David Stockman, David Stockman’s Contra Corner, 7/5/16
The inexorable effect of contemporary central banking is serial financial booms and busts. With that comes increasing levels of systemic financial instability and a growing dissipation of real economic resources in misallocations and malinvestment. At length, the world becomes poorer.
Why? Because gains in real output and wealth depend upon efficient pricing of capital and savings, but the modus operandi of today’s central banking is to deliberately distort and relentlessly falsify financial prices.
After all, the essence of ZIRP and NIRP is to drive interest rates below their natural market clearing levels so as to induce more borrowing and spending by business and consumers.
David Stockman is a former Republican congressman from Michigan and was President Reagan’s budget director from 1981 to 1985. After leaving the White House, Stockman became a managing director at Salomon Brothers, and he later founded a private equity fund. David is the founder of David Stockman’s Contra Corner, and he is the author, most recently, of The Great Deformation: The Corruption of Capitalism in America.