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"The Train Wreck Is Coming," David Stockman Warns, "All Hell Will Break Loose"

Tyler Durden's picture


Submitted by David Stockman via Contra Corner blog,

Transcript of David Stockman Interview on King World News

Eric King:  “David, the man who is counsel to big money around the world, Michael Belkin, just spoke with KWN and issued a dire warning for the financial markets.  I just wondered how you see things at this point with the Dow recently tumbling and everything that is happening across the globe?  What should we expect?”

Stockman“Well, the watchword at this point is stay out of harm’s way.  We are headed into a perfect storm of policy failures.  This is not simply a failure by the Fed, which has inflated this massive bubble and painted itself into a corner with no clue how to get out, but we are also seeing an absolute failure of American world dominance….

Our foreign policy is collapsing everywhere and yet the Washington war party keeps wanting to do more of the same.  This confrontation with Putin is utterly out of hand and unnecessary.  Now we have a trade war going that is going to ricochet through an already fragile European economy.

We hear today that Obama is considering going back into Iraq.  What is he thinking?  If you layer that on top of an already fragile financial bubble that is waiting to burst, I think we are in a zone of extreme danger.  It’s hard to predict whether this will be the big, destructive bear market that inevitably has to come, or simply just another dip that encourages the robots and the trained seals on Wall Street to buy for another move higher.  But one of these times we are going to have a big failure and I don’t think it’s too far down the road.

If you look at the stock market it has gone nearly straight up for the last 64 months.  If you look at the chart of the S&P 500 you can see that year after year the dips get shallower and more infrequent and that is not a healthy chart.  That is a sign of a market that is not discounting the actual real world future, but simply trading the word clouds and the liquidity that is being injected by not only our central bank, but central banks around the world.

The difficulty is that I don’t believe this central bank ‘act’ can be kept up.  We have had such tremendous expansions of balance sheets that even the central bankers are now beginning to second guess themselves, become divided among themselves, and begin to worry about how they get out of the corner they have painted themselves into.

So those are the factors that will ultimately cause a major collapse.  It’s just a question of when the black swan comes flying in, or when the confidence in this whole central banking illusion finally breaks down in the markets.”

Eric King:  “Michael Belkin also told KWN that the Fed doesn’t understand the leverage they have created.  Their easy money policy and money printing funnels into all kinds of hedge funds in mid-town Manhattan and according to Belkin, ‘they leverage up the wazoo in al these weird, arcane derivatives.’  He warned a great deleveraging is coming that is going to feed on itself.”

Stockman:  “Yes.  I think the whole global financial system is booby trapped with both visible and hidden leverage.  The problem with the Fed, and Yellen in particular, is that they are looking at a very narrow set of indicators.  For instance, the nominal balance sheets of the big banks.

But the biggest source of leverage in the economy today is the whole area of structured finance and options trading of one type or another.  These Wall Street mechanisms are inherently leveraged; and the market has been coiled up like a spring everywhere owing to the endless bid funded by that massive leverage.  Well, on the way up this forces assets values to continue to inflate and rise.  But on the way down, when these positions are liquidated, the adjustment can become very violent in the other direction.”

Eric King:  “It sounds like we have a train wreck in front of us.”

Stockman:  Train wreck is a pretty good term to describe what is coming.  But this train wreck isn’t simply going to hit a wall out of the blue. Actually, it has been forming and accumulating and expanding for many years now, and yet it has simply been ignored, particularly by the financial markets which have ridden this bubble to these extreme and historic heights.

But when you take the balance sheet of the Fed from $900 billion to $4.5 trillion in less than 70 months, and when that pattern is replicated around the world, that is a train wreck in slow motion.  The only issue is, when does it hit the wall?  The answer to that question is it’s not very far down the road, and I can promise you that is when all hell is going to break loose.”

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Sun, 08/10/2014 - 11:38 | 5072635 InjectTheVenom
InjectTheVenom's picture

when this train wrecks , lotsa "folks" gonna get hurt

Sun, 08/10/2014 - 11:41 | 5072637 Greenskeeper_Carl
Greenskeeper_Carl's picture

not just that, but gold and silver will go to the moon tomorrow. I know this because king world news has told me so every day for the past 3 years...

Sun, 08/10/2014 - 11:41 | 5072641 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Ha! Waiting for my lottery ticket too.

Sun, 08/10/2014 - 12:16 | 5072733 Da Yooper
Da Yooper's picture

Doom is always 6 months away


one day one of these "experts" will be right


in the mean time prep & enjoy life


keep all the babble in perspective


I now return you to your regularly scheduled program

Sun, 08/10/2014 - 12:48 | 5072811 Chris Jusset
Chris Jusset's picture

David Stockman writes:

"The Fed has inflated this massive bubble and painted itself into a corner with no clue how to get out"

Yes, yes, testify brother!

Sun, 08/10/2014 - 12:56 | 5072823 Escrava Isaura
Escrava Isaura's picture

David Stockman writes:


"This is not simply a failure by the Fed..."


Yes, yes, we have a conundrum here, don't we?

Sun, 08/10/2014 - 12:57 | 5072829 jbvtme
jbvtme's picture

drought in california, fukushima, ukraine, iraq, ebola, fracking, chem trails, gmo food, emf polution, the pacific gyre, ndaa, cops on steroids, nancy pelosi...derivatives are the least of our problem

Sun, 08/10/2014 - 13:40 | 5072938 Boop
Sun, 08/10/2014 - 13:55 | 5072947 TahoeBilly2012
TahoeBilly2012's picture

Agreed. Pelosi's sagging face and senility is a growing black mark on all Italian women worldwide. 

Billy Joel sucks. Here is Joe and the boys-


Sun, 08/10/2014 - 14:29 | 5073070 americanspirit
americanspirit's picture

Slight addition to your thoughts TahoeBilly2012 - Pelosi's sagging face and increasingly obvious senility are characteristic of over-privileged rich bitches worldwide who think their husband's bankroll means that their shit doesn't stink and everyone else's does.

Sun, 08/10/2014 - 15:22 | 5073203 Arius
Arius's picture

all of these "experts" saw the light as soon as Obama came into office ... before that all was okay ... not a problem ... right, i believe you just show me another chart or computer program predicting it.

Sun, 08/10/2014 - 15:23 | 5073205 wallstreetapost...
wallstreetaposteriori's picture

I already ordered my Dow 1000 train wreck hat....  First one that I know of..

Sun, 08/10/2014 - 15:26 | 5073214 Keyser
Keyser's picture

I've got Kyle Bass on speed dial...

Sun, 08/10/2014 - 15:41 | 5073274 Truthseeker2
Sun, 08/10/2014 - 20:37 | 5074425 weburke
weburke's picture

no silly, 2015, septemberish.  in the meantime, stockman doesnt actually reveal anything does he. surface, and with "stupidity" used as a factor. sheesh, -stupid- is such a tactic, wonderful, blame -dumb- in stead of finding reasons. 

Sun, 08/10/2014 - 22:49 | 5074853 0b1knob
0b1knob's picture

There is no train coming.  Oh wait....



Sun, 08/10/2014 - 23:29 | 5074938 Drunk In Church
Drunk In Church's picture

Stockman's correct.  Seventeen thousand is about as high as the DOW is gonna get.  We won't have to wait long.  Bitchez.

Mon, 08/11/2014 - 07:42 | 5075496 gold-is-not-dead
gold-is-not-dead's picture

DOW to $20k, and then DOW/GOLD/BTC = 1

Mon, 08/11/2014 - 08:21 | 5075563 dontgoforit
dontgoforit's picture

Nice of him to affirm what we've seen coming here on ZH for the last 3 years or more.  Timing is everything.  What we saw last week with the DJIA is just a foretaste.  We all know this could just as easily run up to 20,000 before it bursts.  Crap shoot at best.  One thing he's right about is it could be 'hellish' for many.  All the governments are broke.

Sun, 08/10/2014 - 17:12 | 5073465 ebworthen
ebworthen's picture


Yellen shoveling coal into the boiler, pulling the wihistle chain.

"Next stop...Paradise City!"

Sun, 08/10/2014 - 17:44 | 5073697 ThirteenthFloor
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AmericanSpirit > She looks like a lot of American's I see today...walking around half-dead (skin falling off) + full-brain dead from GMO's, Pharma and Flouride, not mention the devil that eats from inside.  I am thankful I have not had a single pharma product in 20 years.

I used to think Keith Richards was proof man could survive anything, but now I see I was wrong, it was slow chemical warfare and satan that kills

Sun, 08/10/2014 - 17:09 | 5073564 sleigher
sleigher's picture

I don't think Billy Joel sucks that bad.




Maybe just the later stuff...

Sun, 08/10/2014 - 18:38 | 5073930 SuperRay
SuperRay's picture


Sun, 08/10/2014 - 17:53 | 5073729 ThirteenthFloor
ThirteenthFloor's picture

"Man looks up at a yellow sky and the rain turns to rust in his eye. Rumors of his health are lies. He steals from me and he lies to you."

Old England is dying....Still he sings an Empire song, he keeps his Navy strong, and he sticks his flag where it ill belong"

Waterboys...take the liberty of changing Old England to Uncle Sam....


Sun, 08/10/2014 - 18:11 | 5073789 drendebe10
drendebe10's picture
  1. "There ain't nuthin uglier than an old white woman."  Fred Sanford
Mon, 08/11/2014 - 00:58 | 5075090 drendebe10
drendebe10's picture
  1. "There ain't nuthin uglier than an old white woman."  Fred Sanford
Sun, 08/10/2014 - 21:07 | 5074518 Mr. Lucky
Mr. Lucky's picture

You forgot to mention 2008.

Sun, 08/10/2014 - 15:52 | 5073303 Karaio
Karaio's picture

Será muito interessante assistir o Federal Reserve Bank declarar num Tribunal que não irá pagar aos "fundos abutres" da China, como Argentina fez.



Sun, 08/10/2014 - 16:48 | 5073501 J Pancreas
J Pancreas's picture

Parece nos precisamos zerohedge.com.br meu irmão! Bem vindo

Sun, 08/10/2014 - 18:33 | 5073901 Uchtdorf
Uchtdorf's picture

tudo e legal

Sun, 08/10/2014 - 19:53 | 5074281 SoberOne
SoberOne's picture

Floripa tem mi coracao

Sun, 08/10/2014 - 18:59 | 5074039 ThirteenthFloor
ThirteenthFloor's picture

Usted puede descubir que China posee gran parte de FRB.

You may discover that China already owns large part of FRB.

EDIT: They already access the Treasury directly.  At zerohedge.


Sun, 08/10/2014 - 12:57 | 5072827 jbvtme
jbvtme's picture


Sun, 08/10/2014 - 12:59 | 5072833 Escrava Isaura
Escrava Isaura's picture


Try this, as our real problem:

The Long Descent: The End of the Industrial Age
Sun, 08/10/2014 - 17:32 | 5073659 ThirteenthFloor
ThirteenthFloor's picture

We are out of bubbles and oxygen this time.   GW Bush - "This sucker is going down".  No shit sherlock, how presidential.

Yes...along with the rest of the Trans-Atlantic Economic system + Japan.  Germany's at the exit door trying to get out as I read this.

BRICS "Resource Producers" 2

London "Wall Streeters" - 0  

wanna bet on the outcome ?


Sun, 08/10/2014 - 14:10 | 5073018 Fíréan
Fíréan's picture

in reply to :

Doom is always 6 months away

one day one of these "experts" will be right


One of these days they'll be wrong and it won't be six months away any more,  it willl be a today ! !

Sun, 08/10/2014 - 16:29 | 5073425 Lost My Shorts
Lost My Shorts's picture

And meanwhile, get off my lawn !!

Sorry, it's easy to get snarky about the steadfast prophets of doom-that-never-quite-comes.

Sun, 08/10/2014 - 18:53 | 5074012 BringOnTheAsteroid
BringOnTheAsteroid's picture

The more wrong doomers appear to be, the more right they will eventually be. Then the several years they have been banging the drum will seem like a flash in the pan. Have you ever been in excruciating pain, one minute feels like one hour. All the cynicism about these never ending calls of collapse will be instantly converted into howls of anguish of how could this happen and when is it going to stop. If you are cynical and frustrated now when there is at least a facade of normality, wait till you have endured the same period of time in chaos. One day, very soon, we will wake to news that will leave us frozen with fear.

Sun, 08/10/2014 - 19:21 | 5074141 Dugald
Dugald's picture


One day, very soon, we will wake to news that will leave us frozen with fear.

And you can take that to the bank...

Sun, 08/10/2014 - 20:26 | 5074393 jimmytorpedo
jimmytorpedo's picture

Obozzo will sell Lucky into slavery.

I'm still waiting with with Didi and Gogo.

Sun, 08/10/2014 - 18:09 | 5073783 Slomotrainwreck
Slomotrainwreck's picture

Doom is always 6 months away until it happened yesterday.

Sun, 08/10/2014 - 16:06 | 5073348 duo
duo's picture

Well, on the way up this forces assets values to continue to inflate and rise.  But on the way down, when these positions are liquidated, the adjustment can become very violent in the other direction.”

Gold miners?

Sun, 08/10/2014 - 11:42 | 5072642 InjectTheVenom
InjectTheVenom's picture

... and Simon whats-his-name 

Sun, 08/10/2014 - 13:15 | 5072868 indygo55
indygo55's picture

"... and Simon whats-his-name"


Simon Black thinks that the Maidan riots were exclusively the work of freedom loving patriots living in Kiev. They took control of their government and all is well. Bless them. 

Won't be listening to any more of his otherwise interesting and well executed podcasts for a while, without my bullshit filter on 10 of course.


Sun, 08/10/2014 - 13:33 | 5072917 HamFistedIdiot
HamFistedIdiot's picture

Didn't Simon have a piece talking about the inexpensive apartment he rented and the great business opportunities to be had in Kiev a year or two back?

Mon, 08/11/2014 - 00:33 | 5075052 August
August's picture

Simon's problem, put simply, is that doesn't know what he doesn't know.

I am a paid-up Simon subscriber, but would never accept anything he says as being reliable, until confirmed by otherr sources.

Sun, 08/10/2014 - 11:46 | 5072651 RaceToTheBottom
RaceToTheBottom's picture

If you don't like the messenger, discount him, but listen to the message.

Just look at the S&P.....

Have you ever seen that line in your investing life?

Sun, 08/10/2014 - 11:56 | 5072682 Dapper Dan
Sun, 08/10/2014 - 12:07 | 5072706 RaceToTheBottom
RaceToTheBottom's picture

Variations of the same line.  Free Money looking for a home, not evaluating risk; gauging investments...

Maybe try another time, since the great depression, or even the WWII.


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