{"id":378,"date":"2013-04-11T13:49:51","date_gmt":"2013-04-11T17:49:51","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=378"},"modified":"2013-04-12T16:33:48","modified_gmt":"2013-04-12T20:33:48","slug":"david-stockman-sez-were-all-gonna-die-hes-wrong-right","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/david-stockman-sez-were-all-gonna-die-hes-wrong-right\/","title":{"rendered":"David Stockman sez we\u2019re all gonna die! He\u2019s wrong. Right?"},"content":{"rendered":"
\"Showtime's<\/a>

Show\u00adtime\u2019s Sava\u00adnaro\u00adla from The Borgias<\/p><\/div>\n

Sea\u00adson 3 of The Bor\u00adgias<\/a> pre\u00admieres on Show\u00adtime this Sun\u00adday . For those not yet ensnared in this addic\u00adtion, the series tells the sto\u00adry of Renais\u00adsance Pope Alexan\u00adder VI<\/span><\/a>,<\/span> one of the papacy\u2019s most dev\u00adil\u00adish\u00adly inter\u00adest\u00ading char\u00adac\u00adters. Show\u00adtime takes the usu\u00adal Hol\u00adly\u00adwood lib\u00ader\u00adties with his\u00adto\u00adry, though Alexan\u00adder, born in Spain as Rodri\u00adgo de Bor\u00adgia, led a life that needs no embell\u00adish\u00ading. A curi\u00adous mix of reli\u00adgios\u00adi\u00adty and world\u00adli\u00adness, cal\u00adcu\u00adla\u00adtion and dis\u00adsi\u00adpa\u00adtion, he would slip com\u00adfort\u00adably into our own cul\u00adture as a larg\u00ader-than-life celebri\u00adty or phi\u00adlan\u00adder\u00ading politi\u00adcian. His\u00adto\u00adri\u00adan John Julius Nor\u00adwich<\/a> reck\u00adons that Alexan\u00adder \u201cfathered no few\u00ader than eight chil\u00addren by at least three dif\u00adfer\u00adent women,\u201d but that nev\u00ader dis\u00adtract\u00aded him from his cen\u00adtral task of pro\u00adtect\u00ading the wealth, pow\u00ader and influ\u00adence of the papa\u00adcy against ris\u00ading nation-states like France and Spain. Though oth\u00aders saw him as a cor\u00adrupter of the church, Alexan\u00adder always imag\u00adined him\u00adself as its sav\u00adior and protecter.<\/p>\n

His many ene\u00admies includ\u00aded a Domini\u00adcan fri\u00adar named Sava\u00adnaro\u00adla<\/a>,<\/span> whose fiery ser\u00admons against the excess\u00ades of Alexan\u00adder and of Florence\u2019s rul\u00ading Medici fam\u00adi\u00adly delight\u00aded and inspired the Flo\u00adren\u00adtine mass\u00ades. Though a mem\u00adber of a reli\u00adgious order, Sava\u00adnaro\u00adla believed that God spoke to him direct\u00adly, not through the reli\u00adgious hier\u00adar\u00adchy, con\u00adstrain\u00ading him to pro\u00adclaim harsh words against Pope and prince.<\/p>\n

So it is with David Stock\u00adman<\/a>. An insider\u2019s insid\u00ader \u2013 Stock\u00adman was a Con\u00adgress\u00adman, Pres\u00adi\u00addent Reagan\u2019s Direc\u00adtor of the Office of Man\u00adage\u00adment and Bud\u00adget, then a Wall Street banker who came to a bad end in 2007 \u2013 Stock\u00adman, like Sava\u00adnaro\u00adla, broke ranks with the estab\u00adlish\u00adment, preach\u00ading eco\u00adnom\u00adic ruin. This being the dig\u00adi\u00adtal age, Stock\u00adman doesn\u2019t expound his mes\u00adsage of doom on the streets of Wash\u00ading\u00adton or the canyons of Wall Street, in the man\u00adner of Sava\u00adnaro\u00adla. Instead he chats it up with Jon Stew\u00adart<\/a> and Wall Street Jour\u00adnal edi\u00adtors<\/a>,<\/span> writes a book<\/a>,<\/span> and deliv\u00aders tid\u00adings of despair in an East\u00ader morn\u00ading op-ed in the New York Times<\/a>.<\/em><\/p>\n

His mes\u00adsage is as straight\u00adfor\u00adward as it is dark.<\/p>\n

\u201c<\/span>The Unit\u00aded States is broke \u2014 fis\u00adcal\u00adly, moral\u00adly, intel\u00adlec\u00adtu\u00adal\u00adly,\u201d his Times<\/em> op-ed declares. \u201cWhen the lat\u00adest bub\u00adble pops, there will be noth\u00ading to stop the collapse.\u201d<\/p><\/blockquote>\n

Sava\u00adnaro\u00adla would have employed more apoc\u00ada\u00adlyp\u00adtic imagery, per\u00adhaps, (pop\u00adping bub\u00adbles hard\u00adly com\u00adpares with stars shoot\u00ading mad\u00adly from their spheres), but Stockman\u2019s mes\u00adsage is no less ominous.<\/p>\n

As he sees it, the seeds of our destruc\u00adtion were sown dur\u00ading the Roo\u00adsevelt Admin\u00adis\u00adtra\u00adtion and the resul\u00adtant tox\u00adic weeds that now choke our econ\u00ado\u00admy have been cul\u00adti\u00advat\u00aded ever since by politi\u00adcians of both par\u00adties and by the Fed\u00ader\u00adal Reserve. He is crit\u00adi\u00adcal of gov\u00adern\u00adment deficits \u2013 he famous\u00adly quit the Rea\u00adgan Admin\u00adis\u00adtra\u00adtion because the Pres\u00adi\u00addent did not share his pas\u00adsion for bal\u00adanced fed\u00ader\u00adal bud\u00adgets \u2013 which he sees as a mis\u00adguid\u00aded Key\u00adne\u00adsian eco\u00adnom\u00adics. And he is espe\u00adcial\u00adly crit\u00adi\u00adcal of the Fed\u00ader\u00adal Reserve, which he accus\u00ades of \u201cdig\u00adi\u00adtal\u00adly print[ing] new mon\u00adey at the astound\u00ading rate of $600 mil\u00adlion per hour.\u201d<\/p>\n

This new mon\u00adey, cou\u00adpled with gov\u00adern\u00adment bor\u00adrow\u00ading, far from grow\u00ading the econ\u00ado\u00admy as Key\u00adne\u00adsians pre\u00addict\u00aded, has brought it to the edge of ruin. Stock\u00adman sees evi\u00addence of this decline all around him. Since, 2000, he writes:<\/p>\n

\u201c<\/span>Eco\u00adnom\u00adic out\u00adput has grown by an aver\u00adage of 1.7 per\u00adcent a year (the slow\u00adest since the Civ\u00adil War); real busi\u00adness invest\u00adment has crawled for\u00adward at only 0.8 per\u00adcent per year; and the pay\u00adroll job count has crept up at a neg\u00adli\u00adgi\u00adble 0.1 per\u00adcent annu\u00adal\u00adly. Real medi\u00adan fam\u00adi\u00adly income growth has dropped 8 per\u00adcent, and the num\u00adber of full-time mid\u00addle class jobs, 6 per\u00adcent. The real net worth of the \u201cbot\u00adtom\u201d 90 per\u00adcent has dropped by one-fourth. The num\u00adber of food stamp and dis\u00adabil\u00adi\u00adty aid recip\u00adi\u00adents has more than dou\u00adbled, to 59 mil\u00adlion, about one in five Americans.\u201d<\/p><\/blockquote>\n

As he traces the arc of our decline, Stock\u00adman sin\u00adgles out for\u00admer Fed\u00ader\u00adal Reserve Chair\u00adman Alan Greenspan\u2019s loose mon\u00ade\u00adtary poli\u00adcies for par\u00adtic\u00adu\u00adlar criticism.<\/p>\n

\u201c<\/span>That Mr. Greenspan\u2019s loose mon\u00ade\u00adtary poli\u00adcies didn\u2019t set off infla\u00adtion was only because domes\u00adtic prices for goods and labor were crushed by the huge flow of imports from the fac\u00adto\u00adries of Asia. By off\u00adshoring America\u2019s trad\u00adable-goods sec\u00adtor, the Fed kept the Con\u00adsumer Price Index con\u00adtained, but also per\u00admit\u00adted the excess liq\u00aduid\u00adi\u00adty to fos\u00adter a roar\u00ading infla\u00adtion in finan\u00adcial assets. Mr. Greenspan\u2019s pan\u00adder\u00ading incit\u00aded the great\u00adest equi\u00adty boom in his\u00adto\u00adry, with the stock mar\u00adket ris\u00ading five\u00adfold between the 1987 crash and the 2000 dot-com bust.<\/p>\n

\u201c<\/span>Soon Amer\u00adi\u00adcans stopped sav\u00ading and con\u00adsumed every\u00adthing they earned and all they could bor\u00adrow. The Asians, burned by their own 1997 finan\u00adcial cri\u00adsis, were hap\u00adpy to oblige us. They \u2014 Chi\u00adna and Japan above all \u2014 accu\u00admu\u00adlat\u00aded huge dol\u00adlar reserves, trans\u00adform\u00ading their cen\u00adtral banks into a string of mon\u00ade\u00adtary roach motels where sov\u00ader\u00adeign debt goes in but nev\u00ader comes out. We\u2019ve been liv\u00ading on bor\u00adrowed time \u2014 and spend\u00ading Asians\u2019 bor\u00adrowed dimes.\u201d<\/p><\/blockquote>\n

Greenspan\u2019s flood of mon\u00adey, Stock\u00adman says, result\u00aded in a big boom and bust cycle for Wall Street, fueled yawn\u00ading trade imbal\u00adances with Asia, and enabled con\u00adsumers to use cred\u00adit to live beyond their means despite stag\u00adnat\u00ading wages. Greenspan was suc\u00adceed\u00aded as Fed Chair\u00adman by Ben Bernanke, whose poli\u00adcies fueled the hous\u00ading boom and enriched Wall Street bankers.<\/p>\n

\u201c<\/span>The explo\u00adsion of the hous\u00ading mar\u00adket, abet\u00adted by pho\u00adny cred\u00adit rat\u00adings, secu\u00adri\u00adti\u00adza\u00adtion shenani\u00adgans and will\u00adful mal\u00adprac\u00adtice by mort\u00adgage lenders, orig\u00adi\u00adna\u00adtors and bro\u00adkers, has been well doc\u00adu\u00adment\u00aded. Less known is the bal\u00adance-sheet explo\u00adsion among the top 10 Wall Street banks dur\u00ading the eight years end\u00ading in 2008. Though their tiny sliv\u00ader of equi\u00adty cap\u00adi\u00adtal hard\u00adly grew, their depen\u00addence on unsta\u00adble \u201chot mon\u00adey\u201d soared as the reg\u00adu\u00adla\u00adto\u00adry har\u00adness the Glass-Stea\u00adgal Act had wise\u00adly imposed dur\u00ading the Depres\u00adsion was total\u00adly dismantled.\u201d<\/p><\/blockquote>\n

But Stock\u00adman reserves his harsh\u00adest crit\u00adi\u00adcism for the bailouts engi\u00adneered by Bernanke and his com\u00adpa\u00adtri\u00adots Tim Gei\u00adth\u00adn\u00ader, then head of the New York Fed, and then-Trea\u00adsury Sec\u00adre\u00adtary Hank Paul\u00adson, whose bailouts of Wall Street, he says, exem\u00adpli\u00adfy crony capitalism.<\/p>\n

\u201c<\/span>There was nev\u00ader a remote threat of a Great Depres\u00adsion 2.0 or of a finan\u00adcial nuclear win\u00adter, con\u00adtrary to the dire warn\u00adings of Ben S. Bernanke, the Fed chair\u00adman since 2006. The Great Fear \u2014 man\u00adi\u00adfest\u00aded by the stock mar\u00adket plunge when the House vot\u00aded down the TARP<\/span> bailout before cav\u00ading and pass\u00ading it \u2014 was pure\u00adly anoth\u00ader Wall Street con\u00adcoc\u00adtion. Had Pres\u00adi\u00addent Bush and his Gold\u00adman Sachs advis\u00ader (a k a Trea\u00adsury Sec\u00adre\u00adtary) Hen\u00adry M. Paul\u00adson Jr. stood firm, the cri\u00adsis would have burned out on its own and met\u00aded out to spec\u00adu\u00adla\u00adtors the loss\u00ades they so rich\u00adly deserved. The Main Street bank\u00ading sys\u00adtem was nev\u00ader in seri\u00adous jeop\u00adardy, ATMs were not going dark and the mon\u00adey mar\u00adket indus\u00adtry was not imploding.<\/p>\n

\u201c<\/span>Instead, the White House, Con\u00adgress and the Fed, under Mr. Bush and then Pres\u00adi\u00addent Oba\u00adma, made a series of des\u00adper\u00adate, reck\u00adless maneu\u00advers that were not only unnec\u00ades\u00adsary but ruinous.\u201d<\/p><\/blockquote>\n

The bailouts didn\u2019t stop the stock market\u2019s skid, how\u00adev\u00ader, and the major indices touched mul\u00adti-year lows in March 2009. But the bull mar\u00adket is now in its fifth year and the S&<\/span>P 500 has climbed beyond its 2007 highs. Doesn\u2019t that vin\u00addi\u00adcate the Fed\u00ader\u00adal Reserve\u2019s pol\u00adi\u00adcy? Quite the con\u00adtrary, accord\u00ading Stock\u00adman. By bloat\u00ading its bal\u00adance sheet, the Fed risks eco\u00adnom\u00adic havoc.<\/p>\n

\u201c<\/span>If and when the Fed \u2014 which now promis\u00ades to get unem\u00adploy\u00adment below 6.5 per\u00adcent as long as infla\u00adtion doesn\u2019t exceed 2.5 per\u00adcent \u2014 even hints at shrink\u00ading its bal\u00adance sheet, it will elic\u00adit a tidal wave of sell orders, because even a mod\u00adest drop in bond prices would destroy the arbi\u00adtrageurs\u2019 prof\u00adits. Notwith\u00adstand\u00ading Mr. Bernanke\u2019s assur\u00adances about even\u00adtu\u00adal\u00adly, grad\u00adu\u00adal\u00adly mak\u00ading a smooth exit, the Fed is domi\u00adciled in a mon\u00ade\u00adtary prison of its own making\u2026<\/p>\n

\u201c<\/span>What\u2019s at hand is a Great Defor\u00adma\u00adtion, aris\u00ading from a rogue cen\u00adtral bank that has abet\u00adted the Wall Street casi\u00adno, cru\u00adci\u00adfied savers on a cross of zero inter\u00adest rates and fueled a glob\u00adal com\u00admod\u00adi\u00adty bub\u00adble that erodes Main Street liv\u00ading stan\u00addards through ris\u00ading food and ener\u00adgy prices \u2014 a form of infla\u00adtion that the Fed feck\u00adless\u00adly dis\u00adre\u00adgards in cal\u00adcu\u00adlat\u00ading inflation.<\/p>\n

\u201c<\/span>These poli\u00adcies have brought Amer\u00adi\u00adca to an end-stage metas\u00adta\u00adsis. The way out would be so rad\u00adi\u00adcal it can\u2019t hap\u00adpen. It would neces\u00adsi\u00adtate a sweep\u00ading divorce of the state and the mar\u00adket econ\u00ado\u00admy. It would require a renun\u00adci\u00ada\u00adtion of crony cap\u00adi\u00adtal\u00adism and its first cousin: Key\u00adne\u00adsian eco\u00adnom\u00adics in all its forms. The state would need to get out of the busi\u00adness of impe\u00adr\u00adi\u00adal hubris, eco\u00adnom\u00adic uplift and social insur\u00adance and shift its focus to man\u00adag\u00ading and financ\u00ading an effec\u00adtive, afford\u00adable, means-test\u00aded safe\u00adty net.\u201d<\/p><\/blockquote>\n

Stock\u00adman believes that our polit\u00adi\u00adcal sys\u00adtem lacks the resolve to change its ways, lock\u00ading us in to irre\u00adversible decline. At least Sava\u00adnaro\u00adla believed that if the Flo\u00adren\u00adtines repent\u00aded their van\u00adi\u00adties and cast off the yoke of the Medici, God would show them mer\u00adcy. Amer\u00adi\u00adca, unlike Flo\u00adrence, lies beyond God\u2019s redeem\u00ading hand, accord\u00ading to Stock\u00adman. The next bub\u00adble will pop and noth\u00ading will stop our col\u00adlapse. His con\u00adclud\u00ading advice:<\/p>\n

\u201c<\/span>Get out of the mar\u00adkets and hide out in cash.\u201d<\/p><\/blockquote>\n

It should be said that the estab\u00adlish\u00adment regards Stock\u00adman as a bit of a loon, just as Pope Alexan\u00adder must have regard\u00aded Sava\u00adnaro\u00adla. Fig\u00adures on the left like Paul Krug\u00adman believe that the Fed\u00ader\u00adal Reserve, far from being reck\u00adless, as Stock\u00adman main\u00adtains, has actu\u00adal\u00adly been too timid, that it should flood the banks with more mon\u00adey and that Con\u00adgress should run even larg\u00ader deficits. Our tepid eco\u00adnom\u00adic recov\u00adery, accord\u00ading to these thinkers, is due to our squea\u00admish\u00adness about gov\u00adern\u00adment debt and infla\u00adtion. Fig\u00adures on the right believe that if Con\u00adgress and the Pres\u00adi\u00addent were to com\u00admit to fis\u00adcal rec\u00adti\u00adtude, the econ\u00ado\u00admy would right itself over the longer term.<\/p>\n

But Stock\u00adman is not so eas\u00adi\u00adly dis\u00admissed. Both par\u00adties seem curi\u00adous\u00adly small and inef\u00adfec\u00adtive at explain\u00ading, much less address\u00ading, more than five years of eco\u00adnom\u00adic sput\u00adter\u00ading. And the Fed\u00ader\u00adal Reserve, as Stock\u00adman right\u00adly notes, fore\u00adsaw nei\u00adther the real estate bub\u00adble nor its col\u00adlapse and still denies its respon\u00adsi\u00adbil\u00adi\u00adty for either. Chair\u00adman Bernanke\u2019s cur\u00adrent claim that the Fed can unwind its tril\u00adlions in asset pur\u00adchas\u00ades with\u00adout crash\u00ading equi\u00adty mar\u00adkets is less cred\u00adi\u00adble giv\u00aden past failures.<\/p>\n

Like Pope Alexan\u00adder and the Medicis, our lead\u00aders are con\u00advinced that they\u2019re doing what\u2019s best. Alexan\u00adder deft\u00adly steered the church through shift\u00ading alliances with for\u00adeign pow\u00aders, encour\u00adag\u00ading them to bring their armies into Italy in the papacy\u2019s defense. That strat\u00ade\u00adgy was to back\u00adfire, as for\u00adeign invaders enriched them\u00adselves at Italy\u2019s expense. The result was that Italy, then a cen\u00adter of inter\u00adna\u00adtion\u00adal finance and the arts, fell into a cen\u00adturies-long decline. Savanarola\u2019s dark prophe\u00adcies were in that sense fulfilled.<\/p>\n

Let\u2019s hope that the same won\u2019t one day be said of Stockman.<\/p>\n","protected":false},"excerpt":{"rendered":"

David Stock\u00adman sez we\u2019re all gonna die! He\u2019s wrong. Right? Con\u00adtin\u00adue read\u00ading \u2192<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":381,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[12,18,17,14],"tags":[86,93,91,78,90,88,84,89,94,100,103,98,97,87,92,74,80,85,77,96,82,104,1185,73,79,83,101,76,71,1186,72,95,1187,26,81],"class_list":["post-378","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-debt-ceiling","category-economy","category-entitlements","category-global-economy","tag-alan-greenspan","tag-ben-bernanke","tag-china","tag-david-stockman","tag-disability","tag-economic-output","tag-federal-reserve","tag-food-stamp","tag-glass-steagal-act","tag-goldman-sachs","tag-great-deformation","tag-great-depression-2-0","tag-hank-paulson","tag-inflation","tag-japan","tag-john-julius-norwich","tag-jon-stewart","tag-keynesian","tag-medici","tag-new-york-fed","tag-new-york-times","tag-paul-krugman","tag-pope","tag-pope-alexander-vi","tag-reagan","tag-roosevelt","tag-sp-500","tag-savanarola","tag-showtime","tag-tarp","tag-the-borgias","tag-tim-geithner","tag-unemployment","tag-wall-street","tag-wall-street-journal"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t