David Stockman: This is Mutant Capitalism

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David Stockman joins Michael Covel on Trend Following Radio for his second ever appearance on the show to discuss the economy and his latest book Trumped! Click here to catch the full interview.  In the episode the two economic heavyweights dive deep into topics ranging from Glass Steagall, the Clinton and Trump campaigns and even unpack the recent Deutsche Bank debacle.

Stockman when asked about the Federal Reserve and its economic largesse responded, “The idea that you can operate a giant hedge fund (trading operation) inside a bank and that it is the job of the central bank to backstop the asset base, and the financial foundation of that kind of operation does not make any sense. It is not necessary for a healthy economy. It is completely foreign to what people had in mind when the Federal Reserve was established over a century ago. It is a lesson learned from the crisis in 2008 that needs to be implemented.”

He goes on to note that, “The idea that we can’t reform and stabilize (or at least domesticate) the banking system because we need more debt is a non-starter.”

David Stockman is a two time US congressman who also served in the Reagan Administration as the Director of The Office of Management and Budget.  His latest book “Trumped: A Nation on the Brink of Ruin… And How to Bring it Back” is out now and reports directly on how the US arrived at this fractured economic state, and what it must do to climb out.

When Covel asked the best selling author on the recent news from Deutsche Bank and Europe he noted, “I think the Deutsche Bank crisis is only the opening event of what’s going to be a worsening and continuing crisis in the European Banking system. This was brought even further by Draghi himself when he became convinced about all of this nonsense about “whatever it takes” mentality and driving interest rates lower and lower until he got into the “sub zero zone.”  He continued expanding the balance sheet of the ECB beyond all recognition.  All of this has taken, not only the ECB to a dead end, but it has destroyed whatever viability was left in the big banks in Europe.”

He went on to say that, “There are hundreds of trillions of risky assets on the balance sheets of European banks, including Deutsche Bank, that are counted as zero in their risk asset base “reckoning” because of these convenient – but nonsensical rules.

Covel pressed Stockman, asking what the fallout from election 2016 will be? Stockman left nothing on the table saying, “There will be a recession. There will be a market crash regardless of which candidate wins. All of that will then begin to raise basic questions about whether this was just a fantasy. [People will then think] Why did we believe that you could do all of the unsound things over the last two to three decades? In some ways this wild and woolly presidential campaign is just a warmup for the next phase of political and economic life in the United States – and around the world.”

For the complete conversation click here. If you would like to have a copy of Stockman’s latest book, Trumped! Sent directly to your door – CLICK HERE to learn more.

Regards,

David Stockman
for The Daily Reckoning

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