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.
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The Great Deformation: The Corruption of Capitalism in America Hardcover – April 2, 2013
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PublisherPublicAffairs
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Publication dateApril 2, 2013
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Dimensions6.5 x 2.25 x 9.75 inches
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ISBN-101586489127
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ISBN-13978-1586489120
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Editorial Reviews
From Booklist
Stockman, veteran of the Reagan White House and Wall Street, offers his self-described polemic, a wide-ranging indictment of the American government-economic complex; free markets and democracy have been under long-term attack, and the author explains why we have myriad problems, perhaps intractable. He indicates the book “contains much original interpretation of financial and public policy events and trends of the last century, even a revisionist framework.” Stockman concludes his lengthy controversial argument with: “the cure . . . is to return to sound money and fiscal rectitude and to correct the great error initiated during the New Deal . . . . In pursuing humanitarian purposes the state cannot and need not attempt to manage the business cycle or goose the free market with stimulants for more growth and jobs; nor can it afford the universal entitlements of social insurance. Its job is to be a trustee for citizens left behind, maintaining a sturdy, fair and efficient safety net.” This thought-provoking book will contribute to important debates on these issues. --Mary Whaley
Review
Kirkus Reviews
Bruce Krasting This is a history book. It's a detailed account of the key events since the Depression that have shaped modern finance. I love history, and I'm familiar with those events. Stockman's spin on financial history makes for a very good read. There's something for everyone.”
Stockman performs a real service when he debunks the myths that have been associated with Reagan's conservatism and promotes Eisenhower's fiscal and military conservatism
. Stockman forcefully conveys enormous amounts of knowledge.”
LewRockwell.com
Stockman produces a persuasive and deeply relevant indictment of a system dangerously akilter
. What Stockman has written is a book that makes clear we are that future generation of the past, inheritors of all the wishful thinking, simple illogic and flawed compromises that produced the near-term benefits our parents and grandparents worried about but ultimately wanted. And now it's payback time.”
David Weigel, Slate
Paul B. Farrell, Marketwatch
Steve Weinberg,USA Today
Stockman devotes some of the book to the past five years, joining multiple previous authors who have presented their nominations for the villains and heroes of the 2008 economic collapse. As a book critic and investigative reporter, I have absorbed a dozen of those previous books. Stockman's is my favorite because of his original research, the context he presents (starting with the economic depression of the 1930s), his former insider status, and his apparent political non-partisanship during the endeavor.”
David Weigel, Slate
I'd read this book 10 times before I read another possible presidential candidate's memoir of how his Real American Story schooled him in the Audacity of Hope.
a coherent vision of a World Without the Fed.”
Paul B. Farrell, Marketwatch
In The Great Deformation, David Stockman former US congressman and budget director under Ronald Reagan tells the story of the recent crisis, and takes direct aim at the conventional wisdom that credits government policy and Ben Bernanke with rescuing Americans from another Great Depression. In this he has made a seminal contribution. But he does much more than this. He offers a sweeping, revisionist account of US economic history from the New Deal to the present. He refutes widely held myths about the Reagan years and the demise of the Soviet Union. He covers the growth and expansion of the warfare state. He shows precisely how the Fed enriches the powerful and shelters them from free markets. He demonstrates the flimsiness of the present so-called recovery. Above all, he shows that attempts to blame our economic problems on "capitalism" are preposterous, and reveal a complete lack of understanding of how the economy has been deformed over the past several decades
Thanks to The Great Deformation, not a shred of the regime's propaganda is left standing. This is truly the book we have been waiting for, and we owe David Stockman a great debt.”
Booklist
This thought-provoking book will contribute to important debates on these issues.”
Washington Post
His rhetoric in a recent New York Times op-ed piece ignites like Seal Team Six coming at you, flash grenades exploding, assault weapons blazing. No wonder he triggers wild angry, hatred and revenge. Yes, he's a truth-teller. And truth hurts, flushing out his enemies. Why? They're sucking trillions from Americans. So you hate him. Counterattack. Big mistake. Don't dismiss David Stockman. He's no Kim Jong-Un blow-hard.”
Bruce Krasting
Reuters Breakingviews
For anyone whose economics are Austrian, and who agrees with Stockman that crony capitalism and corruption have led both fiscal and monetary policies into a cycle of ever-increasing stimulus and ziggurats of debt, The Great Deformation' is gloomily persuasive and bodes ill for the future.”
Townhall.com
Agree with Stockman or not, one can't deny that he's a colorful writer!”
Rick Santelli, CNBC Squawk on the Street”
About the Author
David A. Stockman was elected as a Michigan congressman in 1976 and joined the Reagan White House in 1981. Serving as budget director, he was one of the key architects of the Reagan Revolution plan to reduce taxes, cut spending, and shrink the role of government. He joined Salomon Brothers in 1985 and later became one of the early partners of the Blackstone Group. During nearly two decades at Blackstone and at a firm he founded, Stockman was a private equity investor. Stockman attended Michigan State University and Harvard Divinity School and then went to Washington as a congressional aide in 1970. He is also the author of the New York Times bestseller The Triumph of Politics: Why the Reagan Revolution Failed.
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Product details
- Publisher : PublicAffairs; 1st edition (April 2, 2013)
- Language : English
- Hardcover : 768 pages
- ISBN-10 : 1586489127
- ISBN-13 : 978-1586489120
- Item Weight : 2.46 pounds
- Dimensions : 6.5 x 2.25 x 9.75 inches
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5.0 out of 5 stars
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
Reviewed in the United States on September 1, 2014Verified Purchase
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.
Reagan's Stockman
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."
Notable Quotes
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).
The Gospel?
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.
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.
Reagan's Stockman
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."
Notable Quotes
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).
The Gospel?
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.
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Top reviews from other countries
birchden
4.0 out of 5 stars
Economic debacle dissected
Reviewed in the United Kingdom on November 4, 2015Verified Purchase
In this somewhat lengthy yet very worthwile book, former Reagan advisor David Stockman argues that today's US economy has been warped out of shape by decades of state intervention to the point where free markets have almost ceased to function, with the result that living standards are slipping, a once vibrant and enterprising middle class has being hollowed out to the benefit of a tiny elite and the whole edifice is moving steadily towards the point where a catastrophic collapse occurs.
Along the way he takes a critical and very illuminating look at the New Deal (this could usefully be expanded into a book of its own), examines the functioning of the gold standard and Nixon's closure of the gold window, and details the various errors made by US monetary central planners over the last few decades. There is a also - rather optimistically - an interesting section detailing some of the policies that could be implemented to correct the distortions that bedevil the US economy, though there can hardly be much chance of any politicians taking note.
Although the book is aimed at a US readership, most of what is said here applies equally or with even greater greater force to the UK, and could be read with profit by British readers who are seeking explanations for the growing gap between rich and poor, continual boom-bust cycles and general economic under performance.
My only real criticism of this book is that it could do with a good edit. Potentially, this could reduce the length by about a third without any loss of substance, making for a much sharper and more focused narrative, which would have the added benefit of encouraging a wider readership. And this latter would be a very good thing, because what Mr Stockman has to say is well worth listening to.
Along the way he takes a critical and very illuminating look at the New Deal (this could usefully be expanded into a book of its own), examines the functioning of the gold standard and Nixon's closure of the gold window, and details the various errors made by US monetary central planners over the last few decades. There is a also - rather optimistically - an interesting section detailing some of the policies that could be implemented to correct the distortions that bedevil the US economy, though there can hardly be much chance of any politicians taking note.
Although the book is aimed at a US readership, most of what is said here applies equally or with even greater greater force to the UK, and could be read with profit by British readers who are seeking explanations for the growing gap between rich and poor, continual boom-bust cycles and general economic under performance.
My only real criticism of this book is that it could do with a good edit. Potentially, this could reduce the length by about a third without any loss of substance, making for a much sharper and more focused narrative, which would have the added benefit of encouraging a wider readership. And this latter would be a very good thing, because what Mr Stockman has to say is well worth listening to.
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Eagle
3.0 out of 5 stars
is this 'polemic' a personal manifesto?
Reviewed in the United Kingdom on July 20, 2013Verified Purchase
The Great Deformation by David Stockman - a Review
Two major theses were being propounded by the author.
1. That the Financial Crisis of September 2008 Needed Not to have happened but was engineered by Ben Bernanke and Hank Paulson of Wall Street and Goldman Sachs. They engineered a panic that resulted in the bailing out with Tax-Payers money of Too Big To Fail (TBTF) banks thus making lots of money and greatly increasing the amount of debt that the U.S. owes the world. (chapter 1)
2. That the U.S. had been heading towards its demise for the past thirty to forty years. This began with FDR's, the 1931 confiscation of gold and the devaluation of the dollar from $20.50 to $37.50 in 1933 bringing in a change that had not happened since 1832, the New Deal and Richard Nixon's break of the dollar from gold in August 1971 after a fateful meeting with economists at Camp David. (rest of the book)
The author acknowledges that his thesis is revisionist history. I am therefore puzzled by the method of writing the account adopted by the author. The author used the method of themes within each chapter, which makes following the narrative difficult for the like of me - a retired surgeon who is not exactly stupid but brought up to be sceptical. There was no chronological order and one has to trust the author implicitly. I found it very difficult to demonstrate veracity in his arguments. I was taught that in re-writing history, especially if it was of a revisionist nature, that if true would bring about an entire paradigm shift, it is very important that the arguments can be easily proven and demonstrably so. I am NOT saying that the financial arguments quoted by the author are false. It is just that the way the book is structured makes it very difficult to demonstrate veracity. The author flits from one period to another to make his points. According to David, the New Deal did not end the recession (the conventional opinion) which was already put right by Hoover's tight-money policies of the preceding months. It seemed unlikely that policies would reverse the deep depression of the 1930s within a few months of their enactment.
Does not indicate or provide evidence that the Federal Reserve Bank is a private bank rather than a public entity, although it function as the central bank of America, thus hoodwinking millions of people.
Finally it is unclear to me the purpose of the book which the author does not say. Was it an exposé or was it written as a presentation of a personal philosophy in preparation for high office ? The likes of Ron Paul who has resigned from his membership of Congress this year opens the way for people like David.
From numerous opinion polls and the prevailing demographic shifts, it is fairly certain that the GOP party with its many splits can't win power again. There is also a general disillusionment with Barack Obama's Democratic party. Obama is a severe disappointment. Furthermore there is general hatred by the middle-classes of the Wall Street bankers. This means that David Stockman maybe trying to catch the attention of the third constituency of the young who made up the 99% of the Occupy Wall Street movement.
In the final chapter, there was a list of 13 tasks that will reverse the calamity that is facing the U.S.A. This seemed a contradiction to me as from the first chapter one is led to believe that the U.S. of A is in a terminal decline that is unsalvageable.
It was this final chapter that made me think of this thick volume as a personal manifesto. The thick volume of the book and the way data is presented, which makes it seem full of erudition is what makes me suspicious of its purpose. Was the author trying to hide his thesis of half-truths under the guise of erudition? This is a common ploy of politicians. I also feel that it is the political system where politicians are returned only if they carry out the wishes of the electorate that would explain how politicians would continue to believe in a system based on debts. The book was very USA centric as if the rest of the world does not exist, except in its discussion of the world wars and also China.
I wonder how the book made the New York Times BestSeller List!
Two major theses were being propounded by the author.
1. That the Financial Crisis of September 2008 Needed Not to have happened but was engineered by Ben Bernanke and Hank Paulson of Wall Street and Goldman Sachs. They engineered a panic that resulted in the bailing out with Tax-Payers money of Too Big To Fail (TBTF) banks thus making lots of money and greatly increasing the amount of debt that the U.S. owes the world. (chapter 1)
2. That the U.S. had been heading towards its demise for the past thirty to forty years. This began with FDR's, the 1931 confiscation of gold and the devaluation of the dollar from $20.50 to $37.50 in 1933 bringing in a change that had not happened since 1832, the New Deal and Richard Nixon's break of the dollar from gold in August 1971 after a fateful meeting with economists at Camp David. (rest of the book)
The author acknowledges that his thesis is revisionist history. I am therefore puzzled by the method of writing the account adopted by the author. The author used the method of themes within each chapter, which makes following the narrative difficult for the like of me - a retired surgeon who is not exactly stupid but brought up to be sceptical. There was no chronological order and one has to trust the author implicitly. I found it very difficult to demonstrate veracity in his arguments. I was taught that in re-writing history, especially if it was of a revisionist nature, that if true would bring about an entire paradigm shift, it is very important that the arguments can be easily proven and demonstrably so. I am NOT saying that the financial arguments quoted by the author are false. It is just that the way the book is structured makes it very difficult to demonstrate veracity. The author flits from one period to another to make his points. According to David, the New Deal did not end the recession (the conventional opinion) which was already put right by Hoover's tight-money policies of the preceding months. It seemed unlikely that policies would reverse the deep depression of the 1930s within a few months of their enactment.
Does not indicate or provide evidence that the Federal Reserve Bank is a private bank rather than a public entity, although it function as the central bank of America, thus hoodwinking millions of people.
Finally it is unclear to me the purpose of the book which the author does not say. Was it an exposé or was it written as a presentation of a personal philosophy in preparation for high office ? The likes of Ron Paul who has resigned from his membership of Congress this year opens the way for people like David.
From numerous opinion polls and the prevailing demographic shifts, it is fairly certain that the GOP party with its many splits can't win power again. There is also a general disillusionment with Barack Obama's Democratic party. Obama is a severe disappointment. Furthermore there is general hatred by the middle-classes of the Wall Street bankers. This means that David Stockman maybe trying to catch the attention of the third constituency of the young who made up the 99% of the Occupy Wall Street movement.
In the final chapter, there was a list of 13 tasks that will reverse the calamity that is facing the U.S.A. This seemed a contradiction to me as from the first chapter one is led to believe that the U.S. of A is in a terminal decline that is unsalvageable.
It was this final chapter that made me think of this thick volume as a personal manifesto. The thick volume of the book and the way data is presented, which makes it seem full of erudition is what makes me suspicious of its purpose. Was the author trying to hide his thesis of half-truths under the guise of erudition? This is a common ploy of politicians. I also feel that it is the political system where politicians are returned only if they carry out the wishes of the electorate that would explain how politicians would continue to believe in a system based on debts. The book was very USA centric as if the rest of the world does not exist, except in its discussion of the world wars and also China.
I wonder how the book made the New York Times BestSeller List!
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N. J. Bjergstrom
5.0 out of 5 stars
A must-read if there was one recently
Reviewed in the United Kingdom on November 27, 2013Verified Purchase
This very timely book clearly explains where the international monetary system with fiat money and central banks has failed, exactly what lead to the banking crisis in 2008 (and earlier similar crises) and what will happen next.
I contains a history and analysis of monetary systems tried over the past couple of hundred years and clearly places the responsibility for failures where it belongs, with criminals like Nixon and false prophets like Keynes, as well as with clueless people like Bernanke.
This is an absolute must read for all politicians and economists of all persuasions, a really important document.
I contains a history and analysis of monetary systems tried over the past couple of hundred years and clearly places the responsibility for failures where it belongs, with criminals like Nixon and false prophets like Keynes, as well as with clueless people like Bernanke.
This is an absolute must read for all politicians and economists of all persuasions, a really important document.
James Julius
5.0 out of 5 stars
Stockman's work is the definitive account ofthe descent of the ...
Reviewed in the United Kingdom on October 29, 2014Verified Purchase
Stockman's work is the definitive account ofthe descent of the U.S. into fully-fledged crony capitalism, aided and abetted by various shades of politician. Essential reading for anybody interested in U.S. political and economic history.
Steven
5.0 out of 5 stars
An informative book about the demise of America
Reviewed in the United Kingdom on December 6, 2013Verified Purchase
Required reading for all students of economics and history. Here is a post-mortem recount of America's descent into stupidity and economic purgatory.
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