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David Stockman: The Collapse Of The American Imperium

Tyler Durden's picture




 

Submitted by Adam Taggart via Peak Prosperity,

im·pe·ri·um
noun
1. command; supreme power.
2. area of dominion; sphere of control or monopoly; empire.
3. a nation having or exerting supreme power; superpower.

David Stockman, former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier is an insider's insider. Few people understand the ways in which Washington DC, The Fed, and Wall Street work and intersect better than he does.

He's extremely concerned by the "perfect storm" he sees of concurrent failures in US policy across foreign, monetary, economic, and fiscal fronts:

If you look at the entire radar screen of things developing both domestically and internationally, we are plunging deep into a perfect storm of policy failure. The American Imperium is collapsing. There is blowback everywhere. The wreckage of prior policy mistakes of our intervention with foreign policy is coming home to roost, and the Ukraine is one area at ground zero for that.

 

But second, monetary central planning is now coming to a dead-end. It is inflating the third financial bubble of the century and the Fed is now clueless as to how it will manage to unwind the massive balance sheet expansion it has been undertaken.

 

And third, the fiscal doomsday machine continues to crank on. Washington is ignoring the fact that we are six years into a business cycle expansion and we are still running massive deficits and there is no cushion for the next upset that comes to the economy.

 

Now, why is all of this important? Because I think the foreign policy failures -- the collapse of the American Imperium as I call it -- is at the center of this, and it will push all of these things in the wrong direction.

 

We are now becoming much more aggressive in our foreign policy than ever before. We can't afford it by any means. And the potential for this to create black swans to roil or dislocate these very fragile markets that have been created by this massive central bank balance sheet expansion -- it all makes what is happening in the Ukraine, or in the Middle East in Gaza, or in the collapse of Iraq, even more dangerous in terms of what it could trigger. So we are in a real pickle here and I think it is compounding by the day. 

At risk here is America's capability to remain the world's dominant superpower.

For example, in the current rush to demonize Russia, Stockman sees the military industrial complex (as warned by President Eisenhower) steamrolling over any of the necessary debate, diplomacy or consideration that should proceed such warmongering:

Basically, the war machine in Washington (I call it the Warfare State), couldn't abide that. There are just too many people that operate in the devil's workshop; which is to say we have all of this capacity, we have all this machinery of war-making and of intervention and of global empire that is obsolete and unnecessary -- and yet it is manned by people who want something to do. Who need to justify budgets. Who need to pursue and prosecute missions. That is what I think is happening at the present time.

 

It's just the warfare state machinery has gotten itself activated into motion and it is drastically simplifying the real facts that we face and creating a narrative that is really preposterous in terms of what our national security, the safety and security of the American people, really requires in this circumstance. 

And on the domestic front, he foresees very difficult times ahead as we try to wean ourselves off of the dependency on massive thin-air stimulus our economy has developed over the past six years:

On the way up as they inflated this bubble, the smart money got on board and basically was front running everything the Fed was doing. Once they became confident that the $85 billion of bond buying was going to stabilize, if not enhance, the price of the bond and they could buy it on 98% repo leverage at $0 carry cost, they jumped in hammer and tong. And so the Fed then had this magnetic force working with it, which was the fast money and the market attempting to front run the direction of Fed policy.

 

But just think: What happens if they actually began to allow interest rates to rise or begin to attempt, through one mechanism or another, to shrink their balance sheet?

 

The fast money will get on the other side of the trade just as fast as it rode the bubble expansion to the top. And they will sell what they think the Fed is selling. And that will cause a massive unwind of the greatest overvalued market bubble in the world, which is the government bond market. 

Click the play button below to listen to Chris' interview with David Stockman (55m:23s):

 

 

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Mon, 08/04/2014 - 19:19 | 5046428 The Alarmist
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He's just pissed because he no longer counts among the criminal elite.

Mon, 08/04/2014 - 19:27 | 5046449 knukles
knukles's picture

Betcha he reads the Hedge

 

PS  Decline of Imperium.  Read some Cicero on Rome.  The names were changed to protect the guilty from suing Cicero's estate

Mon, 08/04/2014 - 19:41 | 5046547 Row Well Number 41
Row Well Number 41's picture

I like the way Asimov siad it.

The fall of Empire, gentlemen, is a massive thing, however, and not easily fought. It is dictated by a rising bureaucracy, a receding initiative, a freezing of caste, a damming of curiosity—a hundred other factors. It has been going on, as I have said, for centuries, and it is too majestic and massive a movement to stop.
    -- Isaac Asimov, Foundation

#41

Mon, 08/04/2014 - 20:08 | 5046653 NidStyles
NidStyles's picture

Meh he was from a collapsing Empire, so his opinion might be tainted.

Mon, 08/04/2014 - 20:34 | 5046778 Thirtyseven
Thirtyseven's picture

So was Ayn Rand.  Opinion tainted or learning experience?

Mon, 08/04/2014 - 20:46 | 5046839 Accounting101
Accounting101's picture

Or like Rand, a colossal intellectual and economic fraud.

Tue, 08/05/2014 - 01:26 | 5047686 TeethVillage88s
TeethVillage88s's picture

It sounded like poetry or... egoistic rambling.

I respect Asimov and my family are fans. But WTF?

Tue, 08/05/2014 - 05:04 | 5047858 hootowl
hootowl's picture

Asimov was an arrogant, pompous ass.

Mon, 08/04/2014 - 20:09 | 5046659 Anusocracy
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Thank God the barbarians are already in Washington.

Mon, 08/04/2014 - 20:35 | 5046787 Thirtyseven
Thirtyseven's picture

Metastasizing in all of Northern Virginia, and a cancer upon Montgomery County, MD. Now spreading to the lymph nodes near Annapolis.

Mon, 08/04/2014 - 20:33 | 5046772 Thirtyseven
Thirtyseven's picture

The empire was declining throughout the entierty of the Foundation series.  It was declining even before Hari Seldon put forth his theories.

Mon, 08/04/2014 - 19:46 | 5046549 hobopants
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Polybius's Anacyclosis...If you wanna see how this has played out time and time again. SSDD

Tue, 08/05/2014 - 06:45 | 5047921 oudinot
oudinot's picture

Rome was a Republic in Cicero's day (104-43 BC); Rome became an Empire under Octavius/Augustus (62BC-14 AD).

There was no decline of Imperium  in Rome in Cicero's time.

Mon, 08/04/2014 - 19:24 | 5046453 zorba THE GREEK
zorba THE GREEK's picture

Another feather in Obama's diplomatic cap.

Mon, 08/04/2014 - 19:28 | 5046468 ebworthen
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I believe he is genuine, and genuinely pissed, that the nation is being driven down the road to perdition.

Mon, 08/04/2014 - 20:05 | 5046633 kchrisc
kchrisc's picture

I share your sentiment.

Once a criminal elite, always a criminal elite. And I don't recall him ever standing trial for his oath violations or other crimes while an elite.

Does not mean that nothing he says now is not of value, but I take it all with a grain of salt.

Mon, 08/04/2014 - 21:42 | 5047077 BigJim
BigJim's picture

Please give us a list of this man's crimes and oath violations, Monsieur Robespierre. No witnesses need be called; your word is sufficient.

Mon, 08/04/2014 - 23:33 | 5047458 kchrisc
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First off he has been a pol and crat in the Unconstitutional and criminal DC US government--he is, at a minimum, complicit.

He was a "revolving-door" hire at Solomon Brother when he left the position at DC US OMB. Not a crime, but I would bet that if we looked closely we'd see the "back scratching."

 

Then there is this:

Criminal and civil charges

On March 26, 2007, federal prosecutors in Manhattan indicted Stockman in "a scheme ... to defraud [Collins & Aikman]'s investors, banks and creditors by manipulating C&A's reported revenues and earnings." At the same time, the Securities and Exchange Commission brought civil charges against Stockman related to actions he performed while CEO of Collins & Aikman.[17] Stockman suffered a personal financial loss, estimated at $13 million, along with losses suffered by as many as 15,000 Collins & Aikman employees worldwide. Stockman said in a statement posted on his law company's website that the company's end was the consequence of an industry decline, not fraud.[18] On January 9, 2009, the U.S. Attorney's Office announced that it did not intend to prosecute Stockman for this case.

http://en.wikipedia.org/wiki/David_Stockman

And I see numerous Constitutional violating bills he voted for during his tenure in Congress:

https://www.govtrack.us/congress/bills/browse?sponsor=410394

 

Once a scumbag pol, crat and/or bankster always a scumbag pol, crat and/or bankster. And he has been involved with all three.

Tue, 08/05/2014 - 01:38 | 5047696 TeethVillage88s
TeethVillage88s's picture

Hell-a-Good history there on Stockman.

I would guess that a player has to get slammed before becoming a good citizen or good political commentator.

Not that I trust guys with big mouths that horn the microphone and get big speaking engagements... but think this is what we like to see.

Somehow we have to bring back people caught for marijuana and make them citizens and productive proud voters. Stockman may not be as sin-free as those drug convicts, but there should be a way for him to benefit society, speak against his Industry, and inform against the corruption.

Tue, 08/05/2014 - 01:47 | 5047705 TeethVillage88s
TeethVillage88s's picture

kchrisc;

He sounds like Ken Lay of ENRON.

Impeach Obama & Eric Holder for pardoning Ken Lay or otherwise giving him "Time Served".

Ken Lay is the Poster Child for Corruption. He is the Anti-Christ.

Or maybe I have it wrong, correct me if you have a different Anti-Christ at ENRON.

End the Holder Dynasty. Impeach Holder. Impeach Obama. Impeach the old FBI Director Mueller. Impeach the Director of Central Intelligence. Impeach the NSA Directors of the last 14 Years!!!

Why NOT?

Mon, 08/04/2014 - 20:27 | 5046742 doctor10
doctor10's picture

A real "empire" doesn't send out its women to do its negotiations with critical geopolitic assets and adversaries for a decade-and then wonder what the hell went wrong!!

 

Mon, 08/04/2014 - 19:21 | 5046436 world_debt_slave
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2008 was the collapse, we just haven't felt it yet, the drug hasn't worn off yet

Mon, 08/04/2014 - 19:43 | 5046554 omniversling
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Market collapse 1929 not 'officially a depression' until early 1930's. QEs have delayed insolvency impacts with liquidity foam. Watch this space..

Mon, 08/04/2014 - 19:22 | 5046441 TeamDepends
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And Barry night-putted while D.C. burned...

Mon, 08/04/2014 - 19:38 | 5046526 centerline
centerline's picture

Don't need night vision or glow-in-the-dark balls.  That's a win-win baby!

Mon, 08/04/2014 - 19:42 | 5046557 Eyeroller
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Ew, Barry with glow-in-the-dark balls...

Mon, 08/04/2014 - 19:53 | 5046595 philipat
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Makes it easier for Reggie to locate at night?

Tue, 08/05/2014 - 03:14 | 5047784 Oracle 911
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Mochelle has glowing balls? Oh man, that is the reason why Barry is married to him.

Mon, 08/04/2014 - 19:24 | 5046452 SemperFudge
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David Stockman, predicting doom for a fourth year running! One of these years David... like they say, even a stopped clock is right twice a day!

Mon, 08/04/2014 - 19:43 | 5046559 booboo
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and things have gone swimmingly since he first opined?? Well I guess surfing on a wave of 7 trillion printed Bernanko Bucks is a real confidence booster.

Mon, 08/04/2014 - 19:24 | 5046457 IridiumRebel
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Nothing an 'Merican Samson Option can't take care of....

Mon, 08/04/2014 - 19:31 | 5046458 ebworthen
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"...devil's workshop..." and "...they jumped in hammer and tong...".  Exactly. 

Welcome to the New Rome.

Too bad the populace didn't heed Eisenhower's warning, or Smedley Butler's - would have spared a lot of limbs - and lives.

Tick...tick...tick...  http://www.usdebtclock.org/

Mon, 08/04/2014 - 19:29 | 5046470 Dutti
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It was OK for the US to "intervene" in Vietnam, far from it's shores, but it's not OK for Russia to intervene in eastern Ukraine, where many people of Russian descent live.

Mon, 08/04/2014 - 19:33 | 5046497 The Alarmist
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Correct, because America is exceptional.  Next question.

Mon, 08/04/2014 - 19:36 | 5046513 centerline
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Anon keeps saying it.  Must be true.

Mon, 08/04/2014 - 19:38 | 5046517 Escrava Isaura
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I didn't know America was an Empire!

Since when?.... because nobody told me.

Mon, 08/04/2014 - 20:02 | 5046625 IReallyDontCare
IReallyDontCare's picture

Need heard of rule by proxy?

Mon, 08/04/2014 - 20:46 | 5046848 Escrava Isaura
Escrava Isaura's picture

I wasn’t thinking that far ahead!

Mon, 08/04/2014 - 21:36 | 5047049 cn13
cn13's picture

Aa Jim Morrison used to yell, "Wake Up!"

Mon, 08/04/2014 - 19:33 | 5046498 souljaboy
souljaboy's picture

It's easy to say what is happening. Is it really so hard to say why?

Mon, 08/04/2014 - 19:35 | 5046511 centerline
centerline's picture

Shit folks, we are going to make ancient Rome look like a warm-up act.  Oh, not just us.  This is global.  Good luck.  YMMV.  Batteries not included.  Some assembly required.  And so on.

Mon, 08/04/2014 - 19:47 | 5046574 dbTX
dbTX's picture

And I will make mere lads their princes, and capricious childdren will rule over them.  Isaiah 3:4

Mon, 08/04/2014 - 19:52 | 5046592 Salsipuedes
Salsipuedes's picture

The MIC "... is manned with people who want something to do..." Honest work anyone?

Mon, 08/04/2014 - 19:53 | 5046594 TulsaTime
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Augustus:' The more things change, the more they stay the same.'  Humans labor under the false impression that someone is in charge at the macro level.  We are just bi-pedal bacterium, we will go like crazy with any excuse and at the least provocation.  There are, surprise surprise, limits to what we should try to do.  Endless growth is over, but no one can make us see that.  Remember that black petri dish from biology?  Earth before long....

Mon, 08/04/2014 - 20:01 | 5046623 starman
starman's picture

Once great civilizations always brag about "when we" bla bla bla. Romans, Egypt, Greece etc. 

Exactly what's happening in the US today,  the glory days of this country has long past people. From the roaring 20's to the  industrial 50's.

60's we got drugs and flowers.70's...I won't even go there. 

80's more drugs and horrid fashions and music. 90's  tech revolution.

2000 credit default swaps. 2014 socialism arrived. 

Enjoy.

Mon, 08/04/2014 - 20:12 | 5046672 Escrava Isaura
Escrava Isaura's picture

starman,

You said: "roaring 20's to the  industrial 50's."

Man, you drunken lots of Kool-Aid (indoctrination and propaganda).

US Empire peaked in 1945. Then, in 1949, they lost China.

Roaring 20 was all Ponzi scheme, just like now. US was able to recover because had plenty of oil and Anthracite coal. Then, the global reserve currency, starting in 1944.

Mon, 08/04/2014 - 20:56 | 5046902 p00k1e
p00k1e's picture

The U.S. experienced the blow-off top for the planet this round.  Wasn't it just yesterday the U.S. became policeman of the world? 

Those who live through Ebola will inherit a planet of moldy human bodies half eaten by feral housecats, and fungus.  Not to mention ‘forbidden zones’ where the reactors melted down.

 

Tue, 08/05/2014 - 06:43 | 5047919 Escrava Isaura
Escrava Isaura's picture

Man, what are you smoking? I sure don't want it.

Mon, 08/04/2014 - 20:48 | 5046866 Accounting101
Accounting101's picture

2014 fascism arrived. You have your -isms messed up.

Mon, 08/04/2014 - 20:09 | 5046663 steelhead23
steelhead23's picture

When fast money talks, the Fed listens.  If, as we all suspect, bond prices tank when the Fed stops buying bonds and equities catch the cold, what does David think the Fed will do?  Sit on its keister?  I don't think so.  Think about it for a few minutes.  The Fed claims that it hasn't lost a dime on QE.  If they sell for less than they paid, ding, ding, ding, they would lose money.  So, if they start to sell in earnest (or just quit buying), it is my guess, wholly without the benefit of an economics degree from a prestigous school, they would lose a little money, then switch course saying - "there's a market imbalance, we cannnot sell into this market."  (Even though it is the Fed and its other Central Bank friends that flat fried the markets).  I happen to think that David is reading the tea leaves just right - its just that the tea leaves often purposely lie.

On the other hand, it might be time to make a call on TBT.

Tue, 08/05/2014 - 06:59 | 5047926 oudinot
oudinot's picture

They ARE NOT going to sell into the market.  The Fed will hold the bonds to maturity and with the interest coupons they will buy more bonds keeping the balance sheet at the same level.

If they don't sell bonds they can't lose money, unless the Am. govt. defaults.

However, on the MBS side of the story, they have a better chance of losing money as some of those bonds could default.

Mon, 08/04/2014 - 21:02 | 5046929 Dead Man Walking
Dead Man Walking's picture

yellen: damned if she does

yellen: damned if she doesn't

Mon, 08/04/2014 - 21:45 | 5047096 Semi-employed W...
Semi-employed White Guy's picture

If there's a God and a satan, then she should be just plain damned!

Mon, 08/04/2014 - 21:05 | 5046945 Dead Man Walking
Dead Man Walking's picture

he is really right about the preposterous narrative our war machine is creating.

Mon, 08/04/2014 - 21:10 | 5046966 Keltner Channel Surf
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A 55 min presentation . . . or a 1-page PowerPoint that says "We're Fucked," then a rerun of "Bonanza"    Your choice . . .

Mon, 08/04/2014 - 22:24 | 5047281 AdvancingTime
AdvancingTime's picture

 Too many people it appears a struggle is occurring to unseat America as the worlds most dominate nation. For many proud Americans who see the world from the unenlightened and possibly undefendable position of the United States having a right to be in control it is both threatening and frustrating to see control slip away.

It is threatening to think the country might quickly fall to the position of a second rate power mired in debt with many of the options we have come to see as our right suddenly ripped away. It is frustrating that in many ways the country has become its own worse enemy guilty of political inaction and squandering its power through a series of bad choices and missteps. More on this shift in power and our best response in the article below.

http://brucewilds.blogspot.com/2014/06/americas-struggle-to-stay-on-top....

Tue, 08/05/2014 - 04:50 | 5047844 hootowl
hootowl's picture

The worst enemy the American People have ever faced is the United States Government,....especially under Ovomit and his cabal of demented demoniacs.

Tue, 08/05/2014 - 07:02 | 5047932 oudinot
oudinot's picture

Obama is bad, but Bush/Cneney were certainly worse

Mon, 08/04/2014 - 23:20 | 5047450 yogibear
yogibear's picture

The reckless Federal Reserve goes along with the reckless White House.

Stockman is correct, NATO grew and is knocking on Russia's door. What would the US do if Russia supported the Canadian government as well as Mexican governments? Victoria Nuland is beating the war drum in Washington.

Tue, 08/05/2014 - 03:23 | 5047789 AnAnonymous
AnAnonymous's picture

With 'americans', the duplicity is high.

'Americans' equate the lack of prosperity coming from an empire with the end of the said empire.

As it is, 'americans' have put humanity on the path to depletion of resources. No empire, how successful it is, can change that fact.

In this context, any empire will experience a decrease in prosperity. It does not mean that the empire is ending.

Once again, that is the 'american' meme of infinite growth, of the right policy of growth, of overcoming the environment behind it all.

An empire that is not prosperous cant be an empire because empires are supposed to be prosperous. Even though 'americans' have the counter example right before them, they are forced to cling to the illusion they crafted for themselves, that they are special and can overcome the environment.

The 'american' empire is far from the end, currently, it is the only horizon. But it wont come with an increased or maintained prosperity. Globalization is ending for 'americans' and they must now do with inputs to their economy that can only be marginally increased.

Tue, 08/05/2014 - 04:02 | 5047804 NuYawkFrankie
NuYawkFrankie's picture

I don't believe that even the facade of a Constitutional Republic Of The USA will see this year out. 

Tue, 08/05/2014 - 05:51 | 5047877 pelican
pelican's picture

Fuck it.

Tue, 08/05/2014 - 07:59 | 5048000 Freewheelin Franklin
Freewheelin Franklin's picture

All great empires come to end. Some crash and burn, like the Ottoman Empire, while others fade into nothingness, like the British  Empire. 

Tue, 08/05/2014 - 11:30 | 5048997 Bankster Kibble
Bankster Kibble's picture

Those whom the gods wish to destroy they first make mad.

We've made a good start.

Tue, 08/05/2014 - 11:24 | 5048966 teslaberry
teslaberry's picture

if stockman is correct , and that is a big if,----there will be another perfect bond purchasing opportunity when everyone is screaming bloody murder and interest rates are 5 to 10%. 

 

but david can be very wrong. if severe inflation starts occuring and the military needs money to fight wars-----the fed may be forced to keep interest rates low for another ten years like japan. 

 

in that case , stockman would be very wrong about the 'popping' of a bond bubble. 

perhaps equity and real estate would pop , high yield bonds pop, but good ol' AAA uncle sam would just print. 

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