Sunday, June 14, 2015

Stockman on the Market and Economy

So look at GDP, the red line and the valuation of all equities and financial debt, the blue line, the blue line is the claims on the redline.  See a problem?  And debt or equity you own is thus encumbered.

David Stockman state plainly:
This central bank fueled boom will ultimately be paid for in the form of a prolonged deflationary contraction. Then, trillions of uneconomic assets will be written off, industrial sector profits will collapse and the great inflation of financial assets over the last 27 years will meet its day of reckoning.
As Ross Perot said, when you see a truck coming down the sidewalk, you step off the sidewalk.  But, you know, it is just not that easy.  There are several steps to avoid this truck.  But maybe it is just easy come, easy go.

Read through all four parts.  But when Stockman says "market capitalism" understand he means "free markets.
As indicated in Part 2, the assumption that market capitalism is chronically and destructivly unstable and that the business cycle needs constant management and stimulus by the state is belied by the historical facts. Every economic setback of modern times, including the foundation events of the Great Depression, was caused by the state—either in the form of inflationary war finance or central bank fueled credit expansion—-not by the deficiencies or inherent instabilities’ of market capitalism.
And this -
Accordingly, speculative rent-seeking in the financial arena has replaced enterprenurial innovation and supply side investment and productivity as the modus operandi of the US economy. This has resulted in a severe diminution of main street growth and a massive redistribution of windfall wealth to the tiny share of households which own most of the financial assets. Warren Buffett’s $73 billion net worth is the poster boy for this untoward state of affairs.

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