Market Update: DC/Wall Street Insider Predicts Coming Shock

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When asked what the biggest risks facing the economy are, David Stockman, lifelong Capital Hill and Wall Street insider, says “That’s easy. There are three: The Fed, The Fed and the Fed.”

After decades of misguided policy and chronically missing its targets, Stockman thinks the Federal Reserve is truly barreling off the rails now, hurtling our market economy towards disaster.

He notes that since, 2008, the Fed has subjected the country to twelve and half years of average annual real negative interest rates of -1.35%. With capital so cheap and no ability to generate a safe return on it, corporations and investors alike have been forced out on the risk curve, which has fostered rampant malinvestment and speculation.

The chart below shows how the Fed’s low interest rate policy has blown serial asset price bubbles that collapse, which the Fed then “fights” by bringing rates even lower for even longer, creating an even worse successor:

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The Fed’s ‘leadership’ of our economy will end in tears, Stockman predicts with confidence. What type of shock will topple the system – be it deflation, inflation or civil unrest – is almost immaterial at this point, though all three are highly credible candidates.

Stockman’s warning should carry more weight than perhaps any guest we’ve had yet on this program given his decades of inside expertise interacting with the political and monetary institutions running the show. When someone so knowledgeable and experienced is so worried, the prudent investor should be paying extremely close attention:

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This is a companion discussion topic for the original entry at https://peakprosperity.com/market-update-dc-wall-street-insider-predicts-coming-shock/

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isn’t reckless driving a crime?
this former prosecutor thinks the elements of this crime fit well: a willful and wanton disregard for the safety of persons and / or property

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I’m so jaded and pessimistic my favorite explanation is that the Fed is intentionally driving us toward OUR disaster and they’ll time it such that their owners (the big banks) are positioned to sweep up nearly all the chips. That’s what happened the last time 2007-08. Remember how the story was told in the movie The Big Short. The big banks laughed when Burry and others started shorting the housing market. But then they saw the problem with their own eyes and The Fed and TPTB didn’t let the bottom fall out until the big banks were positioned to profit from the crash and the guaranteed responses from The Fed and the .gov.

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Adam,
I really appreciate your interviews with the various people you have on every week. But it does seem to me that you and Chris are missing a VERY important view of what all this endless monetary support of the largest corporations and wall street is leading to: Fascism. Here is a recent article that makes this point very well.
https://truthout.org/articles/our-capitalist-economys-dependence-on-credit-is-driving-us-toward-fascism/

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Not wanting to be the wet blanket, but David Stockman has been singing the same song for years! Yes, the Fed is out of control. Yes, disaster is mere moments away for the financial markets. Yes, we need to own gold. He’ll be right one day, but that day could quite literally be 20 years down the road. After listening to his predictions for 10 years, I’ve become a little more wary of them. There’s a reason for that saying ‘don’t fight the fed’.

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JT, you are correct but, it doesn’t make Stockton wrong but the crash he’s been consistent with has not happened since the first Hyperinflation he spoke of back in the early 80’s. For 40 years and more our economy according to Stockman should have blown up many years ago and here we are. I don’t doubt the economy could blow up tomorrow and I have no doubts it could keep going well into the future. I am no expert but so long as the psychology of the investors don’t move them to Sell then this can go on for many years. In 2008 we at this site thought we were headed to the complete destruction of our World as we knew it but so far we have kept moving forward. Even the Greatest Financial Crisis and the Greatest Pandemic recorded (all Pandemics are horrible) and here we are, still moving forward and no one has felt much pain other than their jobs and we will have a stimulus passed soon enough to allow these unemployed to get their unemployment and probably $600 more a month to keep them gainfully employed by cashing their unemployment checks. Crazy world but, we’ll keep paying our taxes so that those out of work can sit around and complain about not getting more from those who work and live week to week helping them stay at home and not get out there helping to keep their neighborhoods safe, clean and the parks open and equipment in place so the the kids get some fresh air and have a little fun. To be fair however, this Virus will still do what it does and that means groups of kids or people will stay at a proper distance. Hopefully a vaccine this late Fall works and normalcy returns back to the world and the economy’s everywhere can completely re-open and help the situation exponentially. Respectfully Given… Peace

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Shall we write our congresspeople and request that they develop a Ma and Pa CD paying, let’s see, 12% interest? That seems like a better idea than having a ‘new’ Fed raise interest rates to 5% in interests of price discovery. If the Main street economy is so weak, could the economy handle such an increase? If the ‘new’ Fed cut it’s balance sheet to $1 trillion, would that deflation increase activity on Main street? Maybe it could but the first few months after the increase or decrease, watch out! I suggest that the issues are more complex than people think.
It is really the Congress’ job to get money to anyone’s favored victims, not the Fed. IMO, of course.

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Really enjoy these interviews. Keep them up!!!