• Nick Sorrentino

David Stockman Blasts Trump: Pres. An 'Economic Ignoramus'

David Stockman was once Reagan's budget chief. His book, The Great Deformation is a classic of economic literature and we advise all of our readers to go out and buy a copy.

We've known him for a while and we respect both him and his perspective. He has the same issues with Trump that we do. (Plus perhaps a few more.) But he has been a legitimate critic who has focused on policy. He is not some foaming at the mouth never-Trumper. He has very legitimate beefs.

(From Money and Markets)
“Well, what I think they should do is not what they’re going to do,” he said. “We should normalize interest rates. We had nine years running of negative interest rates in real terms after inflation — in other words the federal funds rate was below the CPI (Consumer Price Index). That’s crazy. It’s never happened in history. It’s the same thing as telling Wall Street that for eight years running, you can roll your carry trades at no cost and gamble away, speculate away until your heart’s content. That was totally wrong.
“Secondly, when they expanded their balance sheet from $900 billion, which is where it was on the eve of the crisis (in 2007), to $4.5 trillion, that was the most radical, crazy monetary experiment in history. No one would have even imagined that happening 10 years previously. So they need to shrink their balance sheet quite substantially in order to allow the bond market to actually price supply and demand in an honest way.”

Ah yes, honest markets. But almost no one (aside from us, Stockman, and the Austrian economists) want really honest markets.

Oh things will get honest, real honest, sooner or later, but not because the Fed or almost anyone else in Washington wants such honesty. It will be forced upon them. And us.