David Stockman Warns “2008 Was Just Spring-Training For What Comes Next” – 07.28.16

  • In effect, America has undergone a rolling national LBO since the Gipper’s time in office. It is the result of the Washington/Wall Street policy consensus in favor of permanent deficit finance, stock market-centered “trickle-down” stimulus by the Fed and massive borrowing by the household and business sectors of the private economy.
  • So the U.S. economy is now stuck in the ditch because it has leveraged itself to the hilt over the past three decades. The vast majority of Americans are no longer living the dream because Wall Street speculators and Washington politicians alike have led them into a debt-fueled fantasy world that is coming to a dead end.
  • Indeed, this deformation has been long in the making and reaches back nearly a half-century. To wit, once the Federal Reserve was liberated from the yoke of Bretton Woods and the redeemability of dollars for gold by Nixon’s folly at Camp David in August 1971, financial history broke into an altogether new channel.
  • As shown in the chart below, since 1971 total public and private debt outstanding soared from $1.6 trillion to $64 trillion or by 40X. By contrast, nominal GDP expanded by only 16X. The very visage of the chart tells you that the former is crushing the latter.
  • These debt numbers are elephantine in their own right, but the real surge began when Greenspan took office in August 1987. Shortly thereafter in response to the infamous 25% stock market crash of October 1987, the purported financial Maestro launched the nation’s central bank down the road of chronic easy money and massive monetary intrusion in the financial markets.

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Source: zerohedge.com

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