In a recent Q&A, David Stockman implied that the only way to safeguard assets today is with cash or gold bars. From his perspective, the efforts made by the Federal Reserve do little but push stock and bond markets closer to the brink.
And Stockman’s opinion is not one to take lightly. The man is known as the cause of one of the largest tax cuts in the history of the United States, former White House budget director and Michigan congressman, as well as one of the biggest risk-takers when it came to investments. Stockman resigned from Ronald Reagan’s service after protesting deficit spending, and went on to make millions in corporate buyouts.
In a Q&A with The Associated Press, Stockman explained why he was so down about the U.S. economy.
“It’s become super saturated with debt,” he said. “Typically the private and public sectors would borrow $1.50 or $1.60 each year for every $1 of GDP growth. That was the golden constant. It had been at that ratio for 100 years save for some minor squiggles during the bottom of the Depression. By the time we got to the mid-‘90s, we were borrowing $3 for every $1 of GDP growth. And by the time we got to the peak in 2006 or 2007, we were actually taking on &6 of new debt to grind out $1 of new GDP.
“People were taking $25,000, $50,000 out of their homes for the fourth refinancing. That’s what was keeping the economy going, creating jobs in restaurants, creating jobs in retail, creating jobs as gardeners, creating jobs as Pilates instructors that were not supportable with organic earnings and income..
“It wasn’t sustainable. It wasn’t real consumption or real income. It was bubble economics. So even the 1.6% (annual GDP growth in the past decade) is overstating what’s really going on in our economy.”
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