Monday, September 23, 2013

David Stockman on the demise of capitalism in the 20th Century

David Stockman was the Director of the Office of Management and Budget under President Reagan from 1981-1985.  Recently he wrote a NYTimes best-selling book examining the massive growth of government via the growth in the power of the Federal Reserve during the 20th century.  Stockman covers a lot of ground, and there are lots of villains (including, interestingly, Reagan himself) and few heroes in his account.  This excerpt is from an interview that he gave recently to the Mises Institute discussing his book:
MI: We’ve been told that deregulation of the financial sector caused the 2008 crisis, and that a lack of regulation allows the “One Percent” to prosper while the “99 Percent” suffers.
DS: Fundamentally, the financial crisis was a product of the Fed’s repeated blowing up of bubbles, and not of deregulation. Moreover, any suffering inflicted on the 99 Percent by our system doesn’t come from the free market, it comes from the crony capitalism that is now our economic system. The Blackberry Panic of September 2008, in which Washington policy makers led by former Goldman Sachs CEO Hank Paulson, panicked as they saw Wall Street stock prices plummet on their mobile devices, had very little to do with the Main Street economy in the United States. The panic and bailouts that followed were really about protecting the bonuses and incomes of very wealthy and politically well-connected managers at banks and other heavily leveraged businesses that were eventually deemed too big to fail. What followed was a massive transfer of wealth from the taxpayers and middle-class savers, in the form of bailouts and zero interest rates on bank deposits imposed by the Fed, to the so-called One Percent.
It's an excellent interview, definitely recommended. [ht: Not PC]