David Stockman Tells It Like It Is

While you many not agree with everything David Stockman has ever said and done, he is a breath of fresh air in this mess called the United States. For example, here's his answer to the question "Should the government provide more stimulus for the economy, or cut spending to bring the deficit down?"

We are not in a conventional business cycle recovery, so stimulus is futile and just adds needlessly to the $9 trillion of Treasury paper already floating dangerously around world financial markets. Instead, after 40 years of profligate accumulation of public and private debt, and reckless money-printing by the Fed, we had an economic crash landing, which left us with an enduring structural breakdown, not just a cyclical downturn.

In effect, we undertook a national leveraged buyout, raising total credit market debt to $52 trillion which represented a 3.6X leverage ratio against national income or GDP. By contrast, during the 110 years prior to 1980, our aggregate leverage hugged closely to a far more modest ratio at 1.5 times national income.

The only solution is a long period of debt deflation, downsizing and economic rehabilitation, including a sustained downshift in consumption and corresponding rise in national savings.

And a key element of the latter is a drastic reduction in government dis-savings through spending cuts and tax increases — and these measures need to start right now.  Keynesian policymakers who say wait for the midterms to address the deficit are like battleship admirals: They are fighting the last war with the same failed strategy that gave rise to our current predicament.

Yes, yes, yes! Not that any of this is going to happen, of course. Economic rehabilitation? Surely not—didn't you hear the news? Weekly unemployment claims were down to "only" 421,000 last week. So, things are looking up—we don't need rehabilitation!

Stockman refuses to play this phony game of "I'm OK, You're OK." He is equally sharp in this interview with Aaron Task. Here Stockman does a close analysis of the jobs numbers and guess what? Things aren't looking so good...

 

Comments

[Jason]

How about if you print money spend it on investment - like rail, energy, etc? Things that will really stimulate economic activity. No one in the main stream media ever brings up government investment as though the government can only loan money to banks and provide welfare checks. Government funds have fostered large prosperous industries - computer industry/internet, suburbia (infrastructure) and everything that goes with that, the military industrial complex. How about spending $2.2T on infrastructure and forget about tax breaks and foreign bank bailouts for awhile? The Fed can even loan the US Government that money at the going rate 0.000225% or whatever the banks are getting.