Peak Bull: Fake Economy, and Fake News

Peak Bull: Fake Economy, and Fake News by David Stockman – Daily Reckoning

[Urgent Note: David Stockman warns that the nation’s economy and a massive debt ceiling hangs in the balance as Wall Street’s peak bull stocks carry on. The economist is on a mission to send his new book TRUMPED! A Nation on the Brink of Ruin… and How to Bring It Back out to every American who responds, absolutely free. Click here for more details.]

The American economy has been mangled by decades of assault on capitalist prosperity.

Growth is now dying because the Federal Reserve’s hit on corporate America that has strip-mined its balance sheets to feed the halls of Wall Street. Trillions of dollars have been thrown into financial engineering (stock buybacks, M&A deals and leveraged recaps) while neglecting real investment and productivity in Flyover America.

Financialization of the US economy since Greenspan

The single most important thing that speculators and bulls on Wall Street should be looking at now is where we came from. If Wall Street understood this, they wouldn’t continue to expect the “born again” Reagan stimulus that has been imagined since Trump’s inauguration.

The extent of what actually happened during the Reagan era is also important to examine. In the eight years after Reagan’s tax bill got handed out, the national debt and defense budget exploded. We had more red ink during in that eight year period than during the first 190 years of the Republic – in fact it doubled.

Federal Debt as GDP

The national debt, which you can see starting in 1980 went from around $800-900 billion to well over $3 trillion. The share of GDP soared during that period.

This is how the Reagan defense and tax cuts were funded. The move left the nation’s fiscal accounts in a dramatically different condition than when it started. Even Ronald Reagan, with his best of intentions, went in believing he was going to end up with less national debt and balanced budgets – though he ended up adding $1.8 trillion.

The system in Washington is not as logical, rational and methodical as some of these Wall Street analysts want to believe.

The 1981 Regan Tax Act

The fact is that what actually happened with the Reagan tax cuts were dramatically bigger than anything that Donald Trump proposed during the campaign or had been found in the one page tax outline from April. The bars on the chart above show, sequentially, the size of the tax cuts relative to GDP over the following decade because it took 10 years to become effective.

When it became fully effective, the tax cut seen in the chart were 6-6.2% of GDP by the end of the decade. It took the federal share of GDP in terms of revenue down from a projected 23% to about 16%.

 

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Rory Hall, The Daily Coin. Beginning in 1987 Rory has written over 1,000 articles and produced more than 300 videos on topics ranging from the precious metals market, economic and monetary policies, preparedness as well as geopolitical events. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver, Silver Doctors, SGTReport, and a great many more. Rory was a producer and daily contributor at SGTReport between 2012 and 2014. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Gerald Celente and Peter Schiff, to name but a few. Don't forget to visit The Daily Coin and Shadow of Truth YouTube channels to enjoy original videos and some of the best economic, precious metals, geopolitical and preparedness news from around the world.