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The Great Deformation
From the Slope of Hope: This is going to be a review of David Stockman's 768-page tome The Great Deformation, and although I never thought it was possible, it makes me angry to write this book review.
I'm not angry because I don't like the book. On the contrary, this is the best economics book I've ever read. Indeed, it
may be the best and most influential book I've ever read in my life. I only wish I had read it the moment it was published in April 2013. I only finished reading it today, and for the entire time I've been plowing through it, I've been trying to think of what I would say in this review.
Why am I angry, then, to write this? Bluntly stated, because nothing I can say will make what I want a reality. And what I want is for every literate person in the United States to read this book, cover to cover. I want them to read it. I want them to understand it. I want them to agitate for the changes that it recommends.
But I know at the outset that none of that is going to happen. The vast majority (I'll pull a number out of the air and declare it as 90%) are too lazy, dim-witted, or apathetic to bother. And that 90%, I daresay, is a kind estimate. I would also wager that another 1% - - and that would be the fabled 1% which enjoy a storied existence at the top of the socioeconomic heap - - would be wholly irrational to embrace any of the core shifts that the book recommends. These elites, after all, are the beneficiaries of the madness elucidated therein.
Reagan's Stockman
Let's back up. As those of you born before 1970 hopefully recall, David Stockman became nationally famous when, still in his mid-30s, he was made the budget director of the newly-elected Reagan White House. Stockman was front and center in national news for years, and I clearly remember, even as a young teenager, reading about Stockman and the battles he was waging to invoke the so-called Reaganomics. My general impression from that time was that he was smart, capable, and committed. Then, as of the mid-1980s, just like most of the rest of the nation, I stopped hearing about him.
I consider myself well-read, and I have the luxury of time to stay abreast of most financial and economic news. In spite of this, if you had asked me several months ago what had ever happened to David Stockman, I would have had absolutely no idea. I daresay most of you are in the same boat, so in brief, I'll bring you up to speed:
After leaving the Reagan administration, Stockman joined Salomon Brothers and later was one of the earliest partners of the Blackstone Group. Years later, he went on to found his own private equity firm, Heartland Industrial Partners, for which he initially raised well over a billion dollars.
Heartland executed over twenty deals, one of which - Collins & Aikman - filed for bankruptcy. Stockman served as CEO at Collins, and early in 2007, he became the target of federal prosecutors in Manhattan as well as the SEC. From the little I've read about this period, the charges were completely ludicrous, and after wrecking nearly two years of Stockman's life (as well as those of many others), the prosecutors dropped the entire fleet of charges well before a trial could even commence.
From what I can gather, Stockman's mounting of his defense during the period of his prosecution was his come-to-Jesus moment, since it dawned on him the nature of the business game he had been playing for so many years. Specifically, the hazards of the debt-saturated private equity world and, much more broadly, the entire globe that had become utterly besotted by debt. Stockman writes:
At length, I saw the light, and it had nothing to do with Paulson's apparent illiteracy on the precepts of sound fiscal policy. The bailouts, the Fed's frenzied money printing, the embrace of primitive Keynesian tax stimulus by a Republican White House amounted to something terrible: a de facto coup d'etat by Wall Street, resulting in Washington's embrace of any expedient necessary to keep the financial bubble going - and no matter how offensive it was to every historic principle of free markets, sound money, and fiscal rectitude.
Stockman thus endeavored to put together this book that is fervent, passionate, articulate, and remarkable in scope. And I kept wondering to myself, if the villains in the book (Paulson, Bernanke, Obama, the corpse of Richard Nixon, Larry Summers, Yellen, etc.) actually read it, would they think to themselves (A) "Oh my God, what have I done?????" or (B) "Crap, they're on to us."
Notable Quotes
My copy of the book is highlighted as heavily as the Bible of a Southern Baptist preacher, so it's hard for me to "boil down" the book to anything less than a fifty page review. I will just share a few morsels that I think help capture some of the points Mr. Stockman wants to make and the elegant fashion in which he presents them:
"This was a blatant miscarriage of governance. As will be seen, at that late stage of the delirious financial bubble which had overtaken America, Goldman Sachs and Morgan Stanley had essentially become economic predators. Their bankruptcy would have resulted in no measurable harm to the Main Street economy, and possibly some gain. It would have also brought the curtains down on a generation of Wall Street speculators, and sent them packing in disgrace and amid massive personal losses - the only possible way to end the current repugnant regime of crony capitalist domination of the nation's central bank." (p. 22)
"In a healthy capitalist economy, income distribution reflects the economic justice of the marketplace, not the political engineering of the state, and properly so." (p. 68)
"Policy measures like Fannie Mae, deposit insurance, social insurance, the Wagner Act, the farm programs, and monetary activism share a common disability: They fail to recognize that the state bears an inherent flaw that dwarfs the imperfections purported to afflict the free market; namely, that policies undertaken in the name of the public good inexorably become captured by special interests and crony capitalists who appropriate resources from society's commons for their own private ends." (p. 169)
"The Thomas Amendment was a nascent version of today's delusion that economic setbacks, shortfalls, and disappointments are caused by too little money. The true cause, both in the early 1930s and today, was actually an excess of debt. This explanation is never appealing to politicians because there is no real cure for the liquidation of excess debt, except the passage of time and the forfeiture of the ill-gotten gains from the financial bubbles preceding it." (p. 183)
It was around this time that I realized even sharing the very best of the best quotes, there would just be far too many, so I jumped toward the end of the book......
"The social insurance system is now entering an era of permanent funding crisis and chronic political turmoil. And, as detailed in chapter 32, the Bernanke stock market bubble is heading for a thundering meltdown which will vastly eclipse that of September 2008. So what lies ahead is endemic fiscal crisis, wrenching financial market dislocations, and relentlessly rising fear about financial security on Main Street." (p. 648)
"Only a financial system addicted to and whipsawed by central bank money printing can produce such erratic, capricious, and correlated results. What is implicated here is not the doings of the free market but the corruption of free money. For that reason, the Greenspan axiom that financial bubbles can't be prevented but only punctured and then bailed out afterward is downright perverse. Now in its third iteration, this policy is, in fact, the backstage mechanism by which society's income and wealth are being redistributed to the top 1 percent." (p. 656)
"While this is seemingly ironic given that Obama was reelected essentially on a platform of "fairness" for the middle class, that was content-free campaign rhetoric. The true irony is that political progressives are so indentured to Keynesian theories of demand stimulus that they have eagerly turned the nation's central bank over to Wall Street lock, stock, and barrel." (p. 657)
"The cruel corollary is that free market capitalism cannot help, either. It has been abused, burdened, demoralized, and impaired by decades of central bank money printing and the speculative raids and rent-seeking deformations which it fosters. Now the White House has a vague mandate that the 1 percent should pay more, but it's too late. The coming crash will leave a lot less to tax." (p. 671)
The Rogue's Gallery
There are some definite "bad guys" (and bad events) skewered in these nearly 800 pages. The names are all known to you, but the deeds, and their details, are articulated in ways I didn't understand well until now. These misfits include:
+ Richard "Tricky Dick" Nixon;
+ FDR (particularly his debasing of the dollar and confiscation of gold);
+ Alan Greenspan's LTCM bailout in 1998;
+ Alan Greenspan's panicked, rate-plunging response to the Internet bubble collapse;
+ Alan Greenspan's deliberate inflation of the housing bubble (sense a trend here?);
+ Larry Summers, pictured here;
+ The military-industrial complex, wholly and utterly bloated beyond need;
+ Medicare/Medicaid/Obamacare and the breathtaking price inflation in the medical racket;
+ The "timorous" math professor Benjamin Bernanke;
+ The GM bailout, TARP package, and smorgasbord of "relief" programs in late 2008/early 2009
+ And, of course, President Obama
There are a few heroes mentioned in these pages, such as Fed chairman William McChesney Martin, Paul Volcker, Eisenhower, and Herbert Hoover (the last most particularly for the well-meaning, but aborted, efforts Hoover invoked to aid the nation as it entered Depression, only to be nefariously thwarted by a breathtakingly cynical FDR).
The Gospel?
Is this book absolutely perfect? Of course not. There are a smattering of typos and misspellings here and there, as one might expect of any book so large that could be used as a weapon of self-defense. It also is peppered with some phrases and expressions that get a bit overused or could be replaced with simpler language (for instance, "it cannot be gainsaid" could just as easily, and more clearly, be expressed by the word "undeniable.")
It's also on the long side, and it needn't be quite so lengthy. I personally found a few of the chapters, particularly those oriented toward leveraged buyouts and private equity, to not add much to the polemic. Stockman knows these topics so deeply, it was probably tempting to spend extra time espousing them, not unlike the way I prattled on in my own recent book about the Silicon Valley's Internet bubble.
But these trifles shave a hundredth of a point off the 100.00 score I would otherwise give the book. It is written with such clarity, fervor, and well-intentioned intellect that, even forty pages into it, I could hardly wait to climb my rooftop to tell the world to go buy it. Mr. Stockman's days at the Harvard Divinity School have eased their way into the pages, because the prose reads like the fiery gospel of a true believer.
It goes without saying that these ideas and arguments are not the scribblings of a lunatic standing on the soapbox in Central Park. Stockman occupied the highest levels of government and finance for his entire working life, and he is a wealthy, famous, and well-connected man who could easily, along with the rest of his 1% brethren, rest comfortably on his laurels for the rest of his days. He chose instead to bring to the truth - - the bare, detailed, and important-to-understand truth - - to the rest of us.
What Needs to Be Done
The final chapter of Great Deformation is the powerful money-shot to the entire tome, but the potency is instantly and honestly neutered by the reality - which Stockman proclaims at the outset - that none of the stated cures will see the light of day. In a word, it's simply too late, and only after a wrenching, worldwide financial cataclysm (that will make 2008 look like a gentle stroll with a lovely lass on a sunlit day) will humanity have the opportunity to get it right.
The last real opportunity to set things straight was presented - as Stockman writes - "on a silver platter" - but Washington doesn't have an iota of the political will that would have been required to seize that opportunity. The America today, and particularly the 1%, are far too fat, happy, and accustomed to the easy way out to undergo such a thing.
Having said that, even though it will break your heart (or should break your heart) to read what has happened, what probably will happen, and what might have been, you owe it to yourself to read this book. America is too flabby to buck up and face reality, but you as an individual should at least take it upon yourself to understand better than 99% of your compatriots how we got here and what road lies ahead. Thank you, Mr. Stockman.
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In case you are reading this Mr. Stockman: Next time get a different editor. The book could have been half the size and therefore much more effective will maintaing the quality content.
There is too much repetitive rambling, although I do agree with it all.
always a tuff call whether Colin Powell or David Stockman or Pete Peterson. While you're making your millions at
the peons expense its steady as she goes. Hit a little ole bump in the rode ie 2X4 backside of the head by YOUR OWN CREW...ahh then u see the 'light'.
takes away from your credibility but hey truth is truth and better late....look what they did to Nader, Chomsky, even those who voted AGAINST IRAQ war, Corzine, Obama....hey wait a second
Let's not forget that Stockman was a Wall Street insider not very long ago.......should he be trusted?
Has David Stockman taken the '9/11 Litmus Test'? Talk about what a "skewing" of economic reality that was! If so, please link. I'd be obliged. If not, why not?
Sorry; double post...
"..... will humanity have the opportunity to get it right." Odds are against humanity getting it right.
911 is all we've got but it is enough.
https://www.youtube.com/watch?v=n_fp5kaVYhk
Join We Are The Faces of The Truth - ("Those who have the privilege to know, have the duty to act" - Einstein).
https://www.facebook.com/groups/911AwarenessProfilePics/330830160418524/...
When the dollar's connection to gold was broken in 1971 the die was cast. The world still needed a medium of exchange to facilitate global trade however and so the dollar remained in use. Now the world has decided it now longer needs the buck and is preparing other plans.
When the impact of decreased use hits we will see all those excess dollars, the ones held by savers and central banks all over the world, flood the market and (probably suddenly) this already overvalued currency will drop in value...eventually to zero.
We still live in tulipland. We still 'know' the dollar has value. One day the buyers won't show up and what happened to those flower bulbs will happen to the value of our currency...though in 400 years we will likely still have tulips.
The entire capitalistic economic/banking system is on autopilot with players such as Stockman, and others mentioned as villans, just playing out their roles assigned by fate and allegance to perpetuation of the system. Some such as Eisenhower came through the military and was indeed honest in his approach. Others were diven by ambition and power ala Cheney. Still others got derailed by lusting for power such as Nixon nnd others such as Robert Anderson, Eisenhower's Sec. of Treasury could have become President but declined the thought of elected public office only to fail in private business. The system and powers within the system is what survives until the system itself disintegrates because it no longer serves it's objectives. That time is fast approaching. From this perspective Stockman's book is right on.
The book is repetitive but it is not laid out as a linear history. It is a forensic examination of a crime scene and he offers no opinion or judgement without the classic who, what, where, when and why of a lawyer building a case on solid evidence rather than hearsay or some half-baked historians opinion.
This is not a volume for someone with a 'belief system' that they know their history because Stockman marshals an overwhelming abundance of annotated facts that are sure to upset some apple-carts full of preconceived notions and par-boiled opinions.
I'm almost halfway through the book so I'm hoping the solutions Stockman presents are as strong as the indictment he lays out.
I'm certain they will be as meticulously well thought out.
great book! he puts words on my intuition
I like everything Stockman writes. What bothers me, is that he belongs to the CFR and Trilateral Commission, if my info is correct. Big red flag.
"Why am I angry, then, to write this? Bluntly stated, because nothing I can say will make what I want a reality. ... Stockman proclaims at the outset - that none of the stated cures will see the light of day."
The established political economy is based on enforced frauds, which engender attitudes of evil deliberate ignorance driving irreparable destruction of the natural world, which is orders of magnitude worse than the runaway, already irreconcilable social polarization. Stockman may well present relatively more economic truth, which makes sense to those who operate inside of the established systems. However, he is still light years away from the basic problem of the Neolithic style of civilization, which is a social pyramid system based on backing up deceits with destruction, through which means the political economy has become based on enforced frauds, which DELIBERATELY IGNORE NATURAL ECOLOGY, since the human ecology and human economy were developed to operate through the maximum possible deceits and frauds.
"In a word, it's simply too late, and only after a wrenching, worldwide financial cataclysm (that will make 2008 look like a gentle stroll with a lovely lass on a sunlit day) will humanity have the opportunity to get it right."
Since that "financial cataclysm" is merely the most visible froth bubbling on top of the overall environmental cataclysms, driven by industrial ecologies based on triumphant frauds and corresponding levels of deliberate ignorance, it is almost impossible to imagine HOW "will humanity have the opportunity to get it right." THE SERIES OF SHORT-TERM SOCIAL SUCCESSES FROM BEING ABLE TO BACK UP LIES WITH VIOLENCE ACCUMULATE WORSE AND WORSE LONGER TERM CONSEQUENCES. We are on the cusp of the tipping point where the systems which were "successfully" able to operate through legalized lies, backed by legalized violence, are having their short-term benefits overwhelmed by their longer term costs, as we go through that turning point towards final failure from too much of the "success" of enforced frauds dominating our political economy.
Theoretical, we may "have the opportunity to get it right," EXCEPT: "The vast majority (I'll pull a number out of the air and declare it as 90%) are too lazy, dim-witted, or apathetic to bother."
Stockman seems to me to be one of the few who have enough intellectual integrity to perceive the overall madness within the political economy, and the ability to articulate that well. However, in my view, he is still far, far away from what it would take for "humanity have the opportunity to get it right." It is the basic structure of Neolithic Civilization that is the problem, which is so serious that the most probable future is for that kind of civilization to madly destroy itself. Any better theoretical solutions would go far beyond what Stockman proposes, (which makes those solutions even more improbable to be implemented than what Stockman recommends.)
We should develop Translithic Civilization, out of creative synthesis of post-modernizing science and ancient mysticism. However, in order to do that, we would have to go through a series of profoundly paradoxical paradigm shifts. Better theoretical solutions would require better understanding of human ecology and political economy as general energy systems (which concepts would then also apply to industrial ecologies, as they did to natural ecologies.)
Please, stockman worked for Regan, he helped to create and profitted quite handsomely from the system. Only one thing really starts to change such a crony/fascist state...
The only thing I will give Regan some credit for, was actually sending bankers to prison during the S&L "crisis". How many of Tim Geithner's "Arosonists" are bankrupt and in prison now?
When the re-set comes, there won't be much left to re-build with, and may not be very many to do the re-building. Mankind most probably will self-destruct. It is only a matter of time before we either set of a nuclear winter, unleash some form of biological nightmare, of so pollute the atmosphere as to cause this place to become unhospitable to human life in general. It may be climate change caused by human activity, or climate change caused by natural phenomena, or a super bug borne in a lab or found in nature, a la ebola, but our days here are numbered.
All the potential solutions that I can see, including yours, requires a fundamental change in human nature....which is not going to happen. People only change when they HAVE to. By the time we HAVE to, it will be too late. I think Mr. Stockman and Mr Kinght have reached a similar conclusion.
Yes, 11b40,
I agree that:
"People only change when they HAVE to.
By the time we HAVE to, it will be too late."
The language I use is that natural selection is the back-up system to artificial selection. The failure to improve our systems of artificial selection, because they are now in a strangle-hold of the combined effects of the social pyramid systems, namely that the ruling classes are the best at backing up dishonesty with violence, while those they rule over have adapted to go along with that, means that our established systems of artificial selection operate through the maximum possible dishonesty about themselves, in which context the controlled opposition groups spout the same bullshit as the biggest bullies.
The basic problem is that the development of science and technology has manifested through social pyramid systems, so that the primary applications of those sciences have been to get way, way better at dishonesty, and being able to back that up with violence, so that there are now globalized systems of electronic frauds, backed by the threat of the force of atomic bombs.
Given that the ruling classes work hard to keep those they rule over as ignorant and afraid as possible, and that war on consciousness has been way too "successful" for way too long, there are no politically practical ways to improve our current systems of artificial selection, which leaves natural selection as the back-up system, which may wipe human beings out, rather than allow humanity to adapt to the development of science and technology.
In theory, we should apply the modes of thinking developed so effectively in other sciences to apply to political science. However, attempting to do that runs into the head-on collision with its conclusion that currently governments are the biggest form of organized crime, controlled by the best organized gangs of criminals. To make artificial selection more workable would require a series of intellectual scientific revolutions. However, most of the ruling classes do not want to do that (as outlined in the book review above), while those that are ruled over do not want to do that either (as also outlined in this book review.)
The basic problems are due to the ways that the oldest and best developed social science was warfare, whose success was based on deceits, upon which foundation was built economics, whose success was based on frauds. Better systems of artificial selection would have to admit and address those profoundly paradoxical political problems, which currently appears to be practically impossible. Therefore, instead, we are rushing faster and faster towards natural selection pressures destroying human civilization so totally that it may never be able to recover?
I'm with you, bro.
Any book that reads what we want to read is a good book. Written by an American who understands what demand and offer is.
Signed: an American.
"In a nutshell : present societies can produce all the goods and services needed for primary consumption using less than 10% of the working force .
The rest (90%) are superfluous .
But there is no guidance to Leisure Consumption or Distribution of Surpluses except a sense of grievance ."
See
http://andreswhy.blogspot.com/2011/06/financial-crises-6-jun-2011.html
O Rly?
That word stew is a fart in a mitten.
Yawn . . .what a bad book review. first few paragraphs are more about the reviewer who lost my interest. I thought that this was a book review, about the book ? ? Very little written of the book, content there after.
Too bad you are so easily distracted. Can't seem to get beyond the shallows, it seems.
where is the depth within the review ? And ai read the whole thing.
i have the same feeling as the author whenever I read one of Stockmans pieces on his blog, that here is someone who oviously gets it and why doesnt the rest of the world see it this way and do something about it. Then I remember that if Wilson was the worst President in history, and then FDR, Obama is a close third, or maybe even second.
I will have to get the book. I just finished Confessions of an Economic Hit Man. What a pile of self pitying schmaltz. Stockman will be a good antidote.
John Perkins is a pretty poor writer. He's much more impressive in interviews.
Stockman is a blithering idiot, as is the douche-fuck brain-dead reviewer.
It's obvious Ex that you have never read any of his articles,he lays it out so well that even a moron like you could understand.
Well, how about sharing some of your brilliance with all of us. Then we can determine for ourselves who the real blithering idiot is.
Ex Catherdra (is that you, Larry Summers?) vs. David Stockman & Tim Knight. Ought to be a real intellectual slugfest.
Stockman is still only halfway there - and maybe he's overrun the target on several issues like deposit insurance. I don't think he groks what Bernanke and even Yellen grok about printing money, the benefits as well as the problems, and therefore Stockman is not really aware of the current monetary situation.
Nor does he much seem to care about the political shenanigans that accompany all this financial folderol, when the politics override the math then we're all in big trouble.
But he does see the big picture now, the capture of regulators and government. The question is what can anyone suggest about it short of the guillotine? The modern bankster has proven once and for all, they will not do what's right if doing what's wrong nets them billions of dollars. Moral hazard on that scale is very hard to fix.
i agree he is only halfway there. His book has been on my 'too read list' for a while, i guess i will have to kindle it next. I have read a couple summaries, and read everything he writes that gets on here and on lewrockwell.com. I really enjoy his opinions and his styles, but his defense of a couple fed chairmen signal to me that he is only halfway there. They may have been 'good' fed chairmen, only to the extent that there SHOULD BE NO FED CHAIRMEN. That institution should not exist. I understand his arguments against 'activist' fed chairs, trying to cnetrally plan everything, and he is right about that. However, since that institution puts that power(unconstitutionally, i might add) into the hands of a couple unelected bankers, the institution shouldnt exist. I like stockman, however, i don't understand how someone so awake and aware of the powers of the free market can't grasp that there is no need for a central bank, and that it is in fact deterimental to the free marker
Much of what Mr.Stockman asserts is true as far as it goes, but all of the ills he recounts spring from a monetary system - call it the $IMFS, which stands for the dollar based international monetary system - that has been maintained far beyond the interval of time that should have been its lifespan. All the excesses and attendant distortions that make up the deformations, as Mr. Stockman dubs the aggregated egregious maladies, would not exist were the present system completely in the annals. Alas, it is not, though the next system is fully constructed, and waiting in the wings.
History shows no huge change can transpire without an accompanying huge trauma to facilitate said change....bummer
I recall that the messages to our congress during the "proposed" bailouts and TARP programs were 80+ to 1 against.
Please Mr. Author, give us some credit.
I will buy this book. I am wondering if my gut feeling is correct, the Ukraine and all the US/NATO war mongering propaganda is to distract us from the obvious, total economic collapse.
My family has observed the obvious collapse through the last few months of purchasing food. It is coming, and very fast.
Your gut is correct. It will increase in frequency and fervor.
Herbert Hoover the "hero?" Didn't he say that he had unwhittingly failed the country after signing the IRS and FED Acts into law? Hardly a hero - the #1 WORST president ever.
I agree. I read the book (as soon as it was published) and I was not under the impression that Stockman had a favorable impression of Hoover. Stockman did make a good case that the US was coming out of the Depression for 6 months before the Democrat convention that nominated FDR. But I don't recall Stockman saying that it was due to anything Hoover did. He was critical of most of the stuff Hoover did. Stockman said that the banking crisis caused the US to re-enter the Depression, and the banking crisis was the fault of FDR. According to Stockman, the banking crisis started when Hoover was president, but it was FDR's fault because after the Democrat convention, everyone realized that FDR was going to win and everyone realized that the three leaders of FDR's economic "Brain Trust" were Marxists. This caused the banks to panic.
Otherwise, this is a good summary of the book. I took notes and tried writing a summary, but it was too long.
The fed was signed into being by Woodrow Wilson - 1913
also the IRS
http://www.theamericandreamfilm.com/the-cast/woodrow-wilson.php
Herbert Hoover the "hero?" Didn't he say that he had unwhittingly failed the country after signing the IRS and FED Acts into law? Hardly a hero - the #1 WORST president ever.
Herbert Hoover the "hero?" Didn't he say that he had unwhittingly failed the country after signing the IRS and FED Acts into law? Hardly a hero - the #1 WORST president ever.
Woodrow Wilson was president from March 1913 to March 1921.
Herbert Hoover was president from March 1929 to March 1933.
The acts that you refer to were passed in 1913 during Wilson's first term.
Perhaps you meant Woodenhead Wilson.
Remember Woodrow Wilson's physician at first thought he was poisoned when he became ill in 1919. The way I now look back on history I am not so sure his first impression was not correct.
But 6 years late.