• BullionStar
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OMB's Stockman: "We're At The Fiscal Endgame"

Tyler Durden's picture


To those on the hill and elsewhere who suggest this growing 'fiscal cliff' and 'debt ceiling' crisis will all get solved, former Office of Management and Budget (OMB) Director David Stockman tells Bloomberg TV that "they will punt, punt, punt and kick the can with partial solutions driven by eleventh hour crisis-based extensions that will go on for the whole of the next term!" When asked whether this economy will be mired in the doldrums, he rather ominously states "it will be worse, because we will be in recession" and notes that when the lame ducks re-look at the budget numbers with a realistic recession (instead of the current assumption of no recession within 12 years) it will be far worse and in a political environment where 'we cannot possibly raise taxes - and we cannot possibly cut spending'. With a 78% disapproval rating for the 'do nothing' Congress, Stockman is surprised that 16% somehow approve - approve of what? His warning is that unlike in past periods, today "we are completely paralyzed, there is an ideological divide on taxes and entitlement like we've never had before" and while he realizes that "the debt problem doesn't become a debt problem until the market suddenly have a wake up call and realize that if the Fed doesn't keep printing, it's game over."


"The fact that rates are so low is not a reflection of the US as a safe-haven but a bet on the Fed not allowing rates to rise."


"The perverse low-rate environment simply tells Congress that they can borrow a trillion dollars for 10 billion a year."


If rates rose then it would break this huge partisan stalemate we have today"


"There is a huge costs to stalemate!"

In a little under six minutes, David factually describes the certainly-not-priced-in dismal reality of the political situation we face in the next few months... must watch...

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Mon, 07/16/2012 - 13:52 | 2620926 mr. mirbach
mr. mirbach's picture

No one could have seen it coming...


Mon, 07/16/2012 - 13:55 | 2620942 JackT
JackT's picture

That's because this time it will be "different".

Mon, 07/16/2012 - 13:57 | 2620950 gmrpeabody
gmrpeabody's picture

What..., they can only inflate their way out???


Mon, 07/16/2012 - 14:27 | 2621082 CClarity
CClarity's picture

Stalemate means game over, restart a new game.  For the US and much of the western developed world, I think this will translate to new currencies (backed by something more tangible that our trust in God or bloated government), new governments (perhaps even some new monarchies, certainly some dictators, and some different republics, democracies, and federations), a few wars (at least), and some debt jubilees for some "lucky" ducks.  

None of this will happen without great strife, angry neighbors, and everyone thinking they've been wronged and it's unfair.

Unfortunately, banksters will still exist in some form or another, and while they will assist in flows of commerce, that will still be to their primary benefit, not the benefit of commerce participants.  

Mon, 07/16/2012 - 14:51 | 2621146 ZerOhead
ZerOhead's picture

New Game? How about NO Game.

In gold we trust

Mon, 07/16/2012 - 16:03 | 2621439 Precious
Precious's picture

Listening to the FED BOARD is like going to a CAR DEALER.  The first thing and only thing you hear is the sound of a lie.

Mon, 07/16/2012 - 18:15 | 2622007 AldousHuxley
AldousHuxley's picture

when you allocate billions to facebook and money movers instead of real productive capacity, you get economy with 7% unemployment even with QE1,2,3...

Mon, 07/16/2012 - 17:07 | 2621759 Spastica Rex
Spastica Rex's picture

It's all a game.

Maybe gold is a better game, but I'm too stupid to argue that one way or the other.

Mon, 07/16/2012 - 14:46 | 2621150 Pladizow
Pladizow's picture

You can only kick the can so far down the road, before thhe worms start to fall out.

Mon, 07/16/2012 - 14:31 | 2621095 SheepDog-One
SheepDog-One's picture

And even that wont work, because how can you inflate your way out when everyones broke?

Mon, 07/16/2012 - 14:55 | 2621186 sessinpo
sessinpo's picture

Shhhh. Don't let the Keynesians know that! We need someone holding the bad of worthless dollars. You know muppets?

Mon, 07/16/2012 - 16:00 | 2621418 Al Huxley
Al Huxley's picture

Everybody's just supposed to take advantage of the low rates and borrow more.  Of course, the rates aren't as low for the unwashed masses as they are for the banking class, but 'hey, still pretty low'.  Mortgage your future, sell your kids and grandkids down the river, get with the consumer program and do your bit to help us 'shop our way out of recession'.

Mon, 07/16/2012 - 13:57 | 2620951 aerojet
aerojet's picture


Mon, 07/16/2012 - 14:16 | 2621036 LMAOLORI
LMAOLORI's picture

lol pretty much anyone one thing you have to agree with Stockman on is this...

"The perverse low-rate environment simply tells Congress that they can borrow a trillion dollars for 10 billion a year."


Mon, 07/16/2012 - 13:59 | 2620959 derek_vineyard
derek_vineyard's picture

japan 1989 to present has been my investing mantra --- read up on it......nekkei at 39k , etc

real rates of interest NO LONGER EXIST EVER IN THIS SYSTEM...get used to it, the system will last a few more decades


Mon, 07/16/2012 - 14:18 | 2621048 Yikes
Yikes's picture


Mon, 07/16/2012 - 14:35 | 2621105 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Yes, but what I would like to know is if money printing will forever hold up stocks or if the S&P drops 80% from peak as the Nikkei has. 

Mon, 07/16/2012 - 14:43 | 2621138 SMG
SMG's picture

Yes.   That's the best answer I can come up with.

Mon, 07/16/2012 - 15:18 | 2621260 Cloud9.5
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Japan is a homogenized culture with an interesting penchant for assuming responsibility for its failures to the point of personal destruction.  We on the other hand are a polyglot with a penchant for blaming the other fellow for our failures.   This is not the Great Depression generation.  There will be blood in the streets.

Mon, 07/16/2012 - 16:25 | 2621579 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Between their fiscal policy and their immigration/demographic policy, Japan is committing national hari-kiri. Wouldn't be the first time they chose that honorable route...

Mon, 07/16/2012 - 23:28 | 2623027 Bananamerican
Bananamerican's picture

yea, they need to freshen the line with a few million head-chopping mexicans

Mon, 07/16/2012 - 18:06 | 2621977 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Na, I think the USA is made up of a bunch of grifters and marks who play the game as best they can, knowing it is mostly rigged.  Once the big game is over, most will pick up the pieces and move on.  Lets face it, most people in the USA have either a) came from much worse circumstances or b) don't expect any competence from government whatsoever.  America will bend, not break.

Mon, 07/16/2012 - 14:08 | 2620998 brewing
brewing's picture

yea, like retail sales "unexpectedly" dropped in june...

Mon, 07/16/2012 - 14:09 | 2621002 HarryM
HarryM's picture

So they keep printing and printing and printing

We'll be old and gray and they'll still be printing -

You can walk around with your "The end is Near!" sign , but this game is not going to end, not for a long , long time


Mon, 07/16/2012 - 14:15 | 2621031 Quantitative_Ap...
Quantitative_Appeasing's picture



What happens when the USD loses reserve currency status?Not to mention the coming demographic crash in health care costs (which is right around the corner).

Curious to your thoughts on the above



Mon, 07/16/2012 - 14:45 | 2621135 Rusty Shorts
Rusty Shorts's picture

"What happens when the USD loses reserve currency status?"

Lmao, not going to happen slick!! The USD dollar is backed by BOMBS,...GREAT BIG BOMBS, bombs so big that they're bigger than B I G. Go ahead, google this "How to build a Thermonuclear Bomb in my Basement" There now, now you can have your very own "reserve currency" ...haahahaa.


Seriously though, google "The Three City States"

Mon, 07/16/2012 - 15:21 | 2621267 Quantitative_Ap...
Quantitative_Appeasing's picture

Uh yeah.  So what about those other countries with bombs - russia, china, england, france, india to name a few.

Somehow I think your "take our debt or we'll bomb you" is going to have a M.A.D. moment. At which point we are back to wheelbarrows.

Seriously, the USSR had a crapload of bombs and it did not stop their implosion, why should we be any different?


"American Exceptionalism" much?



Mon, 07/16/2012 - 15:32 | 2621305 HardAssets
HardAssets's picture

Yes World . . . ship us junk to fill our Walmarts . . . or we'll nuke you !

Sounds like quite a brilliant strategy.

And the Chinese waste their time reading Sun Tzu.


Mon, 07/16/2012 - 16:24 | 2621573 Flakmeister
Flakmeister's picture

You don't understand....

It is about how countries price their oil on the open market, dollar only, please.... The US can tolerate a rogue Iran, but if Russia says nyet or the House of Saud falls, things will get very interesting for the dollar...

Again, the US don't care about ME oil as long as it is priced in dollars....

Mon, 07/16/2012 - 14:44 | 2621141 Jena
Jena's picture

Call it whatever you like but the curious thing about the new Federal Medicare Advisory Panel (MedPac) apparently has no medical doctors who will be making the decisions about what physicians will be allowed to charge for their care for Medicare patients.  There are JDs, Ph.Ds, M.S.s, M.A.s, M.P.P.s, M.P.S.s, M.P.A,s, but no actual medical doctors who have ever worked in the field and have knowledge of what it is like to run a practice.  (This is a departure from the previous and current practice of setting Medicare standard prices.)  

The anticipated result is that reimbursement fees for Medicare patients will drop considerably, which is why most doctors will be far less interested in taking them on as new patients and hospitals will be less inclined to accept them or keep them as in-patients unless they absolutely have to.

Bending the cost curve down one way or another...



(Any GenXer who says "Yay" ponder this:  TPTB probably have something even worse in mind for you.)

Mon, 07/16/2012 - 16:59 | 2621721 MachoMan
MachoMan's picture

Yes and no.  The cramdowns have been occurring for quite a while...  it's certainly not a new trend...  there are also more clawbacks.

In the end, what it does is cause more state sponsored monopolies with existing providers, who leverage existing infrastructure to become more efficient at processing claims.  This means you have to see 150 patients in a day instead of 100, or whatever...  resulting in a decrease of quality of care.  It also causes really weird perversions in that highly specialized doctors (e.g. heart surgeons) end up becoming general surgeons because they can find areas to keep up high billing and have vastly less liability doing it.

Realistically, it's just another barrier to entry for small practitioners...  who don't have the infrastructure/capital to pay for the increased paperwork and billing requirements...  with the end result of herding the best professionals into private practice (who'll only see private insurance or self pay, depending on this option).  The people left at the large medical facilities will be scrubs...  people needing to gain experience and desperate to get a job.  Welcome 2 tier system.

Tue, 07/17/2012 - 00:06 | 2623130 Jena
Jena's picture

Exactly so.  This is another thing that people don't see coming.  What many expect as enhanced care will really be a huge waiting room filled with the sort of people they'd never consider themselves to be a part of.

It's going to be interesting.

Mon, 07/16/2012 - 14:23 | 2621063 SheepDog-One
SheepDog-One's picture

I dont believe that at all, while everyone like you is sure the 'new norm' is just endless printing until 'we're all old and gray' you'll instead soon be whipsawed by a FED announcement one morning theyre tightening...the total chaos that ensues will be just what the FED needs and theyll just look at all you bankrupted suckers and say 'Hey, what did you think? We'd just keep printing forever? Youre all GULLIABLE FOOLS!'

Mon, 07/16/2012 - 15:12 | 2621243 crawldaddy
crawldaddy's picture

Nikkei was at 39k at 1990, its at 8k now, that is game over.  That is the road we are taking.  If DOW hits 4000, sure its not the end of the world, but it is GAME OVER

Mon, 07/16/2012 - 15:31 | 2621303 sessinpo
sessinpo's picture

It's likely to end much sooner then one thinks but longer then those that have been crowing about it for years now. It's not something I would want to play musical chairs with.

It is interesting that Europe's problems are not being taken seriously as a sign of what is to come and Europe is just in the initial stages. Yes there are some differences but there are also things in common.

The big hoohaa is only just starting to be felt at the local level in the most worse managed places where we have bankruptcies at the city and county level. It will be interesting to see how at the federal level the government "manages" youth anger when they are forced into a lower standard of living and no SS.

Mon, 07/16/2012 - 14:15 | 2621033 Offthebeach
Offthebeach's picture

We're doing it to....errr ...for, FOR.. the children.

Mon, 07/16/2012 - 16:16 | 2621519 JamesBond
JamesBond's picture

can't we just go back far enough using an Apple Time Capsule and reset the whole thing?  i'm sure there's a backup point inn time we can all agree upon....



Mon, 07/16/2012 - 13:53 | 2620931 mrktwtch2
mrktwtch2's picture

trure but when does it end..??..they have been saying it for years..but the fed just keeps printing..

Mon, 07/16/2012 - 13:57 | 2620949 NotApplicable
NotApplicable's picture

The instant you refuse to accept dollars for the payment of goods and services.

Mon, 07/16/2012 - 17:14 | 2621144 HardAssets
HardAssets's picture

"crack up boom"  

when people are dumping the fiat paper currency as quickly as possible, converting it into any physical good they can get their hands on, just to get out of the fiat, before it goes to zero.  - - - - This can happen very quickly, over a short period of time.

Mon, 07/16/2012 - 13:54 | 2620935 azzhatter
azzhatter's picture

When you have such a large portion sucking on the tit, it becomes impossible to make changes without pulling their mouth off. Politically impossible now that 50% suck that titty. It will be forced upon us

Mon, 07/16/2012 - 14:30 | 2621091 Bastiat
Bastiat's picture

500 million rounds of .40 cal ammo for DHS helps with the separation anxiety.

Mon, 07/16/2012 - 14:56 | 2621190 Bam_Man
Bam_Man's picture

Apparently they only plan on hitting "the target" about 30% of the time.

Mon, 07/16/2012 - 17:06 | 2621752 MachoMan
MachoMan's picture

That's actually interesting considering it coincides with the RAND NYD study of accuracy for cops shooting at people who didn't shoot back...  30%...


Also, the hit rate for fire fights is...  nil.


Mon, 07/16/2012 - 14:49 | 2621166 centerline
centerline's picture

More than 50% by far.  Enough pain and the majority will scream for anything and everything to be done (except reduce thier own take).  Pretty easy to see how screwed we are and how lots of folks are going to get clobbered.

Mon, 07/16/2012 - 13:54 | 2620937 Larry Dallas
Larry Dallas's picture

Barton Biggs just died. Perhaps this is a sign for things to come?! Bwa hahaha!

Mon, 07/16/2012 - 13:54 | 2620938 Rich Bagg
Rich Bagg's picture

10 year yield is 1.44%.  Stockman is a fool. 

Mon, 07/16/2012 - 13:59 | 2620963 AC_Doctor
AC_Doctor's picture

Change name to Douche Bag asap...

Mon, 07/16/2012 - 14:41 | 2621130 SheepDog-One
SheepDog-One's picture

He goes on to say the 'can kicking will continue for 4 more years'....I just dont pay any attention to peoples timelines, no one knows shit really.

Mon, 07/16/2012 - 15:12 | 2621240 Liquid Courage
Liquid Courage's picture

Listen to wise philosopher Yogi Berra:

"It's hard to make predictions, especially about the future"
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