informationliberation
The news you're not supposed to know...




An Introduction to Austrian Economics: Understand Economics, Understand Everything
The Century of the Self: The Untold History of Controlling the Masses Through the Manipulation of Unconscious Desires
The Disappearing Male: From Virility to Sterility

The Obama Deception: The Mask Comes Off
Operation Gladio: The Hidden History of U.S. Sponsored False Flag Terrorism in EuropeThe New American Century: The Untold History of The Project for the New American Century
(more)
Article posted Apr 05 2013, 1:14 AM Category: Economy Source: Peter Schiff Print

The Stockman Backlash

by Peter Schiff

This week, while economists should have been closely considering the implications of the actual bankruptcy of Stockton, California, they instead heaped scorn on the perceived ideological bankruptcy of David Stockman. In other words, Stockman trumped Stockton.

Ronald Reagan’s former Budget Director contributed “Sundown in America” a multi-page opinion piece to the Sunday New York Times which loudly and eloquently described the illusions of our current economic system. While I don’t agree with everything Stockman believes, I think he is showing great wisdom and courage in making dire predictions and calling for extreme changes in our policy and politics.

What was perhaps more surprising than the Times’ uncharacteristic decision to run the piece in the first place was the vitriolic and largely ad hominem backlash against Stockman that quickly emerged from across the political spectrum. The attacks have focused primarily on his history and personality, and not on his arguments. One would be hard pressed to find any journalistic reaction that did not use the words “screed” “rant” or “unhinged.” I believe these responses reveal an acute sensitivity from mainstream economists that arises from defending contorted Keynesian logic.

It can’t be easy to take the position that debt doesn’t matter and that spending creates economic growth. To do so with any hope of success requires team unity, and Stockman has never really been a team player. His reputation as an apostate and a naysayer has made him an easy target.

Famously, Stockman left the Reagan White House in protest over the Gipper’s half-finished mandate. Yes, Reagan had cut taxes, but he never really cut spending. Stockman never bought into the easy idea, championed by Jack Kemp and Dick Cheney, that deficits don’t matter and that tax cuts pay for themselves. And although the Reagan revolution did clear the way for a return to better growth in the 80’s and 90’s, Stockman knew that the piper would call someday to collect the debt. Despite his foresight on that topic, his criticism of the Reagan legacy has earned him the derision of the Republican establishment for whom that particular hero worship is sacred.

This may have informed the attack issued by neo-conservative apologist and Iraq war cheerleader, David Frum, who offered a solely psychological assessment: “Stockman provides an insight into the gloomy mindset that overtakes us in older age, it’s a valuable warning to those of still middle-aged that once we lose our faith in the future, it’s time to stop talking about politics in public.” So much for respecting our elders.

Bloomberg’s Jeff Kearns, whose support of Fed policy has earned him regular taps at Ben Bernanke’s televised press conferences, provided the most common mainstream dismissal of Stockman: “His warning that the Federal Reserve’s quantitative easing is steering the world’s largest economy toward a crash is at odds with nine quarters of job growth, record stock prices and unprecedented corporate earnings.” This “he must be wrong because things look good now” position supposes that economics can’t be understood or predicted, only observed. I received very similar treatment back in 2006 and 2007 when I tried to tell the mainstream that the real estate market was a house of cards. How could it be bad, they said, if it goes up every year?

Despite his misalignment with the Republican hierarchy, the Left has an even greater revulsion for Stockman. Since the crisis, he has become perhaps the most respected figure (with the possible exception of Alan Meltzer) to take the position that a system based on fiat currency is doomed. Those who most visibly argue these points, like Ron and Rand Paul, and myself, come from the libertarian movement. As a result, we can be easily dismissed as cranks. However, Stockman was once a card-carrying member of the power elite. His embrace of these principles is taken more seriously and is thus ripe for instant attack from liberal economists.

While the usual suspects of Jared Bernstein and Joe Wiesenthal weighed in with heaps of invective, the loudest heckles have come from, whom else, Paul Krugman. He began his multi-post campaign by questioning the “mystery” of why the New York Times would sully Krugman’s own gravitas by forcing him to share column inches with someone as “non serious” as Stockman. He then offers the back of his hand:

“I thought Stockman would offer some kind of real argument, some presentation, however tendentious, of evidence. Instead it’s just a series of gee-whiz, context- and model-free numbers embedded in a rant — and not even an interesting rant. It’s cranky old man stuff.” For the record, Stockman is only 66.

In actuality, Stockman’s NYT piece offers a litany of objectively dismal facts and cogent explanations of how we got here. While most are celebrating the nominal high of U.S. stocks (see my recent analysis of the current rally), he points out that in the five and half years it has taken for the S&P 500 to set a new high, “Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the ‘bottom’ 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled to 59 million, about one in five Americans.” But Krugman fails to find the currency of his stock and trade, the macro-economic statistical models that attempt to describe how an economy works. In truth, those academic ordeals only matter in getting tenure and impressing the global elite. The real economy is much easier to understand.

Case in point: Stockton, California, which on Monday became the largest U.S. city to file for bankruptcy protection. Stockton, a city of 300,000 and two hours from San Francisco, is following the path blazed by many smaller California municipalities that have been unable to support lavish spending, salary and pension guarantees. And although Stockton has tightened its belt over the last few years (unlike similarly bankrupt San Bernadino, which is not even trying), it lacks the capacity to close the gap. Despite its enormous advantages in geography, infrastructure and location, the city is too bloated with government and clogged with taxes and regulation to allow for robust growth. As a result, Stockton is looking to pin the losses on its creditors.

As Stockman makes clear, the United States has been plagued by the same problems that doomed Stockton. His critics argue that the Federal Reserve’s printing press provides a foolproof immunity to such pedestrian problems. But in the end, these paper protections will only exist on paper. We’re all Stocktonians now.





Latest Economy
- Colorado's Illegal Pot Market Thrives
- Neighborhood Bully - America Recklessly Throws its Weight Around
- Doug Casey on the Phil Donahue Show (1980/1981)
- Yellen: Where No Man Has Gone Before
- Block on CNBC: Privatize the Roads
- Burgeoning Regulations Threaten Our Humanity
- How Government Forces the Poor Into Black Markets
- "America Has Ceased to Exist": Investment Guru Doug Casey on the Coming Economic Meltdown









Comments Add Comment Page 1 of 1
trm

Posted: Apr 05 2013, 11:26 AM

Link
7134 When I was in the military and raygun was president I always thought he was a dope, and today nothing changes except he's dead.


Add Comment
Name
Comment

* No HTML


Verification *
Please Enter the Verification Code Seen Below
 


PLEASE NOTE
Please see our About Page, our Disclaimer, and our Comments Policy.


FAIR USE NOTICE
This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the DMCA and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.

About Us - Disclaimer - Privacy Policy



Advanced Search
Username:

Password:

Remember Me
Forgot Password?
Register

Crash Victims, Witnesses Accuse Cops Of Fabricating Police Report Regarding Officer-Involved Collision - 08/27Florida Man Records Himself Getting Attacked By Cop For Not Rolling Down Window All The Way - 08/27No Jail For Oklahoma Cop Who Lied About Beating Motorist - 08/28Chicago Police Jailed Two Innocent Men For 17 Months With No Evidence - 08/27This Citizen Gives a Cop a Taste of What Police Harassment Feels Like - 08/27Video Of Ferguson Police Gassing News Crew And Dismantling Their Equipment - 08/14Crony Phony Drug War - 08/13Jeremy Scahill Says If You Get Pulled Over By Cops They Can See If You Are On A "Watch List" - 07/31

Rialto, CA Police Made to Wear Cameras, Use of Force Drops by Over Two-ThirdsCop Who Karate Chopped NY Judge In Throat Gets Off Scot-FreeFlorida Cop Smashes Compliant Woman's Face Into Car -- "Maybe Now You Can Understand Simple Instructions"VIDEO: Lapel Cam Reveals A Day In The Life Of A U.S. Police Officer (Tasing, Beating, Breaking & Entering, Stomping On Heads... and Laughing About It)Caught On Tape: Officer Sucker Punches Inmate In Face, Files Report Claiming 'Self Defense'Insult Person On Twitter, Go To JailSWAT Team Brings TV Crew To Film Raid Against Threatening Internet Critic -- Raids Innocent Grandma InsteadCop Karate Chops NY Judge In The Throat
(more)

 
Top