Tag Archives: david stockman

Fasten your seat belts…

1/30/1981 President Reagan and David Stockman meeting on the economy in the Oval Office

In his current subscription pitch and announcement for his new book, PEAK TRUMP: The Undrainable Swamp And The Fantasy Of MAGA, David Stockman lays out some startling facts, provides a cogent analysis, and makes some dire predictions. As President Ronald Reagan’s Budget Director and long-time political insider, Stockman should be heeded. Here are some excerpts:

“We are in a whole new ball game. The Deep State, the House Dems, the Mueller hit squad and the mainstream media are all going in for the kill.

“They are determined to take the Donald down and preserve the rule of the bipartisan establishment in favor of Empire abroad and Big Government, massive debt and Fed-fueled Bubble Finance at home.

“At the same time, the Donald is now practically handing them his political head on a platter. That’s because he has bombastically embraced the “big, fat, ugly bubble” that he so accurately harpooned during the campaign.

“But that bubble has now reached a fatal triple-top and is fixing to implode, and to take the American economy and Trump’s presidency down with it.”

Stockman says, “We are heading for the double whammy of a political/constitutional crisis and a thundering financial breakdown at the same time.” He argues that it was the failure of “the Washington/Wall Street consensus” that led to Trump’s victory in 2016, and that actions of the Federal Reserve have caused a massive asset bubble along with huge disparities of incomes and wealth.

He goes on to say that “just because Donald Trump targeted the symptoms correctly [during his campaign] that doesn’t mean he had a plan to fix the American economy or the skills and know-how to move the turgid, essentially paralyzed machinery of the Federal government.” Stockman  characterizes Trump as “a political flyweight, megalomaniacal incompetent and bile-ridden bully who stumbled into the Oval Office against all odds.” He decries the massive growth of government debt over the past four decades and boldly asserts that recession will hit the US economy before November 2020, and that “Wall Street, the US economy and the Donald’s fantasy of MAGA will come tumbling down with it.” Whether or not his timing is correct, it is clear that a political and economic shipwreck is just ahead.

Stockman decries the “bipartisan ruling class” which is “in favor of permanent war, unchained entitlements, fiscal incontinence, unsustainable debt-fueled household spending, rampant corporate financial engineering and Keynesian monetary repression and “wealth effects” based central banking that lies at the roots of our current economic malaise,” and referring to the Mueller Russiagate investigation and subsequent impeachment hearings, Stockman says, “the Donald’s fluke elevation to the Oval Office has finally caused the Deep State to come out of hiding and bare its fangs against American democracy itself.”

Stockman criticizes the Fed for “dithering” and delaying “normalization,” by which he presumably means raising interest rates and ending Fed purchases of government bonds. He also calls for “fiscal rectitude” (balanced budgets) on the part of the government, something that even his beloved Ronald Reagan was unable to pull off.

But what Stockman (and everyone else) fails to realize is that, under the interest-based debt-money regime that has prevailed throughout the modern era, it is impossible for national governments to consistently balance their budgets. Here’s why. Since money is created when banks make loans, and since interest is charged on those loans, aggregate debt increases simply with the passage of time. If growth in the money supply does not keep up with debt growth, many debtors will default and the economy will sink into recession. Thus, the banking system must find ways to keep people and corporation borrowing ever greater amounts of money. Over my lifetime I’ve seen banks roll out a succession of creative schemes. Starting with the liberalization of consumer credit following World War II (“Buy now; pay later”), then the widespread issuance of credit cards, then the introduction of “student loans,” then the easing of requirements for people to buy real estate, banks have gotten people to borrow more and more.

Then, when the private sector is all “loaned up” and cannot take on additional debt, the government must step in as “borrower of last resort.” By deficit spending, financed through the issuance of bonds, the national government, with the help of banks that buy those bonds, the money supply is expanded. (When banks buy government bonds they are making a loan to the government). And when all available funds have been sucked up, the Fed must step in as “lender of last resort” to itself buy up additional government bonds while keeping interest rates at acceptable levels. That approach, called “quantitative easing,” is what saved the global system of money and banking from total collapse in 2008 after the housing bubble burst. Thus, the government and the banking establishment are locked together in a deadly embrace and “dance of death” that is spiraling out of control.

It may very well end with a major decline and long drawn out recovery, as Stockman is predicting, but unless a new interest-free money system is implemented after the wreckage is cleared, the ultimate outcome may simply be another round of ever more extreme boom-bust cycles and political chaos.

The good news is that there are credit money innovations waiting in the wings, and now emerging, that can be rolled out, replicated, and networked together to usher in a “Butterfly Economy” and new world order of peace, justice, and human unity. For details about what the Butterfly Economy might look like, and how we might get there, see my video, The Butterfly Economy: How Communities are Building a New World From the Bottom Up, and my article, Reclaiming the Credit Commons: Towards a Butterfly Society. — t.h.g.

Obama Flushes American Dream in SoU Speech

I don’t take seriously the words of politicians, nor do I pay much attention to the quadrennial presidential election charade. The outcome is decided well in advance of the presidential primaries by the power that be. The mainstream media coverage becomes almost laughable when you notice how the networks contort themselves to make an establishment puppet look like a viable candidate while ignoring anyone who might represent popular interests and real change. That is ably illustrated by this video:

And this article by Patrick Martin helps us to read between the lines of Obama’s speech and understand the dismal state of American government. It is clear that whomever occupies the White House next term, and whichever party controls Congress, WE THE PEOPLE will get no help from Washington. In fact, as David Stockman told us about a year ago, the federal government has become “a fountain of harm.” It is up to WE THE PEOPLE to rebuild American democracy and take back control over our lives, working from our communities on up.–t.h.g.

Obama’s State of the Union address: War and wage-cutting

By Patrick Martin, 25 January 2012

The State of the Union Speech delivered by Barack Obama Tuesday night was memorable only as a further milestone in the decay of American democracy.

While billed in advance by the White House and media pundits as a “populist appeal” by the Democratic president, effectively kicking off his reelection campaign, there was virtually nothing in the speech that even acknowledged the acute social crisis in America, let alone offering any solution.

The annual presidential addresses to a joint session of Congress have taken on an increasingly empty and ritualistic character—the same empty phrases, the same perfunctory ovations, the same gimmick of individuals placed in the First Lady’s box to serve as cameos, the laundry list of proposals, either insignificant or overtly reactionary, the sickening appeals to national unity and militarism.

Four years after the official onset of recession, three years after the biggest financial collapse since the Great Depression, the US economy remains mired in slump and the world economy is rapidly approaching a new cataclysm. Yet neither Obama nor his Republican opponents can acknowledge the overriding fact being experienced by hundreds of millions of working people: the desperate crisis of the capitalist system.

The Wall Street crash of 2008 plunged the country into a social crisis: mass unemployment, increasing poverty, the collapse of local and state government budgets, the shutdown of public services, the spread of hunger and homelessness. Yet for both Obama and the Republicans, the only solution proposed is to increase the profits of American corporations at the expense of the working class. Every so-called “job-creation” measure proposed by Obama was, in reality, a tax break or government subsidy for corporate America.

Obama’s speech not only glossed over the causes and consequences of the 2008 collapse, but entirely avoided any mention of the mushrooming financial crisis in Europe, which threatens to break up the euro zone, with incalculable consequences for the US and world economy.

The axis of Obama’s speech was his invocation of the auto bailout as the greatest vindication of his economic policies. “This blueprint begins with American manufacturing,” he said. “On the day I took office, our auto industry was on the verge of collapse… In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences.”

By “responsibility” Obama was referring to the White House demand that auto workers take a 50 percent pay cut, along with the destruction of tens of thousands of jobs, major cuts in pension and health benefits for retired workers, and a ban on strike action, cementing the role of the United Auto Workers union as the company police force inside the plants.

While auto workers paid the price, the auto bosses reaped the profits. “Today, General Motors is back on top as the world’s number one automaker,” Obama boasted, “the American auto industry is back.”

He continued with the following extraordinary words: “What’s happening in Detroit can happen in other industries. It can happen in Cleveland and Pittsburgh and Raleigh.” This statement should be taken as a threat to the jobs, living standards and democratic rights of every worker in the United States.

While Obama invokes the success of “Detroit,” the city is bankrupt, with poverty and unemployment over 50 percent, widespread foreclosures and utility shutoffs, and a city government committed to scrapping entire neighborhoods and returning large sections of the former manufacturing capital of America to farmland.

The state government is contemplating the installation of an emergency manager who would suspend local government, rip up union contracts and rule by decree. Detroit has become a synonym, not only in America but worldwide, for urban collapse and social misery. This is what Obama offers to workers in “Cleveland and Pittsburgh and Raleigh.”

Besides these remarks, there was much political boilerplate and ballast. The section of the speech described as “populist” in the corporate-controlled media amounted to a few paragraphs out of an address of more than one hour. Obama declared, “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

He made a brief reference to the 2008 financial crash, admitting that the banks were to blame, mainly for the purpose of excusing himself and his administration of responsibility. The president then announced that he had just ordered the attorney general—four years after the fact—to “expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.” This election-year stunt will likely send no Wall Street CEOs to jail. It will fool only those who want to be fooled.

Obama emphasized that his social policies on education and health care were based firmly on the capitalist market and reiterated his commitment to further drastic cuts in social spending. He cited the deal he reached last summer with House Speaker John Boehner to slash funding for Medicare and Social Security in return for slightly higher taxes on the wealthy, which was derailed by opposition from the House Republican caucus.

Equally ominous and reactionary were the brief opening and longer closing sections of the State of the Union speech devoted to foreign policy. Obama began and ended the speech by invoking what he clearly regards as his trump card, the assassination of Osama bin Laden by a team of US Navy Seals.

Obama hailed “the courage, selflessness, and teamwork of America’s Armed Forces.” He continued: “At a time when too many of our institutions have let us down, they exceed all expectations… They focus on the mission at hand. They work together. Imagine what we could accomplish if we followed their example.”

The president repeatedly beat the drums for economic nationalism, focusing particularly on China as an alleged practitioner of predatory trade practices.

In the course of a long paean to American military strength and foreign policy “successes” like the overthrow and murder of Libyan ruler Muammar Gaddafi, Obama cited “the enduring power of our moral example.” Actually, under Obama even more than Bush, America is identified with a policy of global thuggery and murder, carried out by drones, death squads and hired assassins.

In his conclusion, Obama returned to his vision of a society run along military lines when he again invoked the raid that killed bin Laden. For Barack Obama, the cohesion of a team of trained assassins is the highest form of human solidarity.

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