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Page added on August 4, 2014
David Stockman: The Collapse of the American Imperium
noun1. command; supreme power.2. area of dominion; sphere of control or monopoly; empire.3. a nation having or exerting supreme power; superpower.
David Stockman, former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier is an insider’s insider. Few people understand the ways in which Washington DC, The Fed, and Wall Street work and intersect better than he does.
He’s extremely concerned by the “perfect storm” he sees of concurrent failures in US policy across foreign, monetary, economic, and fiscal fronts:
If you look at the entire radar screen of things developing both domestically and internationally, we are plunging deep into a perfect storm of policy failure. The American Impirium is collapsing. There is blowback everywhere. The wreckage of prior policy mistakes of our intervention with foreign policy is coming home to roost, and the Ukraine is one area at ground zero for that.
But second, monetary central planning is now coming to a dead-end. It is inflating the third financial bubble of the century and the Fed is now clueless as to how it will manage to unwind the massive balance sheet expansion it has been undertaken.
And third, the fiscal doomsday machine continues to crank on. Washington is ignoring the fact that we are six years into a business cycle expansion and we are still running massive deficits and there is no cushion for the next upset that comes to the economy.
Now, why is all of this important? Because I think the foreign policy failures — the collapse of the American Impirium as I call it — is at the center of this, and it will push all of these things in the wrong direction.
We are now becoming much more aggressive in our foreign policy than ever before. We can’t afford it by any means. And the potential for this to create black swans to roil or dislocate these very fragile markets that have been created by this massive central bank balance sheet expansion — it all makes what is happening in the Ukraine, or in the Middle East in Gaza, or in the collapse of Iraq, even more dangerous in terms of what it could trigger. So we are in a real pickle here and I think it is compounding by the day.
At risk here is America’s capability to remain the world’s dominant superpower.
For example, in the current rush to demonize Russia, Stockman sees the military industrial complex (as warned by President Eisenhower) steamrolling over any of the necessary debate, diplomacy or consideration that should proceed such warmongering:
Basically, the war machine in Washington (I call it the Warfare State), couldn’t abide that. There are just too many people that operate in the devil’s workshop; which is to say we have all of this capacity, we have all this machinery of war-making and of intervention and of global empire that is obsolete and unnecessary — and yet it is manned by people who want something to do. Who need to justify budgets. Who need to pursue and prosecute missions. That is what I think is happening at the present time.
It’s just the warfare state machinery has gotten itself activated into motion and it is drastically simplifying the real facts that we face and creating a narrative that is really preposterous in terms of what our national security, the safety and security of the American people, really requires in this circumstance.
And on the domestic front, he foresees very difficult times ahead as we try to wean ourselves off of the dependency on massive thin-air stimulus our economy has developed over the past six years:
On the way up as they inflated this bubble, the smart money got on board and basically was front running everything the Fed was doing. Once they became confident that the $85 billion of bond buying was going to stabilize, if not enhance, the price of the bond and they could buy it on 98% repo leverage at $0 carry cost, they jumped in hammer and tong. And so the Fed then had this magnetic force working with it, which was the fast money and the market attempting to front run the direction of Fed policy.
But just think: What happens if they actually began to allow interest rates to rise or begin to attempt, through one mechanism or another, to shrink their balance sheet?
The fast money will get on the other side of the trade just as fast as it rode the bubble expansion to the top. And they will sell what they think the Fed is selling. And that will cause a massive unwind of the greatest overvalued market bubble in the world, which is the government bond market.
Adam Taggart via Peak Prosperity
13 Comments on "David Stockman: The Collapse of the American Imperium"
JJHMAN on Mon, 4th Aug 2014 8:11 pm
If I remember correctly David Stockman was the guy who swore in front of congress that the “Laffer Curve” was going to make us all rich. He may be the ultimate insider but that doesn’t mean he actually knows anything.
Plantagenet on Mon, 4th Aug 2014 8:31 pm
@JJHMAN The Laffer curve has nothing to do with making “us all rich.” The Laffer curve has to do with the fact that lowering taxes can result in economic growth and even greater tax revenue to the government.
Its bad enough that you aren’t willing to listen to Stockman and his interesting presentation about the end of the American Imperium, but even more telling is the fact that the reason you give for not listening is utterly spurious.
Davy on Mon, 4th Aug 2014 8:39 pm
The guy has a good grasp of some significant points but he is still an insider and being an insider blinded by those norms. The global system is much more complexed than the American experience. He has a good understanding of what is wrong on the inside. His lack of a mention of PO dynamics is a critical negative. He seems to still be caught in the superpower fog as if it were good for America. It is my opinion that much of the mal-investment of the late 20th century was a product of our superpower status. We will now pay the price in the coming descent. The guy is a good read for the inside view on the DC mafia. If you follow zero hedge then you will see him regularly.
Northwest Resident on Mon, 4th Aug 2014 9:00 pm
David Stockman is now in the business of selling books, giving lectures and writing articles all of which are designed to appeal to a certain doomer segment of the population — let’s call the “ZeroHedge Doomers”, for lack of a better term. He needs to keep the material coming or he loses relevance. He can blame congress or the president or too high taxes or too much regulation, but he never addresses declining resources which are at the base of all our big problems, at least not that I’ve seen or read. Still, he is interesting and I always pay attention to what he has to say.
He got this right: “He’s extremely concerned by the “perfect storm” he sees of concurrent failures in US policy across foreign, monetary, economic, and fiscal fronts.”
Perfect storm it is shaping up to be. All he needs to do is throw in concurrent failures in energy policy, population control and resource exploitation and he’ll have a “full house” (poker term).
Makati1 on Mon, 4th Aug 2014 9:17 pm
Davy and NWR, I have to agree with you on this one. We are headed deep into that ‘perfect storm’ and what we are ‘feeling’ now is just the outer winds sliding the lounge chairs around on the deck.
ghung on Mon, 4th Aug 2014 9:35 pm
Gosh Davy/NR, I’m surprised you guys didn’t spank Stockman for not including climate change and asteroids in his perfect storm. At least he has the sense to stick to what he knows… and admits that the empire is quickly reaching its pull-by date. That doesn’t mean he has to like it.
Keith_McClary on Tue, 5th Aug 2014 1:01 am
Stockman has published this on his website;
“Unless the underlying issues are addressed, the next ceasefire will not stop this tragic cycle. The stage will be set for another round, when Israel will mow the lawn again. Absent regime change in Israel, the cycle will continue until and unless political leaders in the U.S.-led West summon political courage they have not displayed and acknowledge that the objectives the current Israeli government is pursuing are not in their own country’s interests, or even in Israel’s.”
by:
Paul R. Pillar, in his 28 years at the Central Intelligence Agency, rose to be one of the agency’s top analysts. He is now a visiting professor at Georgetown University for security studies.
http://davidstockmanscontracorner.com/netanyahus-disproportionate-assault-on-gaza-is-driven-by-political-calculus-not-sustainable-israeli-security/
Davy on Tue, 5th Aug 2014 6:24 am
Keith, I tend to agree. There is not much that can stop Israel short term. A paralyzed US political response, a world preoccupied with multiple crisis, an intractable Hamas position. I have read Israel wants a significant buffer for tunnel control and a heavy handed end to the Hamas missile arsenal. I fear they will achieve this. I fear because we are talking women and children that the Israelis know are expendable. The world can’t manage a meaningful response to that crime. I fear because Hamas considers its goal of defiance and attrition worth the civilian casualties. Both organizations are criminal and the situation intractable. They will destroy each other eventually. The Palestinian population growth is too high to control so they will overrun Israel as large populations do. Israel will continue impoverishing and dispossessing a population by destructive responses creating slums, ecological damage, and social stresses. The area is too small to accommodate these pressures. The world is heading for a significant decline and Israel’s only support is from an exiting global superpower. At some point the cost of Israel will be too high for this exiting superpower. Limits of growth and diminishing returns will hit this relationship also. I disagree with the words here that America is owned by the Jews. That is bullshit. They are a big player and well connected but that does not last either. Profound world changes are afoot. Israel’s days are numbered as the force they are today with an economy they have today.
Makati1 on Tue, 5th Aug 2014 9:36 am
Davy, I think that the Jews do run the US, to a great extent. Look at the religious background of most of the people in key positions. ALL Jews.
Janet Yellen
Ben Bernanke
Alan Greenspan
Robert Rubin
Henry Kissinger
Casper Weinberger
Dianne Feinstein
Rahm Emanuel
Larry Summers
Jeremy Boorda
Uriah P. Levy
Elena Kagan
Abe Fortas
Felix Frankfurter
Louis Brandeis
Ruth Bader Ginsburg
Stephen Breyer
Ben Cardozo
George Soros $$$
Steve Ballmer $$$$$$
And on and on…
Didn’t even try to list the Senators, Congressmen, and others in key positions or owners of the media. Too many.
If you don’t recognize these power people, you need some education…
http://www.heebz.com/categories
Arthur on Tue, 5th Aug 2014 10:03 am
Here is a Dutch MSM documentary from 2007 with a very candid view about the power of the ‘Israel Lobby’ in the US. English subs start at 1:20
https://www.youtube.com/watch?v=yw_v3hqtCl0
Interesting are the comments from a black former member of congress, Earl Hilliard, from 15:00 onwards. Everybody is simply too terrified to touch the subject. If you have the wrong opinion about the Lobby, you are finished.
P.S. the Dutch public broadcasting system is unique in the world and based on worldview/religion/party. The available broadcasting time is divided between catholics, protestants, social democrats, liberals, populist right.
The VPRO, producer of this doc, is protestant-secular left.
eastbay on Tue, 5th Aug 2014 3:21 pm
It’s the rampaging elephant in the room everyone knows about and everyone’s fearful of mentioning.
One more point is well worth noting. With 2% of the US student population those who are jewish are reserved a full 25% of the new admission into Harvard each year. This is one of a handful of universities where students are fast-tracked into positions of power and influence. If any other racial or ethnic group received such a wildly disproportional number of admissions people would riot.
Nony on Tue, 5th Aug 2014 3:26 pm
Stockman was sort of a techie version of a paleocon. He didn’t support Laffer and got in trouble with Reagan for remarks to that effect. Zerohedge makes sense for him. He’s a weird duck.
Stephen on Wed, 6th Aug 2014 4:26 am
The Laffer curve did not work. If you look, it caused Government debt to increase big time. See the Movie IOUSA if you don’t beleive me.