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David Stockman: Blame The Fed!

Tyler Durden's picture


Submitted by Chris Martenson

David Stockman, former US Representative and Director of the Office of Management and Budget under Reagan, does not mince words. He sees the monetary systems of the world coming apart.

How did we get here? He identifies the root cause as the intentional over-leveraging of world economies by central planners in a misguided effort to enjoy growth without consequence.

I blame it on the Fed. I blame it on the 1971 decision by Nixon to close the gold window and let the dollar float. Because out of that has evolved -- or morphed -- a central banking policy in the world that absorbs unlimited amounts of government debt. And so we went on what I call the "T-bill standard" or the "federal debt standard." And the other central banks of the emerging mercantilist Asian economies -- Japan, Korea, and now, especially, the People’s Printing Press of China -- have absorbed this massive emission of debt that otherwise would’ve created powerful negative consequences that would’ve forced politicians to act long ago. In other words, higher interest rates, pressure for inflationary monetary policy, and the actual appearance of price inflation. But because all the bonds on the margin were being absorbed by the central banks, we got away for twenty or twenty five years with “deficits without tears.”

And he's just getting started. The only thing more impressive than Stockman's CV of insider roles in public economics and private finance is his talent for colorful metaphor.


On The Fed

As far as I’m concerned, Bernanke is the monetary Darth Vader. He has destroyed the bond market. Because fundamentally, in a healthy capitalist system, the interest rate in the money market and in the longer-term capital market is the price of money and the price of capital. And if the pricing system isn’t working, if it’s been totally crushed, disabled, manipulated, rigged, medicated, everything that the Fed has done with QE1, QE2, zero interest rates, Operation Twist - all the rest of this insanity - then we’ve destroyed the ability of the capital market to function and we’re giving false signals in every direction.    

On The Economy

We effectively had, over the last thirty years, a national LBO - a leveraged buyout of the whole economy. And this is important because if you look at the difference between our historic leverage ratio [1.6 times debt to GDP], which seemed to be compatible with a stable and usually growing economy, notwithstanding periods, obviously, of boom and bust. But at 1.6 times, we would have about $22 trillion of debt -- public and private -- on the US economy today. We actually have $52 at 3.6 times. So the extra two turns have put on the economy -- households, business, government, we can go through the different sectors -- roughly $30 trillion in debt that’s being lugged around by the US economy as it struggles to stay even, to say nothing of recovery today. And until that massive over-leveraging is worked down and reduced and liquidated, which will take years and years in a painful process, we’re not going to get back on track as an economy.

On Our Political Leadership

It’s hard enough for politicians to face the music, to dispense bad news, to make hard choices, allocate pain to constituencies whether it’s spending cut or tax increase. But when the Fed destroys the bond market, which is the benchmark for the whole capital market, and tells the Congress that you can borrow money for two years at eighteen basis points, which is -- as far as Washington’s concerned -- that’s a rounding error. It’s the same as free. 

When you’re giving that kind of signal, then there is no incentive, there’s no motivation for people to walk the plank and face down this monster of a fiscal deficit and imbalance that we have.

Washington thinks you can kick the can down the road, the debt is more or less free, and we’ll get around to solving the problem. But today, let’s not make any tough choices. That’s where we are.     

On the Banks 

The banking system has been saved on the back of the savers of the United States. We have totally destroyed any incentive for thrift, for deferred gratification. The Fed has become more Keynesian than Keynes.

Now, the fact is, if you were going to bail out the banking system with this kind of transfer -- I calculate it at $300 or $400 billion a year -- the suppression of interest rates on depositors, on the $7 trillion or so of deposit base that we have, is at least $300 or $400 billion a year. And that’s the same thing as taxing the public by $300 or $400 billion and redistributing it to banks based on the distribution of their deposit base. That wouldn’t get one vote. Okay, in other words, what I’m saying is if it were done in a proper way as a fiscal transfer put before the democracy to review and vote up or down, it would be voted down overwhelmingly. It would be shouted down. It would not even see the light of day out of committee, to say nothing of the floor of the House or Senate.

On Peak Oil

I think that is being totally ignored. It is another one of the headwinds or constraints that we’re facing along with the demographic time bomb of this huge generation retiring. And if you look at all of these, there’s no reason to expect much economic growth for the next ten or twenty years, even if you had a healthy monetary and fiscal situation. But given the situation that we’ve described and given the massive excess private leverage that was built up in the thirty-year debt spree, we have sort of added insult to injury. We have maybe an inevitable question of the rising real cost of the BTU being added to the demographic question being added to the totally distorted world labor market that the central banks have produced, which is another whole topic. But when you put all those together, the headwinds are truly frightening

On Gold

Gold is becoming the de facto money. We’re going to be back to a gold standard, one way or another, through the back door in only a matter of time, simply because the central banks are dominated by the ritual incantation of dying Keynesian theory. And therefore, I would say that’s what someone needs to do to protect themselves.

The above are small samples from this wide-ranging and deeply penetrating interview between Chris and David. Among other territory, the two get into David's view of the stock, bond, and commodity markets, and what action concerned individuals should be considering at this time.

Click here to listen to Chris' interview with David Stockman (runtime 47m:17s):

Report a Problem Playing the Podcast

Or click here to read the full transcript. 


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Fri, 09/30/2011 - 12:13 | 1726122 Edward Fiatski
Edward Fiatski's picture


Fri, 09/30/2011 - 12:14 | 1726130 Stoploss
Stoploss's picture

Dead nuts right on...

Fri, 09/30/2011 - 14:00 | 1726661 sgt_doom
sgt_doom's picture

Yup, and that's bothersome when one considers that Stockman's biography (please, nobody actually write it!) could be titled:

From Voodoo Economics to the Economics of Voodoo

Stockmans sentence on the national economy being victim to a leveraged buyout over the past thirty years should be obvious to one and all by this time; one could infer it from reading Prof. Hudson over the past forty years, and Catherine Austin Fitts over the past ten.

Indeed:  amassing tremendous debt against the federal government by way of "defense spending" and peddling securitized debt over the past 13 plus years.

And then putting that debt on the citizenry, and demanding the austerity from the citizenry.

Now, they've essentially sold off chunks of America, while taking out all those loans against it.

Only after a Greenspan, or Paulson (Hank), or Rubin (Robert), etc., is found deceased from torture or waterboarding (Cheney-defined non-torture) will there ever be the possibility of change.

Fri, 09/30/2011 - 17:34 | 1727048 redpill
redpill's picture

People should listen to the full audio. It's worth the time. Then sit down and ask yourself if you truly understood these issues. Then ask yourself how many of your friends and family understand this issue. How would they change their behavior, decisions, or voting patterns if they did? They have to want to understand, of course. But sending them a link to that audio with an encouraging word couldn't hurt. Because things can't get better until people finally wake up.

Sat, 10/08/2011 - 02:31 | 1752227 ... crumbs
... crumbs's picture

..." Because things can't get better until people finally wake up."


then what happens ?


anarchy ?


... doubt it - coz there's a game n'hi-def  on at 2 and pizzapizzapizza's trip-bling up

3  for 1  !




Fri, 09/30/2011 - 17:12 | 1727525 jekyll island
jekyll island's picture

It may actually be worse than Stockman indicates.  We really don't know how much off balance sheet "loans" that will never be paid back have been provided by The Fed to European banks, MENA, UN, IMB and just about any insider with connections who asked.  I have heard whisper numbers as high as $16 trillion, no way to substantiate. 

Fri, 09/30/2011 - 12:16 | 1726136 redpill
redpill's picture

"I blame it on the 1971 decision by Nixon to close the gold window and let the dollar float."

It finished closing in 1971.  It started closing in 1913.

Fri, 09/30/2011 - 12:46 | 1726292 Diogenes
Diogenes's picture

Nixon "decided" to close the gold window the way a fat person who has lost his job, has no money and no food "decides" to go on a diet.

America's gold stash was nearly spent. The French in particular were cashing in their dollars for gold as fast as they could. At the rate gold was flowing out of the country Fort Knox would have been empty in 2 to 3 more years.

Fri, 09/30/2011 - 13:05 | 1726391 loveyajimbo
loveyajimbo's picture

Good point.  Since they refuse an audit, I believe the gold, aside from coin melt... is LONG gone.  Which was the last slim hope for our dollar... Can you say: "Currency collapse"??

Fri, 09/30/2011 - 19:32 | 1727820 Jack Burton
Jack Burton's picture

Indeed. Nixon had NO choice or every last ounce of gold would have been gone. Whatever one thinks of Nixon, there was absolutely no choice at all.

Sat, 10/01/2011 - 18:48 | 1729756 BigJim
BigJim's picture

Sure, he had a choice. He could have revalued the $/oz to a realistic level.

But then the US would have had to live within its means. Whereas, the US has spent like a drunken sailor for 40 years.

He made the absolute right decision from a short/medium-termist, selfish point of view, the 'in the long run, we're all dead' point of view.

Sadly... the end of the 'long run' draws nigh.

Fri, 09/30/2011 - 15:25 | 1727068 Silverdes
Silverdes's picture

It's ok folks, it's only temporary...


"Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the dollar against the speculators. I have directed Secretary Connally to suspend temporarily the convertibility of the American dollar except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States."


See...Nixon wasn't lying after all. I bet that by this time next year, the gold window is back open!

Fri, 09/30/2011 - 19:14 | 1727794 StychoKiller
StychoKiller's picture

All right, get Nixon's moldy corpse outa the ground and make Him sign the recision order! :>D

Fri, 09/30/2011 - 12:17 | 1726146 whstlblwr
whstlblwr's picture

@Edward Fiatski, excellent article? or for achieving goal first responder. No way you read it.

Anyway, guess Fed webbots going crazy now LOL.

Fri, 09/30/2011 - 12:20 | 1726161 redpill
redpill's picture

Good point, let me slip this in.


Hey Bernanke, how's my dick taste you son of a bitch!



Fri, 09/30/2011 - 12:21 | 1726168 SheepDog-One
SheepDog-One's picture

David Stockman Im sure just got put on the DHS terrorist watch list for his 'Incindiary and un-american anti FED rhetoric'.

Fri, 09/30/2011 - 12:23 | 1726178 redpill
redpill's picture

I'm sure he'll have fun during his next trip through the TSA line.

Fri, 09/30/2011 - 12:26 | 1726197 duckhook
duckhook's picture

Nah. he has been saying this for a long time

Fri, 09/30/2011 - 12:50 | 1726307 SheepDog-One
SheepDog-One's picture


Fri, 09/30/2011 - 12:42 | 1726267 TruthInSunshine
TruthInSunshine's picture

Stockman's brilliant and refreshingly/brutally honest.

For those of you who may have missed his spot on rant on the Dylan Ratigan show (yes, it actually was allowed to air on Tokyo Rose Hopium Channel (aka proxy for government & banksters bubble-vision that is Main Stream Media), here he is:

David Stockman: Ben Bernanke is either entirely incompetent and an abject failure of an economist and monetary policy maker or a bagman for the globalist Banksters - YouTube
Fri, 09/30/2011 - 14:02 | 1726674 HoofHearted
HoofHearted's picture

He can join all of us at ZH. Soon we won't be able to fly on their airlines...

Fri, 09/30/2011 - 12:54 | 1726314 Don Birnam
Don Birnam's picture

The problem with Stockman is that his solution relies rather substantially upon tax increases to attenuate the deficit -- which ( indeed, any tax increase ) is nothing more than a bailout of Government; once again, saddled upon the backs of [ largely ] the middle class. Let no one be fooled: Stockman is but another Beltway Insider, cut from the same bolt as Pete Peterson.



Fri, 09/30/2011 - 12:15 | 1726134 Archimedes
Archimedes's picture

Saw him on CNBS. Great clip. god! Does anybody else just want to kick Michelle Caruso Cabrera in the face! I hate that chick!

Fri, 09/30/2011 - 12:18 | 1726151 SheepDog-One
SheepDog-One's picture

Definitely...but I'd hate to ruin a good shoe.

Fri, 09/30/2011 - 12:24 | 1726188 Jayda1850
Jayda1850's picture

also saw him on cnbs this morning. Had him on for 3 minutes, but in that 3 mins he completely refuted everything their three hour guest had been saying all morning.

Fri, 09/30/2011 - 12:26 | 1726194 Temporalist
Temporalist's picture

But whose video clips do you think they'll replay?

Fri, 09/30/2011 - 13:29 | 1726527 Vergeltung
Vergeltung's picture

I'd rather horse around with her bOObs, to be honest.


Fri, 09/30/2011 - 13:39 | 1726570 DavidDavid
DavidDavid's picture

Michelle CC is one angry little twit.  That woman has major "daddy" issues.  Trust me, she was ignored by her father as a child.  She hates men.  It all goes back to the childhood.

Fri, 09/30/2011 - 13:47 | 1726602 brew
brew's picture

nice boobs though...

Fri, 09/30/2011 - 14:14 | 1726726 Ned Zeppelin
Ned Zeppelin's picture

Only after banging her like a screen door in a hurricane. 

Fri, 09/30/2011 - 14:27 | 1726793 TruthInSunshine
TruthInSunshine's picture

Michelle CABOOSA Carrera would make a great bull-dyke dominatrix, and Geithner would gladly pay he prevailing rate to be humiliated, just after Michelle CABOOSA Cabrera digested a full meal of black beans, guacomole, chalupas and salsa,

Fri, 09/30/2011 - 18:05 | 1727668 stacking12321
stacking12321's picture

while i have a divergent opinion regarding fiscal policy, i feel we should try and maintain a high level intellectual discussion here on ZH.

oh, and here's a bikini pic of her:

Fri, 09/30/2011 - 12:17 | 1726147 CClarity
CClarity's picture

Stockman has been consistent with this mantra for a while now.  He is the most credible of the previous Treasury, Fed, CEA folk of the past 30 years in my opinion.  He's not defensive, takes some responsibility and is trying to look forward for reconfigured solutions while providing a reasoned explanation of the past.  I sure wish there were more public figures doing this.  

But since there aren't, it is incumbant on the non-public figures to take control.  ZH is a good organizing place for this.

Fri, 09/30/2011 - 14:03 | 1726685 slewie the pi-rat
slewie the pi-rat's picture

he's generally a fairly straight shooter but also is able to develop his own audience's need for him.  this "interview" seems very highly developed, but i just read what was above-the-line here and didn't go to the video for all the light-hearted comedic nuance

we don't try to control too much of the agenda and dialogue here, just what happens on zH, as we dumpster-dive for something Real...

d.s.  seems to appreciate that the low interest rates "imposed" on the nation is to facilitate, even render possible, financing for the incredible goobermint of the USA, which needs to S-T-O-P but just can't! 

as far as the "leveraged buy-out" goes, of course!  this is exactly what the role of fiat in the NWO amounts to, but i think it goes much faster than that as "bad money forces out (buys out) the good".  that is why mark-to-market is essential;  we end up with zombie shells sucking equity outa everybody with all the "market" deals based on new paper and "growth scenario's" and then "passing thru"  the profits and socializing/leaving in 'the market' any losses/"little legal or coroprate problems"

so, yes, the uber-elite seems to own a shitload of everything, asset-wise, quite "legally" too, but not the "liabilities" which are left for the people to suffer, without quite enough means of production left here to support them, employment-wise, either!

so, we watch very carefully as they and their pols and lawyers and regulators and accountants and lobbyists and copy-writers and producers re-adjust the rules, again, preparing the sheeple to "lower future expectaions" as they chuckle at their own magnificence ...


Fri, 09/30/2011 - 17:07 | 1727511 Dirt Rat
Dirt Rat's picture

Stockman is quite adept at evaluating and responding to his audience. He presented a paper to the newly-elected Reagan and his transition team called "Avoiding an Economic Dunkirk." That old WWII buff, Ronnie, was charmed and that's how Stockman got the OMB gig. Plus, in his paper he succinctly and colorfully explained what was going on in the financial markets at the time and why.

Fri, 09/30/2011 - 19:53 | 1727859 slewie the pi-rat
slewie the pi-rat's picture

well, at least he wasn't involved in charming the contras or the iranians or selling drugs to finance covert black ops like those guys in the white house!

i'm sure the budget wasn't involved or they woulda used it!  L0L!!!  i'm sure he's been asked what he didn't know and when he didn't know it.  hasn't he? 

Fri, 09/30/2011 - 12:17 | 1726148 Sir Edge
Sir Edge's picture

Cool Beans...

Zero Hedge Quoted On 12pm EST Strategy Stession on CNBS by a CDS Analyst...


Fri, 09/30/2011 - 12:20 | 1726162 Dr. Engali
Dr. Engali's picture

I wonder when everything is said and done what we will end up with?

Fri, 09/30/2011 - 12:27 | 1726203 Tsar Pointless
Tsar Pointless's picture


Fri, 09/30/2011 - 12:33 | 1726227 redpill
redpill's picture

He asked what we were going to end up with, not what we have now.

Fri, 09/30/2011 - 12:56 | 1726336 faustian bargain
faustian bargain's picture

serfdom, medieval style

Fri, 09/30/2011 - 14:30 | 1726802 bid the soldier...
bid the soldiers shoot's picture


Fri, 09/30/2011 - 12:35 | 1726238 Abiotic Oil
Abiotic Oil's picture


Fri, 09/30/2011 - 12:48 | 1726301 Diogenes
Diogenes's picture

When everything is said and done more will be said than done.

Fri, 09/30/2011 - 12:21 | 1726163 Shell Game
Shell Game's picture

END, Demolish, Obliterate, Disintegrate the Fed!   sniff that social media, attachwatch MF'ers..

Fri, 09/30/2011 - 12:20 | 1726164 monopoly
monopoly's picture

Will roll this over the weekend. Can relax, and listen to the truth. Thanks Tyler.

Fri, 09/30/2011 - 12:20 | 1726165 poydras
poydras's picture

The politicians and the CBs would be wise to listen to Stockman.  He has nailed it!

Fri, 09/30/2011 - 12:22 | 1726176 kito
kito's picture

tyler, what strong underlying business is buffett referring to when discussing his optimism in BAC??

Fri, 09/30/2011 - 13:06 | 1726402 Everybodys All ...
Everybodys All American's picture

More bailout money to the croney Uncle Booofeettt.

Fri, 09/30/2011 - 12:24 | 1726182 PulauHantu29
PulauHantu29's picture

How many physical dollars are floating (or stashed) trhoughout the world...must be trillions flooding various ocuntries like Ukraine, and thru Africa.....

How can any country back up or "guarantee" these quadrillions of outstanding paper IOU's I wonder?

Fri, 09/30/2011 - 15:11 | 1727007 Moe Howard
Moe Howard's picture

There are more physical Euro bills and coins than dollars in the world. Note I said physical, as in not digits on a computer.

Fri, 09/30/2011 - 12:24 | 1726183 JW n FL
JW n FL's picture



Eat the RICH!!

Uploaded by on May 12, 2009

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The stakes are high for us and our children. Everyone should take part in the effort, and HOME has been conceived to take a message of mobilization out to every human being.

For this purpose, HOME needs to be free. A patron, the PPR Group, made this possible. EuropaCorp, the distributor, also pledged not to make any profit because Home is a non-profit film.

HOME has been made for you : share it! And act for the planet.

Fri, 09/30/2011 - 12:50 | 1726306 Diogenes
Diogenes's picture

Relax. They have been saying that for more than 100 years. Even if the world is half shot now it will still last the rest of our lives.

Fri, 09/30/2011 - 15:54 | 1727191 JW n FL
JW n FL's picture

101 East - China's dirty secrets

Uploaded by on Feb 4, 2011

China's juggernaut economy is the envy of the world, but at what cost to the country's people and environment? 101 East investigates.

Fri, 09/30/2011 - 13:04 | 1726385 NotApplicable
NotApplicable's picture

As George Carlin said many times, the planet is fine. The people though, they are fucked.

Fri, 09/30/2011 - 13:40 | 1726574 r00t61
r00t61's picture

Modern homo sapiens sapiens has only been around for 200,000 years.  That's 0.0033% of the Earth's 6,000,000,000 years of existence.  Dinosaurs were around for about 185 million years.  Sharks have been around for 400 million years.  Algae have been around for about 3 billion.


If we go, I can guarantee you, the Earth won't miss us.  She'll get along just fine without us.

Fri, 09/30/2011 - 12:24 | 1726186 Lazane
Lazane's picture

Most here may not remember the economic wonderboy david stockmanof the 1980's. He continues his inciteful wonderment.

Fri, 09/30/2011 - 13:11 | 1726438 NotApplicable
NotApplicable's picture

Problem is, people like him lend credibility to the rest of the criminals in DC. It would be nice though, to see if he can attract the Reagan wing of the GOP over to the Ron Paul camp.

Fri, 09/30/2011 - 17:00 | 1727493 Dirt Rat
Dirt Rat's picture

The Education of David Stockman. He understood we were all fucked in 1981 and he certainly had a hand in that.

Fri, 09/30/2011 - 12:24 | 1726187 TraderMark
TraderMark's picture

He just ruined his chance for Presidency ;)


Oh wait, he could not run in the current setup cuz he speaks the truth, and would piss off extremes of both parties.  Nevermind then - speak on.

Fri, 09/30/2011 - 12:26 | 1726196 Dick Fitz
Dick Fitz's picture

He gets it, and I wish more people would listen to him before the whole world economy implodes.

Fri, 09/30/2011 - 12:33 | 1726228 StrangerThanFiction
StrangerThanFiction's picture

All very true, and especially about OIL the base ingredient of economic growth. The prospects are grim indeed.

Fri, 09/30/2011 - 13:10 | 1726428 Payable on Death
Payable on Death's picture

Strange fiction indeed. All predictions of resource depletion have always been wrong.

Fri, 09/30/2011 - 13:54 | 1726630 fyrebird
fyrebird's picture

Name a resource that is not being depleted. Even one. Okay I know one; human meat.

But apart from human meat. Name one. Oh I know another one; sunlight.

So maybe you are right.

We have lots of humans to eat, and all day to do it. I stand corrected. And beyond this point there be monsters

Fri, 09/30/2011 - 20:49 | 1727959 o2sd
o2sd's picture

Name a resource that is not being depleted.


Sat, 10/01/2011 - 00:59 | 1728308 Creepy Lurker
Creepy Lurker's picture

Actually, sunlight is being depleted, in a sense. The Sun has a finite amount of hydrogen to burn. Around 5 or 6 billion years from now, it will run out of fuel.

I propose a sunlight tax and a sunlight exchange trading market. I'll even start it off by creating, holding and selling the first set of shares.

Sat, 10/01/2011 - 07:25 | 1728475 o2sd
o2sd's picture

Well yes, in the long run we are ALL dead.

In 10 billion years the Sun will supernova, so the solar system has until then to get it's shit together.

My point was to the OP, that the earth is not a closed system, it receives a large amount of energy each day from our star, energy that is used to make algae, grow crops and get tanned. With the exception of radioactive decay, the total quantity of most of the other elements on earth remain fairly constant. Same amount of carbon, hydrogen, oxygen, nitrogen. All of the so called 'resources' on planet earth are made from a vary small number of those elements, and through energy, form molecular bonds to shape them in other ways that are suitable for our use by the planet's organisms, including us.

The 'resource' that is supposedly going to run out is the hydrocarbons, which is simply not true. New hydrocarbons are formed every day, all over the planet. Natural gas can be made from sugar cane. Oil can be made from algae, ethanol can be made from wood, sugarcane and other woody grasses. The fact that we are now using Jurassic Algae for our energy requirements doesn't mean that the planet stopped making hydrocarbons 165 million years ago. Even black coal won't run out for 200 years, and brown coal not for 1000.

Even the DREADED PEAK OIL is an indication that 15% of the reservoir has been extracted using conventional means. When 30-40% of the oil from an oil reservoir has been extracted, the cut is over 50% water. A higher cut is currently considered to be too expensive to bother getting any more oil out, but it is still possible if you are desperate enough. In other words, 60-70% of the oil is still in the ground when it becomes uneconomical to extract any more. In case of extreme desperation, one could use fracking to extract the some of the remaining oil as gas.

Other 'resources', such as fresh water, steel, aluminium, concrete, can be made converting those same hydrocarbons back into heat and power. Fe and Al are pretty common elements also. Calcium carbonate is everywhere, and the oceans contain more water than could actually be used on the available land area.

In short, I don't see how any 'resource' is running out. Certainly stupidity is available in abundance, if only it could be converted to electricity.

Fri, 09/30/2011 - 12:34 | 1726233 MrBinkeyWhat
MrBinkeyWhat's picture you think so? /Sarc

Seriously...point on! Sheeple are fukked, and sheared.

Fri, 09/30/2011 - 12:54 | 1726234 hambone
hambone's picture

Stockman...Achuthan...whatever.  Reality is for losers. 

Winners on Wall Street, CNBC, etc. create their own "reality" that those thinking beyond today, beyond this quarter, simply can't grasp. 

All that matters is to keep the music playing one more minute, then another.  Markets must paint tape and close green...

The whole market / economy is like a swimmer who has set off at a 50m sprint pace and is now miles out to sea and still trying to sprint although clearly exhausted and thrashing about...those (like Stockman) who are trying to figure out how the swimmer can get back to shore simply don't get it...the swimmer never intends to return to shore but simply sprint faster out to sea as long as possible and explain eventually the swimmer will hit land on the "other side" (unknowable, un-quantifiable "other side"). 

Keynsianism is simply another religion based on blind faith twisted for the high priests benefit and ZH'ers and Stockman, et al. are the atheists in temple of the zealots.

Fri, 09/30/2011 - 12:41 | 1726266 Schmuck Raker
Schmuck Raker's picture

David Stockman for President!

Fri, 09/30/2011 - 14:06 | 1726695 Reform1776
Reform1776's picture

Roemer - Stockman 2012

Fri, 09/30/2011 - 12:42 | 1726271 False Capital
False Capital's picture

David Stockman - "“I invest in anything that Bernanke can’t destroy, including gold, canned beans, bottled water and flashlight batteries."

Sounds like he reads ZH ;)

Fri, 09/30/2011 - 12:53 | 1726322 SheepDog-One
SheepDog-One's picture

Dont forget to buy more ammo as well Mr Stockman.

Fri, 09/30/2011 - 14:08 | 1726704 Reform1776
Reform1776's picture

If so, he must have missed the newscaster linked on here a few days ago explaining how gold was backed by the US Dollar. It was very comforting. /sarc

Fri, 09/30/2011 - 15:44 | 1727149 Silverdes
Silverdes's picture

No, you misunderstood; gold is backed by nothing, which is why it is worthless. The US dollar, on the other hand, is backed by the US government, which is why it has value. Get it? This is why you are a financial reporter, because these concepts are so sophisticated, and we need knowledgeable reporters to break it down into manageable chunks for us.

Fri, 09/30/2011 - 12:46 | 1726283 nah
nah's picture

blah blah blah government can ignore the people longer than money


Obama 2012 ! ! !

Fri, 09/30/2011 - 12:49 | 1726303 Absalon
Absalon's picture

There are three fundamental policy failures in the United States.  The failure to confront Asian merchantilism.  The failure to confront medical costs.  The deliberate decision by the Bush administration to bankrupt the country as a way to squeeze social spending. They have all been a long time coming to a head.

Fri, 09/30/2011 - 13:16 | 1726460 PivotalTrades
PivotalTrades's picture

The only failure was the failure to eradicate socialist mentality and indoctrination of the country begun by FDR and perpetuated by the Democrats who preach that Government is the solution.

Fri, 09/30/2011 - 13:21 | 1726486 NotApplicable
NotApplicable's picture

Blah, blah, blah, Tooth Fairy.

The fundamental failure is having expectations that the organized crime syndicate d.b.a. government has the capacity, let alone the ability to solve social problems (and that's not even getting into whether they would even desire to, when they can use the failure to create the next mandate for action).

There comes a time in life to put away childish things.

Fri, 09/30/2011 - 14:14 | 1726731 dr.charlemagne
dr.charlemagne's picture

u don't have the faintest idea what you are talking about

Sat, 10/01/2011 - 19:03 | 1729786 BigJim
BigJim's picture

...The failure to confront Asian merchantilism...

And how, pray tell, would the Asians practice their 'mercantalism', if they didn't have trillions of USD-denominated government bonds to buy to soak up all the currency they create to peg their exchange rate? When the Asians stop buying, the Asians stop lending. THAT is why The Jeethner never gets heavy with China.

Fri, 09/30/2011 - 12:52 | 1726320 TheEmperor
TheEmperor's picture

"...As far as I’m concerned, Bernanke is the monetary Darth Vader. He has destroyed the bond market. Because fundamentally, in a healthy capitalist system, the interest rate in the money market and in the longer-term capital market is the price of money and the price of capital. And if the pricing system isn’t working, if it’s been totally crushed, disabled, manipulated, rigged, medicated, everything that the Fed has done with QE1, QE2, zero interest rates, Operation Twist - all the rest of this insanity.."

<incessant cackling>

The Emperor: Yes, I am sending my apprentice Darth Bernanke.  He will 'deal' with you, and we will have peace.

Fri, 09/30/2011 - 12:54 | 1726324 NoTTD
NoTTD's picture

Stockman appeared on CNBC this AM (9/30) and repeated most of this.  The three hosts (I don't usually watch CNBC so do not know who they were; just stopped while surfing because I saw Stockman.) actually laughed at parts of it and demanded "optimism" from him.  He declined.  Clearly, they were not buying it.

Fri, 09/30/2011 - 13:07 | 1726410 hambone
hambone's picture

Watch the Achuthan interview by the same CNBCialis hosts...angry w/ ECRI for bringing reality to their Disneyfuckingland world.

Fri, 09/30/2011 - 12:57 | 1726338 unununium
unununium's picture

Stockman: "Why would they think at the Fed that with the economy as sick as it is, the housing market as damaged as it is, that if you could get thirty basis points more on the long-term mortgage rate that somehow this is going to make everything better?"


Fri, 09/30/2011 - 13:48 | 1726605 fyrebird
fyrebird's picture

Answer: They don't actually think that at the Fed. They are just playing games, pretending that they have a plan to raise this or lower that or move something else. It's just kicking the can, buying time, sowing confusion, anything to get in another quarter of bonuses at the TBTB.

And then some random day it will all unravel. A few bankers will jump from windows, but the rest will have a laugh and tell us losers to fucking fuck the fuck off, and thanks for the trillions.

It's okay until it isn't okay anymore and then there be monsters.

Fri, 09/30/2011 - 13:10 | 1726342 itchy eyes
itchy eyes's picture

Another phrase worth emphasizing with bold letters:  "...the demographic time bomb of this huge generation retiring."  Tick, Tick, Tick...

Fri, 09/30/2011 - 14:05 | 1726692 sgt_doom
sgt_doom's picture

I think you're ignoring (although I appreciate the Peter G. Peterson/Peterson Institute mindless mindset) the fact of skyrocketing unemployment among the youngest and oldest in the American economy.

Relatively few actually have pension exposure, and most of those are G-workers.

Don't worry, with Peterson's foundations and institutes, and all the other ultra-rightwingers, having promoted the offshoring of Amerika, there's really little to worry about.....

....other than it once required one barrel of oil to recover hundreds of barrels, while today it requires one barrel of oil to recover only three barrels....

Fri, 09/30/2011 - 13:00 | 1726359 mendigo
mendigo's picture

He's saying that it will take a long time to "pay off" these debts.
It seems to me that that is not a real option because our chance of paying our present debt are similar to Greece's - from what the smart guys say. Question is how long do we suffer before we book the loss - Japan has set the benchmark - as usual.

Fri, 09/30/2011 - 14:06 | 1726698 sgt_doom
sgt_doom's picture

Excellent point, mendigo, the fact that the banksters peddled hundreds of trillions of dollars in worthless credit derivatives indicates there's going to be many years worth of debt to go around.....

Fri, 09/30/2011 - 13:02 | 1726368 loveyajimbo
loveyajimbo's picture

This guy would make a better President than all of the current clowns running, except for my guy PAUL.  maybe a VP under Paul or Christie?  His smarts are just what we need right now.

Fri, 09/30/2011 - 13:09 | 1726420 JohnFrodo
JohnFrodo's picture

We have had 25 great magnificant years, if we have 24 bad ones, WINNING!

Fri, 09/30/2011 - 13:17 | 1726463 disabledvet
disabledvet's picture

I count "the end" when Janis Joplin and the Grateful Dead hit paydirt myself. At that point we all knew "sex drugs and rock and roll"'was no mere slogan. I'm still awaiting David Stockman's reply to this actually.

Fri, 09/30/2011 - 13:17 | 1726464 ThirdCoastSurfer
ThirdCoastSurfer's picture

If we are 3x over leveraged to acceptable debt, how is the continual issuance of government debt supposed to ever decrease the ratio? If only by inflation, then get on with it already & raise the Fed rate! 

Keynesian economics probably works great when the money you flood the economy with isn't debt but prior savings. 

Fri, 09/30/2011 - 13:21 | 1726483 unununium
unununium's picture

David Stockman for Secy. Treas.  Please.

Fri, 09/30/2011 - 13:37 | 1726562 fyrebird
fyrebird's picture

It is some complex combination of heroic and horrible and humorous that these words would come from a Reaganite.

We are doomed precisely because we have been stupid. And waiting in the gray, blurry shadows at the edge of epic stupidity there will be monsters.

Fri, 09/30/2011 - 13:42 | 1726582 TheAlchemist
TheAlchemist's picture

I love reading the truth.  It's becoming as rare as unicorn tears.

Fri, 09/30/2011 - 13:48 | 1726609 YesWeKahn
YesWeKahn's picture

Can someone send a copy of this to Bernanke?

Fri, 09/30/2011 - 14:03 | 1726683 fyrebird
fyrebird's picture

Feh. The Beard has lunch wth Stockman twice a year, at least. They have a nice laugh over $200/plate pasta.

Chain your expectations to the real world. You'll be glad you did. Because outside of the knife edges of reality there will be monsters.

Fri, 09/30/2011 - 14:01 | 1726667 NO1HOME
NO1HOME's picture

The Artisan Proroganda Class Citizen will have sway in awaking the wetico to the revolution.

Fri, 09/30/2011 - 14:05 | 1726690 whiskeyjim
whiskeyjim's picture

We are watching the decline of a civilization. Read Tainter. And Olson.

TARP. worst. legislation. ever.

Until they bail out the Eurozone. All of Europe will implode in the next 20 years. Hopefully India and China will take up the demand slack.

Fri, 09/30/2011 - 14:08 | 1726705 Seal
Seal's picture

Let’s all give credit to Wall Street’s best newsletter by Ray DeVoe Jr. of Legg, Mason, et al. and his 2003 story “Most Dangerous Game.” Ray likens Greensp-anke and the powers-that-be to the mad General Zaroff and his gigantic deaf servant Ivan. Zaroff has re-arranged the warning lights on the shoals of Ship-Trap Island Island so that more ships will wreck and he will have better hunting of survivors. Price discovery, destroyed by the Fed, has shipwrecked the American capitalist experience on the shoals of mis or dys-information. Some of these mis-es include the birth-death model of ‘employment gains’, bogus CPI calculations, purposeful intervention in the markets to paint the averages – akin to driving the wrong way down one-way streets while turning the ‘one way’ signs upside down to point in your direction, debt monetization by fictitious entities, suppression of commodities prices which normally act as arbiters of value outside a world of paper, etc.

Fri, 09/30/2011 - 14:15 | 1726725 brianshell
brianshell's picture

As written above, the gold probably already left before Nixon ordered us off it. The gold was intentionally exited by the banksters. Stop and think. If this whole process were intentional, to what end? Who would stand to benefit by placing virtually all mankind into debt? To whom are we in debt? The banksters. The only way out is to pass a constitutional amendment to outlaw federal borrowing. Outlaw fractional reserve banking. Mandate government to (create) debt free money. One idea Still talks about is the re-emergence of states' authority to authorize money (creation). This would take the temptation of abuse out of the federal hands. Lastly, we are battling the age old trap of looking for a silver bullet. We want to do one thing and then turn our back on the ongoing process. This is exactly where the banksters slide in and begin to manipulate us. Even if we are watchful after repairing the system, our children and grand children must learn anew that the devil still lurks in the shadows and will be ever waiting for a chance to reassert their grip in money.

Fri, 09/30/2011 - 14:21 | 1726743 bid the soldier...
bid the soldiers shoot's picture

"I think that (Peak Oil) is being totally ignored. It is another one of the headwinds or constraints that we’re facing along with the demographic time bomb of this huge generation retiring...the headwinds are truly frightening."

There he was totally right.

"He identifies the root cause as the intentional over-leveraging of world economies by central planners in a misguided effort to enjoy growth without consequence."

There he was only half right.

"It was the intentional over-leveraging of world economies by central plannerers," but not to ENJOY GROWTH WITHOUT CONSEQUENCE. ("It gives a lovely light!")


The truth ... is a beautiful* and terrible** thing and should therefore be treated with great caution.

J. K. ROWLING, The Sorcerer's Stone


 * The end of man's inhumanity to man, after one last burst?

** res ipsa loquitor


Fri, 09/30/2011 - 14:34 | 1726817 PulauHantu29
PulauHantu29's picture

<<To fully unwind the bubble, home prices need to fall another 20 percent, says Joshua Shapiro, chief economist at MFR Securities. “As home prices decline further, there will be continued impetus for household deleveraging in order to offset the effect of lower home prices and probably lower equity values on balance sheets,” he says.>>



Fri, 09/30/2011 - 14:34 | 1726819 Ghostbusters
Ghostbusters's picture

this dude is a tool, giving up his two cents to the very few who will listen. 

interesting, Stockman is a member of the CFR, "served" under Reagan(, and has been in bed with Salomon Bros, Blackstone, and others.... this guy trying to spread the word on the truth or are they just stating the obvious again with no "change" to come from it?

Is he in bed with Main Street or Wall Street, well let's see he lives in Greenwich and works in Stamford...

He's a swindler, but then they all are and now he is going to help us?

He is well decorated throughout the last thirty years, benefited directly from this system, and now he is coming to "Jesus?"  Please...this is smoke and mirrors.  Here is another guy who is part of the problem and now he is trying to preach fiscal prudence?  Please this is the guy that said, "[spending increases and tax cuts do not cause deficits.]" 

Fri, 09/30/2011 - 14:37 | 1726835 ArsoN
ArsoN's picture

Always kinda liked what Stockman had to say but this goes beyond good.  Phenomenal articulation of so many core issues.  Bravo!

Fri, 09/30/2011 - 14:40 | 1726857 Lazane
Lazane's picture

Non believers who stupidly remain in the death clutch of Keynes, the party is over, economic and financial repression is upon us and is about to morf into bigger than life creature feature. take less than an hour to listen to Stockman and you will understand why we are trapped in an economic hole with sides that are beginning to cave in around us.

Fri, 09/30/2011 - 15:34 | 1727101 sasebo
sasebo's picture

Francis Bacon said, "The great end (purpose) of life is not knowledge but action"

This is the basic reason I'm voting for Dr. Ron Paul. He's the only one who can fix ANY of the problems addressed by David Stockman, et. al. Also, he's the only one who has walked the walk. All the others are just talking the talk.

Fri, 09/30/2011 - 15:54 | 1727196 Cursive
Cursive's picture

Deficeits without tears...great title for book on the economic filth of modern finance.

Fri, 09/30/2011 - 17:22 | 1727553 Grand Supercycle
Grand Supercycle's picture

S&P500 updated chart at blog shows price converging towards apex.

It should drop out of triangle and resumption of downtrend.

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