Econintersect: David Stockman appeared on Power Trader Radio last week and discussed his perspectives on the state of the economy. In a wide-ranging discussion with host John O'Donnell, Stockman covered many aspects of monetary policy. One aspect that received a great deal of attention was private sector debt. Stockman said that historically the ratio of household debt to income was close to 1:1. From 1987 to 2008 that ratio expanded to 2:1. In the last five years it has only declined to 1.85:1. Stockman sees many years of credit repair remaining.
Host John O'Donnell is Chief Knowledge Officer at Online Trading Academy.
[Video of the interview available after the Read more >> jump.]
Here are some of the highlights of the interview in addition to the private sector deleveraging discussed above:
- Stockman says it is time to take on the Keynsian point of view "frontally, directly and with vigor".
- Going off the gold standard in 1971 was "an abomination".
- The 1990s was not a vindication of the Reagan Revolution. It was the result of a "tremendous monetary stimulus" from 1987 to 2000.
- Bond vigilantes are not in hiding. They are making a fortune off the carry trade supported by Fed QE Treasury purchases providing a price guarantee that assures no losses for "borrowing on the overnight repo market at 98 cents on the dollar and collecting a 160 bp income flow".
Watch the following video for the entire 36 minute interview.
David Stockman is the author of a new book currently on the New York Times Best Seller list, "The Great Deformation, The Corruption of Capitalism in America".
The introduction to the book description at Amazon reads:
The Great Deformation is a searing look at Washington’s craven response to the recent myriad of financial crises and fiscal cliffs. It counters conventional wisdom with an eighty-year revisionist history of how the American state—especially the Federal Reserve—has fallen prey to the politics of crony capitalism and the ideologies of fiscal stimulus, monetary central planning, and financial bailouts. These forces have left the public sector teetering on the edge of political dysfunction and fiscal collapse and have caused America’s private enterprise foundation to morph into a speculative casino that swindles the masses and enriches the few.
Further information, reviews and purchase details are available at Amazon.com, accessible by clicking on the book image.