Financial System Booby Trapped with Debt Bombs-David Stockman
By Greg Hunter’s USAWatchdog.com
Former Reagan Administration budget director David Stockman says the biggest crash coming is not going to be in the stock market. Stockman warns, “I think we are headed for a central calamity. The central banks of the world have been on a 20 year campaign to massively expand their balance sheets and intrude into financial markets in ways that were never before imagined. In the process, they falsified every asset value there is from overnight money all the way to 30-year bonds and the stock market. Everything now is trading off the central banks, but the central banks have hit the end of the road. They have printed so much money and created such a massive global bubble that we are now in the process of that bubble fracturing. The central banks are now beginning to become confused and panicked about what to do. The Chinese have no idea what to do with their $28 trillion credit bubble and that house of cards in China. Our Fed is now on the verge of another meeting where they are debating if 80 months of 0% interest rates is enough. That is crazy.”
Stockman, who also had a 20 year career on Wall Street, says enormous amounts of global bond debt will never be repaid. Stockman explains, “That’s why I say the financial system is booby-trapped with debt bombs waiting to explode. I use the 100 year Brazilian bonds as an example, but there are trillions of dollars of this stuff all over the place. You know the central bankers pretend that they don’t see any bubbles. These people are not only bubble blind, they are bubble deaf. They have no capacity to understand the explosive nature of the financial markets that they are toying with.”
Stockman goes on to paint a grim picture and says, “What happens when the financial breakdown comes is there is a great margin call. Everybody says ‘I want my money back and I’ll take your collateral if I don’t get it back. If I do take your collateral, I will sell it for whatever price I can get and cut my losses.’ So, this is truly a house of cards. The whole pyramid of debt and what we call hypothecation and rehypothecation of financial assets, that is the real bubble. That’s what people don’t focus on enough. Sure, you can think of stocks that are a bubble, like Tesla and its current price of around $250, or the biotech index which is trading at hundreds of times earnings is crazy. What’s really crazy is all of this debt that has been created has been turned into collateral and borrowed against at a very high rate. The whole thing is very unstable and tottering as we speak. . . . Much of this collateralized credit that has been created is a confidence game. It is a daisy chain, and when the confidence breaks and they start to unwind the chain, the amount of debt outstanding will shrink. That will create tremendous broken furniture in the financial system.”
How do you protect yourself? Stockman says, “The place to go in my view is cash. Stay short and liquid because we are going into deflationary collapse. We are going into a great reset in the financial markets where inflated asset values are going to be marked down tremendously, bond prices and stock prices. As a result of, that there will be great opportunity after the dislocation runs its course to buy things much cheaper than they are priced today.”
Stockman thinks the whole system unwinds sometime before the 2016 Presidential race is finished.
Join Greg Hunter as he goes One-on-One with financial expert David Stockman, who is also the author of the best-selling book “The Great Deformation.”
(There is much more in the video interview.)
After the Interview:
David Stockman website has free information on it. It’s called DavidStockmansContraCorner.com. If you would like to buy a copy of Mr. Stockman’s best-selling book “The Great Deformation” click here.
I agree with you to an extent – the government can and, if the situation is dire enough, most likely will confiscate or tax to death any asset, PM and land included. That still doesn’t mean I’m going to be selling my home or pre-war nickels any time soon. In uncharted waters like these, diversification is the best bet, since no one knows exactly how the situation will play out. And frankly, to me having a well stocked pantry to take care of my extended family in the upcoming times of crisis is worth more to me than gold.
And by diversification, I mean buying any or all of the following: PMs, cash, land owned free and clear, original art pieces from respected artists, gold and silver jewelry, a portion/partnership of an organic vegetable farm or non-hormone cattle/chicken farm, a partnership in a car repair shop, a collectible car, etc. But before you diversify, having a well stocked pantry, a Bible and a shotgun are the starting point to everything else!!
Nobody really knows what the future holds but God. And effects of a fall won’t be uniform over the whole nation. It sounds like you are well ahead of me, as my resources are meager. I am NOT helpless, defense wise. A Bible and a shotgun to begin with. No argument there. Don’t forget medicine and medical supplies.
Excellent Stockman. He is excellent. But, get Ellen Brown back on.
New York Times
Adviser Jailed Since 2000 Pleads Guilty in Securities Fraud Case
By GRETCHEN MORGENSON
Published: August 18, 2006
Martin A. Armstrong, a financial adviser who has been in jail
since January 2000 on a civil contempt charge, pleaded guilty
yesterday to a charge of securities fraud in a criminal case stemming
from trading losses incurred by his firm in 1999.
At a hearing yesterday afternoon in United States District Court
in Manhattan, Mr. Armstrong, founder of Princeton Economics International,
admitted to deceiving corporate investors and improperly commingling client
funds in a case that prosecutors said resulted in commodities losses of more than $700 million.
Ex-Money Manager Stays in Jail for Contempt
By BLOOMBERG NEWS Published: November 28, 2006
Martin A. Armstrong, the former money manager imprisoned for almost seven years for contempt of court, will remain behind bars for defying a judge’s order that he turn over $14.9 million in rare coins and gold bars in connection with a federal lawsuit.
Yesterday, the United States Court of Appeals for the Second Circuit, in New York, upheld a decision in 2000 by Federal District Judge Richard Owen jailing Mr. Armstrong for failing to surrender the assets.
The Securities and Exchange Commission and the Commodity Futures Trading Commission sued Mr. Armstrong in October 1999 and ordered him to surrender the gold bars and rare coins to the government; Mr. Armstrong has maintained he does not have the assets.
The ruling has no direct impact on a related criminal case against Mr. Armstrong, 57, who pleaded guilty in August to a federal conspiracy charge stemming from what prosecutors said was a $3 billion Ponzi scheme. He faces up to five more years in prison when he is sentenced in that case in January.
“Fifteen million dollars is a life-altering amount of money,” the three-judge panel wrote in its 58-page decision issued yesterday. Mr. Armstrong may conclude “that the risk of continued incarceration is worth the potential benefit of securing both his freedom and the concealed property.
Have you seen the movie THE FORCASTER?
We saw it….twice.
The place to be is cash … 12:57 mark … though he doesn’t say if its in a bank, or under a mattress …
Most times when people say cash they mean cash equivalents like 90 day T-bills which Mr. Stockman states later on at the 14:56 mark. I agree with him that the dollar, stocks and bonds are not going to zero as some think.
“Nobody said anything would go to zero”
Gregg, I here it almost every day by people on the ALT media sites. Did not mean to imply that I was referring to your interview. I do agree that stocks, bonds and the dollar will be much lower at some point. That is why I am all in cash, cash equivalents and precious metals.
In 1987 I was a rookie Merrill Lynch stockbroker. I remember sitting at my Quotron, yes that’s what we used back then, and watching the market tank on Black Monday. After that we had a saying, “nothing, but nothing, on earth falls faster than a mutual fund in a tanking market.” It’s a self-perpetuating system of collapse when the panic sets in.
What’s going on with silver in Mexico?? I wanted to comment the following, so you can share with your viewers. I’m currently in Mexico where I plan to stay for an extended period of time after I moved out of the USA, given the current situation in California. Here, I just went to try to buy silver to no avail. It turns out that many banks of the same chain “have a system failure” that won’t allow them to process a silver sale to the public. As a mexican citizen, I’ve been buying metals down here for the last year without any issues, until the last month. Coincidence? computer glitch? who knows…one thing I do know; I won’t give up and I’ll be calling the bank until I get my hands on the last few coins they have.
Read this post about Libertad minting problems. It does raise a red flag given that all mints seem to be behind or completely out of product to ship:
I don’t know whether it was coincidence or that you do in fact read my comments and suggestions (refer to Jeff Berwick Interview where I said 09/02/2015 “I would seriously consider another round with Paul Craig Roberts or David Stockman to obtain their insider perspective on the Govt./ FED at this juncture. I believe one or the other or both would confirm the inexplicable occurrences in the financials markets and that loss of control are long overdue”). Although you did probe David on many issues, I was waiting for the question on the “Hidden QE”. Reading between the lines in a few of David’s comments….if the market knew what they (FED) were doing….it would end in an instant. Meaning game over.
Either way ….you did it and it was simply superb. David’s ability to cut through and do so with extreme clarity is priceless. When I hear the words global margin call uttered from a man of his calibre….I have this tendency to shake in my boots….literally. I understand the fullness of that equation.
I agree with a number of his points….esp. the great deflationary bust (which cannot be avoided if you understand the logic of the credit created / re hypothecated/ collateral deficient so called “value” metric that is generally accepted)…and the strength in the dollar. His take on the World Bank and IMF had me in fits of laughter. This comes from a man who was an insider ….he’s is calling it as it truly is.
We cannot escape the destiny that is already written….thanks to the brilliance of the not-so-brilliant money maestros.
SIG. How long till QE to infinity ?
We are taught that the universe is endless.
QE on the other hand has limitations. The FED knows this and has already forewarned on rates. IMHO …the FED would’ve done the 25-50bps move this month had CHINA not gone about their devaluation. IN saying that …I do also believe that CHINA will follow through with another round of devaluation…thereby causing more volatility and more unwanted USD strength. This will rinse and repeat several times over the course of the next 6 months. China wants out and is doing it slam dunk style.
I think Stockman has hit the nail on the head. My prediction…the Fed will increase interest rates .25% before Monday 10 am EST.
Stockman says: “The place to go in my view is cash. Stay short and liquid because we are going into deflationary collapse. We are going into a great reset in the financial markets where inflated asset values are going to be marked down tremendously, bond prices and stock prices. As a result of, that there will be great opportunity after the dislocation runs its course to buy things much cheaper than they are priced today.”
First of all what is “cash” … is he talking about a paper currency that is an IOU (or simply another form of debt) … and yet wants to hold “cash” IOU’s while he expects the “debt” bubble to implode? … if cash “is just another form of debt” … and the debt bubble implodes as he says … will not the “cash” IOU’s he wants to hold also re-set?
Next he assumes we are going into a “deflationary collapse” … does he really think the Fed “will allow” a deflationary collapse … without trying to print even more “cash” debt (that he says he will hold) the way Japan, Europe, China, etc. are doing? … can the Fed allow the US dollar to rise against all currencies destroying our export trade and with it the economy without printing more dollars? … he then says that in the debt re-set to come “asset” prices will be marked down considerably … does he not know precious metals are an “asset” that’s already been “marked down considerably” … and “can be bought now” at cheaper prices?
Great, great comment…you have hit the nail on the head, NOT David Stockman…he can hold all the dollar bills he wants…I’ll even trade him my Zimbabwe note for some it when the time comes.
what I don’t understand is this: if the world is drowning in debt made by fiat currency and its unsustainable, then what makes these smart people believe that central banks will keep this system of currency? Is anyone suspicious of why they printed all this money and issued so much debt that it cannot be paid back? Do guys like David Stockman and Harry Dent really believe that all these different types of currencies will continue in its existence and central banks will deflate the debt, or, what about a another scenario being they invent a brand new world currency? then what? how do you protect your wealth then?
Perhaps you are confusing terms and concepts.
True debt is only measured by the value of the assets offered as security. Debt and Assets are intertwined … what happens to one happens to the other. EG: That’s how housing and business debt is measured. Importantly, assets move in value depending upon the business cycle.
Central banks have been systematically lowering the cost of “borrowing” money, with the intention of pushing up asset prices. This is meant to make people feel wealthier, and therefore to spend more and thereby stimulate the economy and produce growth.
The downside risk, as we have seen, is that assets get overvalued as money pours into assets (eg. Property, stocks, bonds and ever riskier assets) and more and more people see that it is more profitable to earn money from doing nothing other than borrowing at cheap interest rates and depending upon capital growth for return (they become non-productive rentiers). This may initially stimulate some growth, but long term it is destructive, as the young and the low and middle income are increasingly locked out of the market.
The system then moves into exponential asset growth until values become unrealistic. This is what happened in the US housing marking in 2007-2008.
The only way out of this is a collapse in asset prices, which then means that bonds and loans (debt instruments) which are matched to asset values as security will need to be written down in value. This produces a deflationary spiral, where tomorrow’s asset prices are lower than today. This is the opposite of inflation, as money stays in cash – as it increases in value relative to assets.
That’s how free economies operate and only governments and fools try to actively manipulate the business cycle for extended periods of time.
As for government debt, it is practically different in its effects. As it enters the exponential cycle of growth, governments will simply be forced to cut back on their obligations and default on their promises. We seems to be fast heading towards this twin crisis of (1) asset values collapse and (2) government reneging on its promises, so the best anyone can do is to anticipate the trend and prepare.
Has Stockman heard the Fed is thinking about a sinister plan to impose a “tax” on the paper cash he wants to hold … all the more reason for us common people to hold precious metal “money” rather then the Fed debt paper “called currency” as Stockman proposes … the idea the Fed is toying with is to “tax” paper currency to force holders to spend it … the way it would work is that fiat cash would have an in-bedded magnetic strip that would record the date that it was withdrawn from a bank, or ATM, etc. … then when the bills are deposited back in a bank again … the receiving bank would read the magnetic strip data and deduct a certain percentage of the bill’s value (as a “tax” or interest rate penalty) for the “criminal act” of holding it out of circulation.
So lets say the tax rate or interest rate penalty imposed “for holding currency out of circulation” was set at 5% per month … and you took a $100 bill out of a bank … held it for two months … and then deposited it … the receiving bank would read the magnetic strip and register the bill as being worth only $90.25 (as $100 x 0.95 = $95 for the first month and then $95 x 0.95 = $90.25 for the second month).
What the Fed should love about this tax penalty or interest rate penalty idea “for holding cash” … is that the longer a person holds onto paper currency “debt” … say like under their mattress for a rainy day … the less value this paper cash “debt” will have when one eventually needs to use it in an emergency … by the Fed charging interest on it’s debt currency called “cash” it gets a nice side benefit in that it won’t be blamed for creating inflation anymore … think about it … currently when the Fed prints money to lessen the value of the US dollars we hold “they” get blamed for causing inflation … but if the depreciation in the value of the dollar is due to “a tax penalty or interest rate charge for holding “debt” money … the criminal act of depreciating it “is now on the shoulders of the public” for holding onto it too long … if this sinister plan is instituted by the Fed it will make the Fed the “good guys”… and “the people holding their cash” crooks!
Now if you don’t want to be a “crook” penalized for holding a “debt asset” (Fed paper currency) … simply buy a “real asset” like gold (or silver) instead … which is “real money” that does not “charge interest” to hold it!
Some may say this “idea” of charging people interest on the cash they hold in their house under the mattress is preposterous … but consider that the bankers are “currently” charging people (with a negative interest rate) to hold cash in a bank deposit account (in effect a “penalty” for the privilege of keeping your money in a bank account) … so what are ordinary people doing now? … they are withdrawing most of their money from the banks and holding “cash” at home … think the “idea” the bankers are toying with is preposterous any more?
There is a few technical difficulties in implementing such a plan because a magnetic strip will have to be added to the present currency and nothing will be recorded in a people to people exchange of money … so even though the bankers are toying with the idea … a simpler solution is … just “do away with cash” altogether … and implant a currency chip in everyone that can be accessed by the bankers computers and “deductions” made electronically! … everyone talks about currency wars … when the real war is against holding “real money” (gold and silver) … the bankers hate that stuff so much … but we who hold “real money” instead of banker IOU debt currency will eventually beat the “real crooks” at their own game!
I was thinking … to overcome the problem of adding magnetic strips to fiat currency and overcome the problem of people to people exchange of cash … the Fed could think of simply printing an “expiration date” on their cash IOU currency (or the government can do it by Presidential “order” on specific denominations) thus achieving a default on their debt they can blame on the people … to avoid what I think is likely coming I wouldn’t hold $50 or $100 dollar bills under my mattress as they may be the first ones chosen to expire … better off with gold and silver coins … I know what you are going to say … what will prevent them from doing what the Roman Empire did … simply “clipping off” a piece of gold off your coins … that’s why even today Italians love to buy precious metal “jewelry”!
Talking about “booby traps” … have you noticed a “new” $100 dollar bill is being issued … the “official reason” given is that the old $100 dollar bill is too easily counterfeited … I bet the Fed/Government is getting ready to declare the old $100 dollar bill “null and void” as a first start to their debt “default process” !
Paul you are sounding just like Aaron Russo may he rest in peace
Wow, Greg, what coup. Great interview.
David Stockman has incredible command of the financial lunacy in this country and has been a watchman sounding the alarm. Thank you for getting him back on and thank you for producing this program.
Time to go back to basics.imho
As I read multiple stories and or opinions on the shortage of physical silver and deliverable Comex gold I am reminded of the KISS formula.
Keep it simple stupid.
I purchase gold and silver because I believe that it will always have value and that the value in buying power will always remain constant.
I also believe that history has shown us that FIAT consistently looses buying power and that is so because of the basic problems with Central Banking manipulation.
The other reason I own silver and gold is I like to look at it as I believe it has a special look and feeling about it in comparison to ugly often dirty paper currency.
A small part of my holdings are semi numismatics, I love a special coin or round that has a story behind it and I am willing to pay a premium for such an item. (small premium)
To conclude….I choose to buy silver and gold because I see it as a long term safe move and on the subject of supply shortage it has been my recent experience that this is 100% correct.
Mr. Stockman is right on in this interview…..the world financial system presently is based on insanity.
Greg if I’m reading this statement from the Bank of International Settlements right, the Central Banks are set to unwind one way or another.
In my opinion the Fed will make a token gesture to raise its interest rate by 1/2% to please its distractors, and this will set the ball rolling. I could be wrong, but I think the BIS feels it may be in the interest of the emerging markets to somehow take the pressure off by weakening the dollar. We all know QE is driving the dollar don’t we? It sure in the heck isn’t our GDP.
ITS OFFICAL! The financial collapse is over. We have a recovery.
Anybody that believes that is crazier than a bag of rats.
DISGUSTING. I’m glad to finally see D.S. sporting a beard – because he represents “old age finance”. Thing don’t happen like he describes anymore. Shemitahs, market crashes, 1929 stuff are all dead. We’re all in the age of advanced fiscal enlightenment where debt is put in a drawer, converted into 100 year convertible bonds and then gradually pushed
out the back into a dark state of oblivion where it’s fate is totally ignored by all the movers and shakers. Modern economics is a four valve nitrous injected supercharged computer directed colossus that has no time for ancient theories.
There isn’t going to be a crash. The worst will be a slow decline with compensations injected along the way. Sell all your gold and silver while you still can before they hit 500/5 and taxed at 65%…
Dear Leonardo A. DiSanti,
So, you think that no one expects debt to be repaid in this putative “age of advanced fiscal enlightenment”. The Greek people would love to hear that, as well as most of the debtors in the EM nations holding dollar-denominated loans. And try telling that to your bank!
Modern economics is a joke. It’s probably the most misunderstood and most over complicated system of games the world has ever seen. The True and unadulterated ultimate goal of an ECONOMY is to ECONOMIZE, and my best advice to you is to get out of the way while it does. Gold and silver are great places to land, and as the great correction and ECONIMZATION happens, cash will be a safe place to start, but it won’t be an actual place to hide the hard earned wealth you’ve shaved years off your body to amass.
The supercharged engine statement…. HAHA! that was good…. But honestly, do you know what happens to nitrous charged Supercharged engines?……
Well, they eventually blow up, and they don’t tend to make peak power for very long without running the risk of literally blowing up, or detonating…
Long story short.. Everything… and I mean EVERYTHING…has it’s limits.
I actually build these supercharged motors as a hobby. No matter how robust or hardened the parts are, the build is only as strong and reliable as the person who is behind the wheel actually driving it.
If I was an elected official the minute any financial collapse happened I would blame the wealthy hoarders for all of our troubles. With the vast majority of the population left with nothing it would be very easy to blame those who stockpiled PM’s. “Why should the hoarders who caused the financial collapse profit from our destruction?” My own relatives would demand that my PM’s be confiscated or taxed at near 100% to make it fair. When their stock portfolio collapses in value they will demand my wealth also takes a hit and that I should not make gains on their loss. In the end somebody will take the fall for this mess and I am betting it wont be our bribed elected officials…
I can’t be wrong. It must be somebody else’s fault. Penalize them (for my mistakes) because of my situation.
I find it hard to think most people are this way, either.
Its laughable that everyone frets over a .25% rate increase. When the Fed was cutting interest rates in 2008 everyone was saying they were “pushing on a string”. So which is it?
Best interview I heard
I’m going to start reading this man’s website like a menu.
Great interview….but I have to believe that landing wont be so soft….I think he has to do some filtering on answers.
I did notice no mention of silver/gold … Thanks
India is trying to reduce its population’s demand for gold. Good luck on that…
Greg:Thank you for this. . . But please interview Ellen Brown again as she keeps it REAL. With all due respect to Stockman, his advice seemed to be directed towards the wealthy rather than us women and men in the ( dwindling) middle. . For example, he advises to hold cash so that one day asset prices will be more affordable. Say what ?! We are lucky if we keep our jobs post crash, nevermind afford our mortgage payments, food etc. Mr Stockman resides. in Greenwich Connecticut amongst other elites/ Titans. He’s very out of touch with the man on the street.
I’m Mr. Joe Ordinary man-on-the-street Middle Class. I have cash. I’m happy to hear advice on what to do with it.
Greg, TF Metals put up this video which relates to David’s thoughts.
Here is a direct video link:
My question is two fold: a) so what if the Feds raise the rate–they are not going to raise it more than a quarter point, at least this time around; will they continue to raise? To what, a half point? One point? b) and how can they raise it with a national debt of over eighteen trillion dollars–what will that do in regards to adding to the interest that we have to pay on that national debt and, since we’re deficit spending currently even with tax revenues at all time highs, does that not cut back on the social program spending, defense spending, etc.?
I suppose that the Feds could print more money, but then what does that do to the value of the greenback? Which is actually a third question.
Here is some related information to add into the mix:
The global financial system is now resting on a margin of 1.3% by Simon Black
A lesson in the value of a sound currency. My very first job was that of a part-time bank teller.
I remember on the rare occasion when we would get a counterfeit bill we would have to call secret service. The few times we did call them they were at the bank within 15 to 30 minutes.
I was told that they arrived so promptly to make every attempt to stop any type of counterfeiting ring before it got too big or did too much damage to the confidence of the currency. This was truly my first real life econ lesson.
It seems what the Fed is doing now is much much worse.
What a class act of an interview. I absolutely loved his comment about IMF and World Bank .
What do you suggest a 60 your. Old on very limited income invest in and how do I go about it
I have been a true believer that a major ‘Reset’ of some type will happen since 2006 and during that time I have prepared my family to the teeth against such an event, but after 9 years of studying and listening to the talking heads on both sides, whether a ‘Reset’ will happen or not, has now taken a toll on how I live my present life.
My wife tells me that I have become obsessed with this ‘Reset’ and my attitude has become so negative to my surroundings that it’s effecting my quality of life………….and for years, I would say to her, nonsense.
But in the last few weeks, I have come to the realization that my wife is correct. I’ve spend every free time I’ve had on the computer, viewing websites on the economy, trying to understand and analyze everyone’s opinion to a point now, that it’s doing my head in and life is slipping me by.
So from now until the ‘Reset’ happens or my death, I’m going to enjoy the quality of life we now know and understand before it is gone, so the computer will be turned off and I’m going to enjoy my time with my family knowing full well we have insured ourselves against something that may never happen in my lifetime………….God bless you all.
FC: I agree with you. We learn and adapt, doing the best that we can do to prepare and take care of our families. Outside of voting and communicating with our representatives to express concern, national policy decisions are out of our control. Sounds like you’ve taken prudent measures. Time to enjoy life.
Welcome back into the new reality FC. I was asleep for a long time also. I have tried to awaken other Rip Van Winkles. The response is anger. They prefer to remain in slumber dreaming of disaster.
Like in the movie, The Matrix – where Neo is at the door, selling his pirate program, and the buyer suggests… ‘man, looks like you should unplug a little’. It is hard to strike a balance. If things DO go south – all the prep will pay great dividends. But by all means: pour yourself into family and friends. Lead by example has never been replaced or surpassed.
I wish I could turn my computer off and quit worrying about the reset. I just can’t seem to do it. I have everything my family needs for a minimum of three years and the means to protect it, but I am the one that is in charge of our whole group and I don’t want to let anyone down.
By preparing your self and family for the economic collapse, you’ll also be prepared for the little ice age that’s started. It’ll last at least 30 years, causing food and fuel shortages to. I wish I was as prepared as you, I’ve been waiting for the last 7 years for the crash, so I can buy a house for half price ( in the UK ), got my food and money ready though.
Dear Mr. Hunter,
Since interest rates have been so low for so long, the markets have become inured to them and participants have “placed their bets” on the assumption that abnormally low rates will continue indefinitely. If the Fed should determine to raise rates in a financial system saturated with debt and debt-dependent financial “assets”, and should succeed, the results could be very surprising.
For example, if market participants conclude that the announcement of a rate rise of 25 basis points is only the first of a series of rate increases, debt could sell off rapidly. This could result in greater effects as margin calls ensue, and lenders deem themselves “insecure” as the value of their collateral drops. As yields rise with the drop in debt values, rates charged for new loans will increase, further weakening the already-weak economy, and making margin debt more expensive, putting downward pressure on all types of financial “assets”. We can only guess the effects on interest rate swaps, valued in the hundreds of trillions.
But ZIRP can’t continue forever, either, since debt can’t expand without limit. Otherwise, at some point the very concept of “debt” becomes meaningless, and it ceases to bear any relation to human affairs.
So, it seems our un-esteemed leaders have led the nation and the world to the brink of ruin.
Great, great interview, one small thing though, David when you say Cash you mean $US that is not an option for people not in the US this is why people outside of the US are rushing to metal…. This is why the $US IMO is doomed…Where i am I don’t care what the $US is worth cause I cant get them and couldn’t spend them anyway. So if there is a sucking sound coming out of metal markets’ that is the rest of the world speaking to you i.e. here is your dollars back thank you.JMO
Enjoyed the interview, but I am far from selling my silver to stock up on cash..
One more thing I believe your thesis on collateral is exactly what SHOULD happen. The thing that stands’ out in this interview to me is the unspoken and that is that David fully believes’ .Gov to adopt Austerity policies’ ala Greece. Well it may work in Greece but the US? I say look out above! Of course David might be privy to some information the rest of us are not. Just saying.
Enjoyed Stockman. Will try do hear you on a.m. coast-to-coast tonight best wishes.
The bottom line is that the Progressives(socialists) and the Fascists(military industrial complex) have gotten their welfare/warfare state sewn into the American fabric to the point where over 2/3 of the American adult voting population is either living off of or employed,on one level or another, by the government gravy train. Taxes are confiscatory to the point of being regressive,the debt is unsustainable and the American “dollar” is being printed into worthless toilet paper. So now what? Will the politicians(most of whom are puppets) see the light and abandon their voting base? Will the elitists and the bankers give up their power and their quest for a NWO one world government? Will the able bodied parasites who are either employed by or living off of the state find meaningful employment? The answer is no. Once the American people voted to abandon most of the fiscal discipline enacted and written into the original American Constitution the American Republic was finished. The substitute is a mobocracy democracy designed to get something for nothing from the U.S. Treasury and thus perpetuate a corrupt political system. The only answer is to look out for oneself and their families. America,sad to say,is finished as a “free”country. As Rome went so will America.
I find it odd that David made no mention of a potential currency crisis — apparently, he doesn’t find that to be a realistic scenario. Why not?
I agree cash will be valuable for a very brief period as deflation begins to convincingly get the upper hand, but at some point, I believe the financial pain will become too great for the US because deflation makes servicing its massive debt load even more difficult. As a result, the Fed will have no choice but to inflate or die, and it will have no choice but to put the printing presses on hyperdrive. At that point, nobody will want to hold cash anymore because the dollar won’t be worth anything.
He is a brilliant guy, no doubt. However, I am confused by his advice to go to cash. He said that there will be a deflationary crash, then after the reset, the cash can be used to pick up bargains. He seems to assume that the dollar will not be affected whatsoever by all the phony money that has been printed over all these years. I think he left a lot of valuable information on the table that he could share the next time you have him on.
Great work, Greg. Many thanks.
I will suggest to you why Mr. Stockman (and every one else who thinks as he does regarding ‘deflation’ and the $USD) says the place to be is in ‘$cash’ as the ‘opportunities’ on the other side of this maelstrom are said to be tremendous:
Mr. Stockman comes from another era. An era where the $dollar reigned supreme and the U.S. military could dictate events & outcomes around the world at its discretion.
Neither of those two aspects of American power-projection exist in anything resembling what they did in his era. In fact, they not only do not exist like they did then, the last vestiges of them are crumbling before your eyes on the global stage. All that is left is a flailing, out-of-control foreign policy that retains its $USD hegemonic dominance through brute force, intimidation, ‘color-revolution’, ‘regime-change’, CIA overthrow, etc., ad-infinitum…
In short, people like David Stockman believe that because the United States has been the dominant economic and military force in the world for so long, that it always will be… That notion is in the process of being dismantled, one ‘Syria’, ‘Crimea’ and Chinese ‘sand castle’ at a time.
In addition, this notion he suggests that “after the dislocation runs its course to buy things much cheaper than they are priced today” is simply ignorant of the socio-political ramifications of an economic ‘dislocation’ the size & scope of what is likely to occur in the U.S. He severely underestimates – or simply Ignores, the drastic confiscatory and authoritarian measures that government will take, post such economic dislocation. Profiting off of such an event will be the LAST thing on anyone’s mind who is concerned first with ‘survival’, let alone taking advantage of all the things ‘on sale’.
Human life in such an event is what will be ‘on sale’, if you get my drift…
Wow, great debate! There wasn’t a clear winner but it was obvious to the well informed, Trump is well informed. He just might be a USAWatchdog follower. He wouldn’t take the bait on Putin, even saying he could deal with him or even work with him and he and Rand Paul didn’t think Syria without Assad was such a good Idea. The others didn’t have a clue though they all sounded good. And credits due where credits due, the Donald did get to sneak in were facing an economic collapse if you listened carefully as the moderator quickly moved on as they did whenever Rand or Donald were spilling the beans. But as I said it was glaring that someone without a clue of whats really going on in the world could easily be lead by our neo-con men and women if elected like our current president.
Rand and Trump are not in Ignorance concerning foreign policy and the true state of the economy but unfortunately seem to dislike each other, but both strong willed enough like Reagan to stand up to the doctor strange loving neo-cons!
Oops I think you’re on the wrong blog. That said, Donald, if you’re reading this….please stop making fun of the way people look….ya gonna lose, I’m telling ya, da ladies in my exercise class are turning against ya!
Alyce just tell them the truth, Donald never said she was ugly. He was talking about her demeanor and at the time, the scowl on her face. She doesn’t smile and is too stiff. If they make up she could be vice president, a position the Trumpster would not except himself, except if maybe Carly shot him a smile! XXXXALYCE
DEBT IS AN ASSET WHEN IT EARNS MORE THAN THE COST OF DEBT. LOW INTEREST COST IS A CHOKE HOLD ON A GIVEN ECONOMY, WHEN HELD TOO LONG BECAUSE INCENTIVE IS LOST AND OPPORTUNITY TO GAIN IS LOST. SUPPLY SIDE ECONOMICS, FREE MARKET ECONOMICS, ARE STILL MORE SUCCESSFUL THAN KEYNESIAN ECONOMICS WHICH IS BASICALLY SOCIALISM WHICH IS MASKED AS DEMOCRACY AND IS A FORM OF CONVOLUTED FASCISM–COMMUNISM-SOCIALISM. WE USED TO BE A CONSTITUTIONAL REPUBLIC.
Great interview. Stockman makes a lot of sense. I have no bones to pick except one very large one on raising interests rates. If debt or derivative swap deals are leveraged say 20 or 30 to one then a .25% increase would mean the servicing on the leveraged debt would also increase by 20 or 30 times. A .25% increase would amount to equal a 5 to 7.5% in this example on top of a equally leveraged rate currently. On a multi hundreds of millions account going from .25%, in actuallity 5 to 7% to a 10% or higher will mean millions more to service that debt which could lead to a margin call or the forced selling of that debt. This is the danger I see in raising rates even .25%. Perhaps the Fed will raise rates 10 bps to say .35% from .25% so they can say ” we told you we would raise rates” type of thing? I do believe my thinking is correct on this but stand open to correction.
Column and video:
And guess what? “When they start selling” (..Dow plummets), GOLD and SILVER will skyrocket as has happened throughout history!
Apparently there is no way out of the bubble the Federal Reserve has created. Somebody’s going to panic and then all hell is going to break loose.
I am totally in cash right now and following what David suggests.
But my concern is what do you do when the going gets so tough … so much so you’re told by a bank teller that you can’t withdraw your money?! Should I be thinking about taking out my cash while I still can and stuffing my mattress with it???
When the Fed can’t even raise interest rates .25%, because the economy just can’t take it –
– it just proves what Michael Snyder’s been saying all along – that we’re dangerously close to collapse.
Don’t you think that of all people, BANKERS would raise interest rates if it was at all possible? But they can’t, can they?
The stock market is a total sham. Its value is built on QE1, QE2 and QE3. Trillions of dollars of free money, NOT honest value in the companies themselves.
– 93,000,000 people out of work (5.1% unemployment is a lie only a liberal could believe)
– Wages at 1980s levels
– Massive manipulation of gold prices to prevent the dollar from totally collapsing
The American economy is a thin, fragile, delicate shell, empty inside.
There is one and only one reason that the economy hasn’t crumbled to dust yet – and that is because the United States still supports Israel, although that support is waning quickly.
God is honoring his Word, which says that he will bless those who bless Israel.
But watch out for the demonic anti-Israel forces at the UN this month. Our support for Israel is hanging by the thinnest of threads.
When you see Hussein Obama, the America/Israel-hating muslim, withdraw his support for Israel, in favor of a Palestinian state,
I love your interviews. To get David Stockman on your show tells me that you have arrived. You are definetly a top alternative financial news channel now. Stockman is the real-deal and knows what he is talking about. He spent 18 months educating President Reagan that Federal Reserve Notes are not money, but I.O.U.s or debt instruments. He is a very bright fellow and has advice is worth paying heed to. Keep up the great work!
Greg Your interview on coasttocoastam was a work of art this morning. You covered more in 1 hour then most could do in days. I wish George had given you more time to go into detail. If you can get the full interview please post it. This is all I could find on youtube.
It is all over youtube now. I listened to the full interview on the radio. This is a keeper. A day after everything hits youtube.
Greg, great analysis on Coast to Coast. I saw that you were going to be on and made a point to catch your interview. Never disappointed.
If anyone has not heard Greg being interviewed last night with Noory of CTC or on other forums such as John Wells of CTM, you really miss hearing what used to be referred to as the “art of conversation.” He is witty, informative, and goes into depth drawing on his background and deep bench of sources. Gems all.
I agree with your advice on cutting back an all small “luxuries” such as cable and eating out. I worked out my own system a long time ago after Prez Carter cratered the economy. Not looking forward to living nip and tuck all over again but it is what I know. Having been raised with all the comforts, it was a hard pill to swallow at first. Self reliance and acquiring home/cottage skills is what came out of it.
With my neighbor 2 doors down, who knows every fix-it skill under the sun for a decent cost, life got a little less stressful. Hoping when the neighborhood takes that initial blast of ice water called reality that we can be of mutual benefit to each other. For now, I sometimes feel like that last Japanese soldier who had no idea the war had been over for decades.
“Booby trap” earthquakes are going off all around the globe … seems activity is “building” for the “big one” … those in the PNW should take steps to prepare … have “bug out” plan … https://www.youtube.com/watch?v=vbMebROfSM8
Everyone appears to have read over Steven R’s comment above. We all need to go back and re-read his statement. He is 100% correct. You wont be able to trust your own family when you have the goods and they are flat broke. Be ready to run and take your goods with you. When you are out of the country call back to your spouse, (yes I did say that). Look at the refugee onslaught in Europe, without a fense here to keep us in, everyone that has any thing left will be forced to get out of the coutnry to prevent it from being taxed to death or stolen over your dead body. Sorry but I so fear Steven is right.
Not even your family can keep their mouths shut before the turmoil and after, they will all remember. AFter being warned, Mine have blabbed out loud in public places not thinking one nit about the danger that creates. People you can trust wit you money and your life are few and far between. Here is a funny one, I was ratted out at the border once by one of my teenage kids over the duties for a couple of bottles of boos that I was buying for that child in college. Don’t think it won’t happen. Every lesson in life is for a reason. One I learned 20 years ago and never forgot. If I had made a couple more steps, I could have been in jail.
PS. I use the tin foil from my hat to cover even a few of the new 100 dollar bills.
Yes Steven, we all need to think on this matter and think hard.
Donald’s pretty much got his hands tied concerning foreign policy and even the economy, despite the fact he was able to get out, [though abruptly cut-off], that we are facing an economic collapse, you know he must know more about foreign policy also than what he’s letting on, but there’s no way in a debate he could explain the truth about Benghazi Libya and Syria or the real reason we now have a massive walking immigration into Europe! Last night they didn’t want to hear about pipelines and the Christians in the way anyways. But because the others, [the young turks vie’ing for a puppet of a job] were able to spout the neo-con dribble on foreign policy, they were the experts, not Trump! Waite till the truth comes out, they’ll be ah hot time in the old town hall that night!
Will Pipe Dreams & World War Beat Us To The Election of The Donald?
The West’s “Information War” against Syria: Refugees, Russia, And The Balkans
By Andrew Korybko
Global Research, September 14, 2015
David Stockman is down-to-earth, patriotic, and well informed. His point of overvalued, tangible commodities is well taken. That he completely avoids Precious Metals is a purposeful hole. I think he is so smart – that he understands enough people are coving this issue; or that he doesn’t want to be identified on that side. Personally, I won’t put ANYTHING past the Federal Government – outlawing or confiscating, or taxing to death the PMs. More collateral damage will happen when China’s CIPS System comes on-line; and I think cash/FRNs will lose lots of value. I think Stockman is playing it safe, and staying within the confines of the sandbox he is familiar with. I can still hope for the best: but not at the cost of sacrificing preparing for the worst.