It makes you wonder how many economists predicted the Stock Market Crash of 1929?
Many Americans are convinced that the failing economy is the result of our past president, George W. Bush. But according to David Stockman, the U.S. economy is doomed and the government is to blame.
The former budget director for President Ronald Reagan contends, “We’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market, and where has it left us?”
Nation’s Economic Troubles on A “Bogus Economy”
Stockman attributes the nation’s economic troubles on a “bogus economy” that is only sustainable with massive debt and furious government money-printing. In his opinion, we are “headed toward another economic collapse,” according to an interview recently in The New York Times.
The former budget director says that after the beginning of the last recession in 2008, both the administrations of Bush and Obama, in cooperation with the Congress and the Fed, “made a series of desperate, reckless maneuvers that were not only unnecessary but ruinous.”
In his latest book, The Great Deformation, it is his contention the writing was on the wall in 1933. That was when President Franklin D. Roosevelt went to the gold standard instead of the failing depression-era dollar.
He (FDR) “opted for fiat money.”
$17 Trillion in Debt
It is Stockman’s assumption this was the beginning of what is now a $17 trillion in debt, now on a trajectory toward $30 trillion before 2023. “When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is.”
This will come as shocking advice for millions of Americans watching the stock market rise to record highs.
Through the vast improvement in American’s standard of living, modern economic management has meant an economic downturn could never become what the Great Depression was.
Devastating to Stockman’s Theory
The past few years alone have been devastating to Stockman’s theory. Although the almighty U.S. dollar has not collapsed and inflation hasn’t gone out of control, Stockman still insists the worst is ahead.
Many economists dismiss Stockman as today’s “Chicken Little.” The market appears to be rejecting his gloom and doom approach.
But the same conditions were ripe in the late 1920’s. The stock market was hitting record highs while it seemed everyone in it was making a killing. Similarities abound.
Paul Krugman of the New York Times dismisses Stockman’s consensus by saying, it is nothing more than “cranky old man stuff.”
Barack Obama’s Number One Fan
It should be noted that Krugman is Barack Obama’s number one fan and more than likely the most high profile liberal in the country.
“It’s the same sort of gold-bug, free-market absolutist demagoguery you get from Investor’s Business Daily and Rush Limbaugh,” Krugman insists. “Our $16 trillion economy can easily handle current budget deficits, which are now declining steeply. And after the 2008 recession, running deficits was appropriate” to stimulate economic growth. Anyone who says differently hasn’t done his homework.”
It is hard not to heed the advice of a highly experienced economist over a liberal New York Times columnist.