The Tom Woods Show
In 5 minutes
Episode 1072
On today’s episode of the Tom Woods Show, Tom interviews guest David Stockholm, who was the Director of the Office of Management and Budget from 1981 to 1985 under President Ronald Reagan, served as a Congressman (R) for the State of Michigan 1977-1981, author of the book “The Great Deformation: The Corruption of Capitalism in America”
Topics discussed: Steve Bannon, President Donald Trump, and what’s coming for the economy
Before the topics are discussed Woods asks Stockholm about his prediction of whether or not President Trump will last through the end of 2018. Stockholm’s response was “I don’t think so” going on to say that those who say he will last think the new tax bill has been a victory for President Trump and strengthened his seat in the oval office. He goes on to say the Republicans passed the tax bill as a way to campaign against Trump for the next election cycle to show their agenda and ability to get things done without Trump. Stockholm says, as he was in Washington D.C, when President Nixon was in office in 1973, after winning a landslide victory, 18 months later Nixon was removed from office. Stockholm believes it is the deep state and establishment looking to take down President Trump as he is not part of the Republican establishment where he can call on favors from his peers in Washington. Stockholm states that while the stock market is up, going up “100 to 150 points a day for no reason”, if the market breaks, and he says “it will”, President Trumps popularity on the hill will change “dramatically”.
Economy
Woods asks Stockholm that in a January 1st, 2018 column by Economist Paul Krugman that “Presidents don’t really have that much influence after all on the economic health” stating Krugman said markets would never recover under a Trump Presidency. Krugman says it’s the Federal Reserve Chairman who has the most influence on the economy not the President so he doesn’t deserve the credit. Woods says the fed chair really is the one who deserves the blame. Woods goes on to ask Stockholm “since the last year the economy has been pretty good, not that Trump doesn’t deserve the credit but is the economy not as good as people think it is?”
Stockholm says he “is” saying exactly that statement. Stockholm says there is “no reason why the S&P should be up 30 percent on November 16, 2016 because there is nothing good that is going to come out of all of this that is sustainable”. He goes on to say that the Federal Reserve is responsible for the “bubble” and is running on “residual momentum”. This economy boom is market speculators looking for the top and waiting for something to stop the momentum of it. Stockholm says Trump was “right” when campaigning that this bubble was created under the Obama stimulus, the feds massive monetary expansion, and how it is unstainable and going to collapse. Stockholm says Trump should have stuck with that and immediately removed Janet Yellen of the Federal Reserve and put a “hard money” person as the Chairperson which would have collapsed the bubble and rightfully blame the economy on the Obama administrations monetary policies. Instead, Trump is simply embracing the economic boom as his own doing. He says the Russel 2000 is trading at about 130 times reported income and the S&P 500 as of today closed in on upwards of 26 and people haven’t realized these crazy multiples this late in the cycle. He goes on to say how we are in month 103 of this expansion and nearing the all-time record of 119 months that happened in the 1990’s under far more “propitious conditions”. Therefor we shouldn’t be valuing the market at its height when the “game is nearly over”. Stockholm says the economy is due to a “rotten monetary policy, a dangerous institution that dominates all in the Federal Reserve, and its heading to a real collision”. As the Keynesians are running the Federal Reserve and Trump has appointed more followers of that economic theory and they have “spooked” themselves as we are in month 103 and will have a recession. Their response is “QT” or Quantitative Tightening which is being ignored by the stock market and most of Washington and Trump. The Federal Reserve has said they are going to “shrink” their balance sheet that has become “elephantine” at 4.4 trillion by roughly 2 trillion over the next several years which has begun at 10 billion a month of “shrinkage” in the previous quarter and 20 billion a month in the current quarter which will amount to 600 billion a year of shrinkage by October 2018. Going into fiscal year of 2019, the Republicans and Trump have “inherited a 700 billion deficit” with 280 billion of revenue loss in the new tax cut in its first year while adding 120 billion in defense and non-defense appropriations, 100 billion for what Stockholm says “disasters we’ve had”, and promising to bail out the Obamacare subsidies. Stockholm predicts a 1.2 trillion deficit in 2019 while being 10 years into a “recovery”. Stockholm states that you’re supposed to have a deficit in a recession while the first or second year get back to normal or run a surplus. All while the fed for the first time in 30 years no buying bonds which holds down yields that monetizes the government’s debt, but instead selling down its balance sheet or “shrinkage” all while the Treasury sells 1.2 trillion of new paper which is 1.8 trillion and the question to be asked is “Who’s going to buy it and who’s going to buy it at 2.3% yield?” Stockholm says that the interest rate is heading to 3% because the current system is built upon “ultra-low interest rates and being sustained indefinitely” but all of that is changing as we speak. Stockholm goes on to say that we are headed to a bond market collision this fall as we are in “peak financial absurdity”.
Bannon/Trump
As Steve Bannon steps down from Breitbart, Woods asks Stockholm about “Bannonism” and his thoughts about that from a non-leftists point of view. Stockholm is happy that Bannon is gone but that “Bannonsim” is still “on the table” at the white as Bannon was “self-described individual” who tried to make sense of the ideology of nationalism which was protectionism, nativism, xenophobia, and what he describes as the strong man luster. With the problems in fly over America today and the crashing economy in terms of growth, the problems aren’t due to imports “per se”, isn’t due to immigrants crossing the border taking away American jobs or crime coming from immigrants other than the drug trade which is a function of the “War on Drugs” which can only be remedied by getting rid of the war, Stockholm says the package Bannon was delivering to Trump was the “Walls” package. Walls on the economy, walls on the boarder which was an “upside down” way of looking at those issues. Stockholm says the problem with America today is not what’s flowing in (imports or immigrants) but rather what’s flowing out by way of imperialism we are imposing all around the world and bankrupting ourselves fiscally as well as the monetary imperialism of the Federal Reserve. As the fed took its balance sheet from 500 billion in 2000 to 4.5 trillion which is a 9 fold increase in 17 years flowing it into the world economy. Stockholm says had the rest of the world played by the “old rules” their exchange rates would have soared and the dollar would have collapsed but since the countries are mercantilist, Keynesians, and statists, they instead bought up dollars the R&B and the other currencies from rising. Which meant that we were exporting what Stockholm calls “monetary insanity” to the rest of the world. As we continue to live outside our means with cheap interest rates allowing households and corporations to unlimited borrowing which has added to the GDP as how it is calculated even though it doesn’t amount to growth or real wealth. These are the problems that the fly over states voted for Trump. As the fed destroys the purchasing power of wages with a 2% inflation target, destroying the value of savings as a result of interest rates being held to near almost zero for 9 years all while the fed is encouraging the executive leadership of corporate America to cycle their cash flow and balance sheet capacity into financial engineering buying back their stock, bloating dividends, and engaging in massive unproductive M&A deals. All of this, Stockholm describes, flushes all the corporate resources back into Wall Street which in turn levitates stock prices and fuels the speculative cycles. But none of this results in real tangible production on main street that create productivity and rising profits/wealth or real sustainable economic growth. As Trump said he was a low interest man in regards to the Federal Reserve, Bannon never said anything about the Federal Reserve and the core problem that was creating the economic decline to which he proposed to solve with walls on the border. None of the solutions regarded the need for a “cleaning of the house” in regards to the Eccles Building which has yet to happen. Jerome Powell, a Keynesian and crony-capitalist and nominated by Trump to lead the Federal Reserve, and other board members are in favor of negative interest rates which are the confiscation of the wealth of people who aren’t willing to buy junk bonds or overpriced stock because the Federal Reserve tells them to, all while negative interest rates are a way of forcing people to do what the monetary central planners plan. In short terms, negative interest rates of theft. Currently there is as nominee to the Federal Reserve who is in favor of negative interest rates as well as recommending that we enter into a cashless society so there is no alternative except to have their savings confiscated if they are unwilling to buy junk bonds. As Trumpism has nothing to do with healing the economy and Bannonsim is just a distraction, the two problems this country faces is out of control national debt and a central bank that is dominated by the central planning as neither problems are being approached. Stockholm goes on to say that nothing could be worse than putting someone on the fed who wants to abolish cash and impose negative interest rates or someone, 10 years into this cycle and pump up the deficit to 1.2 trillion in the face of a recession as well as the bigger deficits from the breakdown of revenue. Add on the fact that there is 12 trillion of built in new debt for the next 10 years with the baseline federal budget taking the national debt to 32 trillion. As Stockholm describes, “the furniture is going to start breaking in fiscal 2019” In the end, Trumpism is what Stockholm describes as a “dogs breakfast” with no sound economic principle to it. The Trump administrations game plan should have been how to conquer the trillion dollar deficit “monster” looking mainly at entitlements and defense with 600 Billion on defense spending which Stockholm recommends cutting that in half and still being able to properly defend the nation as no industrial size nation poses a serious threat to national security.
Show Notes
https://itunes.apple.com/us/podcast/t...
http://www.TomWoods.com/1072
http://www.davidstockmanscontracorner...
http://www.SupportingListeners.com
http://www.RonPaulHomeschool.com
http://www.FreeHistoryCourse.com
http://www.TomsFreeBooks.com
Guest work/information: “The Great Deformation: The Corruption of Capitalism in America” – A book that debunks the bailouts of 2007-2008 and a revisionist economic history of the 20th century.
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