David Stockman: America Now Lives Under A ‘Perverted Regime’
The rise of Trump—and Bernie Sanders too—vastly transcends ordinary politics. In fact, it reaches deep into a ruined national economy that has morphed into rank casino capitalism under the misguided policies and faithless rule of the Washington and Wall Street elites.This epic deformation has delivered historically unprecedented set-backs to the bottom 90% of American households. They have seen their real wealth and living standards steadily deteriorate for several decades now, even as vast financial windfalls have accrued to the elite few at the very top.In fact, during the last 30 years, the real net worth of the bottom 90% has not increased at all. At the same time, the top 1% has experienced a 300% gain while the real wealth of the Forbes 400 has risen by 1,000%.That’s not old-fashioned capitalism at work; it’s the fruit of a perverted regime of printing press money and debt-fueled faux prosperity that has been foisted on the nation by the bipartisan ruling elites.To be sure, the proximate cause of this year’s election upheaval is similar to that in Reagan’s time. Back then, an era of drastic bipartisan mis-governance generated an electoral impulse to sweep out the Washington stables.Now, however, it is not just the Beltway political class that is under attack. The very foundations of American economic life are imperiled. What remained of healthy market capitalism in Reagan’s time is no more.It has been battered by 30 years of madcap money printing at the Fed. It labors under the $50 trillion of new public and private debt generated by that monetary eruption. And it staggers from the destructive blows of serial financial bubbles.These bubbles have self-evidently resulted in a destructive boom-and-bust cycle in the financial system, but also much more. Bubble Finance has drained productivity and efficiency from the Main Street economy and has channeled vast resources to speculators and wasteful malinvestments.~ “Trumped!” by David Stockman
David Stockman, former director of the OMB under President Reagan, former US Representative, and veteran financier is an insider’s insider. Few people understand the ways in which both Washington DC and Wall Street work and intersect better than he does.
In his upcoming book, Trumped! A Nation on the Brink of Ruin…And How to Bring it Back, Stockman lays out how we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few. And when trouble arises, these few are bailed out at the expense of the public good.
Stockman brings us his report of what 30 years of politics, degenerative crony capitalism and “bubble finance” have finally wrought. The upheaval and crossroads represented by Donald Trump’s candidacy spell economic disaster or resurgence, depending on the steps America chooses to take from here:
This election is enormously important but it’s not entirely about the candidates, per se, but about the fact that much of the country is beginning to recognize that we’ve been on the wrong path for a long time and we’re reaching a dead end. And that’s why, you know, on the cover of this new book, I have a map of America and the east and west coast are colored, shaded, and the vast area in between is in white. I call it Flyover America.
And part of the book is to try to explain the phenomena of the Trump campaign, which came out of nowhere, and why there seems to be such an unexpected ground swell of economically driven support. Of course, the elite media wants to blame it on racism and xenophobia and, you know, small-mindedness of one type or another. But I think the underlying driver here, the underlying alienation comes from an economic policy that has benefitted enormously the bicoastal elites and we go through that, a very small share of the population that lives off finance venture capital and the enormous expansion of the warfare state and welfare state in Washington. Versus the rest of America – call it the 90% to use a general term.
But the think that I try to demonstrate in the book is that since 1987 when Greenspan arrived at the Fed in this era of bubble finances I call it incepted, we basically have a bifurcated economy. The bottom 90% of the population has no more real net worth today if you use an honest inflation measure to deflate nominal values. It has no more net worth today than it did in 1987. That’s nearly 30 years of going nowhere. The top 1% has gained 300% in net worth, which the Forbes 400 to take the final clip on this, is 1,000% gain.
Now, that’s not market capitalism at work. That is a, as I called it, a deformed or mutant system of crony capitalism and finance-driven economic life coming right out of the central bank and that whole complex of unsound policy that has produced a result that is very unsustainable. Not only has there been no net worth gain as we lay out in the book but if you just go to the year 2000, real median household income – again, deflated with, I think, an accurate measure of the cost of living faced by most households – is down nearly 20% from where it was when Bill Clinton was shuffling out of the White House.
Click the play button below to listen to Chris’ interview with David Stockman (49m:26s).