Tags: Stockman | BRIC | bubble | credit

David Stockman: The BRIC Success Story Is a Fable By Goldman Sachs and the Fed

By    |   Sunday, 04 January 2015 12:36 PM

There was never a miracle of capitalism that ignited the previously emerging BRIC nations —just a giant global credit bubble that is now rapidly deflating, according to David Stockman, former White House budget chief under President Regan.

He believes the Wall Street manipulators who got rich on the scam involving Brazil, Russia, India and China will soon have their comeuppance.

"The BRIC countries were actually economic cripples riven with socialist and statist policy afflictions that had the good fortune to hitch a ride on the central bank-fueled credit binge of the last two decades," Stockman writes on his Contra Corner blog.

In Stockman's view, the whole BRIC saga amounts to "pettifoggery" by the likes of Goldman Sachs and its ilk, which he said have been operating a "devil's workshop" for the Federal Reserve and other central banks.

"After all, in the age of central bank-driven bubble finance the purpose of Wall Street and its equivalents elsewhere is to scalp profits from the expanding bubble, not to discover honest securities prices, allocate capital or transform real economic savings into productive long-term investments."

Stockman suggests there is little chance the federal government will balance the nation's budget, that the Fed's zero interest rate policy that has wrecked consumer savings will be altered, that real Wall Street reform a la "super Glass-Steagall" will be enacted or that too-big-to-fail banks will be broken up. In his view, such steps would harm the false "economy" he believes has been concocted in Washington, D.C. and on Wall Street.

"In truth, it does not take a great deal of investigation to see that the red capitalists of China, the thieving oligarchs of Russia, the corrupt labor socialists of Brazil and the Fabian apparatchiks of India did virtually nothing during the last two decades to change policy direction or inaugurate free market policies that could unlock true growth and wealth," he notes.

"Instead, they simply figured out that in a world economy driven by money printing central bankers at the Fed, ECB, BOE and BOJ — the only smart thing to do was join the party. So they commanded their central banks to operate their printing presses in overdrive mode, and this was highly convenient."

Stockman says China's colossal export machine was made possible because China's central bank money printing presses ran amok and that unfettered debt expansion in the U.S. engineered by the Fed furthered the global bubble.

As for Russia, which Stockman describes as "a giant oil and gas patch and open mining pit," he said its "prosperity was derived almost entirely from the global commodity bubbles fueled by the first round effects of massive money printing."

According to data-crunching publisher FiveThirtyEight, the true health of the U.S. economy should become evident in 2015.

Ben Casselman, FiveThirtyEight’s chief economics writer, says there is plenty of statistical evidence to show that while the economy is growing, gains are being made in employment and GDP is blossoming, a large percentage of Americans have not seen any improvement in their lot.

"There are, broadly speaking, two explanations for the recovery's failure to reach the middle and working classes. One is that it just hasn't yet been strong enough, but as growth picks up, so will Americans' fortunes. The other is that there is something more fundamentally wrong with the structure of the U.S. economy that growth alone won't solve," he writes.

"The new year is shaping up as a test of those two theories. Now that the recovery has taken hold, will it finally reach the many Americans who have been left behind?"

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There was never a miracle of capitalism that ignited the previously emerging BRIC nations —just a giant global credit bubble that is now rapidly deflating, according to David Stockman, former White House budget chief under President Regan.
Stockman, BRIC, bubble, credit
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2015-36-04
Sunday, 04 January 2015 12:36 PM
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