🔴 How the Fed Paved the Way to Trump (w/ David Stockman)

DAVID STOCKMAN: The Fed, led by Bernanke,
increased its balance sheet by 1 and 1/2 times more than had occurred during the first 94
years of the Fed’s operation. 13 weeks, 150% of what it taken 94 years to
create. The balance sheet of the Fed was $500 billion
at the turn of the century. It had taken roughly 84 years to get there
from when the Fed opened in 1914. During the first few years of this century,
Greenspan pumped money like no tomorrow, trying to bail out the economy from the dotcom and
tech crash. That, of course, produced an even worse housing
bubble and then the consequence of that in 2008 and 2009. But the point is that on the eve of the Lehman
filing, the balance sheet of the Fed was about $850 billion. In the next 13 weeks, which isn’t a long time
in the scheme of things, the Fed, led by Bernanke, increased its balance sheet by 1 and 1/2 times
more than had occurred during the first 94 years of the Fed’s operation. 13 weeks, 150% of what had taken 94 years
to create. Now, that’s just madness. There was no predicate for that. There was no historic tradition or learning,
or even financial theory that says you should take the balance sheet from $850 billion to
$2.2 trillion in 13 weeks. What it did was it fundamentally ruined Wall
Street. All of the lessons that should have been learned
were basically interrupted by that madness that Bernanke undertook. Once they had increased the balance sheet
in this fantastic way, they didn’t know what to do next. They just kept doing more until obviously,
we got into Q2 Q3 and a $4.5 trillion balance sheet. Now, I think that when you have, as we have
today, a society that’s so– a public narrative, I should say, that is so focused on the minute
and the hour and trading conditions in Wall Street, both the overnight market and the
cash market, that we lose all sense of perspective when you look at things on a day-to-day or
even hour-to-hour basis. But the fact is, when you take the balance
sheet in a few short years from $900 billion to $4.5 trillion, it’s the biggest financial
fraud in human history. Trump obviously promised that he was going
to make the American economy great again and he said, check with me later, and I’ll tell
you how. Most campaigns have pretty thin gruel for
policy content anyway, but his was completely content free. He said that we’re losing jobs massively,
which is true, but he didn’t say how he would bring them back other than that we had bad
deals, and that he was a deal maker par excellence. He would take the skills that led to his real
estate empire, whether it was true or not, he would apply those to renegotiating all
our trade deals, and that was going to make everything better. That was complete nonsense. None of this had to do with bad trade deals. NAFTA was what it was. NAFTA didn’t cause our trade deficit with
Mexico to rise to $70 billion today when, in 1991, we actually had a surplus with Mexico
at the same time that our trade balance with Canada has been more or less close to zero
for the same 25 years. Now the point is, this is a function of monetary
policy. It’s the fact that we’ve inflated the costs
and wages in our economy to a noncompetitive level in the global market, where we buy and
sell goods, and money flows and finance flows in its trillions, day in and day out. He had no content to policy. He just said, trust me. I’ll make some good deals, and it’ll get better. The point is, in flyover America, they were
desperate enough for a change that they were willing to take a chance. I call it the Hail Mary of politics. Trump said he’s the king of debt, and he’s
proving it at the federal level. It’s bad enough when you have a giant deficit
at the bottom of a business cycle in the depths of a recession or in the year or two of recovery. I don’t think it really solves anything, but
at least it’s understandable in terms of the fiscal math. When you’re 10 years into a recovery, when
you’re at month 115, where we are today, and therefore, the second longest business expansion
in history, you have recession facing you around the corner. It’s written on the forehead of the economy,
because sooner or later, the economy is going to roll over. Here’s the key point and why the next shoe
to fall is going to be fairly traumatic and unpleasant. He is going to need to borrow, in year 10
of a business cycle, $1.2 trillion, an unheard of number, over 6% of GDP at the same time
that, finally and belatedly, the Fed is beginning to normalize its policy and particularly shrink
its balance sheet through the QT program at a $600 billion rate. Now, they make this sound very antiseptic. We’re just going to let it roll off. That’s not true. They’re effectively, as an economic or financial
matter, functionally selling the debt. We are at a point of peak Trump. I actually, in my book, identify a specific
date– September 20, 2018. The S&P peaked at 2.940. That happened to be exactly 800 points higher
than election eve, when it was 2,140. Trump called it one big, fat, ugly bubble,
an overvalued market, an accident waiting to happen in the campaign. He was right then, and yet he’s such an incorrigible
egotist that he could not prevent himself from embracing 800 points, a gain that were
utterly unjustified, and that are going to come back to bite him hard as the air comes
out of this balloon. The point, though, is it was only symptomatic. Embracing the bubble, I call that a rookie
mistake. Ronald Reagan knew better when he took office. We had a mess then too, but he spent three
years denouncing the failed Jimmy Carter economy, denouncing the failed policies of the Democrats. He never took ownership until we got to 1984. Trump is making the opposite– took the opposite
position. Within days of being sworn in, all of a sudden,
he was talking about the Trump bump and an economy that he was taking credit for that
was actually failing. What he doesn’t seem to realize is that at
the end of every long business cycle– we’ve only had two over 100 months– you do get
an unemployment rate down to 4% or 3.7%. That’s like the law of economic gravity happening. He had nothing to do with it. We know from the ’60s, the first cycle that
lasted that long, by the time you get to 3.7% unemployment, you’re about a year away from
a recession. We know from the 1990s, the longest cycle,
119 months, that when it hit 3.8 in the spring of 2000, we were less than a year away from
the next recession. Trump has really made a huge mistake embracing
the so-called booming economy, embracing the stock market. That’s why I call it peak Trump. The problem is, having made that mistake,
as everything comes unwound this year and next year, which it will, he’s going to get
blamed for it. It’s going to be same thing that produced
Trump in 2016 will produce, I think, a left-wing populist income redistribution-oriented, “let’s
get the billionaires” candidate. That will mean some pretty serious repercussions
for policy, and it will mean the end of the dream on Wall Street.

100 thoughts on “🔴 How the Fed Paved the Way to Trump (w/ David Stockman)

  1. the balance sheet was five hundred billion at the turn of the Century – do you mean 1900 or 2000 both are "turn of the century"
    checking i a few other sources it seems you mean the two turns of the century ago (1900)
    Five hundred billion in 1900 dollars? in year 2000 dollars – those are completely different things.
    an average worker made less than a dollar a day in 1900 and over 15 dollars per hour in 2000.
    This is why such dramatic comparisons do not mean anything/

  2. To be fair, Trump didn't have a comprehensive plan though the tax cuts and de-regulation did a lot to boost investments. There is a lot of capital in private hands, you need to give them a reason to open up their wallets.

  3. when you have no power and nobody pays attention to you; pretend you are an expert and make a you tube video talking about the fed

  4. Trade deals protected and grew capital. Labor got cheaper stuff but has a race to the bottom for wages. I can be convinced otherwise, but no arguing with permafools

  5. David, obviously you don't like President TRUMP and that's fine, he's not everyone's cup of tea. But please, keep your feelings to yourself and just provide facts and data. Furthermore, the stats you stated in your interview I think are a little bit of BS. I'm still searching for them. Cheers. And to Real Vision Finance, stick to FINANCE PLEASE. Majority of people around the world are over the TRUMP bashing.

  6. Trump is already blaming the Fed for not cuting rates bigger and faster. He wants to win the next election then it can all fall down around him. But if the Fed doesn't want trump in office then they will let/make a recession happen before the election

  7. This has a lot to do with trade deals. When we have fair trade deals manufacturing increases creating more jobs with more people having money to buy things. To act like bad trade deals do not harm us is ridiculous. It may need not fix everything but it for sure helps.

  8. Why do the most brilliant minds in economy keep repeating that we've been in a 10 year recovery??? We never recovered at all, unless you want to count the bank bailouts, artificial stimuli, and zero interest rates that were implemented. I personally could never utter the word recovery when referring to 2008. It only delayed the inevitable and will make the day of reckoning far worse.

  9. Short version- one way free trade with a huge autocratic economy makes everyone else behave more like them to try to keep up. It's funny that our politicians gave them free trade with us as a gift to try to make them more democratic like us- not the other way round.

  10. Our children and Grandchildren are going to pay so dearly for Trump's crimes and politically failure that they will pray for a better day but none will be found!,,,

  11. We are NOT 10yrs into a recovery. The Fed Res was UNABLE to normalize its balance sheet, and companies have been in zombie mode, getting themselves into even more debt, as well as consumers, because of almost 0% interest rates.
    Also, “business cycles” are a creation of the central bank contraction/expansion fiat garbage based monetary system. They’re fake and NOT part of true capitalism or free markets.

  12. And the funny part is that all ignorants out there will blame the free market and capitalism for the upcoming depression. What free market?

  13. Are simple facts lost on Stockman due to his anti Trump bias? Trump made the American economy business friendly by reducing taxes and govt regulations. Yes it is that simple.

  14. Trump is solving the previous President's bad/wrong decisions&policies. USA is lucky. When it happens somewhere else then will we be so lucky.

  15. Stockman is exactly right and the expansion of the balance sheets by the central banks and US deficit spending will end very very badly.

  16. Cranes everywhere with almost free money, bankers buying and selling business like used cars, ads on becoming a day trader are everywhere. This looks and feels so familiar. Tech and housing bubble, Act III.

  17. I heard his criticism of Trumps campaign promises – what I found interesting is that there is ZERO difference between his vague promises and all other vague promises that came before him. Veering off into Trump election criticism ruins his discussion. There is plenty to criticize with the Trump policies related to debt – stick to that.

  18. There are a few key missing points in your argument.

    Firstly, you forget that we have been in a global economy for at least three centuries now. Especially since Bretton Woods when the ownership of the global economy was handed to the US as the central reserve currency and to be the country that would govern the global financial system. This was a way of stopping Europe from fighting with each other, which had happened countless times before that. Bernanke's response to 2008 was not a US domestic response, but a global one and that is what you miss I feel. The Feds balance sheet is not for US domestic use only, but for the global financial system as US global multinationals are essentially key drivers in the global economy and export their capital around the world as they invest and grow themselves.

    Secondly, the global economic demographics have changed significantly over the last few years especially since the fall of the Berlin wall. The whole of Eastern Europe, Russia and China have embraced global capitalism and buy their energy and gold (India) in dollar denominated instruments. That massive growth in the global population, around a billion since 2000 probably 3 to 4 billion since 1985 (with Reagan and Thatchers Big Bang) and then just factor in inflation. You need more capital and currency on the ground under these new sets of circumstances to make everything work and keep everyone trading.

    This creates a massive thirst for capital.

    My only criticism of Bernanke, would be that QE3 was unnecessary and was an example of how the Fed was playing towards the media and markets in a over-hyped situation. Also, China had stepped up to the plate then and became the 2nd largest economy, along with the other G7 countries that can print too. Stronger guidance and co-ordination between central banks would have been enough I feel, instead of QE3. The US's position as the central reserve currency needs to be looked at again as the global economic environment has changed significantly since the end of WWII. Now with the Euro, Yen & Renminbi, which I feel should be made into a basket and then oil and gold priced in them rather than just the dollar. Then we wouldn't need he Fed to bail everyone out like they just did.

    Lastly, the populist shift in society that gets people like Trump and Hitler elected, comes from change demanded by society after a massive economic downturn, 1928 Depression and World War I war reparations for Germany, the 2008 in today's world. Creates an angry society that then votes for the guy/girl that offers dramatic change to them, which usually means kick out all the foreigners and keep the economic pie to ourselves (lower taxes, build a wall & change Washington – Trumps main election narrative).

    Bernanke's response was to reignite the economy and get the US global multinationals trading and employing again. If anything he was what made it a close election race, if you remember Hillary won more votes. Had he sat on his hands and done nothing, you would have seen the fallout that happened when Hoover was president who did nothing after 1928. It was the repricing of gold, under Roosevelt, after seeing the UK and France abandoning the fixed rate of exchange for gold and successfully freeing up capital in their economies, that essentially reignited their economies.

    There is no way around it, you have to keep printing. Well there are two options, either sit back and get ready for deflation and a lower salary each year or try stop humans from greedily chasing economic ambition… that one is called Communism, and we all know how that ends.

  19. The air will never come out of the bubble with MMT. Central banks will print as much money as necessary to keep the air in the bubble. We are now all living on financial fantasy island. The only way it will end is if the central banks decide to pop the bubble. And if they follow their usual playbook, they eventually will pop the bubble. Probably on the eve of the 2020 US election.

  20. If the manufacturing base increases substantially in the US thereby creating more jobs and greater tax revenues, Trump may be proven correct.

  21. "The end of the dream on Wall Street", which from what I understand means that Wall Street will have to sink or swim on its own initiative, not supported by endless taxpayer funding. That's okay with me!

  22. The government has shown is a TOTAL mess with corruption, immigration policy that isn't working, drugs other nations and cartels are destroying our county with, total media bias, espionage from other nations, imbedding communist CCP and Russian sympathizers, and now it is apparent China has hacked our financial system with fake money. Now we are dealing with a Congress that won't cut spending because it is financing their corruption.

    A good leader doesn't have answers for everything but a goal. A good leader develops a group who can manage their duty. Trump has had to build a cabent from nothing with a corrupt party, he had to fix. Never mind the corrupt party he cant fix, that has become more corrupt. He has done one hell of a job, frankly.

    How is it that people like this guy can't grasp it takes time… It's been 2 years of many President's messes. What this guy is ignoring is how China imbeded a money laundering system into our market. China funneled 2 trillion in fake money into our stock markets… You want to know where the money went? Look… Trade deals is a large portion because it will make our money more valuable. I feel like economist ALWAYS forget the value of money is based on conceptualized need and difficulty to get. If it is harder to get, it becomes more valuable and other nations will work harder for it.

    Instead of blame why don't you present a plan? Why don't you help instead of throw hate at the President actually trying to fix this… I'll tell you why… Ego… "I'm smart and I don't like this smart guy because he does things different than me". Well, you're not a leader, and your not helping ANYONE… Typical….

  23. The only way to reverse this, is do the same thing again, but give the money directly back to people…. this was the biggest theft in human history… quantitative easing would have worked wonders if it was a bottom up scheme… but the Zionists had to gut the country first.

  24. More commentary from someone who has done nothing but underperform massively the last decade. Massive and imminent crash is coming any day now, as he has been saying for 10 years straight.

  25. I thought it for Trump, I also bought a lot of gold and silver in 2011 and in 2012. I listen to David Stockman back then, and because of that I lost a lot of money. He’s touting the same thing. I’m just saying, be careful. Obama is a globalist, and I lost a lot of sleep worrying about what might happen to this country. And a lot of what was said was going to happen never did. That’s all I’m saying.

  26. Trump is a master of the Blame Game. Americans really Love playing the Blame game. Donald blamed the Mexicans, he blamed fat women…he blamed the Chinese, her blamed the Arabs, He blamed Obama and the Clintons he even blamed the handicapped, the Canadians and the Europeans….And yet enough Americans believed his insanity to put the mad man into the White House .

     According to Trump everyone is cheating Americans except Americans! IF that were true then why has Trump tried to fire the very same people he himself appoints to office?

  27. He's worried about the end of the dream on Wall Street. Americans are dying in the ME everyday, and they're doing it for foreign multinationals, and in the case of Afghanistan it's directly for the Chinese and their investors. China is all over Afghanistan, we're providing them with the security they need to "open" Afghanistan. We're doing this for a country ruled by communist, that shares a border with Afghanistan, so that people like him can make big money, and he's worried about the socialist coming to take his dream. People are starting to wake up, and realizing what's really happening in the world. The threatened pull out of Afghanistan is just part of negotiating the Chinese trade deal.

  28. Why does this smell like Stockman positioning his "I told you so" moment based on things we already knew? Noticeably lacking in this diatribe is a permanent solution to the mess we're in. The election of Trump was more than his promises and vision for a stronger America, it was a repudiation of the criminality of Hillary Rodham Clinton and the kleptocrats that pervade Washington, (also not mentioned by Stockman).

  29. There is no "financial theory" required for a thief to steal from some people with a Ponzi scheme. It has not been an academic endeavor. It`s been a RIP OFF of epic proportions.

  30. There seems to be No Meat in Trump's MAGA Project . If Americans only believe in dreaming so be it to suffer the consequences .

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  32. INFLATION-CORRUPTION- CRIMES- INEQUALITY and other alike are responsible for TRUMP election. Criminals rule the world in an inhuman way. THIS HAS TO CHANGE.

  33. Trump promised to normalize the American economy and end the Monetary Madness of Obama/Bernanke. We are still waiting.

  34. Stockman os a permanent bear. Why would you waste time having him on. If you had taken his advice, you would have missed this entire bull market. I put him in the same bucket as Harry Dent. Maybe instead of only giving voice to confirmation bias, you should do like planB and discuss counter arguments to your thesis.

  35. Yes Trump is a blowhard, we all know this but THIS whining does nothing to find a solution since he wasn't the cause.

  36. This guy totally discounts the fact that our entire money system is make believe and has no basis in reality yet he kept quoting make believe numbers about a make believe monetary system as if they have some sort of predictive ability about whether or not a majority of people will or will not believe in our fake monetary system. Insanity, yet this guy sincerely thinks he is sane. You might as well go consult an astrology chart or a tarot cards to make any sense of our imaginary economy.

  37. The economy is booming because the Trump administration encourages hydrocarbons and suppresses regulations, among other things. And this guy complains about inflated wages? The man is hallucinatory.

  38. David Stockman is the one man SAVING 19TH CENTURY DEBT BANKING-ignore digital economy & irrelevance of Central Banks! US Treasury needs to create a US World Reserve Cryptocurrency and transition Debt to Cryptocurrency end the FED since it’s irrelevant & Globalist “Money Changer” scam! Globalist Great China Ponzi scheme is crumbling dragging EU & ECB with it! Zuckerberg recognizes this & creating his own cryptocurrency!

  39. Did this dude just say we INFLATED our incomes and thus cannot compete globally?! Mr Stockman thinks the minimum wage that has ppl collecting food stamps and living in vans is TOO MUCH money??

  40. Sorry Mr Stockman, but you're wrong. The economy did respond positively to Mr Trump's election, his efforts to remove useless regulations, decrease taxes, and his cheerleading the economy. Obama can't take credit for the goosing that the economy got under Trump. It's never automatic when people finally get jobs and go back to work. That only happens when managers are confident enough in their future earnings to hire people.

     The only question is, can we keep our heads above water when both Europe and China are about to implode? It's going to take some pretty adroit maneuvering, and there's nobody I'd rather have a the helm than Donald Trump. I sure don't want sleepy creepy corrupt Joe Biden negotiating with China and trying to help unravel the mess that Germany has made of Europe. Nor are there any other Demonrat candidates that could do any better than sleepy creepy corrupt Joe. Lying Liz Warren? Hahahahah!

  41. Stockman lacks imagination. As he himself notes the CB's have done something unprecedented. It's not just the end of the business cycle, it's the end of the CB cycle. He doesn't see or won't acknowledge this. He still thinks it can be fixed. xD…

  42. We are in year 3 on our recovery. The problem with all these wealthy bears is that they were so insulated, living in their own bubbles that they never realized how bad it was in flyover country. Our life expectancy has been going down for years; but it is not due to the opoid crisis; that is a symptom. The cause was the de-industrialization and depression that was brought to the heartland since 2000. Now, with Trump fighting for us, there is 8 years of pent up demand, and therefore plenty of room for this recovery to continue for 1-4 more years. The american worker can compete against anyone given a level playing field. The only reason for a recession now is if we stop believing in ourselves and begin to pull back like the rest of the world has.

  43. The next and real question is: Who turned Trump against the American Taxpayers? He was supposed to be CUTTING THIS TOO BIG GOVERNMENT!

  44. It’s a convoluted concocted conjured orchestrated by irresponsible federal reserve instead of slashing expenditures after 115 months of economic expansion

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