Stockman: “Fed is the heart of the problem”

David Stockman, former Reagan OMB director, explains why he thinks the Romney-Ryan budget plan is a fantasy and shares his thoughts on the best way to restore the economy and create jobs. Here is a direct link.

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9 Responses to Stockman: “Fed is the heart of the problem”

  1. Joseph says:

    Great interview; an even better interview is the one on the Bill Moyers show on PBS earlier this year on the topic of crony capitalism in which Stockman diagnoses the underlying factors perpetuating the dysfunctional status quo. I do not recall whether Ms. Park made a reference to it at the time. She seems to appreciate Moyers, so I assume she did. It is worth mentioning again anyway because Stockman seems to hit the nail on the head.

    Money is clearly corrupting the political process. That is not new, but what is new, is the magnitude today, especially going forward after the “Citizens United” Supreme Court decision. Stockman’s suggestion of a constitutional amendment to limit lobbying and political campaign contributions seems to be the only way to implement reform without violating a partisan Supreme Court’s interpretation of the first amendment (free speech) as it applies to corporations and other super-rich vested interests.

    Of course, getting an amendment passed is incredibly difficult to do even at the best of times without rich and powerful vested interests tenaciously opposing it. It would probably take a catastrophic economic/financial crisis to create enough outrage just to instigate it. Stockman ominously ends the interview by warning that without some kind of crucial reform “crony capitalism is here for the duration”. (Incidentally, Chris Hedges, another fierce articulate critic of crony capitalism, fears that it may already be too late.)

    Anyway, I do not have a direct link to the Stockman – Moyers interview, but it can be easily found by Googling their names and the term “interview” and/or “crony capitalism”.

  2. John says:

    When I go to listen to somebody, I want to listen to that person. I don’t want nor need to listen to the talking heads repeatedly interrupting the guest and trying to be funny.
    It drives me away. Somebody should teach these clowns some manners.

  3. William says:

    1. The FED is NOT the heart of the problem ! The FED CAN and WILL inflate as long as one or more asset classes continue to rise in price.
    2. The FED DOES NOT determine interest rates. “Mr. Market” does.

  4. The Fed is the accomplice to overspending by the government and reckless liquidity to the banking sector which continues to aid and abet destructive levels of financial speculation. Or in the words of the Pecora Commission report June 16, 1934:

    “the excessive and unrestrained speculation which dominated the securities markets in recent years, has disrupted the flow of credit, dislocated industry and trade, impeded the flow of credit, dislocated industry and trade, impeded the flow of interstate commerce, brought in its train social consequences inimical to the public welfare. The cost to the American public of maintaining the securities markets has been staggering.”

  5. John says:

    The Fed is “Mr. Market” in our current, corrupt system.

  6. William says:

    Perhaps I was a bit too harsh. But the overall theme remains the same. The FED only facilitates speculation. As long as one or more assets classes are going up in price then banks will lend and investors/speculators will borrow (to go long one or the other assets class). Do you want to go long e.g. Apple on leverage when that stock is going down the drain ?

    A good example was the railroad bubble before the 1873 crash. Then the FED wasn’t around but there still was a bubble. If people want to speculate then they will speculate. And then banks are willing to lend them the money. And that requires rising asset prices. Another thing that facilitates lending/borrowing is falling interest rates. And interest rates are determined by “Mr. Market” (Supply & Demand for Money/Capital), not by the FED or ECB, BoJ etc.

    See what happened to the Debt to GDP ratios after 1981 in comparison to 1945-1981. Reason ? Falling interest rates ! The bubble of the 1920s was facilitated by falling interest rates !! Remember the graph you posted this year ?

  7. William says:

    If you want to dramatically curb taking more on debt then ALL taxlaws that encourage taking on more debt should be eliminated. I don’t know about Canada but in the US interest payments on mortgages are tax deductable. It facilitates home owners taking on more debt and helps home prices to rise.

  8. aliencaffeine says:

    Witnessed a bog fire in progress near the Wisconsin Dells on Sunday. My oh my! Slow-burning, creeper fire….maybe an inch per hour…for days upon days… I watched I mentioned to the family next to me it kind of reminded me of the Coming Boomer Retirement Crisis ie ‘not saving enough’ and its only beginning. Slowly people start to realize they have woefully not prepared for years of expenses and its now starting to dawn on them. And like the bogfire, it slowly burns through what you thought you had saved up.

  9. William says:

    In the 1920s US interest rates were falling. and that, of course, facilitated speculation, because when interest rates go down 50% then one can double its debts and still pay the same amount of interest.

    In 1926 Britain was forced to raise interest rates, in order to defend the peg between gold and pound sterling, which was set at a too high a rate. Higher interest rates restrains the rise of debts and therefore growth. It crushed the british economy and therefore the growth of debt was “weaker”. That’s why the british economy contracted only 8% in the early 1930s whereas the US economy contracted much more (25 (??) %).

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