'We're Going to Have a Crisis': David Stockman's Stark Warning for America

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    Apr 03, 2013 6:16 PM GMT
    http://www.theatlantic.com/politics/archive/2013/04/were-going-to-have-a-crisis-david-stockmans-stark-warning-for-america/274554/
  • conservativej...

    Posts: 2465

    Apr 04, 2013 3:14 PM GMT
    When viewing David Stockman from the perspective of one's own record of building wealth, it is important to realize he has learned the difference between knowledge and wisdom. It is equally important to understand that any individual such as David Stockman -- and the current crop of Washington politicians -- are what they are: politicians. It is their business to tell you what is best. The successful individual who has built tremendous wealth did not do so by following the paradigm of any politician.
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    Apr 04, 2013 3:15 PM GMT
    Stockman is making atonement for starting the crisis under Regan.
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    Apr 04, 2013 3:40 PM GMT
    swimguychicago saidStockman is making atonement for starting the crisis under Regan.


    Hardly - read the article.
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    Apr 04, 2013 5:35 PM GMT
    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/01/the-nihilism-of-david-stockman/
    And Krugman devoted 3-4 posts on his faulty use of statistics. Yeah, it's Krugman, I know. He was rather tame in his criticism, compared to others. icon_lol.gif

    Stockman, BTW, wasn't quite successful in the private sector.
    http://www.slate.com/articles/news_and_politics/politics/2013/04/david_stockman_s_return_the_former_reagan_budget_director_gets_media_attention.htmlStockman wrote this and then—as far as Washington was concerned—disappeared. He took his own advice, avoided the rent-seeking harems of K Street, and re-entered the private sector. That did not end well. Stockman started a private equity firm and became CEO of Collins & Aikman Corporation, an auto parts manufacturer in his native Michigan. He cut 750 management jobs from the manufacturer, betting that the manufacturing industry was about to take off. It didn’t take off. In 2005, the company collapsed, and in 2007 the Securities and Exchange Commission accused Stockman of defrauding investors with schemes like phony letters “that purported to justify the immediate recognition of rebates in income.” The case was settled in April 2010, when Stockman paid $7.2 million in fines.


    In the meantime, we have the Japanese doing this (and the stock market loved it):
    http://www.bloomberg.com/news/2013-04-04/bank-of-japan-boosts-bond-purchases-at-kuroda-s-first-meeting.htmlThe BOJ plans to purchase 7.5 trillion yen ($78.6 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said in Tokyo today. That exceeded economists’ median estimate of 5.2 trillion yen a month and is the biggest move since quantitative easing began in 2001.

    Stocks surged as Kuroda won investors’ confidence in a campaign to revive the world’s third-biggest economy, mired in three recessions in the past five years. The BOJ set a two-year horizon for the price target under a “new phase of monetary easing,” as the governor won the backing of a board mostly appointed by the previous government.
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    Apr 04, 2013 5:47 PM GMT
    q1w2e3 saidIn the meantime, we have the Japanese doing this (and the stock market loved it):
    http://www.bloomberg.com/news/2013-04-04/bank-of-japan-boosts-bond-purchases-at-kuroda-s-first-meeting.htmlThe BOJ plans to purchase 7.5 trillion yen ($78.6 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said in Tokyo today. That exceeded economists’ median estimate of 5.2 trillion yen a month and is the biggest move since quantitative easing began in 2001.

    Stocks surged as Kuroda won investors’ confidence in a campaign to revive the world’s third-biggest economy, mired in three recessions in the past five years. The BOJ set a two-year horizon for the price target under a “new phase of monetary easing,” as the governor won the backing of a board mostly appointed by the previous government.


    Quantitative easing is, and always will be, a sign of a failed political establishment. Compared to a fiscal response, it's a greatly inferior tool during an economic crisis because it's so indirect and, indeed, the long term effects are almost entirely unknown. I think the only reason it's tenable is that almost nobody in the general public—and most likely politicians—actually understand monetarism.

    I just hope it works in Japan. QE terrifies the fuck out of me, to be honest :-/
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    Apr 04, 2013 6:37 PM GMT
    I agree, but Japan's problem is its shrinking workforce. Monetary easing helps in the short run for deflation, but until Japan allows more immigration from other countries (culturally) and increases its birth rate, it's all going to be a temporary fix.

    But my point is: it's nothing like the deadly sin that Stockman seems keen on making it.
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    Apr 04, 2013 8:24 PM GMT
    q1w2e3 saidI agree, but Japan's problem is its shrinking workforce. Monetary easing helps in the short run for deflation, but until Japan allows more immigration from other countries (culturally) and increases its birth rate, it's all going to be a temporary fix.

    But my point is: it's nothing like the deadly sin that Stockman seems keen on making it.


    Er - I'm glad you feel so certain. You should bet on it. The problem in Japan has little to do with immigration - it's the fact they have chosen not to deal with their bad assets - which not so coincidentally is similar to the issue facing the US.
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    Apr 04, 2013 8:51 PM GMT
    riddler78 said
    q1w2e3 saidI agree, but Japan's problem is its shrinking workforce. Monetary easing helps in the short run for deflation, but until Japan allows more immigration from other countries (culturally) and increases its birth rate, it's all going to be a temporary fix.

    But my point is: it's nothing like the deadly sin that Stockman seems keen on making it.


    Er - I'm glad you feel so certain. You should bet on it. The problem in Japan has little to do with immigration - it's the fact they have chosen not to deal with their bad assets - which not so coincidentally is similar to the issue facing the US.


    Wow, you just put aside what every cultural and economic observer has noted about Japanese lack of immigration and aging of their working population. icon_eek.gif
  • conservativej...

    Posts: 2465

    Apr 04, 2013 8:52 PM GMT
    America is stuck, for better or worse, with a Monitarist as Chairman of the Federal Reserve. My question to all is what route you would have taken were you in control of the Federal Reserve and all three branches of government; the primary elements of control lying in the legislative and executive branches.
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    Apr 04, 2013 9:52 PM GMT
    conservativejock saidAmerica is stuck, for better or worse, with a Monitarist as Chairman of the Federal Reserve. My question to all is what route you would have taken were you in control of the Federal Reserve and all three branches of government; the primary elements of control lying in the legislative and executive branches.


    Isn't the Chairman of the Federal Reserve a Monetarist (note spelling) by definition?
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    Apr 04, 2013 9:57 PM GMT
    q1w2e3 said
    riddler78 said
    q1w2e3 saidI agree, but Japan's problem is its shrinking workforce. Monetary easing helps in the short run for deflation, but until Japan allows more immigration from other countries (culturally) and increases its birth rate, it's all going to be a temporary fix.

    But my point is: it's nothing like the deadly sin that Stockman seems keen on making it.


    Er - I'm glad you feel so certain. You should bet on it. The problem in Japan has little to do with immigration - it's the fact they have chosen not to deal with their bad assets - which not so coincidentally is similar to the issue facing the US.


    Wow, you just put aside what every cultural and economic observer has noted about Japanese lack of immigration and aging of their working population. icon_eek.gif


    While they may be issues, that's hardly their primary problem.
  • Medjai

    Posts: 2671

    Apr 04, 2013 10:31 PM GMT
    My riddler sense is tingling on this article...
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    Apr 04, 2013 10:47 PM GMT
    riddler78 said
    swimguychicago saidStockman is making atonement for starting the crisis under Regan.


    Hardly - read the article.


    I read the article and am an economist. The beginning of the debt explosion and the intellectual rationalization of it started under Regan and Stockman. On a personal note, I took American Economic History from Regan's Chairman of the Council of Economic Advisers, Martin Feldstein.
  • stratavos

    Posts: 1831

    Apr 04, 2013 10:47 PM GMT
    this is in poor taste but...

    "Let's have a crisis
    I wanna have a crisis-lock the doors, tight
    Let's have a crisis: stocktrader
    I'm going to let you have it.
    let's have a crisis!
    dive, turn, work,
    let's have a crisis
    We're gonna serve, and work and turn
    And h-h-honey"
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    Apr 04, 2013 10:52 PM GMT
    conservativejock saidAmerica is stuck, for better or worse, with a Monitarist as Chairman of the Federal Reserve. My question to all is what route you would have taken were you in control of the Federal Reserve and all three branches of government; the primary elements of control lying in the legislative and executive branches.


    Well, given the fiat power your question implies, yes I would have spent more on infrastructure as a typical Keynesian stimulus. However, even if the President and Congress had agreed to a massive infrastructure and fiscal stimulus bill, a reduction in interest rates would still have been necessary to prop up Wall Street and consumer sentiment.
  • Suetonius

    Posts: 1842

    Apr 04, 2013 10:52 PM GMT
    Politics aside (his or yours) Stockman is right in that the country is heading for an economic crisis -but it may be further off in the future than just around the corner. So intelligent investors would plan for their own economic security , no matter what befalls the nation.
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    Apr 05, 2013 1:18 AM GMT
    Aristoshark said
    riddler78 saidThe problem in Japan [is] , . . the fact they have chosen not to deal with their bad assets - which not so coincidentally is similar to the issue facing the US.

    As much as it makes me want to throw up to say this, for once Riddler is correct. The unwillingness to discharge dead obligations, coupled with capital requirements, effectively freezes the banking system.


    Debt might be the obvious tangible problem, but as Jared Diamond points out, that's just a symptom of a larger social set of problems, which I pointed out above.

    http://www.bloomberg.com/news/2012-04-25/three-reasons-japan-s-economic-pain-is-getting-worse.html

    But we digress.
  • coolarmydude

    Posts: 9190

    Apr 05, 2013 1:59 AM GMT
    I found Stockman's basic premise odd and ironic.

    He wants a middle-of-the-road approach to economics and monetary policy, but he's a Ron Paul supporter, where there is no middle-of-the-road. icon_idea.gif
  • B71115

    Posts: 482

    Apr 05, 2013 2:13 AM GMT
    We are well into a crisis, and we will never emerge.
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    Apr 05, 2013 2:31 AM GMT
    q1w2e3 said
    Aristoshark said
    riddler78 saidThe problem in Japan [is] , . . the fact they have chosen not to deal with their bad assets - which not so coincidentally is similar to the issue facing the US.

    As much as it makes me want to throw up to say this, for once Riddler is correct. The unwillingness to discharge dead obligations, coupled with capital requirements, effectively freezes the banking system.


    Debt might be the obvious tangible problem, but as Jared Diamond points out, that's just a symptom of a larger social set of problems, which I pointed out above.

    http://www.bloomberg.com/news/2012-04-25/three-reasons-japan-s-economic-pain-is-getting-worse.html

    But we digress.


    Jared Diamond's books have been so easily debunked. The bad assets that haven't been dealt with are really not a symptom of the larger set of social problems - it was a choice not to deal with them borne of cowardice and fear.