Federal Reserve

The World Champion of America

By David Stockman  |  November 5, 2018

Was it the first expression of what evolved into “Cold War Logic” after World War II?

Hard to say whether that’s true.

It is historical fact, however, that President Franklin D. Roosevelt side-tracked to Egypt right after the Yalta Conference in February 1945 to meet King Abdul Aziz Ibn Saud.

By then, FDR well understood the value of what lie beneath Saudi Arabia. And the United States of America needed/wanted that crude oil.

Charming the isolationist warlord who united the Dessert Kingdom was the last move of a career marked by historic acts of personal diplomacy on behalf of a burgeoning empire.

Of course, Saudi kings no longer bring eight goats to slaughter for meals when leaving their country for the very first time.

Indeed, that meeting aboard the U.S.S. Quincy on the Great Bitter Lake in the Suez Canal set the stage for seven decades of less innocent despot-democracy diplomacy.

We needed them to prevent dominos from falling to Communism. They needed us for military, infrastructure, and “popular” support.

Their games have evolved, too.

And now they feel the kind of freedom to do stuff like sanction the public assassination of a dissident journalist.

It truly does not get more bizarre and despicable than this. Yet this is how deep the despotism runs in that malignant petrol state

Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud – known as “MBS” for the 21st century – sent 15 elite members of his personal Royal Guard to Istanbul, top intelligence officers and Royal Air Force personnel to Istanbul.

He also sent this guy, on the right, Dr. Bonesaw and Mr. Body Double, too, Mustafa al-Madani:

There he is, captured by Turkish surveillance cameras, garbed in the still-warm jacket, shirt, shoes, and trousers of the late Mr. Khashoggi. He’s coming out the back door of the Saudi consulate in Istanbul, just like they said “he” did.

I thought Brian De Palma laid to rest hammy-but-deadly “body double” plots way back in the 1980s.

It speaks to how far we’ve come during this era of American Empire. Consider: Khashoggi’s assassination has been memory-holed by Bubblevision in the run-up to Tuesday’s Vengeance Vote.

Everybody wants to slag the Welfare State.

But nobody wants to talk about the ugly expressions of our Warfare State policy – neither CNN and MSNBC nor Fox News.

This is the duopoly. And it loves American Empire.

There’s another thing here, another deadly “body double” delusion.

We do talk a lot on Bubblevision about this “bull market” that came roaring out of the financial slaughterhouse after March 9, 2009.

It’s so juiced with monetary stimulus that it kicks, snorts, and gallops like the real thing. But Wall Street right now is just a Federal Reserve-confected simulacrum.

There’s no connection to reality.

And here’s one simple yet powerful way to measure, or “quantify,” this disconnect.

The Nasdaq 100 recently hit a new peak since the pre-Global Finance Crisis peak of nearly 220% in inflation-adjusted terms.

During the same 11-year period, industrial production has increased by just 2.2%.

That’s a ratio of 100 to 1.

And we are talking apples-to-apples here, constant-dollar stock prices versus real physical output. And we are measuring from the prior peak – not the March 2009 stock market bottom.

So, we get a feel for all the terrain we’ve traveled, up and down.

Was the Nasdaq 100 savagely repressed at the peak of the housing bubble in November 2007?

Or is that the 100-to-1 gain is a bull market “body double”…

Just prior to the dot-com peak in 2000, U.S. stock market capitalization reached 144% of gross domestic product (GDP).

By the pre-crisis peak in 2007, it had gotten back to 144% of GDP.

Today, at its peak, U.S. stock market capitalization hit 160% of GDP.

In the B.G. Era – Before Greenspan – total U.S. stock market capitalization averaged between 40% and 50% of total economic output.

What’s happening here?

How has Wall Street continued to soar while Main Street flat-lines?

It’s only a matter of time the Fed’s illusions are exposed.

Perhaps Tuesday marks the beginning of the end…

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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