Investments

Nothing Is Too Big to Fail

By David Stockman  |  February 1, 2019

For they have sown the wind, and they shall reap the whirlwind: it hath no stalk: the bud shall yield no meal: if so be it yield, the strangers shall swallow it up.

– Hosea 6:8 KJV

After Lehman Brothers collapsed in September 2008 and set off the Great Financial Crisis, monetary central planners all over the world doubled down on Bubble Finance.

“All easy money, all the time” fueled a massive, decade-long rally that peaked in September 2018.

But it made worse all the conditions that created the crisis in the first place… And it gave us the Tweeter-in-Chief.

Wall Street benefited, of course, from the Federal Reserve’s generosity. But its systematic damage to Main Street intensified.

That’s because more easy money incentivized CEOs and CFOs to exploit any and every opportunity to please their masters via income-killing financial engineering and offshoring of production.

The Fed’s lopsided reflation – “RECOVERY!” for Wall Street, “recovery?” on Main Street – was a gigantic mistake.

It further bifurcated America’s economic and financial life. And it’s unsustainable. It’s only a matter of time before the fantasy reverses.

Two statistics tell the story.

Between the pre-crisis peak in late 2007 and September 2018, the inflation adjusted Nasdaq 100 Index rose by a whopping 200%.
Industrial production, meanwhile, gained just 3%.

Self-evidently, 11 years of boom on Wall Street and stasis on Main Street could not stand as an economic matter.

But there’s something more…

America’s democratic machinery may be enfeebled, even sidelined, by Imperial Washington’s permanent ruling class.

But the 2016 election proved that when things get far enough askew, the unwashed masses can still make themselves heard.

The fact is, “President Donald J. Trump” happened because our “betters” took the wrong damn road taken – bailouts for “too big to fail” vampire squids on Wall Street – after September 2008.

It gave the Fed 10 more years to hammer the Main Street economy with its spurious 2% inflation target. That sent more jobs and production overseas. And it subsidized the strip-mining of Corporate America in order to pump dividends, buybacks, and M&A deals back to Wall Street.

This second, even greater round of bubble blowing has churned up a tidal wave of economic hurt and social resentment in the burned-out industrial districts of Flyover America.

That’s why the Donald conquered the Electoral College, riding the votes of ex-Democrats in the Rust Belt to the Oval Office,

But the crisis of 2008-09 never really ended. And the underlying problems that created it certainly haven’t been fixed.

The mess was just swept under the rug by Imperial Washington. Monetary central planners did so with violations of the requisites of sound money, fiscal rectitude, and free market financial discipline.

Indeed, they doubled down on easy money…

And the Everything Bubble reached its high mark on September 21, 2018.

The retracement back to the interrupted purge of September 2008 will invite an even greater crisis.

It will end in ignominy for the Donald.

And it will result in staggering political and economic setbacks for the nation.

The Revolution Will Not Bet Televised…

…But you can read all about it in The Stockman Letter.

The crash of 2008-09 was not some “once in 500 years” economic ailment that needed to be “healed” with “extraordinary” policies like “ZIRP” and “QE.”

To the contrary, the Great Financial Crisis was an intense but standard-issue bursting of a bubble. It’s the inherent result of monetary central planning and the systematic falsification of financial asset prices.

It’s going to happen again.

And the Acela Corridor is sweating all the potential consequences – including a collapse on Wall Street and the end of Imperial Washington.

That’s what we’re discussing in the February issue. And you can get it today.

Are you prepared for a major re-pricing of all financial assets? How do feel about thousand-point intraday and/or day-to-day swings?

At the center of The Stockman Letter is “The Stockman Model.” It combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos.

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents.

Join us.

David Stockman's signature

David Stockman

Former White House Budget Director: 50% Crash Coming!

The horrible start to October has investors on high alert. This market bubble – inflated by the Fed’s low interest rates and Republican tax cuts – may have finally run its course.… Read More
David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR