable or you don’t.  If you’re in the latter camp, then you have no rational/logical choice but to bring in the “bulldozer” and “wrecking balls” to demolish the condemned building that poses a health, safety and moral hazard, and to make plans for a new building.

If you’re “with me” so far, then you should not be shocked that there are two and only two path to D-Day that is sooner, rather than later:

A.      Default (in the coming weeks or months). --> Let’s be “real”:  This is NOT gonna happen, wish it as you might.

B.      Default by continued debauchery of the currency à MOAR QE.  No Taper.  This is a virtual certainty.

If you think that (B) above is the most likely outcome, then – and here comes the “gotcha” – you have NO choice but to want it to happen ASAP.  Unless you want #3 above to continue.  Well, DO you?  Do you want the Crime of the Millenium to continue?  If not, then you have no logical/rational choice but to agree with raising the Debt Ceiling to higher levels or removing it entirely.  It’s the only way to bring about D-Day ASAP and avoid extending the timeline for #3 (the thefts by the 1%).  By printing to Infinity, the BRIC+ will arrive at the "Fuck You, Bernanke!" point sooner, rather than later.

Again, just to be clear:  The WORST possible outcome is for #3 to continue for a long time – by dragging out things with half-measures and can-kicking.  It’s either Full Stop, or Full Print.  There can be NO middle ground.

Choose your poison.  Choose your Rx.


Sun, 10/06/2013 - 16:44 | 4028265 Kirk2NCC1701
Kirk2NCC1701's picture

The only things we have to really watch for, is that TPTB won't pivot & turn, and use this crisis as an Opportunity.

I.e. an opportunity to get their 1-World currency-- IMF's SDR -- which they'll...

A. Weigh heavily toward the USD, and

B. Have the SDR be fiat-based (as a basket of G20 fiat currencies), rather than Asset/Gold-based.

We've seen how they pulled a "fast one" in 1913 and with the Income Tax starting at 1%.  So beware of their games.  If they can't win on Principle, they'll play the old trial-lawyer game: Win on Procedure.

Sat, 10/05/2013 - 21:04 | 4026819 Parrotile
Parrotile's picture

 >  washed down with some zantac and maybe a handful of prozac and viagra, that's keepin' USA on top of the fuckin' heap. <

Spoken in jest, but in reality true - Fluoxetine (Prozac) does cause GI upset in many users (especially those on 60mg daily (!!!). Ranitidine (Zantac) has been shown to be beneficial in such cases (but no more beneficial that taking the fluoxetine as a divided dose, with food).


Sat, 10/05/2013 - 22:38 | 4026964 Crash Overide
Crash Overide's picture

I wish 20% of the population would actually read this article and understand what it says because if they did tomorrow we would see a different world. Just saying...

Sat, 10/05/2013 - 19:39 | 4026683 GMadScientist
GMadScientist's picture

Those who can read, are expected to, which leaves you excused; now please step into this chamber and inhale deeply.

Sat, 10/05/2013 - 19:45 | 4026693 it aint easy
it aint easy's picture

I find myself reluctantly agreeing with you. I mean, how many lengthy diatribes do we really need to be bombarded with? If we haven't gotten it yet we never will.

Sat, 10/05/2013 - 20:39 | 4026762 Mike in GA
Mike in GA's picture

Plus there are others who may not be as aware as you yet and this lengthy explanation of the various moving parts may help them to get where we all were a few years ago. 

One of the interesting things about living is we all do it at a different rate. 

Sat, 10/05/2013 - 21:53 | 4026896 Rogue Trooper
Rogue Trooper's picture

True, an excellent summary.  If a few more start to understand then that's a good thing.

Unfortunately, it also indicates why we are terminally fucked with these clowns in charge.

Prepare accordingly...

Sat, 10/05/2013 - 21:28 | 4026844 astroloungers
astroloungers's picture

If it was just another pundit or blogger selling a news letter I would agree.....but it is not. Stockmans view has hands on insight and carries some weight. I will admit I had to go back and reread parts. He admits to changing the way he looks at policy. Hate to use this quote but is true "When the facts change I change my mind sir,what do you do"

Sat, 10/05/2013 - 21:39 | 4026869 BigJim
BigJim's picture

Knowing Keynes, I expect the 'facts' hadn't changed at all; just the way the political winds were blowing.

Sun, 10/06/2013 - 14:01 | 4027900 IndyPat
IndyPat's picture

If we could get Jay-Z to say the same things and Milely to twerk them while masterbaiting a midget, it would be a different world tomorrow.
I think the issue runs deeper.

Sat, 10/05/2013 - 19:50 | 4026702 floyd084
floyd084's picture

Well you're not expected to be intelligent or smart or well read or worth a dime. So no you're not expected to read this, but I would be surpirsed if you even read this far into my comment.

Sat, 10/05/2013 - 20:45 | 4026786 max2205
max2205's picture

Clift notes please

Sat, 10/05/2013 - 23:47 | 4027050 wee-weed up
wee-weed up's picture

Krugman, is that you?

Sat, 10/05/2013 - 23:54 | 4027056 kito
kito's picture

Cliffs notes. Shit, you can't even get the correct name of the dumbed down version of worthwhile reading. How could you possibly keep your attention deficit disorder in check for this article?

Sun, 10/06/2013 - 00:00 | 4027068 akak
akak's picture

its like yeah,,,,,clifts man,,,,,,CLIGTS!!!,,,, you no,,, like fuckin shit man  !

Sat, 10/05/2013 - 21:42 | 4026876 Mentaliusanything
Mentaliusanything's picture

Well I read it twice. That article was the best thing I've read in 55 years. Someone needs to give copies to Ben Bernanke, all Wallstreet Big wigs, all who have there fingers deep within the pie. Then send it and its back up information to The Supreme Court of America...;;.................. For this article could never be written, in this day of defamation laws and electronic secured information without hard evidence 

Sun, 10/06/2013 - 01:21 | 4027140 Crash Overide
Crash Overide's picture

Use those email address's you all have in your Bloomberg terminals and pass along some friendly reading...

Sun, 10/06/2013 - 02:10 | 4027185 SilverRhino
SilverRhino's picture

Correction :  ASS NAPKIN .... get it right.

Sun, 10/06/2013 - 10:37 | 4027500 Zadok
Zadok's picture

Time for the Jubilee, actually way overdue!

Sat, 10/05/2013 - 18:45 | 4026579 fonzannoon
fonzannoon's picture

The Schiff interview up on Drudge right now is the best one I have seen from him, maybe ever. I hope ZH throws it up here, and ZH should listen to me because I would never question their credibility.

Sat, 10/05/2013 - 19:11 | 4026624 Australian Economist
Australian Economist's picture


Sat, 10/05/2013 - 19:14 | 4026627 fonzannoon
fonzannoon's picture

I'm mobile right now and this phone sucks. can't link it. right hand side of page Schiff interview "I think we are in a depression".

sorry that is the best i can do

Sat, 10/05/2013 - 19:30 | 4026659 Australian Economist
Australian Economist's picture

Thanks least he doesnt have an interviewer that doesn't believe a word he says and laughs in his face.

Sun, 10/06/2013 - 00:02 | 4027069 RafterManFMJ
RafterManFMJ's picture

Marshall Law? That dude was always stern but fair.

Sun, 10/06/2013 - 01:46 | 4027167 Crash Overide
Crash Overide's picture

I found it a rather insightful exchange of information.

Sat, 10/05/2013 - 18:47 | 4026580 Constitutional ...
Constitutional Republic's picture

David Stockman has been doing a great job of ringing the alarm bell, and exposing the lies beneath the shiney hope changey thing. When that mask slips, it reveals the ugly plot beneath:-

"After we win this election, it’s our turn.  Payback time.  Everyone not with us is against us and they better be ready because we don’t forget. The ones who helped us will be rewarded, the ones who opposed us will get what they deserve. There is going to be hell to pay.  Congress won’t be a problem for us this time. No election to worry about after this is over and we have two judges ready to go.”

So said Obama's mentor Valerie Jarrett, the daughter of a die-hard Communist family and network, days before the 2012 election.

Remember: class warfare, social division, state brutality, abuse of law and terrorizing any opponent is the stock and trade of any Politburo - including the one being made now in DC, aided by the biggest banks. Corporatism: the iron fist of big government allied with the biggest money powers.

Mussolini called it fascism. Hitler had a different version. Lenin simply said: 'Crush the bourgeoisie between the millstones of taxation and inflation.'

All going to plan... 

Sat, 10/05/2013 - 18:56 | 4026599 prains
prains's picture

You and Stockman both make valid points about where and why it falls apart but the implicit agreement in the use of your words is there is an alternative. And both your implied alternatives are Republican. If both of you're going to trash the Dems which is perfectly valid but avoid the R Team in your complaints then by omission you both imply they are a worthy alternative.

Sat, 10/05/2013 - 20:08 | 4026722 Constitutional ...
Constitutional Republic's picture

There is no support in my comment for the Republicans either. 

Sat, 10/05/2013 - 20:41 | 4026769 prains
prains's picture

it's by omission, when you live in a two party state and deride only the acting gov't at the moment then by omission, support for the other party is inferred. that may not be your intention but it is the underlying message. All comments should  be directed to the entire apparatus not just the team of the week, it narrows the focus too small and allows for divide and conquer tactics to succeed.

Sat, 10/05/2013 - 22:21 | 4026933 NidStyles
NidStyles's picture

So you admit that the Democrats are Marxist then?

Sat, 10/05/2013 - 22:50 | 4026989 prains
prains's picture

there's not an american alive today that could define what a "marxist" is anyway so what are we talking about? it's a word without meaning, context or understanding. You guys throw it around like kids calling people names without any context or understanding of what it is? It's a meaningless word in 2013, absolutely pointless to use it.....may as well name a new chevy model a "marxist" it's that fucking useless.....


you 'Merican's are worth the price of admission to watch the Bukkakee <Ben> Theatre you call a cuntry,,,,,,,,LOFL

Sun, 10/06/2013 - 02:14 | 4027188 mc225
mc225's picture

a car model called 'marxist'




'solid gold, jerry'

Sun, 10/06/2013 - 07:56 | 4027341 Keyser
Keyser's picture

And the Eurozone is better off with your form of socialism? Please, don't insult our intelligence. 


Sun, 10/06/2013 - 10:15 | 4027472 GMadScientist
GMadScientist's picture

Perhaps you'd get a better view from Venezuela...they call it Bolivar now and even have vuvuzelas to herald their coming.

Americans have always known class struggle and who was bourgie vs prole, they just come up with marketing-savvy names for it like "the other side of the tracks" or "service industry workers" (of the world, unite!...with purple shirts, how "classy"!).

Sun, 10/06/2013 - 02:25 | 4027197 All Risk No Reward
All Risk No Reward's picture

1. Top establishment democrats are fascists sucking off the Biggest Finance Capital klepto parsitic, genocidal t*t.

2. Most boot on the ground democrats are well meaning people who simply can't resist their school programming and don't understand basic math.  Lenin called them "useful idiots."  Ironically, everyone I know who bragged about cheating on their taxes was a democrat.

Marxism is a fable, just like Capitalism, to fool those inured with the oligarch of the day false narrative "matrix."

All serfs are under a dictatorship, it just depends on what kind.

America is a financial dictatorship.  If you don't think so, try to redefine money as something other than debt.


How to be a Crook

Method? 6: "They will feel indebted to you. They will rob themselves every month (aka, interest)......While feeling a moral obligation to do so. Not only that, they will view themselves as the crook if they stop going along."

Sun, 10/06/2013 - 01:22 | 4027145 Lednbrass
Lednbrass's picture

Logically incorrect- by your thinking a statement that one doesn't like syphilis means that they somehow support gonhorrea.  There are millions of people who don't bother to vote at all, or vote for non Dem or Repub candidates.

Your inference is your personal bias, not some underlying reality.

Sat, 10/05/2013 - 19:55 | 4026711 it aint easy
it aint easy's picture

History repeats itself.

Mainly because it's the same bankers now as it was then..

Sat, 10/05/2013 - 20:52 | 4026793 tao400
tao400's picture

But the fact is that obama isn't a communist or even a socialist, as the article points out, he is the biggest crony capitalist who has ever been president. that's the beauty of it. they have obama painted out to be something to the stupid public and in fact he is exact opposite. It's a ruse and a stroke of genius. 

Sat, 10/05/2013 - 18:50 | 4026590 macholatte
macholatte's picture

so what happened to the black girl the DC pigs murdered?

Sat, 10/05/2013 - 19:00 | 4026604 I am Jobe
I am Jobe's picture

The Pigs got medals and standing ovation. Fuked up country 

Sat, 10/05/2013 - 23:09 | 4027006 monad
monad's picture

There are a number of things that don't add up. Whatever happened we are being kept in the dark. These statists have claimed the unconstitutional authority to lie to us. They don't mean "I'll still love you after the count", they mean total fabricated revisionist reality, until we are dead.

Sat, 10/05/2013 - 19:47 | 4026700 Emergency Ward
Emergency Ward's picture

She wasn't a government employee, so news coverage shifted to renaming the Washington Redskins.

Sat, 10/05/2013 - 21:39 | 4026871 Promethus
Promethus's picture

I bet we find out she was the number three in command of al qaeda and her baby had links to the tea party.

Sat, 10/05/2013 - 22:02 | 4026912 Born2Bwired
Born2Bwired's picture

She was the dental hygienist of my mom's dentist! Recently let go it appears.

Sat, 10/05/2013 - 18:51 | 4026592 fonzannoon
fonzannoon's picture

My wife's grandparents are still alive and fairly well. I spent today at their place listening to what it was like in 1950 Belarus. It's amazing hearing the stories (good and bad) from people who lived it.

Sun, 10/06/2013 - 01:54 | 4027172 Crash Overide
Crash Overide's picture

I still have a copy of the statement my grandmother put on record in England regarding Germany and then Russia kicking our family's ass around Europe, they were simple Polish farmers. We not only lost land but more importantly family.

I am glad I asked my grandmother about what happened when she was alive, the way she would talk about it... the places she had been, like you said fonz, they lived it.

Sat, 10/05/2013 - 18:53 | 4026594 surf0766
surf0766's picture

He is wrong. The east coast and west coast states will fail and union with Mexico. From Texas to N.D will continue as the UNited States.

Sat, 10/05/2013 - 19:01 | 4026601 I am Jobe
I am Jobe's picture

Yeap TX will be pussified in the  USSA 

Sat, 10/05/2013 - 20:26 | 4026749 lostintheflood
lostintheflood's picture

"Yeap TX will be pussified in the USSA"

texas sucks.

Sat, 10/05/2013 - 22:29 | 4026948 stacking12321
stacking12321's picture

what do you mean, "will be"?

boy, there's only steers and queers in texas.

and, boy, you don't much look like a steer to me.


Sun, 10/06/2013 - 08:01 | 4027343 Keyser
Keyser's picture

Yep, these boys denigrating Texas wouldn't last long down here as we don't tolerate fuckwits lightly. Don't believe me? Come on down and start some shit, but have your affaris in order if you do. 

On another note, the GDP of Texas rivals that of many nations, so you folks from the rust belt and libertard states just stay right where you are and collect those unemployment checks. 

Sat, 10/05/2013 - 22:33 | 4026955 stacking12321
stacking12321's picture

you're right, that is very likely.

though, i think east and west coast will go separate ways - the east coast will join portugal, and the west coast will be taken over by micronesia.


Sun, 10/06/2013 - 01:28 | 4027146 Lednbrass
Lednbrass's picture

EDIT-Comment removed after further reflection.

Sat, 10/05/2013 - 18:55 | 4026596 orangegeek
orangegeek's picture

Deflation folks.  Get ready.  When wealth is concentrated.


Wealth needs to be distributed by the market, not that nazi pig who lives in the white house nor his fucking shit policies.

Sat, 10/05/2013 - 22:23 | 4026940 NidStyles
NidStyles's picture

No economic collapse in history has ever been preceded by an increase in the value of it's currency.

Sat, 10/05/2013 - 23:56 | 4027064 kito
kito's picture

Deflation of asset prices, not your milk and eggs

Sat, 10/05/2013 - 18:56 | 4026597 blindman
blindman's picture

density, wow.
moar density.

Sat, 10/05/2013 - 18:59 | 4026600 mydogisprettier...
mydogisprettierthanyou's picture

I just heard a rumor that russia seized private pension funds....anyone else hear anything?

Sat, 10/05/2013 - 21:59 | 4026907 tsx500
tsx500's picture

whatchoo tawkn bout Willis ?!

Sat, 10/05/2013 - 23:20 | 4027021 stacking12321
stacking12321's picture

i googled what you said, it turns out they are not seizing them.

first off, it's only a temporary measure, this article even says so:

secondly, the russian government is just checking the funds are safe, they are doing it for the benefit of the people.

as a capitalist pig, you probably don't understand that in russia, the government acts for the benefit of hardworking people to protect their interests.


Sun, 10/06/2013 - 08:14 | 4027352 shovelhead
shovelhead's picture

^ lol.

Funny guy.

Sun, 10/06/2013 - 09:43 | 4027439 mydogisprettier...
mydogisprettierthanyou's picture

Uh huh...sure they do

Sun, 10/06/2013 - 19:31 | 4028714 BigJim
BigJim's picture

I hear Jesus wants to learn how to be more like Vlad

Sun, 10/06/2013 - 00:49 | 4027117 kito
kito's picture

holy shit. good catch. tyler will be putting this up. no way he cant.

Sat, 10/05/2013 - 19:01 | 4026603 cossack55
cossack55's picture

Way too much truth. Thank goodness the sheeple are not interested in economics or history.  

Sat, 10/05/2013 - 19:01 | 4026607 I am Jobe
I am Jobe's picture

It's football season do you expect anything different. Waiting for chciks t get knocked up season by jocks. Nothing new in AMERIKA. Next stop Hookers R US USSA

Sat, 10/05/2013 - 19:05 | 4026606 ebworthen
ebworthen's picture

"Now the American state----the agency which was supposed to save capitalism from its inherent flaws and imperfections----careens wildly into dysfunction and incoherence."

Sundown indeed.

Stockman spells it out so clearly, that if Bernanke ever read it his eyes whould bleed before his head popped like a bad zit.

End the FED!!!

Kill the Ponzi!!!

Sat, 10/05/2013 - 20:55 | 4026797 tao400
tao400's picture

He doesn't have to read. If he wanted to, he could have written it himself. They know exactly what they are doing. Stockton is exposing it, even though we all know it as well. But who among us could be so literate in pointing it out?

Sun, 10/06/2013 - 08:06 | 4027345 Keyser
Keyser's picture

The Bernanke is wimpering softly into his pillow as Soros fucks him in the ass. The only sounds uttered from his lips are "my legacy, my legacy" as George gives it to him good. 


Sat, 10/05/2013 - 19:03 | 4026608 jballz
jballz's picture


Dear Zerohedge

Realize you all want to make some coin but just to let you know your ads are really pushing the threshold of my tolerence. I'm not gonna say I won't come to the site anymore, but damn sure I will only come once a day or less, I have a pretty high tolerence for ad bullshit so you are probably on the verge of shooting yourselves in the foot. 


Overkill, btichez.

Sat, 10/05/2013 - 19:06 | 4026616 pauhana
pauhana's picture

There's an app for that.

Sat, 10/05/2013 - 19:07 | 4026618 ebworthen
ebworthen's picture

Adblock Plus.

Free, works like a charm:

Sun, 10/06/2013 - 00:25 | 4027099 jballz
jballz's picture


holy fucking shit.

yeah that works.

Thanks ebworthen,

fuck off corproate whores.

later bitchez.

Sun, 10/06/2013 - 01:10 | 4027135 ebworthen
ebworthen's picture

No problem, yw.

I resisted for a while but the page loads got so slow or failed on a bad ad that I took the plunge on a suggestion from another poster and haven't looked back.

I also installed "Track Me Not" to confuzzle the NSA ; I can disavow knowledge because it has a mind of it's own and I have no idea what it is searching.

Sun, 10/06/2013 - 08:09 | 4027348 Keyser
Keyser's picture




Sun, 10/06/2013 - 02:43 | 4027204 Curiously_Crazy
Curiously_Crazy's picture

And don't forget - as any self respecting privacy advocate will tell you - on top of that use:

- Noscript

- Ghostery

- Https everywhere.

And most importantly Linux

Sun, 10/06/2013 - 10:44 | 4027511 Henry Hub
Henry Hub's picture

Also add BetterPrivacy to that list. It allows you to delete "permanent" Flash Cookies

Sun, 10/06/2013 - 10:03 | 4027448 buckethead
buckethead's picture


Sat, 10/05/2013 - 19:07 | 4026619 surf0766
surf0766's picture

Layoff the midget tranny porn sites and those ads won't pop up

Sat, 10/05/2013 - 19:16 | 4026628 prains
prains's picture

What's this porn you speak of? I'm getting ads for Mig welders and I don't weld

Sat, 10/05/2013 - 19:32 | 4026666 bank guy in Brussels
bank guy in Brussels's picture

Apparently, as covered on ZH a little earlier, the category leaders are Xvideos and then YouPorn ... it seems sites with thousands of hours of free online porn videos are very popular

« ... At peak time, Xvideos might burst to 1,000Gbps (1Tbps) or more. To put this into perspective, there’s only about 15Tbps of connectivity between London and New York ... in other words, a single porn site accounts for almost 2% of the internet’s total [global] traffic. »


Overheard in a pub:

Chap 1: You know, nearly 40 % of the internet is porn ?

Chap 2: Are you telling me I've never seen 60 % of the internet ?

Sat, 10/05/2013 - 21:16 | 4026830 lasvegaspersona
lasvegaspersona's picture

bank guy

just read the link

somethin about porn, transmission rates,  blah blah need bigger pipe blah blah

Sun, 10/06/2013 - 00:05 | 4027073 WillyGroper
WillyGroper's picture

Well that explains the NSA.

Sat, 10/05/2013 - 20:21 | 4026737 it aint easy
it aint easy's picture

Yea without adblock zh is almost nsfw.

Edit: if it was based on surfing habits it would be nsfw..

Sat, 10/05/2013 - 20:28 | 4026751 lostintheflood
lostintheflood's picture

Realize you all want to make some coin but just to let you know your ads are really pushing the threshold of my tolerence.


wait...does zero hedge have ads?  i never knew!!!

Sat, 10/05/2013 - 23:08 | 4027007 jballz
jballz's picture

apparently your readership like to suck corporate cock (or have the appropriate cockblock), judging by the junking.

Well good, means I am in the minority with the non-fucking-morons.

carry on...

Sun, 10/06/2013 - 13:17 | 4027782 blackbeardz
blackbeardz's picture

 I use yarip bc it's better for my preferences.

Sat, 10/05/2013 - 19:07 | 4026610 Rogue Economist
Rogue Economist's picture

How can somebody go through an explanation this long of why Amerika has stagnated economically without mentioning Energy at all?

Like monetary policy alone is the reason the industrial economy is failing?  Without cheap energy to waste, the system fails.  Period.  It's not Rocket Science and you don't need to be an Economist to understand it.


Collapse Cafe Chief Barista

Sat, 10/05/2013 - 20:27 | 4026748 it aint easy
it aint easy's picture

EROI is indeed the acronym du jour.

Sat, 10/05/2013 - 20:47 | 4026790 Mike in GA
Mike in GA's picture

Rogue - Good catch.  I read a lot online and been studying this stuff as a layman for years.  We are at the "endpoint" of so many things but energy is the one that brings everything down.  Currency collapse is a temporary phenomenon but curtailed grocery delivery is cause for revolution.  These are interesting times.

Sun, 10/06/2013 - 10:06 | 4027459 buckethead
buckethead's picture

Good Catch = Nice Snatch?

Sat, 10/05/2013 - 22:31 | 4026953 NidStyles
NidStyles's picture

Because it has nothing to do with the situation, and the situation has everything to do with $85 Billion a month.

Sat, 10/05/2013 - 19:04 | 4026614 pauhana
pauhana's picture

Stockman = Prophet crying in the wilderness.  Problem is, no one is heeding the message.

Sat, 10/05/2013 - 19:14 | 4026625 RaceToTheBottom
RaceToTheBottom's picture

But Apple has a new Ipad out and there is another Kardashian in the news

Sat, 10/05/2013 - 19:20 | 4026641 grid-b-gone
grid-b-gone's picture

Speaking of sundown, how about sunset on some governmental programs?


Now is the perfect time to test how critical many of these programs are.

Step 1 - Tell each American family how big a check they will receive from eliminating ... oh, say for example the Department of Education.

             $79 billion divided among 116 million households = $681

Step 2 - Defund the sucker

Step 3 - After 12 months, each family can cast a vote online via a household code/sign-in to refund or receive their check. Since most education effectiveness

            resides at the state and local level, I'll guess voters will take the cash.

Step 4 - Repeat with every department except Defense and Coinage (That's coinage, not necessarily the Treasury or Federal Reserve)


Result - The federal government finally goes through the right-sizing that most Americans have already been part of, and for programs that get restored, there is a

            revived buy-in of support for the tax dollars the surviving programs receive.


Sat, 10/05/2013 - 19:31 | 4026663 prains
prains's picture

Why NOT Defence?

Sat, 10/05/2013 - 20:20 | 4026742 grid-b-gone
grid-b-gone's picture

Critical functions like food safety/meat inspection, drug safety, and defense may still belong under Congressional review. Even I put Monroe in the "first four presidents in order" question, plus, having just read "The Art of Thinking Clearly", it's easy to wonder if the average American could even decide their own best interest for complicated issues. 

If they screw up mohair subsidies, big deal. It can be undone. The nuclear issue?..., not so much.



Sat, 10/05/2013 - 20:46 | 4026783 prains
prains's picture

I'm still not understanding your reasoning behind not cutting a bloated defence budget when it's pretty obvious there's little to no "defending" going on in their jurisdiction but rather a whole bunch of "offending".


Why is it, in so many Americans minds the DOD Budget is so sacrosanct from budget cuts? Especially in light of the fact they're more a large Stasi Operation than a "Defence" department

Sat, 10/05/2013 - 21:56 | 4026901 Not My Real Name
Not My Real Name's picture

prains, is the defense budget bloated? Yes. Does it need to be cut? Yes.

But defense is one of the very few responsibilities actually allocated to the federal government under the US Constitution. All of the massive social programs and their expenditures (which are a bigger part of the overall gov't budget than defense) are not.

That doesn't justify the massive spending, but I think it explains why there is more leeway given to defense in people's eyes.

Sun, 10/06/2013 - 08:13 | 4027354 Keyser
Keyser's picture

The MIC budget has been growing uncontrollably since 1913. The US does not need $650 billion worth of national defense in this day and age. It would need far less if the US would stop interfering with the sovereignty of foreign nations.

Sun, 10/06/2013 - 10:10 | 4027464 buckethead
buckethead's picture

Defense is one of the few constitutional mandates. Standing armies? Not so much.


Defense should be cut DRASTICALLY. (Note the all caps for dramatic affect) Not, however, eliminated.

Sat, 10/05/2013 - 23:22 | 4027023 groundedkiwi
groundedkiwi's picture

Years of Nuclear attack practise at schools. Hiding under a desk does that to you.

Sun, 10/06/2013 - 11:52 | 4027627 RaceToTheBottom
RaceToTheBottom's picture

" if the average American could even decide their own best interest for complicated issues."


I see no difference in complexity between defence and education, especially when you take into account the LOng term future of the country. 

And congress to solve what people cannot?  Well, with their rating of 8% approval apparently 92% can form an opinion.

Sat, 10/05/2013 - 21:31 | 4026848 lasvegaspersona
lasvegaspersona's picture

g b g

Lowering ANY spending IS the problem. The economy cannot survive any less spending. That is why Ben had to keep adding 85+ billion a month. That is why we 'need' a war with Syria. It is why we MUST continue government spending and therefore borrowing. 

Look. The GDP is about 16 trillion (yes I know it is a bullshit number) and of that 3 trillion is government spending. They freak if it goes down 0.5%. Now inagine if we reduced borrowing by half, we only borrow .5 trillion. That's a hit to GDP of 3%. It would put us back in 'recession.' Of course since we are in 'permanent' mode this will just go on until it stops.

Unlike Stockman I do not see any change in behavior that changes the outcome or even the timing, of our demise. Instead of trying to find solutions we should all be readying the lifeboats. No sensible, well informed person would try to start or grow a business now. Investing should be looked at as one would the occasional $20 in the airport video slot machine...entertainment. Preparation for currency collapse deserves all your attention. Gold and guns and plans for a long spell of trouble is the order of the day. 

I go on with my daily routine of work and home life but I am not going to be surprised when the wistle blows on the dollar. I am always early on this kind of call but this time I believe I will not be sorry...or that early.

Sun, 10/06/2013 - 01:32 | 4027153 harleyjohn45
harleyjohn45's picture

16 trillion GDP.  42% of GDP is goverment employees.  Goverment budget is 3 trillion,  I guess the state budgets are making up the 3 or 4 trillion.  Amazing, how can government employees be listed as producers, since they produce nothing.

Sun, 10/06/2013 - 10:14 | 4027471 buckethead
buckethead's picture

"The economy cannot survive any less spending. "


An economy is not limited to currency expansion, GDP, or any other artificial construct. I would argue that a collapse of the petrodollar/benniebucks expansion would merely reveal the Actual Economy. (Yes, there is overlap. Our economy is based on imaginary wealth, but real purchasing power is derived from such, and supported (stolen, if you will) by the DOD along with the other letters)

Sat, 10/05/2013 - 19:20 | 4026642 Stockmonger
Stockmonger's picture

Epic rant!

Do NOT follow this link or you will be banned from the site!