I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can't get up off the mat.
We're doing all the wrong things. We're adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We're not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.Mr. Stockman made a salient point that should be made common knowledge: Since its creation in 1913, Fed money printing has caused periods of economic malaise in this country:
The greatest period of growth in American history was 1870-1914 – the Fed didn't exist. Right after 1870, when we recovered from the Civil War we went back on the gold standard. It worked pretty well. World War I was a catastrophe for the financial system. The Fed financed it, but I don't give them any credit for that, okay? We shouldn't have been in that war. It was a stupid thing to get involved in. But once we got involved in it, the Fed printed money like crazy, it facilitated borrowing, set the groundwork for the boom of the 1920s and the collapse of the 1930s.The former Comptroller General hammered home the point that the Fed has been propping up the stock market:
...then the crisis came in September, 2008. They panicked and pulled out the stops everywhere. As I said, tripled the balance sheet in thirteen weeks, [compared to what] they had done in 93 years. They are now at a point where they don't dare begin to reduce the balance sheet, begin to contract, or they'll cause Wall Street to go into a hissy fit. They are afraid to death of Wall Street going into a hissy fit, so essentially, the robots and the boys and girls and the fast-money traders on Wall Street run the Fed indirectly.
Clearly, Stockman isn't fond of the Fed's board of directors:
So no wonder we are in totally uncharted waters, and it's being run by people who are clueless as to how to get out of the corner they've painted this country into. They really ought to be run out of town on a rail.Watch the video. It's well worth your time: