Peak Prosperity, Released on 9/18/20
When asked what the biggest risks facing the economy are, David Stockman, lifelong Capital Hill and Wall Street insider, says “That’s easy. There are three: The Fed, The Fed and the Fed.”
After decades of misguided policy and chronically missing its targets, Stockman thinks the Federal Reserve is truly barreling off the rails now, hurtling our market economy towards disaster.
He notes that since, 2008, the Fed has subjected the country to twelve and half years of average real negative interest rates of -1.35%. With capital so cheap and no ability to generate a safe return on it, corporations and investors alike have been forced out on the risk curve, which has fostered rampant malinvestment and speculation.
The Fed’s low interest rate policy has blown serial asset price bubbles that collapse, which the Fed then “fights” by bringing rates even lower for even longer, creating an even worse successor.
The Fed’s ‘leadership’ of our economy will end in tears, Stockman predicts with confidence. What type of shock will topple the system — be it deflation, inflation or civil unrest — is almost immaterial at this point, though all three are extremely highly credible candidates.
Stockman’s warning should carry more weight than perhaps any guest we’ve had yet on this program given his decades of inside expertise interacting with the political and monetary institutions running the show. When someone so knowledgeable and experienced is so worried, the prudent investor should be paying extremely close attention.
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 of The Great Deformation: The Corruption of Capitalism in America, Trumped! A Nation on the Brink of Ruin… And How to Bring It Back and Peak Trump: The Undrainable Swamp And The Fantasy Of MAGA.
Adam Taggart is the President and Co-Founder of Peak Prosperity. He wears many hats, but his basic job is to handle the business side of things so that his fellow co-founder, Chris Martenson, is free to think and write. Adam is an experienced Silicon Valley internet executive and Stanford MBA. Prior to partnering with Chris (Adam was General Manager of our earlier site, ChrisMartenson.com), he was a Vice President at Yahoo!, a company he served for nine years. Before that, he did the ‘startup thing’ (mySimon.com, sold to CNET in 2001). As a fresh-faced graduate from Brown University in the early 1990s, Adam got a first-hand look at all that was broken with Wall Street as an investment banking analyst for Merrill Lynch. Most importantly, he’s a devoted husband and dad.