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NEWS AND VIEWS THAT IMPACT LIMITED CONSTITUTIONAL GOVERNMENT

"There is danger from all men. The only maxim of a free government ought to be to trust no man living with
power to endanger the public liberty." - - - - John Adams

Wednesday, April 3, 2013

David Stockman: "We've Been Lied To and Robbed"




"Then, when the Fed’s fire hoses started spraying an elephant soup of liquidity injections in every direction and its balance sheet grew by $1.3 trillion in just thirteen weeks compared to $850 billion during its first ninety-four years, I became convinced that the Fed was flying by the seat of its pants, making it up as it went along. It was evident that its aim was to stop the hissy fit on Wall Street and that the thread of a Great Depression 2.0 was just a cover story for a panicked spree of money printing that exceeded any other episode in recorded human history."    - - - - David Stockman
 

Capitalism is Dead  -  It has been replaced by Corporatism and a corrupt bi-partisan wholesale looting of America
  • Reagan Budget Director David Stockman rips into the insanity of Washington, endless money printing and corrupt insider crony-capitalism.
 

Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash.

David Stockman, President Reagan's Budget Director, says that sooner or later this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

David Stockman says a new, bigger
economic bubble is coming caused by out
of control spending and money printing.

The economy is a basket case.  Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

Stockman points out that Washington is piling a soaring debt burden, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing.

The Fed has flooded liquidity (money printing) into the system.  But instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.
      
When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.



David Stockman:  We've Been Lied To, Robbed, And Mislead




PBS  -  David Stockman Defines Crony Capitalism




Reason TV  -  David Stockman on TARP, the Fed, Ron Paul and Reagan
At the very start of the "Reagan revolution," David Stockman exposed the myth that Ronald Reagan and the modern Republican Party are dedicated to small government.

In 1981, the 35-year-old Stockman gave up his Michigan seat in Congress to become Reagan's budget director. A vocal critic of what he continues to call the "welfare-warfare state," Stockman had signed on because he believed in the limited government rhetoric that Reagan espoused. Once inside the White House, Stockman quickly became disenchanted.

The federal debt tripled while Reagan was in office.





Stockman points out the culprits are bipartisan, though you’d never guess that from the blather that passes for political discourse these days. The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry.
      
Under the exigencies of World War II (which did far more to end the Depression than the New Deal did), the state got hugely bloated, but remarkably, the bloat was put into brief remission during a midcentury golden era of sound money and fiscal rectitude with Dwight D. Eisenhower in the White House and William McChesney Martin Jr. at the Fed.

Lyndon B. Johnson’s “guns and butter” excesses, which were intensified over one perfidious weekend at Camp David, Md., in 1971, when Richard M. Nixon essentially defaulted on the nation’s debt obligations by finally ending the convertibility of gold to the dollar. That one act meant the end of national financial discipline and the start of a four-decade spree during which we have lived high on the hog, running a cumulative $8 trillion current-account deficit.

The Fed fueled a roaring inflation in goods and commodities during the 1970s that was brought under control only by the iron resolve of Paul A. Volcker, its chairman from 1979 to 1987.  Under his successor, Alan Greenspan kept interest rates too low for too long and flooding Wall Street with freshly minted cash.  Greenspan’s loose monetary policies didn’t set off inflation was only because domestic prices for goods and labor were crushed by the huge flow of imports from the factories of Asia.

The Reaganite shibboleth that “deficits don’t matter” and the fact that nearly $5 trillion of the nation’s $12 trillion in “publicly held” debt is actually sequestered in the vaults of central banks. The destruction of fiscal rectitude under Ronald Reagan — one reason Stockman resigned as his budget chief in 1985 — was the greatest of his many dramatic acts.

It created a template for the Republicans’ utter abandonment of the balanced-budget policies of Calvin Coolidge and allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy. In effect, the G.O.P. embraced Keynesianism — for the wealthy.

But even Obama’s hopelessly glib policies could not match the audacity of the Fed, which dropped interest rates to zero and then digitally printed new money at the astounding rate of $600 million per hour. Fast-money speculators have been “purchasing” giant piles of Treasury debt and mortgage-backed securities, almost entirely by using short-term overnight money borrowed at essentially zero cost, thanks to the Fed. Uncle Ben has lined their pockets.

Stockman feels it is too late for reforming the Fed.  It will never happen because there are trillions of dollars of assets, from Shanghai skyscrapers to Fortune 1000 stocks to the latest housing market “recovery,” artificially propped up by the Fed’s interest-rate repression.

The United States is broke — fiscally, morally, intellectually — and the Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse.


David A. Stockman is a former Republican Congressman from Michigan, President Ronald Reagan’s budget director from 1981 to 1985 and the author, most recently, of “The Great Deformation: The Corruption of Capitalism in America.”

For Stockman's full article go to:   New York Times




Everyone is looting the Treasury from illegal aliens to unions to farmers to Wall Street.  Everybody wants something for nothing and they buy the politicians with their votes or cash to get it.




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