Once an apostle of supply-side economics, former Reagan budget director David Stockman became a pariah among Reaganites when he wrote a 1986 book, The Triumph Of Politics, detailing his complaints about the administration’s unwillingness to support his cost-cutting proposals.
Now Stockman is attracting attention with a book titled The Great Deformation: The Corruption of Capitalism in America. The latest Bloomberg Businessweek documents some of Stockman’s key arguments.
The 66-year-old Stockman appeared on Charlie Rose and The Daily Show With Jon Stewart, declaiming the need to save America’s economy from its addiction to what he calls “monetary heroin,” the U.S. Federal Reserve’s penchant for printing money, keeping interest rates artificially low, and encouraging asset bubbles.
In Stockman’s view, the Federal Reserve has entered unsafe and unknown territory. In nearly doubling its balance sheet to $3.2 trillion in assets since October 2008, the Fed has artificially propped up the prices of fixed-income assets and driven interest rates to absurdly low levels. The Fed’s actions have left investors with little choice but to seek higher yields by mispricing risk. Worse, he argues, all the new money that the Fed has pumped into Wall Street is not getting to Main Street, where theoretically it could be used to help the economy grow; instead, it’s just being pushed around by traders. While Wall Street cashes in, yet another new, dangerous financial bubble is being inflated—all of which has left the U.S. economy at risk of another 2008-style meltdown. Only this time, Stockman wrote in the New York Times on March 30, “there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.”
You don’t have to agree with all of Stockman’s pronouncements to see that some of them are worth exploring further.
