David Stockman: "The Capital Markets Are Simply A Branch Casino Of The Central Bank"

Tyler Durden's picture


A selected excerpt by David Stockman from his just released interview with Alex Daley of Casey Research:

This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they're doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank. And they will keep laughing all the way to the bank on Wall Street until they lose confidence in the Fed's ability to keep the yield curve pegged where it is today. If the bond ever starts falling in price, they unwind the carry trade. Then you get a message, "Do not pass go." Sell your bonds, unwind your overnight debt, your repo positions. And the system then begins to contract... The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

From Casey Research

The New Economic Collapse Video: It makes uncomfortable but urgent viewing.

When Casey Research Chief Technology Investment Analyst Alex Daley met former Reagan Budget Director David Stockman to talk about the economy and where he sees it leading taxpayers investors and savers in the near future, he got some very intriguing insights from a man who served right at the heart of the US federal government.

True, some if it makes for uncomfortable watching, but the message is critical if you want to keep your assets safe in what David calls calls "the great unwind."

Watch the video and secure your money.


Full Transcript:

Interviewed by Alex Daley, Chief Technology Investment Strategist, Casey Research

Alex Daley: Hello. I'm Alex Daley. Welcome to another edition of Conversations with Casey. Today our guest is former Reagan Budget Director and Congressman David Stockman. Welcome to the show, David.

David Stockman: Glad to be here.

Alex: So we're here in Florida talking at the Recovery Reality Check Casey Summit. What do you think: is the United States economy on the road to recovery?

David: I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can't get up off the mat.

We're doing all the wrong things. We're adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We're not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.

Alex: You paint a very stark picture, but if people just stop spending, start saving, won't companies like Apple see their earnings hurt? Won't the stock market then start to tumble, people's net worth fall? Isn't that a negative cycle that feeds on itself?

David: Sure it does, but you can't live beyond your means because it's pleasant. It's not sustainable. Clearly the level of debt that we have is not sustainable. We have a whole generation – the Baby Boom – that's about ready to retire, and they have no retirement savings. We have a federal government that is bankrupt, literally. Its [debt is] $16 trillion and growing by a trillion a year. Something's going to give. We can't pay for all these entitlements. There won't be the revenue generation in the economy to do it.

So as a result of that, we are deluding ourselves if we think we can just continue to spend. Look at the GDP that came out in the first quarter of this year. It was only 2.2%. Most of it was personal consumption expenditure, and half of that was due to a drawdown of the savings rate, not because the economy was earning more income or generating more real output. It was because of a drawdown of savings. That is exactly the wrong way to go – an indication of how severe the crisis is going to be.

I'm not saying the economy should stop spending entirely. I'm only saying you can't save 3% of GDP and spend 97% if you are going to get out of this fix. As the savings rate goes up both in the public sector (which means reduction of spending and the deficit) and the household sector (to seriously reduce debt burden, which has not really happened) we are going to, on the margin, spend less, save more. It will slow down the economy. It will undermine profits, I agree. But profits today are way overstated. They're based on a debt-bloated economy that isn't sustainable.

Alex: So we can only live beyond our means for so long, as any family knows.

David: Yes.

Alex: Now, the government can reduce its expenses at any time by simply reducing spending, and it can reduce debt if it brings in more tax revenue. That's austerity – I think that's how they refer to it. But won't austerity cause massive joblessness? Won't there be millions more people in this country not receiving a paycheck?

David: Yes, but the critique, the clamoring and clattering that you hear from the Keynesians (or even mainstream media, which is pretty clueless economically) that austerity is bad forgets the fact that austerity isn't an elective course. Austerity is something that happens to you when you're broke. And yes, it is painful and spending will go down and unemployment will go up and incomes will be impaired, but that is a consequence of the excess debt creation that we've had for the last thirty years. So austerity is what happens when you break the rules.

And somehow we have this debate going on. They're making a mistake. They chose the wrong strategy. Do you think Greece chose the wrong strategy with austerity? No. No one would lend them money. That's why they ended up in the place they were. Do you think that Spain today is teetering on the brink because they said, "Oh, wouldn't it be a good idea to have austerity?" No, they had a gun to their head. They were forced to do this because the markets would not continue to lend, and even now their interest rate is again rising. The markets are losing confidence, and unless the ECB prints some more money and bails them out some more, they are going to have austerity. So the austerity upon us is the backside of the debt supercycle we had for the past thirty years. It's not discretionary.

Alex: Austerity hasn't been forced upon us yet. The dollar is up, people are continuing to buy Treasuries – both nations and banks are buying Treasuries. To all extents and purposes, people are continuing to show massive confidence in the US government, lend it money at extremely cheap interest rates, and letting it build up its debt.

So you are advocating that, unlike Greece or Spain taking it to the edge and having austerity forced on them, we should volunteer for austerity today? Instead of just kicking the can down the road and living high a little bit longer, until the bill collectors finally come knocking? Why go today, why start austerity now instead of doing what Greece did and going as long as you possibly can?

David: Because Greece is a $300 billion economy. Tiny. A rounding error in the great scheme of things. It's – last time I checked – about eight and a half months' worth of Walmart sales. Okay? That's a little different than when you have the $15 trillion heartland of the world economy, and the $11 trillion Treasury market which is at the center of the whole global financial system buckle and falter. That's the risk you're taking if you say, "Mañana. Kick the can; let's just wait for something good to happen."

This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they're doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank. And they will keep laughing all the way to the bank on Wall Street until they lose confidence in the Fed's ability to keep the yield curve pegged where it is today. If the bond ever starts falling in price, they unwind the carry trade. They unwind the repo, because then you can't collect 190 basis points.

Then you get a message, "Do not pass go." Sell your bonds, unwind your overnight debt, your repo positions. And the system then begins to contract – exactly what happened in September and October of 2008. Only, that time it was an unwind to the repo on mortgage-backed securities and CDOs and so forth. That was a minor trial run for the great unwind that is going to happen when the Treasury market is finally shattered with a lack of confidence because, on the margin, no one owns a Treasury bond: they just rent it on borrowed money. If the price starts falling, they'll get out of that trade as fast as they got out of toxic CDOs.

Alex: So when people run away from the US, they will run away all at once.

David: Well, if they run away from the Treasury, it sends compounding forces of contagion through the entire financial system. It hits next the MBS and the mortgage market. The mortgage market then scares the hell out of people about the housing recovery, which hasn't happened anyway. And if there isn't a housing recovery, middle-class Main-Street confidence isn't going to recover, because it is the only asset they have, and for 25 million households it's under water or close to under water.

Alex: We saw something much like that in 2008. All the markets correlated. Stocks went down. Bonds went down. Gold went down with them. It sounds like what you're saying is that the Fed is effectively paying bankers to stay confident in the Fed, and that the moment that stops – either because the Fed stops paying them or something else shakes their confidence – this all goes down in one big house of cards?

David: Yes, I think that's right. The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

Alex: Last night you told our audience that if you were elected president, the first thing you would do is quit. Or at least demand a recount, I believe were your words, which I thought was telling. Are you saying there are no policy changes we could make today that would get us out of this? Or at least that wouldn't get you assassinated?

David: Yeah, there is a paper blueprint. People who believe in sound money and fiscal responsibility, that you create wealth the old-fashioned way through savings and work and effort and not simply by printing money and trading pieces of paper – there is a plan that they could put together. One would be to put the Fed out of business. You don't have to "end the Fed," although I like Ron Paul's phrase. You have to get them out of discretionary, active, day-to-day meddling in the money markets. Abolish the Open Market Committee.

The Fed has taken its balance sheet to $3 trillion. That's enough for the next 50 years. They don't have to do a damn thing except maybe have a discount window that floats above the market, and if things get tight, let the interest rate go up. People who have been speculating will be carried out on a stretcher. That's how they used to do it. It worked prior to 1914. That's the first step: abolish the Open Market Committee. Abolish discretionary monetary policy.

Let the Fed, if you're going to keep it – I don't even know that you need to do that, but if you are going to keep it – be only a standby source. As Badgett said (Walter Badgett, the great 19th-century British financial thinker): provide liquidity at a penalty rate to sound collateral.

Now, that's what J.P. Morgan did in 1907, in the great crisis of 1907, from his library. He didn't have a printing press. He didn't bail out everybody. He didn't do what Bernanke did and say: "Stop the presses, freeze everybody, and prop up Morgan Stanley and Goldman Sachs and all the rest of the speculators." The interest rate, the call-money interest rate, which was the open-market interest rate at the time, some days went to 30, 40, 70% – and they were carrying out the speculators left and right, liquidating margin debt, taking out the real estate speculators. Eight or ten railroads went bankrupt within a couple of months. The copper magnates got carried out on their shields.

This is the only way a capital market can work, but it needs an honest interest rate. And we have no interest rate, so therefore we solve nothing and we have the kind of impaired, incapacitated markets that we have today. They're very dangerous, because they're all dependent on twelve people. It is what I call "the monetary Politburo of the Western world," and they are just as dangerous as the Politburo in Beijing or the Politburo of memory in Moscow.

Alex: A twelve-person Open Market Committee determining the future of our economy by manipulating rates. Sounds like central planning to me.

David: It is. They are monetary central planners who are attempting to use the crude instrument of interest-rate pegging and yield-curve manipulation and essentially buying debt that no one else would buy, in order to keep this whole system afloat. It's Ponzi economics. Anybody who had financial training before 1970 would instantly recognize this as Ponzi economics. It is only because of the last twenty years we got so inured to prosperity out of the end of a printing press and massive incremental debt that people lost sight of the fundamental principles of sound money, which, there's nothing arcane about it. It's just common sense. It is not common sense to think that 50, 60, 70% of all the debt that's being created by the federal government can be bought by the Federal Reserve, stuffed in a vault, and everybody can live happily ever after.

Alex: So the government has certainly put us in a precarious position, but I don't think they alone have put America in this position, have they? You mentioned consumer debt becoming a major burden on the economy. How do we shed ourselves of that? I mean, the federal government can repudiate its debts if we walk away from it. We might see a few wars or something from that. It could inflate its way out of it. It can tax its way out of it. But how do households get out from under the debt burden that they have today?

David: Well, it's very tough, and they were lured into it by bad monetary policy when Greenspan panicked in December 2000. The interest rate was 6.5%; we had an economy that was threatened by competitors around the world. We needed high interest rates, not low. He panicked after the dot-com crash, and as you remember in two years they took the interest rate all the way down to 1%, and they catalyzed an explosion of mortgage borrowing, which was crazy.

When they cut the final rate down to 1% in May, June 2003, in that quarter – the second quarter of 2003 – the run rate of mortgage borrowing was $5 trillion at an annual rate. That was nuts! There had never been even a trillion-dollar annual rate of mortgage borrowing previously. In that quarter the run rate was $5 trillion, 40% of GDP. Why? Because the Fed took the rate down to 1%. Floating-rate product got invented everywhere. Anybody that had a pulse was being given mortgage loans by the brokers. The mortgage brokers didn't have any capital or funding. They went to Wall Street. They got warehouse lines, and the whole thing got out of control. Millions of households were lured into taking on debt that was insane, and now we have a generation of debt slaves.

There are 25 million households in America who couldn't move if they wanted to, because their mortgages are under water. They cannot generate a down payment and the 5% or 6% broker fee that you need to move. So we've got 25 million households immobilized, paralyzed, and worried every day about when they are going to lose property, because of what the Fed did. It's a terrible indictment.

Alex: Mobility itself is the American dream, isn't it? It's the ability to pick up and find work and then move and do all that. So now we have people who are slaves to their debt. How do we get ourselves out of this? Is this just a matter of personal financial discipline? Is there a policy move that can happen?

David: It's policy. If we don't do something about the Fed, if we don't drive the Bernankes and the Dudleys and the Yellens and the rest of these lunatic money-printers out of the Federal Reserve and get it under the control of people who have at least a modicum of sanity, we are just going to bury everybody deeper.

It's unfortunate. The American people are as much a victim of the Fed's massive errors as anything else. People were not prudent when they took on debt at 100% of the peak value of their property at some moment in 2004 and 2005. They were lured into it. But now we're stuck with something that didn't need to happen.

Alex: The Federal Reserve was founded in 1914, and it saw America through World War I, World War II. It saw America through Vietnam, saw America through the biggest boom in the economic history of the world. Yet now, today, you are calling for the abolishment of the Fed. Wasn't the Fed here the entire time that America was a prosperous, growing, wealthy, technology-driven nation? What's changed?

David: The greatest period of growth in American history was 1870-1914 – the Fed didn't exist. Right after 1870, when we recovered from the Civil War we went back on the gold standard. It worked pretty well. World War I was a catastrophe for the financial system. The Fed financed it, but I don't give them any credit for that, okay? We shouldn't have been in that war. It was a stupid thing to get involved in. But once we got involved in it, the Fed printed money like crazy, it facilitated borrowing, set the groundwork for the boom of the 1920s and the collapse of the 1930s.

Even then though, we had great minds who coped with reality in a pragmatic way in the Fed. Even Marriner Eccles wasn't all that bad. He stood up to Truman in 1951, when Truman wanted to force the Fed to continue to peg interest rates at 2% or 2.5% when inflation was 5%. Then we had William McChesney Martin: brilliant, pragmatic. He wasn't some kind of gold-standard guy in a pure sense, but a pragmatic guy who understood that prosperity had to come out of private productivity, out of investment, out of risk-taking, and the Fed had to be very careful not to allow speculation to start or inflation to get ignited. In 1958, he invented the phrase, "The job of the Fed is to take the punchbowl away." And we had a small recession. Six months after the recession was over he was actually raising the margin rate on the stock-market loans in order to quell speculation, and raising interest rates so that the economy didn't start to inflate again.

Now that was the regime we had until, unfortunately, Lyndon Johnson came along with his "guns and butter," took William McChesney Martin down to the ranch, and beat the hell out of him and forced him to capitulate. But here's the point I would make: In 1960, at the peak of what I call the golden era – the twilight of fiscal and financial discipline – we had $30 billion on the balance sheet of the Fed. It had taken 45 years to build that up. Then, as they began to rapidly expand the balance sheet of the Fed during the inflation of the '70s and the '80s, even then it took us until September 2008 – the Lehman collapse – to get to $900 billion. Had the balance sheet only grown at 3%, which is what the capacity of the economy to grow, I think, really is, it would have been $300 billion, so they were overshooting.

Alex: We're three times where we should be.

David: Where we should have been by the Lehman crisis event. In the next seven weeks, this crazy lunatic who's running the Fed increased the balance sheet of the Fed by $900 billion, in seven weeks. In other words, they expanded the balance sheet of the Fed as rapidly in seven weeks as it had occurred during the first 93 years of its existence. And that's not all, as they say on late night TV: in the next six weeks they added another $900 billion. So in thirteen weeks they tripled the balance sheet of the Fed.

Alex: Wow, that's an incredible…

David: So no wonder we are in totally uncharted waters, and it's being run by people who are clueless as to how to get out of the corner they've painted this country into. They really ought to be run out of town on a rail.

Alex: I think you'd find that a lot of our viewers would agree with you on that one. You know, the average American is suffering. It looks like the average American is going to have to suffer more to get us out of this, but it seems like the only thing the Fed is interested in these days is propping up the stock market. Why is that? Where does that come from?

David: The Fed has taken itself hostage with this whole misbegotten doctrine of wealth effects, which was created by Greenspan. In other words, if we get the stock market going up and we get the stock averages going up, people feel wealthier, they will spend more. If they spend more, there is more production and income and you get a virtuous circle. Well, that says you can create wealth through speculation. That can't be true, because if it is true, we should have had a totally different kind of system than we've had historically.

So they got into that game, and then the crisis came in September, 2008. They panicked and pulled out the stops everywhere. As I said, tripled the balance sheet in thirteen weeks, [compared to what] they had done in 93 years. They are now at a point where they don't dare begin to reduce the balance sheet, begin to contract, or they'll cause Wall Street to go into a hissy fit. They are afraid to death of Wall Street going into a hissy fit, so essentially, the robots and the boys and girls and the fast-money traders on Wall Street run the Fed indirectly.

Alex: So, in the 1960s, the Fed is taking away the punchbowl. Sounds like in 2010 the Fed is the one adding the alcohol. They are afraid to stop, lest everybody riot.

David: Yes, they got the party going, and they're afraid to stop it. As a result of that you have a doomsday machine.

Alex: At some point we are going to be forced to stop. Market forces will kick in and Europe and China and India will stop lending us money.

David: Yes. As I say, when the crisis comes in the Treasury market, it will be the great margin call in the sky. They'll start unwinding all of the carry trades, all of the repo. Asset prices generally will be affected, because this will ricochet and compound through the system.

Alex: When does this happen?

David: People looked at the housing market and the mortgage market way back in 2003 – there were some smart people looking at this. They looked at the run rate of gross mortgage issuance, the $5 trillion I was talking about, and said: "This is insane, this is off the charts, this is so far beyond anything that has ever happened before, something bad is going to come of this." It's obvious, if you pour debt into markets… I mean a lot of people leveraged 98%, or whatever they were doing at the time with so-called mortgage insurance, and just high loan to value ratios. They were driving up prices, and so there was a housing-price boom going on. It was sucking the whole middle class into speculation. So that's the nature of the system, and now they don't know how to unwind it.

Alex: That's a pretty stark picture. So as an individual investor, what are we to do? How do we protect ourselves in this type of situation? Should I be owning bonds and staying out of stocks? Should I be owning stocks?

David: No, I would stay out of any security markets. These are unsafe markets at any speed. It's all tied together. As I was saying when the great margin call comes and they start selling the Treasury bond, they'll take everything else with it. Real estate is priced off Treasuries. Mortgaged-backed securities are priced off Treasuries. Corporates are priced off Treasuries. Junk bonds are priced off Treasuries. Everything. The stock market will go into a panic. We don't know when the timing will come – we've never been in a world where there is $15 trillion worth of central-bank balance sheets, like we have today. The only thing I think you can conclude is preservation is the only thing you are about as an investor. Forget about yield. Forget about return. Just keep yourself liquid and preserve your capital, because you can't predict the day when, as I say, the great margin call in the sky comes down.

Alex: So if it's not about coming out ahead, it's about coming out not behind everybody else. It's just losing a little less. What's the most effective way to do that? Do you want to hold cash? Alternative options?

David: Yes. I don't even think there's nothing wrong with owning Treasury bills. I mean, if you want to get, for a one-year Treasury, what is the thing now? Twenty basis points or something?

Alex: So when the great Treasury crash comes, I should own Treasury bills?

David: Well, it doesn't mean the price of the Treasury is going to crash, no.

Alex: Okay, so we are just going to see interest rates skyrocket on new issues. The US government is not going to be able to borrow.

David: That's why you're short. If you're in a thirty-day piece of paper, you're not going to lose principal.

Alex: What happens to the dollar in all of this? If I'm holding dollar denominated assets –?

David: Well, the dollar, in theory, people would think is going to crash. I don't think it is because all the rest of the currencies in the world are worse.

Alex: So once again, America is not that bad off.

David: Well, we're bad off because when the financial markets reprice drastically, it's going to have a shocking effect on economic activity. It's going to paralyze things. It's going to finally cause consumption to come down. It's going to cause government spending to be retracted.

You know, the Keynesians are right. Borrowing does add to GDP accounts. But it doesn't add to wealth. It doesn't add to real productivity, but it does add to GDP as it's calculated and published – because GDP accounts were designed by Keynesians who don't believe in a balance sheet. So they said, "If the public sector and the household sector are borrowing, let's say, $10 trillion next year, run it though GDP, you'll get a big bump to GDP." But sooner or later your balance sheet will collapse. They forgot about that one. So my point is that we've gone through a thirty-year expansion of the balance sheet, an artificial growth in GDP; now we're going to have to be retracting the collective balance sheets. That means that GDP will not grow. It may even contract, and no one's prepared for that.

Alex: So the economy will collapse. The dollar will be okay, because we still need a medium of exchange and the dollar is the least-bad currency in the world. How does gold fit into the picture? Do you think that gold is a good asset?

David: Yes, I think that gold is a good asset. It's the only currency that anybody is going to believe in after a while.

Alex: Okay, so maybe hold that as an insurance policy. Do you own gold yourself?

David: Yes, as an insurance policy.

Alex: Where else do you invest in today?

David: I'm preserving capital. I'm in cash. I don't think the risk of the system is worth it.

Alex: So you are practicing what you preach, 100%?

David: Yes.

Alex: That's great. It's good to hear. This is excellent advice for our subscribers as well, to consider that there's a lot of potential energy built up in the system. You've articulated it well, a lot of painful policy moves ahead of us, and probably something that makes 2008 look like a preview, if you will.

David: It was just a warm-up.

Alex: Just a warm-up. Thank you very much.

David: Thank you.

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Tue, 07/24/2012 - 19:53 | 2647538 Reese Bobby
Reese Bobby's picture

This is what you get when you piss off a crook.  At least he is entertaining, and seemingly honest now...

Tue, 07/24/2012 - 20:05 | 2647572 Tippoo Sultan
Tippoo Sultan's picture

"This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed..."

"Medicated rates" indeed -- a consumption-driven economy on poppers...coming hard off the high.

Tue, 07/24/2012 - 20:09 | 2647588 stocktivity
stocktivity's picture

"This market isn't real"

...or to put it in my terms...It's all Bullshit!

Tue, 07/24/2012 - 20:23 | 2647613 cranky-old-geezer
cranky-old-geezer's picture




Where's the risk in it?  Borrow at 0% and buy treasuries yielding 2%?  Where's the risk?

It's all rigged in banks' favor.   That's not a casino.


Tue, 07/24/2012 - 20:28 | 2647621 Fred Hayek
Fred Hayek's picture

The dealer facing you on the other side of the blackjack table doesn't seem to be facing much risk either. He's in a casino. You just have to know who's on which side of the felt covered table.

Tue, 07/24/2012 - 21:03 | 2647675 TheSilverJournal
TheSilverJournal's picture

Every major country in the world, except China, is unable to pay its bills without going deeper into debt. All while interest rates are at dead nuts lows. Low interest rates should only be earned on the safest of plays, but loaning to a broke country is clearly not a safe play. Once broke, a default can occur at any time, or it can be delayed until hyperinflation. That’s it. And once the whirlwind effect of inflation pushing up interest rates starts, the existence of the major currencies of the world, except the Chinese Yuan, will be measured in months.


Tue, 07/24/2012 - 21:29 | 2647726 Soul Train
Soul Train's picture

Stockman is right.

And I'll tell you what else. The FEDERAL RESERVE are spin-meisters who use certain segments of the financial media to do their spin work.

Read this one - it reeks of spin  http://www.nytimes.com/2012/07/25/business/economy/fed-leaning-closer-to...

Tue, 07/24/2012 - 22:12 | 2647795 Careless Whisper
Careless Whisper's picture

 "...this crazy lunatic who's running the fed..."  (@22:10)  

Tue, 07/24/2012 - 22:42 | 2647840 markmotive
markmotive's picture

So are property markets...in fact anything tied to the cost of money. But I guess that's half the point.


15 most expensive cities in the world:


Tue, 07/24/2012 - 22:58 | 2647875 old naughty
old naughty's picture

Gambling is additive...

So racing, stocks, currencies, like ponds, lakes, and oceans are all about flow, of money. They are all part of the credit now.

Contracting though, even LV.

Tue, 07/24/2012 - 23:13 | 2647891 LetThemEatRand
LetThemEatRand's picture

Stockman is to truth as the Fed is to sound monetary policy.  It's like a crack dealer telling you that it's bad for you.  As you hand over the cash.  He's right, and no one at fault is going to jail.

Tue, 07/24/2012 - 23:57 | 2648007 AldousHuxley
AldousHuxley's picture

lottery is tax on stupid

casino is tax on fools

stock market is tax on greed


Wed, 07/25/2012 - 00:03 | 2648019 LetThemEatRand
LetThemEatRand's picture

400 individuals have more wealth than half of America.  The Lotto is chump change to these fucks.  They already won the class war.

Wed, 07/25/2012 - 00:22 | 2648049 TheSilverJournal
TheSilverJournal's picture

The class that owns silver will win the war.

Wed, 07/25/2012 - 00:16 | 2648040 The Monkey
The Monkey's picture

Stockman has a good argument, but then it just meanders off to a crashing of the treasury market. That is unlikely anytime soon.

What is more likely, is that the Fed blows another giant bubble. I would say we're getting there.

Wed, 07/25/2012 - 06:58 | 2648329 Benjamin Glutton
Benjamin Glutton's picture

here is Benny "the Bucks" Bernanke telling the world that the Banks bailed out AIG with printed money from their own deposits parked at the Fed Res. 60 minutes talky March 9th 2009.


about 1 minute plucked from the 2+ hour documentary 97% Owned.


Wasn't Stockman Reagan's trickle down architect credit whore who killed the peace dividend while enabling Star Wars?

Tue, 07/24/2012 - 20:39 | 2647641 Daily Bail
Wed, 07/25/2012 - 00:01 | 2648012 AldousHuxley
AldousHuxley's picture

how many of these kids live in homes where their parents voted for Bush (war) and lived large in houses they couldn't afford?


debt or not, most of them going to work for Chinese anyway so tell them to redo the video in Chinese.



Tue, 07/24/2012 - 21:16 | 2647694 taeonu
taeonu's picture

The "branch offices" are part of the casino.  They're the only one's that get to borrow from the discount window and then redeposit back at the Fed for a profit.  

Schmucks like you and me don't get that deal.  The banks borrow at around 0% from the Fed and we get to pay 20% on our credit cards.

Tue, 07/24/2012 - 22:37 | 2647837 ebworthen
ebworthen's picture

The risk is for any individual who has tried to save and invest.

People being held captive in pensions, IRA's, 401K's, or other attempts to be responsible.

Their assets are the butter that toasts the bankers bread; and they get the crumbs.

Tue, 07/24/2012 - 22:51 | 2647857 Yes_Questions
Yes_Questions's picture



My name is Dimary Prealer, and I'm gableholic.


Tue, 07/24/2012 - 23:07 | 2647893 rayduh4life
rayduh4life's picture

Uh, Cranky, isn't that the idea of a casino - things rigged in the houses (banks) favor?

Tue, 07/24/2012 - 21:21 | 2647707 Moon Pie
Moon Pie's picture

Other than that...things are looking up.  Giants v. Dallas opener in 43 days.  Yay!

Tue, 07/24/2012 - 21:32 | 2647733 azzhatter
azzhatter's picture

Cost of capital has to reflect the value of capital in an honest market. This is a fucking disaster and Ben Bernanke should be ass fucked by a clydesdale before being tried for treason

Wed, 07/25/2012 - 08:25 | 2648468 sessinpo
sessinpo's picture

You are so cruel!   You would really do that to a clydesdale?

Tue, 07/24/2012 - 20:52 | 2647663 Peter Pan
Peter Pan's picture

As they say, every saint has a past and every sinner has a future. I watched him and got a good historic overview which is crucial. What should be clear to readers s that not only is physical gold and silver an imperative but so is physical cash because when the fractional reserve system starts to fold I am not sure that lining up at the bank will serve any purpose.

Wed, 07/25/2012 - 05:31 | 2648272 cossack55
cossack55's picture

Depends on how many matches you have with you.

Tue, 07/24/2012 - 21:49 | 2647760 yrad
yrad's picture

I work for a major bank. I'm not in investments and I've never seen a portfolio. I'm just a guy who works with business accounts. Ive visited this site daily for a few months now and I have had a crash course on investor lingo and sentiment. It's educating. Fuck robottrader and Ben. Humorous...

There has been a lot of high dollar clients yanking cash. A lot... And they are putting it in pm. The conversations with them are all the same. Get out.... Many with Fed contacts (you can guess my city now.)

It's a joke around the office about my food storage project and gardening. I don't feel so crazy now. This shit is real.

I'm not nor have I ever been "doomsday." But if a bunch of ignorant, scared, hungry people are caught with their pants down, I won't be among them. Me and my wife will be fully loaded and fed.

Hello ZH. My name is yrad.

Tue, 07/24/2012 - 23:45 | 2647983 Anusocracy
Anusocracy's picture

Don't forget bottled alcohol for bartering.

Wed, 07/25/2012 - 00:37 | 2648077 RockyRacoon
RockyRacoon's picture

Telling folks that you are prepping wasn't your best move.   When things get rough you'll be seeing them banging on your front door.   Got ammo?

Wed, 07/25/2012 - 00:59 | 2648106 knukles
knukles's picture

He'll just fire up his generator to light up his neon "Beer Pussy & Ammo" sign.

(Missed the part about humility....)

Tue, 07/24/2012 - 22:07 | 2647782 luna_man
luna_man's picture



Yeah, may be a "crook", but,  boy he sure sounds like the man to right this sinking ship! 

Tue, 07/24/2012 - 23:46 | 2647986 HardAssets
HardAssets's picture

It would be freshing to have someone around who had a combination of intelligence w/ integrity, knowledge & respect for the US Constitution,  ability to communicate to the people, military knowledge/experience, and knowledge of Wall Street & banking (takes a crook to know what the crooks are up to ) - - - -

A combination of Thomas Jefferson, George Washington, and Joe Kennedy

Tue, 07/24/2012 - 23:56 | 2648006 yrad
yrad's picture

Ya, somebody like Ron Paul..oh wait

Wed, 07/25/2012 - 08:27 | 2648479 madcows
madcows's picture

Ron Paul would be great if he thought Iran shouldn't have the bomb.

The first obligation of the federal government is to protect me from my enemies, and Iran is enemy #1.

Tue, 07/24/2012 - 19:54 | 2647543 fonzannoon
fonzannoon's picture

The ten year is 2%? Not to nitpick but when was this interview done? He is a little off.

Tue, 07/24/2012 - 20:05 | 2647582 Dr. No
Dr. No's picture

"that's, that's nit-picking, isn't it?"

Tue, 07/24/2012 - 20:32 | 2647626 Jay Gould Esq.
Jay Gould Esq.'s picture

"Abolish the Open Market Committee."

Post tenebras, lux. +1.

Tue, 07/24/2012 - 21:06 | 2647682 Bananamerican
Bananamerican's picture

I think this is one of the best things I've ever read on ZH.

Cogent, concise, no B.S....it's going out to everyone i know....

Tue, 07/24/2012 - 20:07 | 2647583 AllWorkedUp
AllWorkedUp's picture

 Yeah he is. Ten-year hit below 1.4% today which means anyone who is buying is absolutely, certifiably insane. The sooner we start hanging these guys, the better.

Tue, 07/24/2012 - 20:21 | 2647606 CrashisOptimistic
CrashisOptimistic's picture

If you bought at 2%, you made some nice money price increased via the yield smashdown to 1.49%.

And if you buy at 1.49% you may make a TON of money down to -0.75%.

Welcome to relentless, grinding, perpetual deflation.

Tue, 07/24/2012 - 20:37 | 2647635 fonzannoon
fonzannoon's picture

welcome to bubble mania.

It seems to me what Stockman may be wrong about is the dollar. The day other countries force our hand is the day we really see what Bernanke is made of. If we think he is printing now wait till he is faced with total annihilation of the capital markets or hyperinflating our way out. Thats the choice that will have to be made.

Tue, 07/24/2012 - 21:17 | 2647700 JLee2027
JLee2027's picture

Yup. I see vaporization of all dollar debt and "wealth" of all asset classes; 401K's, pensions, bank accounts, T-bills, etc. The only survivors will be in hand - holders of Gold and Silver.

Tue, 07/24/2012 - 22:47 | 2647850 kito
kito's picture

stockman is absolutely right about the dollar...although i would add that the money needs to be in physical cash....when the entire world of electronic dollars gets wiped, the only thing standing will be the cashmoney.......the entire expanding universe of credit/debt gets wiped away in one fell swoop of deleveraging....entire institutions will crumble....and what everybody will run for is cash, cash, cash...certainly by all means diversify, nobody can ever say with a crystal ball what will be......keep some gold, get a renminbi account, but cold hard cash will rule the day when this thing topples......

Wed, 07/25/2012 - 02:25 | 2648183 J U D G E M E N T
J U D G E M E N T's picture

As a reinforcement, my grandmother of 100 years now, lived thru the

great depression.  She can be quoted as saying that

"Dollars were worth something, its just that no one had any."

Money scarcity.

Tue, 07/24/2012 - 22:02 | 2647777 Ricky Bobby
Ricky Bobby's picture

Crash Is it deflation or is it financial repression. Of course you won't know when the real policy changes, unlike the insiders. So the ton of money you speak of may be Corzined before you get your hands on it.

Tue, 07/24/2012 - 19:54 | 2647548 Seasmoke
Seasmoke's picture

Wall Street has always been a casino.....its the changing of the goal posts that has become the problem

Tue, 07/24/2012 - 20:07 | 2647585 nasa
nasa's picture

It doesn't help that the refrees are under the hood watching  "training videos" instead of calling the game.  A few perp walks would go a long way....

Tue, 07/24/2012 - 19:55 | 2647549 FinalCollapse
FinalCollapse's picture

"Riders on the storm.

 There's a killer on the road"

Tue, 07/24/2012 - 19:56 | 2647555 HelluvaEngineer
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