David Stockman On America's Goldman Sachs Regency

Tyler Durden's picture

Authored by David Stockman via The Daily Reckoning,

There’s not many tears being shed over Steve Bannon’s departure. His ethno-nationalist and protectionist worldview are opposite to true notions of liberty, free markets and a minimalist state.

While Bannonism presented itself as a coherent alternative ideology to mainstream Big Government, it actually boiled down to an incoherent potpourri of cultural resentments and prejudices, economic shibboleths and amateur historical theorizing. His message appealed to the alt-Right because it proposed to replace oppressive statism with a more right wing version rooted in protectionism and nativism.

Notwithstanding the rotten essence of Bannonism, however, the firebrand self-promoter who was the Donald’s chief strategist got it right in his parting shots at his internal White House enemies. In so many words, he correctly asserted that the nation will now be ruled by a Goldman Sachs Regency and a team of generals.

The move embodies the essence of Albert Einstein’s famous definition of insanity: Doing the same thing over and over and expecting a different result.

“The Trump presidency that we fought for, and won, is over,” Bannon told the conservative Weekly Standard on the Friday after his White House departure.


“We will make something of this Trump presidency. But that presidency is over.”

The Donald will now function, as Robert Wenzel aptly described it, as “something of a tweet master frontman” with the Vampire Squid riding higher than ever before.

Expect him to be riding even higher than when the George W. Bush handed a blank check to Wall Street for a bailout at the Treasury led by former Goldman CEO, Hank Paulson.

Goldman’s crew in the current White House – Gary Cohn, Steve Mnuchin, Dina Powell and Jared Kushner – are likely to bring about the final destruction of the Trump presidency. The cast of characters will eventually trigger a thundering collapse in the markets which will finally crush Goldman Sachs and its posse of gamblers and crony capitalist.

In the coming battles over crucial economic issues surrounding the debt ceiling, tax reform and healthcare, Trump will be getting the worst advice imaginable. The Donald will be pushed into attempting to make “bipartisan” deals that will blow the tenuous GOP majorities to smithereens, and do so in the name of status quo statism.

Right after Labor Day the destructive game plan of the Goldman Regency will show up in battles over a “clean” debt ceiling. Pundits make the move sound easy with the notion that GOP leadership only needs a modest number of Democrats to supplement their own rank and file votes to enact a debt ceiling increase. Such fiscal finesse would permit the government to borrow all the money needed to pay bills and protect the sacred credit rating of the U.S. Treasury.

Except it doesn’t work that way. If there is any cooperation at all, it will be only on the basis of a quid pro quo that requires Trump to give up the Wall, tax cuts, proposed deep domestic spending cuts and to fund the insurance bailouts required to forestall premium increases and coverage cancellations during the 2018 insurance (and election) year.

By demanding this kind of quid pro quo as a side deal, rather than as an explicit rider to the debt ceiling bill, it will have the same effect. The Freedom Caucus and the vast majority of conservative leaning congressional Republicans will jump ship.

Washington is heading for weeks of fraught indecision, backroom maneuvering and contentious political in-fighting that will scare the Wall Street casino that it is stuck in complacency.

The fact is that the market is breaking down beneath the shrinking number of Big Cap stocks and levitating averages. This has all set-up a severe downside shock within the coming weeks.

As to the market’s weakening internals, consider that there are 2,800 stocks on the New York Stock Exchange (NYSE). Back in early 2013 when the bull market was still being super-charged with massive QE purchases by the Federal Reserve, 85% or 2,380 of them were above their 200-DMA. By contrast, currently only 1,050 of them (37.5%) are above that level, meaning that the bull is getting very tired.

That vulnerability is also evident in other indices, but especially in the Russell 2000 (RUT). The index is a huge cross section of primarily domestic companies with an average market cap of just $2 billion. But the RUT is now 6.5% below its July 25 high of 1450, and, more importantly, has now plunged below its 200 displaced moving average after the huge bounce from the Trump Reflation euphoria.

The RUT is still trading at an absurd 88 times the reported net income of its constituent companies. When the market plunged into its mini-swoon of January-February 2016, the RUT dropped more than 200 points or 21% below its 200-DMA. That would be 1090 today – with much lower levels to come once the selling momentum accelerates.

It will do just that because the RUT is being fueled by huge inflows from several ETFs (iShares, Vanguard and SPDR all have a tracking ETF) and various other forms of passive indexing. The robo-machines and day-traders have not simply been voting for Trump and an incipient economic and profits boom. What they’ve been doing is chasing the index up a nearly 30% incline between early November 2016 and the July 25 peak shown in the chart below. Now they are now stranded in the nosebleed section of the outfield bleachers.

Russell David Stockman Goldman Sachs

The same pattern is evident in the Dow Transports, as well. After peaking at 9,742 on July 14, the index is down by 6.4% and has dropped well below its 200-DMA. Moreover, there is no reason it should be even remotely at current levels based on real activity in the main street economy.

Nearly all measures of domestic activity are flat-lining and threatening to roll-over. That is clearly the case with car sales, brick and mortar retail, housing starts, restaurant traffic (July was down 4.5%) and much more.

2 Dow Jones Index Goldman Sachs Stockman

The idea that corporate profits are about to rebound sharply is getting steadily debunked by the so-called “in-coming data.” At $104 per share, the June twelve month earnings of the S&P 500 were still 2% below their September 2014 level. Current earnings of the Russell 2000 at $15.50 per share are actually 7.2% below their July 2015 level of $16.70.

It is only a matter of time before Wall Street gamblers discover they are home alone on the earnings front.  All this while gridlock in Washington will intensify suddenly and dramatically. The Treasury’s cash balance is now down to $82 billion, and at its current $2 billion burn rate per calendar day it will be gone by the end of September.

It will come as no surprise that Goldman Regency’s spokesman, Treasury Sec. Mnuchin, has been out once again insisting on a “clean” debt ceiling bill.

Treasury Secretary Steven Mnuchin, speaking at an event in Louisville, said that “we need to raise the debt limit and it’s my strong preference is that there’s a clean raise of the debt limit.”

While Mnuchin conceded that he is “all for spending controls” and Congress has the “absolute right and the absolute obligation” to oversee spending, the Treasury secretary issued another stark warning that “he’ll run out of authority by end-September to stay under the debt ceiling.”

This means that Congress will have just days to reach a compromise on the debt ceiling when it returns from recess. But this will not be the Congress of September 2008 that rolled-over to pass the bailout TARP bill at the insistence of Secretary Paulson. This time Goldman’s bag-man will be told “no dice.”

After all, the Dems now have a President to hound from office and the Freedom Caucus will not again be intimidated by Wall Street into obeisance. Expect a full throated war between Washington, Wall Street and the establishment that is attempting to overturn the 2016 election.

Bannon on the outside will likely prove to be the Goldman Regency’s worst nightmare. There is not a chance that while he is back at Breitbart he’ll tolerate a “capitulation to the left” deal for even a New York minute.

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gregga777's picture

"Here is a quote from the Los Angeles Times from Joel Stein, “I don’t care if Americans think we’re [Jews] running the news media, Hollywood, Wall Street or the government. I just care that we [Jews] get to keep running them.”"


Ghost of PartysOver's picture

Brake out your day trading stuff boys and girls.  Volatility is about to go ballistic and it will be fun.  Lots of opportunities to leverage Deep State Stupidity into cash via the 2 minute trade on the stock indices .  Stack-able cash that is.  Of the shiny persuasion.  My mouse fingers are starting the training regiment tomorrow morning.

SafelyGraze's picture

"Bannonism ... actually boiled down to an incoherent potpourri of cultural resentments and prejudices, economic shibboleths"

The term originates from the Hebrew word shibbólet (?????????‎), which literally means the part of a plant containing grains, such as an ear of corn or a stalk of grain

The modern use derives from an account in the Hebrew Bible, in which pronunciation of this word was used to distinguish Ephraimites, whose dialect included a differently-sounding first consonant, to the word “Shibboleth”. The difference concerns the Hebrew letter shin, which is now pronounced as (as in shoe).

To identify and kill these Ephraimites, the Gileadites told each suspected survivor to say the word shibboleth. The Ephraimite dialect resulted in a pronunciation that, to Gileadites, sounded like "sibboleth."

Then said they unto him, Say now Shibboleth: and he said Sibboleth: for he could not frame to pronounce it right. Then they took him, and slew him at the passages of Jordan


bannon the Gileadite


DownWithYogaPants's picture

Ghost:  Please explain.  I am not familiar with what you described.

oops.  google yielded results

Paul Kersey's picture

The Vampire Squid has long, long tentacles.

"Bannon worked at Goldman Sachs as an investment banker in the Mergers and Acquisitions Department. ... He stayed at this position with Goldman in Los Angeles for two years, leaving with the title of vice president."

gregga777's picture

As long as Goldman Sachs drowns when the ship sinks it will have been worth the price. I'd gladly pull a few of them under with me when I go.

youshallnotkill's picture

GS reigns supreme and the pedophiles are in control. Fun fact:

Alan Dershowitz and Ken Starr colluded with Trump's now Labor Secretary, then federal prosecutor, Acosta to help their client Jeffrey Epstein dodge federal prison for raping an underage girl.

Consuelo's picture



Ahhh...   The same Kenneth Starr, whom if I remember correctly, was about ~this~ close to nailing  'ole Billy Jeff - how many times...?   But something always got in the way as I recall, hence, like her wife today, nothing ever came of it then, nor will ever come of it now...



LetThemEatRand's picture

"Steve Bannon’s ... ethno-nationalist and protectionist worldview are opposite to true notions of liberty, free markets and a minimalist state"

Stockman once again shows his true colors and how guys like him got us into this mess, even as he goes on to correctly call out the squid.  Look, Stockman, it is a verifiable fact that sending our manufacturing jobs overseas has gutted the middle class economy.  It is a verifiable fact that middle class wages have stagnated for decades as a result of US trade policy.  It is not anti-free market to recognize when global powers (that are not themselves free markets) are using their slave labor to destroy the US economy in order to build up their own.  It is simply common sense.  It is also common sense that most Americans want to do something about it, but unfortunately the politicians are all owned by the huge corporations and bankers that benefit from the status quo you helped to create with your simplistic ideology.

Gorgeous's picture

Have to agree with you.  Starting with the opening sentance:

"His ethno-nationalist and protectionist worldview are opposite to true notions of liberty, free markets and a minimalist state."  Does this make any sense??  So apples are opposite to oranges?

Mfg jobs went overseas to Japan, Taiwan, Singapore, Ireland, Malaysia, Bangkock, coastal China, interior China, etc., etc for the simple reason they are chasing low cost labor.  If the US had the political will to depose of the unions, and the technical chops to automate, more manufacturing would stay.  The manufacturing would stay, not the jobs.  At least not the type of manufactring jobs we used to know.

LetThemEatRand's picture

I call BS on the argument that automation makes the moving of factories overseas irrelevant.  If automation effectively makes factory work obsolete, why did the US factories move overseas in the first place?  Why didn't the companies just build robots and save a ton of money and red tape and bribes to local politicians etc so they could build factories halfway across the world (which continues today)?


rejected's picture

Agreed.... Good post and is absolutely true.

biker_trash's picture

Agreed. I've worked in many offshore factories. The overhead is less offshore regardless of robot implementation. The only reason not to do it is not being able to hire a competent engineering staff for a challenging technology.

dcohn's picture

Because this started before the Reagan days when automation was far from available to the millions of small businesses that are now gone.

The NY City Garment district emcompassed I would guess at least 40% of all blue color workers in All five boros.

I realize I am guessing here but there were so many factories and so many homeworkers in those days it was unreal how much work we all had.  By 1992 my business was losing ground and I was not talented enough to go out and steal the few accounts left from the other stitchers in my trade.  

Every day you saw hundreds of people in the street pushing piece good racks full of material as well as racks of dresses etc.

Brooklyn, Bronx, Queens, Manhattan, Union CIty NJ had a tremendous amount of people put out of work from the Garment industry alone.

Then go down South and the huge plantss that used to make all the textiles are all gone.  The Cotton plants were huge in those days as well.

ALL GONE.  TShirts are wildly uncomfortable today as well.  Maybe the cotton is GMO.

Reagan made the China deal and that was the start of the end.

You guys still love Reagan though.  WHY I DON'T know cuz I was an active business man in those days and I transitioned into the Computer Business which I also had issues with in the 2001 crash.  I survived but barely.


AurorusBorealus's picture

"Ethno-nationalism?"  This is just absurd.  At no time has Bannon or anyone associated with modern conservatism advocated for "ethno-nationalism."  This has nothing to do with ethnicity and everything to do with nation-states, national sovereignty, and the right of people, regardless of their "ethnicity," to be ruled by governments responsive to the desires of their populace, not arbitrary distant powers, such as Brussels, Wall Street, Washington, or Beijing.

LetThemEatRand's picture

This is all part of the message being conveyed in the MSM echo-chamber that anyone who is against globalism or unfettered immigration is racist and for all intents and purposes a Nazi.

Normalcy Bias's picture

Bingo. It's just a knowingly dishonest, intellectually lazy tactic used to denigrate Americans who are tired of seeing the the entire wage scale suppressed by the massive influx of skilled (H-1B) third world, and unskilled third world 'slave' labor.

HRH Feant2's picture

That statement about Bannon being an "ethno-nationalist" is a nothing but a smear and a lie! I have been a Breitbart reader for several years. Thank god there is a place to go that has real news, from around the world, that is not just pablum and propaganda. The MSM is on its deathbed. I can't wait to see them fail.

Give Me Some Truth's picture

One can't say that Stockman is sucking up to Breitbart or its leader. If Stockman simply wanted to build his brand and make friends "on the right," he wouldn't have written some of the sentences about Bannon that are in this article. Calling it like he sees it, regardless of who he may or may not offend. I like that. Kinda rare.


Oldwood's picture

They are all out to get us. Always have been. We are the ones who sent our jobs overseas. Nobody forced us to buy imports, anymore than they force us to buy products from automation, or GMO foods.

We are weak and simple minded. We can't see the future beyond our immediate needs and desires....and those taking advantage of this know this....supremely. Like any addiction, its "costs" reduce our ability to afford, making it more imperative that we seek out lower and lower cost "satisfactions".

We claim we MUST buy imports as we can afford no better, yet this very act ensures we will be able to afford less and less....a downward cycle. we have always carried this weakness for the good deal, the something for nothing, and it has always been the enabler of our demise, but the sinister part is that they have discovered means to create infinite debt that ensures our "habit" continues and creates a society of dependents that will burn the place down on command if their providers deem it necessary.

Only salvation lies in our hands, not with bloody revolution but with a willingness to sacrifice the very least of things, our conveniences and luxuries. Now I know this is heresy as most now days would rather lose an arm than give up those things that have been indoctrinated into believing defines them.

We still can choose, albeit painful choices. we can forgo our entertainment to buy from our neighbors. we can forgo that new BMW to purchase a vehicle that we KNOW contains the highest percentage of American made components. it's not too late...but it's close.

Archibald Buttle's picture

well said. i forget who posted this months ago, but "thrift is our best weapon against them." wise words, in my opinion.

junction's picture

Comes next February, all the Goldman Sachs alumni still in the executive branch will jump ship, they got their tax free cashout of their equities. 

richsob's picture

We had just one experience dealing with GS.  We got to the point where we knew for a fact that they were lying and I politely got one of their people off by himself and tried to clear the air.  His response was for us to take it or leave it.  I laughed and told him we would obviously leave it but I wanted him to remember one thing: GS is dirty and so long as he stayed there he would undoubtedly see more than his fair share of personal problems in life because their way of doing things is self destructive.  He told me to go F himself.  I lost track of him but about 10 years later I found out he had gone through two divorces and a daughter had overdosed.  Karma is a bitch.  I can only wish it on anyone who chooses to join GS and blinds themselves to the truth about that company.

Give Me Some Truth's picture

They do view themselves as "masters of the universe." They also probably view themselves as untouchable, meaning they know they can get away with anything and everything. I guess this is understandable in that they do seem to be untouchable and apparently can get away with anything. 


Gorgeous's picture

"the nation will now be ruled by a Goldman Sachs Regency and a team of generals."

Nice hyperbole, but please, a "Regency and a team of Generals"?  What are we watching, Game of Thrones?

Maybe Trump has Generals who have been trained to achieve goals with discipline and objectivity over politics.  Maybe the Squiddies are the guys who know the guys who can actually pull the levers of financial power.

Best to never ever associate with them.

Mon T's picture

STOCKMAN useless. Goldman Sachs is corrupt. Shepwave has been only one getting markets right. Should be watched. Never trust any of these totally. 

DownWithYogaPants's picture

At first I thought you meant Shemp for Victory  but I knew that couldn't be.  3 Stooges should not be referred to for stock advice.

Give Me Some Truth's picture

Stockman  is definitely not "useless." He is very well informed, obviously smart, has an impressive resume, in addition to being a talented and witty writer. He also gets the attention of the "mainstream" world ocassionally. That is, he gets to actually make the case that the system is rigged and that most of conventional wisdom is wrong to a sizeable audience (compared to, say, the size of the audience that is reading any of our posts).

And he is persuasive and articulate. He can make his points with confidence and can handle himself in a debate setting. I don't see many people on "our side" who have all of those attributes and that access to a sizeable audience. If he is right about the system soon imploding, he will get even more attention and will have even a greater opportunity to dispel lies and force people to confront some politically incorrect truths.

Stockman is challenging everything the MSM and politicians spout as gospel. He ain't the enemy. I don't know why so many people on this site insist on attacking him, or have such a strong negative reaction to his essays, which are of the highest quality. 

kudocast's picture

it's because he tells the truth.  The far right doesn't want to hear the truth.

rejected's picture

There’s not many tears being shed over Steve Bannon’s departure. His ethno-nationalist and protectionist worldview are opposite to true notions of liberty, free markets and a minimalist state.

This is some really stupid shit. There's nothing wrong with being a nationalist and loving your country, They're conflating nationalism to the Nazi shit which was national socialism.  And I don't see any difference in protecting your economy than protecting your borders which the US does neither but you get my point.

What,,, does everybody have to be freaking unemployed before they figure out globalism may not be as hot as everyone is making it out? 

Karl Marxist's picture

Odd, 'cause Bannon's had only the kindest things to say about Stockman....

east of eden's picture

If you have a disease (as the US does in spades), and you linger or refuse treatment, then what happens is largely predictable. Personally, I hope the government does shut down and that it does not re-open until at least half of the carperbaggers have been shown the door. The world has changed a lot since 1945, and the US is the one that is mainly responsible for all the change. If you fucked it up, then you only have yourselves to blame.

GunnerySgtHartman's picture

I would LOVE to see Bannon singlehandedly take down GS.  What a day that would be!!

Give Me Some Truth's picture

It looks like Bannon is surviving his summer camp at the White House with his reputation intact. Maybe he can prove himself as someone who genuinely cares about smaller government and wants to end America as a military empire in his old/new gig. I'm like Stockman though. I don't know what his ideology really is. I know Breitbart definitely leans "neocon." Just read the posts of its readers. They always "bite" whenever the warmongers want them to bite and salivate for wars and occupations.

Anyone remember that picture of Bannon with the chalk board of all his "things to do" in the background. "Audit the Fed" was no where to be seen. Neither was "expose bogus economic stats" or "audit the gold" or "show that markets are no longer free." He might be better than Trump but if this guy is our "savior" we ain't going to be saved.


Posa's picture

Oh yeah. Bannon definitely was committed to let the US do Bibi's dirty work with a war on Iran... and while Bannon's protectionist sentiments are a fine antidote to decades of pauperizing the US workforce, a trade war with China is not the way to implement what should be a phase-in of tariffs.

biker_trash's picture

Stockman's paradigm is a bit out of touch. When .gov can arbitrarily change laws to make any bank solvent, digitally print endless QE to keep the stock market afloat using closed loop HFT none of this Blue Team/Red Team crap is significant. The PPT team has also shown it can prevent a crash if it wants to.The stock market will go down when it's not a National security issue to do so and it fits into TPTB agenda. Rothchild is selling his USD now. That very well may be the signal to take the market down to create some more chaos for Trump.  

journal's picture

Any cartoonists at ZeroHedge? I would like to see a cartoon of Trump [in a long shirt of course]  with his pants down handing his sevred testicles to Lloyd Blanlfein. It is so disappointing that he is as "in" with them as Hilary!

GoldHermit's picture

If you think the freedom caucus and enough Democrats are going to agree, think again. This is going to be a battle royale.