on April 2, 2013
David Stockman believes that our economy is almost past the point of no return. With a staggering federal debt and a deficit that keeps rising, he considers our economy to be a "setting sun" economy- our best days are behind us. But there's still hope, it's not too late to turn it around.
The book starts off with details on how, in the past, the banks leveraged capital and how their methods of investment were contingent on a constant upward spiral of success. He goes on to talk about how the fed propped Wall Street up with hopes of creating wealth through the stock market and that he believes they have overstepped their bounds. He criticizes Greenspan for his fiscal policies and compares that bubble to the one we are in today. Most of the book talks about the past and how we can relate it to the present and what we can learn from the mistakes made by our predecessors.
The facts and statistics he presents show that the "too big to fail" ideology adopted by the government was incorrect and in fact, many of the companies that received bailouts had sufficient assets to fend for themselves. Using AIG as an example, he outlines the overall sector's strengths and weakness during the crash of 2008. He asserts that during times of financial crisis, such as the crash of 2000, companies would inaccurately portray sales in order to make their company appear more valuable.
Highly critical of the Fed, many of his opinions are based around failures of the federal government to correctly manage the economy. Most of the time, he believes that their attempts to bolster the economy stem from pressure from business, rich people, or other government entities. He takes the reader through all of the United States' bubbles since before the Great Depression and explains the causes of each one. According to his statistics, most of the bubbles were caused by the Fed unnecessarily pumping money into the economy. He talks about the $800 billion stimulus and the minimal impact that it has had. He believes Bernanke and Obama are merely buying borrowed time with borrowed money.
The most interesting parts are when he quotes grim situations which highlight the depth of corruption in the government and big banks. In one instance, during the financial crisis of 2008, the Chairperson of the FDIC was "rarely consulted" and when she was, she was commanded: "you have to do this or the system will go down." There was "no analysis, no meaningful discussion." She expressed her frustration and explained that it became commonplace for her to be forced to carry out orders without being told the reasons or the end goals behind those orders. Generally, the government was unable to give reasons because they were acting on the whim of large banks. In another story, a head government official recounts the CEO of Goldman Sachs coercing him into providing the banks with bailout, lest their be dire consequences. The book has many shocking stories such as these. Each uncovers a different piece of corruption that, when added up, reveals a frightening picture of our government today.
It was VERY detailed. There were countless facts and statistics to support his arguments and viewpoints.
It provided a good snapshot into the inner workings of politics and government monetary policy.
He provided factual stories and quotes throughout the book.
He focused on many of the large power-players in our economy and their roles in the financial crashes.
The book tended to jump from time period to time period. One moment it's about the Great Depression, and the next, it's current. It can make it difficult to follow at times. It also makes it difficult to review.
It can be repetitive. Many of the things are said more than once or they are just reworded.
It's a bit dry. Even with the stories and shocking data, I still found it hard to concentrate.
on April 4, 2013
Disclosure: I've been a fan of David Stockman ever since he got in trouble for speaking the truth as Director of the Office of Management and Budget under President Ronald Reagan in 1981. As part of the Reagan Revolution, he'd had the audacity to disparage certain aspects of its supply-side policies! Last May, I posted an interview of him on my website where it was read 25,000 times. So I was thrilled when he told me that he has been reading my site. And then one day, I received an advance copy of his latest book, "The Great Deformation: The Corruption of Capitalism in America."
What an awesome romp through the economic, financial, and monetary shenanigans that culminated in the financial crisis of 2008, and its aftermath! It hones in on the Fed, Wall Street, corporate America, and the bog of "crony capitalism" and "central planning." He is consistently bipartisan: when he bashes Mitt Romney in one chapter, he'll bash President Obama in the next--because financial and economic principles matter, not party affiliation. An attitude that got him in trouble with the White House back in the day. And he does it in a pungent voice, kicking shins left and right, and knocking out a few teeth too, while vacillating in the gray area between rage and humor.
In Part I, "The Blackberry Panic of 2008," Chapter 1, "Paulson's Folly: The Needless Rescue of AIG and Wall Street"--the titles are part of the pleasure of the book--sets the tone with its bloodcurdling analysis of AIG's bailout and who benefited from it. He aims, as he writes, "to unpeel the onion of obfuscation that has emanated from Wall Street, bailout apologists, and the trio of Washington economic doctrines that assume the state can revive a failing economy when, in reality, it is a failing state that is crushing what remains of Main Street prosperity."
Skewering company after company for their financial practices, he calls Goldman Sachs and Morgan Stanley "the last two predators standing," GE Capital an "unstable house of cards," and GMAC "the single most malodorous" of the financing companies. Their "bailouts hemorrhaged into a multibillion-dollar assault on the rules of sound money and free market capitalism." And he ridicules Fed Chairman Ben Bernanke's rationale for printing money as "Great Depression bugaboo"
He lambasts Republicans not only for having opened the Treasury's floodgates with TARP but also for having turned the Fed over to the "money printers and Wall Street coddlers" Alan Greenspan and Bernanke, who congratulated themselves for "the phony prosperity they fostered." Yet Bernanke's "bailout spasms" of 2008 confirmed the "triumphs of crony capitalism." Not a breath is wasted.
In Part II, "The Reagan Era Revisited: False Narratives of our Times," he dives deeper into history and shows how events of the 1980s paved the way for the Republican-led bailouts of 2008. In the process, he debunks the GOP's "nostalgic claim" that the current fiasco could be fixed somehow by returning to "undiluted Reaganism."
It wasn't supply-side dynamics but the 12-year Keynesian deficit-funded spending frenzy under Reagan and George H. W. Bush that created this "phony prosperity." It left Republicans with the "insidious idea" that deficits don't matter. And in 2008, there were no conservatives left "to safeguard the gates of the Treasury." Instead, to goose growth, they focused on "tax cut gimmicks."
The Reagan Revolution envisioned that the rising tide would lift all boats, based on market dynamics. In reality much of the growth in wealth over the last three decades originated in financial and real-estate bubbles caused by "profligate borrowing" of the government and "the money-printing spree" of the Fed. Despite the core tenet of the Reagan Revolution that the boundaries of the government should recede, the government became "ever more corpulent" even as the tax burden was reduced, and as household and businesses piled on debt. Hence the "deformation" of the Reagan Revolution.
In Chapter 5, "Triumph of the Warfare State: How the Budget Battle Was Lost," Stockman recounts how, after large tax reductions had been put in place, the defense budget for 1982 suddenly was 50% larger than the number previously assumed. Stockman was "dumfounded" when he learned about "this calamitous result." It was the beginning of a spending spree on conventional arms--tanks, helicopters, and the like--that had no relationship to the Soviet nuclear threat. After the Soviet Empire collapsed, it was clear that the only thing missing was a "plausible justification" for a conventional war. Thus, the Reagan Revolution, the "tribune of small government," turned into the "great enabler of the 1980s warfare state revival." It entailed "staggering waste and lamentable historical consequences."
Then he slams the "Triumph of the Welfare State" and--whiplash--the "anti-tax religion" of the GOP, the "supply-side fantasy" that lower taxes and more growth would reduce deficits. Instead, deficits ballooned even during the phenomenal 1983-1990 Reagan-Bush recovery, proof that supply-side economics is a hoax. In the process, the Republicans' taboo against chronic deficit financing in peacetime was jettisoned. So a push for higher outlays from liberals was met with a push for lower taxes from conservatives. They both had their way. Hence, today's budget nightmare.
The root cause dates back to August 1971, the "Nixon abomination," when President Nixon took the US off the gold standard, thus defaulting on the promise to redeem US debt in gold. It "paved the way for the eventual deformation of central banking" and "institutionalized monetization on a massive scale" that would allow the gigantic deficits of the 1980s to accumulate without dislocations. So, the Reagan Revolution wasn't the apex of free market capitalism but a stepping stone to "the BlackBerry Panic of 2008."
In Part III, "New Deal Legends and the Twilight of Sound Money," Stockman, armed with a plethora of detail, debunks the current generation of "high priests of Keynesianism" who follow the presumed "sacred texts" of that era: the Bush and Obama administrations. They touted deficit spending as a solution to the "illusory depression bogyman" of the financial crisis.
But the New Deal created what would become monsters that played a prominent role in 2008, for example Fannie Mae that offered low-rate 30-year mortgages that were too risky for banks. So began the slippery slope of separating the mortgage origination process from owning and servicing the mortgage. It moved funding mortgages away from local banks and their deposits to global financial markets. And it gave rise to the "housing complex" with all its shenanigans that culminated in September 2008 with a $6 trillion bailout of the GSEs.
In Part IV, "The Age of Bubble Finance," Stockman contends that taking the US off the gold standard created a "casino" attitude of finance that blew up in mid-October, 1987, when the market crashed. Instead of allowing the excesses to be purged, Greenspan, a proponent of free-market ideology, embarked on flooding the market with cash--even though the real economy was growing at a healthy clip. Since then, "meddling by financial officialdom" has become "standard operating procedure." Greenspan had misunderstood the "most thunderous wakeup call in financial history" and ended up ignoring the "corrupting influence" of the printed money they were handing out.
The era of the "Greenspan put" had begun. It set the stage for future mayhem, including the concept of too big to fail. The Fed became "the speculator's best friend." Serial bubbles ensued, including stock market bubbles and the $11 trillion housing bubble, the "great housing deformation" that bloated Main Street consumption with borrowed money and brought real-estate speculation to neighborhoods.
Normally, the bursting of the Greenspan debt bubble would have been followed by a long deleveraging cycle to undo the "phony growth of the bubble years," accompanied by downward pressure on consumer prices--a "modest reprieve" after forty years of inflation that whittled down the value of the dollar to 25 cents.
But Bernanke would have none of it. Instead, he played the "deflation card," and everything below 2% inflation suddenly became deflation. He used "economic alchemy" to insist that higher inflation would somehow create jobs. Turns out, the "money printing spree was a dud" and resulted in the feeblest job creation in half a century.
Part V, "Sundown in America: The End of Free Markets and Democracy" is where presidential candidate Romney gets gored for his "fiscal dereliction" (i.e. defense and Social Security) and for his "complete failure" to see that free market capitalism had been "fatally corrupted" by the Fed's coddling of Wall Street. The company he helped found, Bain Capital, an outgrowth of that Great Deformation, "garnered fabulous winnings through leveraged speculation" in markets that had been "perverted and deformed" by the Fed. And this experience, despite what Romney claimed, didn't qualify him for the Oval Office.
Then the Obama administration gets gored for its sins, among them the "green energy extravaganza" and electric car boondoggle, and the bailouts of GM and Chrysler that didn't save any jobs but "just reshuffled them from rising plants in right-to-work (red) states to dying plants in UAW (blue) states." These bailouts were a "crushing blow to free market capitalism."
Stockman spreads the blame for the auto bailouts: they were initiated by the "nation's bailout crazed de facto president, Hank Paulson" and became a "bipartisan embrace." Stockman argues that the free market would have provided debtor-in-possession loans, just as the government did, to take the automakers out of bankruptcy, though the interest rate would have been higher.
But on Main Street, the recovery was "utterly botched." Instead of "breadwinner jobs," we once again have "faux prosperity." The Bernanke bubble is "an even sketchier version" of the Greenspan bubble, focused on the "deliberate and relentless reflation of financial asset prices." The money-printing spree, a "gift" to Wall Street and the "1 percent," ignited another round of rampant speculation and created a "wealth effect tonic that boosted spending at Nordstrom and Coach." The wealth of the "1 percent" has recovered to the pre-crisis level, but successful Fed-driven speculation isn't a sign of "honest economic recovery" but a "prelude to yet another spectacular meltdown."
The Great Deformation is a hefty 700+ pages. Each chapter is divided into short blistering sections with intriguing titles, and it's easy to read in small increments. The wealth of economic and political history is drawn together with constant focus on the financial crisis and its aftermath. We might not agree with every point and observation, and we might get antsy when Stockman slaughters one by one our sacred cows, but we enjoy following his analysis and his inner fire, his bitter logic, and his thoughts--while his language leaves us smiling so many times.
I also posted this review on my website. The link to my site is on my Amazon author page.
David Stockman has the professional and life experience to accurately portray the road the United States has publicly and privately taken for the last several decades. Noting major historical points in history supported by data, Stockman now reinforces the facts we are now faced with with sound arguments. We are living the result of decades of myopic and self-destructive economic and public policy. What makes "Deformation" so important and powerful is the amount of information covered. This book can be read quickly, which should allow it to have some impact. The benefit to some readers of this book are to those that are afflicted with the partisan 'illusion of choice' in current election cycles.
Stockman first went to Washington almost 40 years ago as a Representative. He's a former Supply-Side advocate and was Reagan's Budget Chief in the 1980s. In addition to Stockman's factually based critiques of the current Obama/Bernanke Monetary policy, he also criticizes the economically destructive path the Reagan administration took. The Great Depression and other eras are also focused on in "Deformation," as they do relate to our present-day situation. The facts speak for themselves.
The government and Wall Street are intertwined with Wall St. having the upper-hand: the stick. Stockman details the main reasons for TARP and the subsequent stimuli: lobbying, pressure, and scare tactics by a very small number of extremely wealthy and powerful people on Wall street. As for the corruption angle in "Deformation," Stockman specifically focuses on the TBTF (too big to fail) mainstream media campaign, and and in particular on the AIG bailout. He provides numerous stats, actions and quotations to reveal the fraud involved in this. The 2008 meltdown led immediately to a Wall Street orchestrated "Great Fear." One of the major players in this campaign was the CEO of Goldman Sachs. Stockman also goes back in time and methodically covers and links Greenspan's actions in the 1980s and 90s under particular situations. Then (as now), creating money and pumping that newly-created money into specific places (and in the general circulation). This was the remedy. It is still the remedy now, but in a larger and more destructive way. Why is the S & P now at an all-time high in April, 2013? Notice, that there are no celebrations nor positive commentary regarding this all-time high.
The Future is Now:
Stockman (and many others with experience and credentials) are correct: the US has been kicking the can down the road for decades. Now, we are at end of the road. Not tomorrow, not in a couple of years in the future, but now. One example is the recent sequester. It is only $85 billion in cuts out of a multi-trillion dollar budget, but it has brought tails of woe from the 'working person' dependent upon regular paychecks to cover monthly maintenance debt payments to mainstream media fear disseminated in a soap-opera like fashion. These fiscal cliff issues and sequester (translation ---> austerity) will become the norm. It has only just begun.
Stockman uses a plethora of sources and statistics to reinforce and augment his points throughout this book. He does give opinions, but primarily he just gives the facts. He does lighten "Deformation" up with stories and parables which illustrate concepts (the pig farmer) and this is very well done. He notes Bain Capital's failed Fed-like business model and also critiques the Laffer-Curve.
Stockman's take on the future: political turmoil and economic decline. Both have already begun.
"The Great Deformation" is a book that should be read by everyone.
on October 4, 2013
Mr. Stockman's book, The Great Deformation, makes a persuasive case against "crony capitalism" and Keynesian economics. In example after example he attacks Republican and Democratic administrations for destroying the free market and bowing to the "K street" lobbyist that demanded more government spending to prop up the economy. His overall view of the economy, especially the state of our current economic crisis, is insightful and useful in a macroeconomic sense. However, to an investor or someone looking for immediate guidance in policy decisions it is almost useless. A congressman reading this book would come away with foreboding, but no immediate answers. Stockman himself admits his offered remedies cannot be implemented. Investors know that bubbles, and we are in a huge bubble now according to The Great Deformation, will burst, but when they will burst is unknown and unknowable. Thus, the book is useful on an overall theoretical basis and perhaps knowledge on what will eventually happen and why, but in knowing what to do right now it isn't useful.
Stockman offers several ideas that could be implemented in an ideal world; however, these ideas are not tied together by an overall theory. Stockman believes in the free market, a smaller government, and in government safety nets for people who pass a means test, which place him into an economic middle ground where government protects at a basic level but lets the market decide who wins and loses the economic game on a larger scale. He is neither a classical economist or a Keynesian. But what he actually is on a theoretical basis is unknown and this leaves us wondering what he would recommend in situations he has not covered.
Stockman's analysis fails on many levels when it comes to specifics. Like many a liberal he wants the military cut to Eisenhower levels and he wants to eliminate the conventional military force and depend on a nuclear deterrent alone. This was exactly what Truman tried and it resulted in an invasion of Korea. The communist correctly reasoned that the US would not risk a nuclear war over S. Korea; thus, the US entered the war with surplus WWII equipment and poor training for the front line troops. The results were nearly a disaster. Naturally, Stockman does not discuss this setback. Will we risk a nuclear war for Kuwait? No is the obvious answer, and that would allow dictators to conquer small nations with impunity. So the military reduction idea he offers has been tried and it failed. We do not need to be the world's policeman, but we must be able to protect vital national interests. What those are is up for debate, as Syria clearly shows, and perhaps a reduced military would cut back presidential adventurism; however, a fall back to the nuclear deterrent alone is foolish in the extreme.
Mr. Stockman admits his work is a polemic, which indeed it is, but it is a poorly organized polemic. The author throws ideas out faster and with more jargon than Dennis Miller answering a question about Apple's Steve Jobs, but they are also about as well organized. The Great Deformation goes over the same ground many times and makes the same points many times. The history of our republic, from an economic view, should have been handled in one place rather than repeated in chapter after chapter. Also, Mr. Stockman makes the mistake of critiquing decisions without context. When Nixon made the decision to go off the gold standard, gold was streaming out of the country in exchange for dollars and he faced an extraordinarily hard set of choices. Instead of laying out the choices and telling us why Stockman's choice was better he just dumps on Nixon's decision. Without the background context of the decisions his criticisms are not understandable. Yes, I get it that he doesn't like the decision and from an macroeconomic point of view the decision (whatever it was) was bad, but it is hard to agree with a person who leaves out the context of the decisions. Spending more time on context could have strengthened Stockman's arguments appreciably.
Then there is the vitriol. This constant spewing of venom actually makes the book harder to read. Stockman's last chapters try to justify the harsh language because he thinks we are destroyed and there is no fix. We do not have the political will to fix the problems, thus they will destroy us, according to the author. I agree that the politicians have destroyed the USA with their Keynesian policies, but harsh language and jargon will not help put the arguments over. If Mr. Stockman organized his work and left out the jargon and the vitriol the book could have been reduced by over 100 pages and made improved arguments for his position. He also assumes the reader has a rather firm grasp of various economic principles; however, an appendix would have been useful to fully explain some of these ideas in a non-jargon filled fashion (like Mercantilism). By leaving out the unnecessary attacks and by improving his organization he could have cut the size of the book dramatically and still put in an explanatory appendix on basic economic ideas.
We now have fiscal cliffs as far as the eye can see - mostly the result of the Federal Reserve and crony capitalism acting in a manner inimical to free markets and democracy. Both parties are responsible, beginning with LBJ's 'guns and butter' and continuing with every president since..(Reagan left the federal government barely 0.5% GDP smaller than Carter, while adding a massive structural deficit.) Bush II, per Stockman, jumped into the 'deep end' - the result of large tax cuts, funding two wars, adding an expensive prescription benefit to Medicare, and building up the military.
From 1880 to 1980, total public and private debt rarely exceeded 1.6X GDP; by 2008 it was 3.6X GDP. This massive growth was encouraged and made possible by the Federal Reserve, first under Alan Greenspan and now continuing with Ben Bernanke - digitally printing enormous amounts of money ($600 million/hour during Sept. 2008) to expand its balance sheet 6X to $3.2 trillion from $500 billion), lowering 'real' interest rates to below zero, deflecting efforts to address the 'Too Big to Fail' (TBTF) issue, endorsing a policy of spurring economic growth through the 'wealth effect' of rising stock prices (adding to its other goals of smoothing out the business cycle, minimizing inflation and unemployment, promoting home-ownership), supporting massive (and unnecessary bailouts), and institutionalizing the 'Greenspan put.'
Yet, during the 2000 - 2013 period, economic output grew by an average of 1.7%/year, the slowest since the Civil War, real business investment increased only 0.8%/year, and payroll job counts increased 0.1%/year. At the same time, the real new worth of the 'bottom' 90% has fallen one-fourth, the number of food stamp and disability aid recipients more than doubled. Thus, our Main Street economy is floundering while Washington piles soaring debt burdens on our descendants, unable to rein in either warfare or welfare states, or raise the taxes to pay our bills.
Stockman believes there never was even a remote threat of a Great Depression Redux - the Great Fear was purely a self-serving Wall Street concoction. The recent AIG bailout ($180 billion) was one of the most egregious examined by Stockman. He tells us its balance sheet at the time held $800 billion of mostly high-grade stocks/bonds, and its CD liabilities accounted for less than 10% of all liabilities. Congressional investigators found that the $400 billion (notational value) of busted CD insurance it underwrote was held by about 12 of the world's largest financial institutions, and virtually none by Main Street banks. The worst-case loss facing those giant institutions would have amounted to no more than a few month's bonus accruals against combined assets of $20 trillion, and each had the balance-sheet capacity to absorb an AIG hit. Goldman Sachs was the largest beneficiary paid full value (nearly $19 billion), $17 billion went to France's second largest bank, $15 billion to Deutsche Bank, $14 billion to Bank of America and Merrill Lynch, and nearly $10 billion to London-based Barclays.
Another rationale offered for bailing out AIG was to protect those individuals holding some of the $800 billion in insurance policies it held - first from a potential 'panic' run, and secondly from having those assets taken over by lawsuits over AIG's busted CD insurance. Stockman, however, says those assets would not have been subject to a 'panic' run, and policyholders were already protected by state insurance commission rules.
Bailing out the TBTF banks was rationalized as a means of protecting commercial, 'Main Street' banks. (I must admit to losing the chain of logic on this one.) Stockman, however, points out that those banks were mostly devoid of serious problems - their 4th quarter 2008 assets totaled $11.6 trillion, but only $200 billion (1.7%) were toxic. Commercial real estate loans accounted for most of the 500 bank closures conducted by the FDIC, and most of those loans were 'interest-only' with a 5 - 10 year maturity that would only have generated a slow bleed-off.
As for bailing out money market mutual funds, Stockman disagrees with that action also, pointing out that about half the $3.8 trillion was in funds exclusively invested in 'governments,' and they experienced no losses or liquidations. The other also held commercial paper, and during the several weeks after the Lehman failure about $430 billion 'fled,' triggered by one fund declaring it had 'broken the buck' because $750 million of its $60 billion assets was in Lehman paper (a loss of only 3%). Regardless, 85% of the flight money ($370 billion) simply moved to the 'government only' funds, and most of the remaining $60 billion went into CDs and other bank deposits, not under people's mattresses as feared.
G.E. was given $30 billion in taxpayer loans and guarantees to help it roll over its commercial paper and avoid the need to sell some assets at fire-sale prices or issue more stock. Again, unwarranted, per Stockman. Similarly with Goldman Sachs ($10 billion), which then generated $16 billion in salaries and bonuses atop $13 billion in net income for the year that began just 3 months later. Etc., etc. These bailouts rescued the perpetrators, but not the victims - per Stockman.
As for bailing out G.M. and Chrysler, Stockman contends those actions were also unnecessary - the jobs supposedly protected would simply have moved to existing plants in the Southeastern U.S. (Stockman also criticizes Romney for waffling on the topic, purportedly to help him win Ohio.)
Turning to the 'Greenspan/Bernanke Put,' Stockman recounts how Greenspan flooded Wall Street with money after the 10/1987 crash, and then the 1998 LTCM/Russian ruble collapse (LTCM had 30:1 leverage ratios). During the next 15 months, the S&P 500 rose 50% because Wall Street now believed errors would no longer be punished. Just before the dot-com bubble burst, the NASDAQ multiple reached a ridiculous P/E ratio of 100:1, about 6X its average historical level. Then, in response to a barely measurable GDP downturn in 2001, the Fed again flooded the market with more money - between early 2002 and mid-2005 the CPI increase averaged 2.5%/year, vs. short-term borrowings at 1.5%. Greenspan was now running a bubble machine; between 2002 and 2007, public and private debt grew $18 trillion, 5X the gain in GDP.
The Federal Reserve now holds up trillions of dollars worth of inflated asset prices via its destructive policies that it doesn't know how to unwind with creating another crash - domiciled in a monetary prison of its own making.
The bulk of 'The Great Deformation' is taken up with recounting how we got from the 'New Deal' to our current state of affairs.
Near the end, Stockman takes a few pages to also demolish a few currently popular myths, pointing out first that investors/entrepreneurs among the top 1% now have the lightest tax burden since Hoover and that the 2011 federal tax take of 15.2% GDP is as low as 1948 levels. He also contends there's not a bit of evidence to support the Laffer rationale for reducing current moderate marginal income tax rates, that half of personal consumption expenditure growth since 2007 has been funded by deficit-financed transfer payments - phony growth borrowed from future taxpayers. As for the supposed 'manufacturing Renaissance,' Stock says the real growth of manufacturing shipments from early fall 2000 to Sept. 2012 was only $200 billion in 2012 dollars, not the unadjusted $1.5 trillion commonly reported. All of 4%! Meanwhile, real defense goods growth in shipments increased 41% - obviously contributing significantly to the already anemic 4% total manufacturing growth, while producing nothing of economic value and creating new enemies.
As for Romney's 'business skills' - Stockman asserts Bain Capital garnered its winnings through leveraged speculation in financial markets perverted and deformed by money printing and Wall Street coddling. When he began in 1984, the S&P was at 160, and 1270 by early 1999. They were not rewards for capitalist creation, but mainly windfalls collected from gambling in markets rigged to rise. In fact, four of the ten Bain Capital home runs under Romney ended up in bankruptcy. Stockman makes this claim with confidence because he pursued this model as well.
Unfortunately, Stockman is not optimistic about the future. He sees CBO forecasts as overly rosy on wage and job growth, while also overestimating any decline in food stamps, unemployment, and other support programs. Our 2012 defense budget is 80% above Clinton's, in constant dollars, despite a 'peace' president. Meanwhile, the Fed has incited a global currency war. And then there's the matter of our skyrocketing health care costs.
The stock market is now where it was 13 years ago - meanwhile, we've only created 17,000 jobs/month vs. the 150,000 needed, we now have a cumulative current-account deficit of nearly $8 trillion, and the number of high-value jobs has shrunk.
Stockman predicts that within a few years the latest Wall Street bubble will explode, and the nation will enter an era of virulent political conflict, with no growth at all. His prescription - providing 100% public financing for candidates, limiting campaigns to eg. 8 weeks, a life prohibition on lobbying by anyone who has been on a legislative or executive branch payroll, restore and strengthen Glass-Steagall, abolish deposit insurance, impose a 30% tax on wealth, replace income taxes with consumption taxes, eliminate the massive bias in the tax doe for debt and capital gains, and mandating that Congress pass a balanced budget or face automatic sequester. Further, he would end the bailouts - much through Constitutional amendments.
Bottom-Line: Stockman's 'The Great Deformation' provides a lot of common sense, carefully analyzed facts, and a cold-dash of reality. Well worth reading.
on May 7, 2013
As a political scientist, I could not stop reading this book. I now have notes in it from front to back. Of the 60 plus books I've purchased on America's evolving economic quagmire, this is clearly the most informative, insightful and expertly written. The book is a masterpiece of historical knowledge, moral reason, financial insight and sardonic wit.
The author is erudite yet his book is approachable for college educated readers. He is non-partisan and equally critical of the mistakes of both parties and their leaders. While he has not written a cheery book, it is anything but downbeat, since the superb educative value of the book enlightens and empowers.
The work is no rant or harangue. It is not an act of bashing government. It is an articulate, frank and powerful assessment of how ignorance and greed have combined to reduce the American prospect through the deformation of our core values and political system. Admittedly, the book sees a "sundown" era coming, with a debt crisis by the end of this decade (576, 648, 659, 671). Along that vein, Stockman offers thirteen recommendations (some involving constitutional amendments) that might reduce pending damages.
Stockman is transformed since his own Waterloo (572-75). Now, he abhors the way that central bankers help financial elites plunder the world economy. Earlier, he was a political wonk, three-time Congressman, and OMB Director (appointed by President Reagan in 1981). After leaving politics, he spent most of two decades as a private equity player for big Wall Street banks and as head of his own firm. Admirably, when his CEO experience came to a calamitous end in 2005, he was man enough to admit his greed and mend his values. Now, with his extraordinary understanding of the financial and political landscape, he sets about to help his country find its financial morality anew.
THE FOOTNOTE CONTROVERSY
Some reviewers complain that Stockman's work--rich in statistics, case reviews, historical data and insider knowledge--does not use footnotes. Considerations of this nature are important to college professors (like myself). As Stockman explains in his endnote on sources (which he divulges), his work of interpreting and patterning economic developments does not lend itself to the footnote approach. This is reasonable. Stockman's data squares with widely disseminated information about the events he explores. His work demonstrates so much savvy interpretation and discernment that to footnote arguments would involve erroneously attributing to other writers nuanced conclusions for which they are not responsible. Thus, I have no quibble over Stockman's documentation.
CONTENT OUTLINED BY BOOK SECTION
PART I of the 34 chapter book introduces the 2008 financial panic with a perceptive narrative, factual gleanings, wry and sardonic anecdotes, and a scathing discussion of the nature and extent of crony capitalism that fostered the 2008 crisis and our current environment.
PART II of the magnus opus explores the Reagan era as viewed by one of Reagan's best placed counselors. The endeavor is assisted by recourse to the Nixon era, the birth of the GOP's anti-tax religion, and the triumph of the welfare state in America. This section reveals an arsenal of micro-details and macro-financial facts.
PART III evaluates New Deal episodes and myths, the twilight of sound money, and President Eisenhower's last stand for fiscal rectitude. People who think there is something worthwhile in a gold standard will relish much of this section. Stockman builds a case that a properly designed gold-based system can reduce the ability of central bankers to pursue asset inflation at a cost to the sustainable public interest. That said, a gold system would need a new design to work. (There are, perhaps, other ways to make central bankers toe the line.)
PART IV contains 13 chapters that cover a vast landscape stretching from the rise of speculative finance through bull market cultures, roads to quick riches, serial bubbles, the Fed's subsidy of gambling manias and various other deformations of economic sanity. Along the way, Stockman shows how trillions of dollars of wealth has been transferred from America's workers to a sliver of the nation's elite. It is likely the greatest legalized robbery of all time.
PART V wraps up the book with 8 chapters specific to recent political and economic events, mostly during the Obama era. One chapter in particular, "The Bernanke Bubble," has many observations that deserve airings at white tie events. Something has to awaken the consciences of those on the receiving end of an asset playing field unfairly tipped.
COMPARISONS AND SUMMARY
While Stockman's book stands in its own class, it resonates with themes in William Greider's 2003 book, "The Soul of Capitalism." It also shares connective tissue with Jeff Gates' work, "Democracy at Risk" and Nomi Prins' perceptive book, "It Takes a Pillage" (2010). As it regards Stockman's claim that the current recovery is "not real or sustainable" and amounts to "reverse Robin Hood redistribution" on behalf of Wall Street (653), similar arguments are found in, "America's False Recovery: The Coming Sovereign Debt Crisis and Rise of Democratic Plutocracy" (2011).
In sum, only time will tell whether asset inflation, Fed-style, can heal an underlying Main Street economy. If Stockman errs in seeing a phony economic foundation, he will at least be correct in observing the brazen immorality of the wealth redistribution underway. The trouble is not that some are wealthier than others, but that the central bank has chosen to massively subsidize asset growth for Wall Street's most undeserving elites.
on April 27, 2013
My real rating for the book is a mix. One star; or 4 plus stars. Chicken little would give it a 5; Paul Krugman and the Keynsians would trash it.
Stockman''s lengthy tome is a vast expansion of a half-page Op-Ed piece of a few months ago arguing that our political inability to bring deficits under control will ultimately destroy our economy. I feel the same way, so I bought the book to provide me with comfort reading. For a true believer such as I, deeply concerned for the future of my grandchildren, it provides lots of anecdotal support for the ugly reality that both political parties and the Fed have abandoned the free-market economy, and will use the government printing press to shower money on their friends until some Armageddon stops their profligacy. The Keynsians will simply ignore Stockman's fevered prose, knowing that it is always more popular to keep filling the punch-bowl than to take it away, no matter how chaotic the party is becoming.
Trying to evaluate the book as a read, without regard to its message, these observations: First, the bad news. The principal negative its it it's too long by at least half. Stockman would have been well served by an editor equipped with a big pair of scissors and a thesaurus.
If the reader isn't persuaded after 300 pages, he or she isn't likely to suddenly see the light. And much of the "fill" is, in my judgment both unnecessary and unconvincing. He spends many pages with a revisionist history of the New Deal, asserting that the Depression was nearing an end before Roosevelt took office, and that the measures of the New Deal actually prolonged the pain. Again, philosophically I would like to agree, but that's a lot of highly unorthodox thought to be offered without a single footnote. Certainly the book would, in my judgment, have been much stronger if he had either eliminated, or at least dramatically shortened, the material about the New Deal, which is of use to him only in bemoaning the current tendency to claim that what was done, or not done, during the Depression provides proof that the policies of today must be right..
When Stockman moves to a more current time, his writing is more persuasive because he was personally involved in the events, and because he excoriates both Republicans and Democrats. He may, in fact, be even harder on the Republicans, who purport to be supporters of a market economy, but, when in power, are just as much statists as are the Democrats. But he can''t avoid min-numbing detail about arcane financial deals he has known. I spent almost 50 years working with complicated financial transactions, but despite this, following his lengthy descriptions of the several deals he talks about was just too much work.
The last bit of bad news is a minor annoyance. Perhaps because of the book's length, Stockman runs out of news words to describe the events he's talking about, and so tends to overuse, and, even worse, misuse (in my judgment) a few adjectives. The one I found particularly grating was his constant reference to apparently endless upward trends as "parabolic''. But upward parabolas come to a peak, and then go down, and none of the "parabolic" events he talks of ever crested. I would have been lots happier with some better word or words.
The good news is that Stockman is, generally, a quite engaging writer. Or at least, his contempt for many of the men of whom he writes is so deeply felt that he can often indulge in sarcastically contemptuous descriptions of foolish men doing dumb things with high-sounding objectives. He adopts some most contemptuous terms to describe the villains of his book--Keynes, Greenspan, and especially Bernanke--to whom He refers with a wonderful (to me) variety of terms of praise so obviously not intended that they become pejoratives--"the maestro" being my favorite.
The final bit of good news is that Stockman was on the front lines during the current march to insolvency, a witness to the folly of our current policies both as a member of the Reagan cabinet, and as an investment banker who got rich thanks to Bernanke's improvidence. One looking for a catalog of horrors of the current madness couldn't do better. Overall, I think the book may be best as a source for anecdotes of the excesses of our current financial structure. I plan to make a few notes.about some of these cases to serve as ammunition when next I argue about these issues.
on September 1, 2014
This is going to be a review of David Stockman's 768-page tome The Great Deformation, and 0831-deform
although I never thought it was possible, it makes me angry to write this book review.
I'm not angry because I don't like the book. On the contrary, this is the best economics book I've ever read. Indeed, it may be the best and most influential book I've ever read in my life. I only wish I had read it the moment it was published in April 2013. I only finished reading it today, and for the entire time I've been plowing through it, I've been trying to think of what I would say in this review.
Why am I angry, then, to write this? Bluntly stated, because nothing I can say will make what I want a reality. And what I want is for every literate person in the United States to read this book, cover to cover. I want them to read it. I want them to understand it. I want them to agitate for the changes that it recommends.
But I know at the outset that none of that is going to happen. The vast majority (I'll pull a number out of the air and declare it as 90%) are too lazy, dim-witted, or apathetic to bother. And that 90%, I daresay, is a kind estimate. I would also wager that another 1% - - and that would be the fabled 1% which enjoy a storied existence at the top of the socioeconomic heap - - would be wholly irrational to embrace any of the core shifts that the book recommends. These elites, after all, are the beneficiaries of the madness elucidated therein.
0831-stockmanLet's back up. As those of you born before 1970 hopefully recall, David Stockman became nationally famous when, still in his mid-30s, he was made the budget director of the newly-elected Reagan White House. Stockman was front and center in national news for years, and I clearly remember, even as a young teenager, reading about Stockman and the battles he was waging to invoke the so-called Reaganomics. My general impression from that time was that he was smart, capable, and committed. Then, as of the mid-1980s, just like most of the rest of the nation, I stopped hearing about him.
I consider myself well-read, and I have the luxury of time to stay abreast of most financial and economic news. In spite of this, if you had asked me several months ago what had ever happened to David Stockman, I would have had absolutely no idea. I daresay most of you are in the same boat, so in brief, I'll bring you up to speed:
After leaving the Reagan administration, Stockman joined Salomon Brothers and later was one of the earliest partners of the Blackstone Group. Years later, he went on to found his own private equity firm, Heartland Industrial Partners, for which he initially raised well over a billion dollars.
Heartland executed over twenty deals, one of which - Collins & Aikman - filed for bankruptcy. Stockman served as CEO at Collins, and early in 2007, he became the target of federal prosecutors in Manhattan as well as the SEC. From the little I've read about this period, the charges were completely ludicrous, and after wrecking nearly two years of Stockman's life (as well as those of many others), the prosecutors dropped the entire fleet of charges well before a trial could even commence.
From what I can gather, Stockman's mounting of his defense during the period of his prosecution his come-to-Jesus moment, since it dawned on him the nature of the business game he had been playing for so many years. Specifically, the hazards of the debt-saturated private equity world and, much more broadly, the entire globe that had become utterly besotted by debt. Stockman writes:
At length, I saw the light, and it had nothing to do with Paulson's apparent illiteracy on the precepts of sound fiscal policy. The bailouts, the Fed's frenzied money printing, the embrace of primitive Keynesian tax stimulus by a Republican White House amounted to something terrible: a de facto coup d'etat by Wall Street, resulting in Washington's embrace of any expedient necessary to keep the financial bubble going - and no matter how offensive it was to every historic principle of free markets, sound money, and fiscal rectitude.
Stockman thus endeavored to put together this book that is fervent, passionate, articulate, and remarkable in scope. And I kept wondering to myself, if the villains in the book (Paulson, Bernanke, Obama, the corpse of Richard Nixon, Larry Summers, Yellen, etc.) actually read it, would they think to themselves (A) "Oh my God, what have I done?????" or (B) "Crap, they're on to us."
My copy of the book is highlighted as heavily as the Bible of a Southern Baptist preacher, so it's hard for me to "boil down" the book to anything less than a fifty page review. I will just share a few morsels that I think help capture some of the points Mr. Stockman wants to make and the elegant fashion in which he presents them:
"This was a blatant miscarriage of governance. As will be seen, at that late stage of the delirious financial bubble which had overtaken America, Goldman Sachs and Morgan Stanley had essentially become economic predators. Their bankruptcy would have resulted in no measurable harm to the Main Street economy, and possibly some gain. It would have also brought the curtains down on a generation of Wall Street speculators, and sent them packing in disgrace and amid massive personal losses - the only possible way to end the current repugnant regime of crony capitalist domination of the nation's central bank." (p. 22)
"In a healthy capitalist economy, income distribution reflects the economic justice of the marketplace, not the political engineering of the state, and properly so." (p. 68)
"Policy measures like Fannie Mae, deposit insurance, social insurance, the Wagner Act, the farm programs, and monetary activism share a common disability: They fail to recognize that the state bears an inherent flaw that dwarfs the imperfections purported to afflict the free market; namely, that policies undertaken in the name of the public good inexorably become captured by special interests and crony capitalists who appropriate resources from society's commons for their own private ends." (p. 169)
"The Thomas Amendment was a nascent version of today's delusion that economic setbacks, shortfalls, and disappointments are caused by too little money. The true cause, both in the early 1930s and today, was actually an excess of debt. This explanation is never appealing to politicians because there is no real cure for the liquidation of excess debt, except the passage of time and the forfeiture of the ill-gotten gains from the financial bubbles preceding it." (p. 183)
It was around this time that I realized even sharing the very best of the best quotes, there would just be far too many, so I jumped toward the end of the book......
"The social insurance system is now entering an era of permanent funding crisis and chronic political turmoil. And, as detailed in chapter 32, the Bernanke stock market bubble is heading for a thundering meltdown which will vastly eclipse that of September 2008. So what lies ahead is endemic fiscal crisis, wrenching financial market dislocations, and relentlessly rising fear about financial security on Main Street." (p. 648)
"Only a financial system addicted to and whipsawed by central bank money printing can produce such erratic, capricious, and correlated results. What is implicated here is not the doings of the free market but the corruption of free money. For that reason, the Greenspan axiom that financial bubbles can't be prevented but only punctured and then bailed out afterward is downright perverse. Now in its third iteration, this policy is, in fact, the backstage mechanism by which society's income and wealth are being redistributed to the top 1 percent." (p. 656)
"While this is seemingly ironic given that Obama was reelected essentially on a platform of "fairness" for the middle class, that was content-free campaign rhetoric. The true irony is that political progressives are so indentured to Keynesian theories of demand stimulus that they have eagerly turned the nation's central bank over to Wall Street lock, stock, and barrel." (p. 657)
"The cruel corollary is that free market capitalism cannot help, either. It has been abused, burdened, demoralized, and impaired by decades of central bank money printing and the speculative raids and rent-seeking deformations which it fosters. Now the White House has a vague mandate that the 1 percent should pay more, but it's too late. The coming crash will leave a lot less to tax." (p. 671)
The Rogue's Gallery
There are some definite "bad guys" (and bad events) skewered in these nearly 800 pages. The names are all known to you, but the deeds, and their details, are articulated in ways I didn't understand well until now. These misfits include:
+ Richard "Tricky Dick" Nixon;
+ FDR (particularly his debasing of the dollar and confiscation of gold);0831-fatpig
+ Alan Greenspan's LTCM bailout in 1998;
+ Alan Greenspan's panicked, rate-plunging response to the Internet bubble collapse;
+ Alan Greenspan's deliberate inflation of the housing bubble (sense a trend here?);
+ Larry Summers, pictured here;
+ The military-industrial complex, wholly and utterly bloated beyond need;
+ Medicare/Medicaid/Obamacare and the breathtaking price inflation in the medical racket;
+ The "timorous" math professor Benjamin Bernanke;
+ The GM bailout, TARP package, and smorgasbord of "relief" programs in late 2008/early 2009
+ And, of course, President Obama
There are a few heroes mentioned in these pages, such as Fed chairman William McChesney Martin, Paul Volcker, Eisenhower, and Herbert Hoover (the last most particularly for the well-meaning, but aborted, efforts Hoover invoked to aid the nation as it entered Depression, only to be nefariously thwarted by a breathtakingly cynical FDR).
Is this book absolutely perfect? Of course not. There are a smattering of typos and misspellings here and there, as one might expect of any book so large that could be used as a weapon of self-defense. It also is peppered with some phrases and expressions that get a bit overused or could be replaced with simpler language (for instance, "it cannot be gainsaid" could just as easily, and more clearly, be expressed by the word "undeniable.")
It's also on the long side, and it needn't be quite so lengthy. I personally found a few of the chapters, particularly those oriented toward leveraged buyouts and private equity, to not add much to the polemic. Stockman knows these topics so deeply, it was probably tempting to spend extra time espousing them, not unlike the way I prattled on in my own recent book about the Silicon Valley's Internet bubble.
But these trifles shave a hundredth of a point off the 100.00 score I would otherwise give the book. It is written with such clarity, fervor, and well-intentioned intellect that, even forty pages into it, I could hardly wait to climb go my rooftop to tell the world to go buy it. Mr. Stockman's days at the Harvard Divinity School have eased their way into the pages, because the prose has reads like the fiery gospel of a true believer.
It goes without saying that these ideas and arguments are not the scribblings of a lunatic standing on the soapbox in Central Park. Stockman occupied the highest levels of government and finance for his entire working life, and he is a wealthy, famous, and well-connected man who could easily, along with the rest of his 1% brethren, rest comfortably on his laurels for the rest of his days. He chose instead to bring to the truth - - the bare, detailed, and important-to-understand truth - - to the rest of us.
What Needs to Be Done
The final chapter of Great Deformation is the powerful money-shot to the entire tome, but the potency is instantly and honestly neutered by the reality - which Stockman proclaims at the outset - that none of the stated cures will see the light of day. In a word, it's simply too late, and only after a wrenching, worldwide financial cataclysm (that will make 2008 look like a gentle stroll with a lovely lass on a sunlit day) will humanity have the opportunity to get it right.
The last real opportunity to set things straight was presented - as Stockman writes - "on a silver platter" - but Washington doesn't have an iota of the political will that would have been required to seize that opportunity. The America today, and particularly the 1%, are far too fat, happy, and accustomed to the easy way out to undergo such a thing.
Having said that, even though it will break your heart (or should break your heart) to read what has happened, what probably will happen, and what might have been, you owe it to yourself to read this book. America is too flabby to buck up and face reality, but you as an individual should at least take it upon yourself to understand better than 99% of your compatriots how we got here and what road lies ahead. Thank you, Mr. Stockman.
on April 2, 2013
This book reveals the details of a dark truth that most Americans have feared: that big business and big government have formed an unholy alliance against those not on the inside to take over the machinery of power in the USA for their own special interests, subverting both free market capitalism and democratic liberty in the process. Written from the perspective of a man who was himself on the inside of Washington and Wall Street for decades, the book is post-partisan, exposing both republicans and democrats as big-spending crony capitalists. Stockman does a thorough analysis of the past, present, and probable future if America continues down its present path. This book will no doubt prove prescient in many respects.
on October 9, 2015
For devoted followers of David Stockman's blog, this book is like fundamentalist scripture. Anyone trying to better understand the intensity of the daily diatribes on his Contra Corner website needs to read The Great Deformation to gain full immersion into his torment. He believes that our global economic system has become progressively unhinged over the past three decades and is now poised for a catastrophic collapse unlike any that has gone before. The book is a kind of conservative answer to Karl Marx's theory of capitalism's end-game crisis, except that Stockman sees statist intervention - which has grown in scope over most of the past century - as the problem's cause, not its solution. In his view, Keynesian policymakers are like doctors continuously upping the dosage of bad medicine in a self-defeating effort to cure a disease they themselves have caused.
The primary targets for Stockman's wrath are the world's central banks, and in particular the U.S. Fed. He sees The Fed, under Paul Volcker, as having done God's work in the early 1980's in taming the ruinous inflation that followed Richard Nixon's 1971 decision to default on America's gold-for-dollars promise that had for the preceding two decades successfully underwritten the world's monetary system. When Volcker retired, however, the devil took control in the person of his successor Alan Greenspan. Both Greenspan and his own successor, Ben Bernanke, poured liquidity onto every small crisis and drove the short-term policy rate along a secular downtrend that finally guttered out at zero in 2008, where it has remained. Stockman sees this chronically loose monetary policy as doing little to help the "Main Street" economy, but everything to help Wall Street, which he believes has turned the Fed into its lap dog. Virtually free money, procured in the repo and other short-term markets, is used to fund aggressive leveraged speculation that drives the prices of stocks and other financial assets to unsustainable levels that inevitably collapse in crashes such as occurred in 2008. Connected fast-money players are able to read the signals and dump or reverse their positions in time to escape the full weight of the carnage, which is born mostly by hapless Main Street investors trapped in slow-moving mutual funds. The Fed then starts the process all over again by re-inflating the markets with fresh liquidity infusions.
Stockman is a free-market conservative, but many of his rants would sound at home on the pages of Mother Jones, Daily Kos, or any of the other leftwing soapboxes where the same nails are hammered. Like his leftist counterparts, Stockman rails about the growing concentration of wealth in America which, in contrast, he blames not on "capitalism" but on the cozy relationship that's developed between Wall Street and the government's monopoly bank, i.e. the Fed. Exclusive hedge funds and private equity firms are the vehicles through which the rich are able to compound their wealth. These are, of course, the very players who have learned how to exploit the Fed's interest rate suppression to pursue leveraged buy-outs, debt-financed share repurchases and other forms of financial engineering that provide high returns for their wealthy principals while increasing systemic risk for everybody else. Stockman believes that these destructive practices would be minimized in an environment where free markets were allowed to punish them with high interest rates.
There is an air of wounded innocence about David Stockman, who in his youth once attended Harvard Divinity School. He has a sincere and honest belief in the efficacy of free markets, which he sees being trampled everywhere he looks. He first rose to prominence in the early 1980's as Budget Director for the Reagan White House, where he arrived with a sharp mind and bright eyes, hoping to serve the cause of honest budgeting among ideological soulmates. What he found instead was an administration that had been hijacked by budget busters on all sides: monomaniacal "supply side" tax-cutters and "neocon" advocates for unconstrained military spending. It was, paradoxically, the Reagan administration that gave rise to the belief that "deficits don't matter", a notion that has metathesized into a lethal mantra now three decades later in the era of Barak Obama. Stockman believes that the combination of costly imperial overreach and the Ponzi-scheme financial logic inherent in the structure of social entitlement programs has now taken America to a point of no return. The colossal rickety machine continues to lumber along only because the Fed manages the funding cost through interest rate suppression. And that lasts only so long as foreigners go on buying the bonds needed to fund the deficits. These days are now numbered. And because America had led the world since World War II, its other major economies, including China's, have fallen in line behind us as we all descend into the same treacherous dysfunction. The crack-up, when it comes, will be global.
Following his rancorous split with Reagan, Stockman found his way to Wall Street, of all places, like an honest priest stumbling into a brothel. He then wound up at a private equity firm, no doubt initially believing in that industry's self-defining mission of strengthening free enterprise by ridding companies of waste. What he found himself doing instead was taking control of vulnerable businesses, stripping them of resources, loading them up with unsustainable debt burdens, and plotting profitable exit strategies for himself and his partners. At one point he was even personally indicted for fraud, and while the charges were eventually deemed groundless and dropped, the former divinity student has to have begun questioning the road he had taken in life.
Traumatized by experience, he moved on to become a full time financial writer' He now declaims to us like Cassandra wailing from the top of the temple stairs in doomed Troy. In the bitterly partisan climate of contemporary America, Stockman is refreshingly non-partisan as he slams with equal virulence politicians of both major parties. He despises Richard Nixon for destroying sound money with his 1971 decision. He holds George W. Bush in even lower regard for accelerating the fiscal doomsday clock by embracing big government, costly military entanglements and lower taxes for rich people all at the same time. Democrats Jimmy Carter and Bill Clinton actually get off with a lighter touch, since Stockman credits them with at least a modicum of respect for fiscal prudence. Barak Obama, however, is another story altogether, as he has doubled down with the hated Keynesian poison since the day he came into office.
There are, in my judgment, stylistic problems with Stockman's writing. He's shrill and grossly repetitive, and he probably could have covered the ground nicely in this book in half of its 712 pages. He writes in the rolling cadences of an angry prophet, and he at times allows passion to outrun his logic. This book is full of facts and figures, but apparently not wanting footnotes to slow him down, Stockman provides not a single one.
Still, I've learned to trust him, and I find most of his case compelling, despite his exaggerations, his unwillingness to see much good or wisdom in anyone, or his inability to offer practical solutions to the problem he describes. His last chapter is entitled "Sundown In America", which strikes me as far too peaceful a metaphor for the explosive picture he paints in this book.