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Stockman: “What’s Going On Today Is Complete Insanity”

from ZeroHedge:

In his recent TV appearance, last week David Stockman suggested that President Trump would be better suited to spend some time actually addressing economic issues instead of the administration’s travel ban for immigrants from Middle Eastern countries, which Stockman called “a giant misfire.” Employing the 1992 Clinton Campaign motto of “it’s the economy, stupid,” Stockman noted “Trump was elected because flyover America is hurting economically. The voters of Racine, Wisconsin and Johnstown, Pennsylvania are imperiled not because of some refugees, they’re imperiled because their jobs have all been disappearing for decades.” He added, correctly, that “the problem is far more the Federal Reserve, Janet Yellen, the bubbles they’re creating on Wall Street.”

Stockman went on to suggest that the Trump Administration is showing decreased interest in “draining the swamp”, having surrounded himself with, as he himself has now realized, the “Goldman Guys.”

Then, in a follow up interview with CNBC, Stockman once again discussed the impact of Trump, this time on markets, and warned that while stocks are booming under Trump, with the S&P now up 12% since the election (with banks up 25% and Goldman 35% higher), traders are living in a “fantasy land” that can’t last —and Trump’s policies will derail the market for years to come.

Stockman reiterated his concern that Trump has lost his focus on the economy, and has become distracted by other issues which should be a particular point of worry for investors.

Most of Trump’s actions “[have] nothing to do with the economic agenda” he’s proposed, Stockman told CNBC. That, along with a debt ceiling debate that will take place on March 15 in Congress, and a market rally that has gone on for a while, has the bearish Stockman worrying about a big downturn, which however not only refuses not to come, but the S&P hasn’t had a 1% drop in 85 days.

What’s going on today is complete insanity,” said Stockman. “The market is apparently pricing in a huge Trump stimulus. But if you just look at the real world out there, the only thing that’s going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history.”

He added that “there’s going to be no tax action this year,” said Stockman, echoing repeated concerns by Goldman who have said, mostly recently this morning, that Trump’s plans for the economy are facing mounting political risks. Last week, the president vowed that tax reform could happen this year, and promised to unveil a “phenomenal” tax plan within the next few weeks, which however has drawn skepticism from Washington insiders.

“If there’s any next year it will be deficit neutral, which means it’s not going to add the $15 to earnings like these people expect,” Stockman said. In fact, as reported earlier, with the Border Adjustment Tax becoming a virtual impossibility, the extent of corporate tax cuts will likely be far less than what the market is pricing in currently.

“My argument is there is not going to be any economic rebound, there is not going to be any profit surge,” Stockman added. “Therefore the market will be repricing dramatically downward once it’s clear that that’s the case.”

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1 comment to Stockman: “What’s Going On Today Is Complete Insanity”

  • rich

    ‘Fed Up’ exposes the elite rot inside the Federal Reserve

    Such criticism is generally limited to what the Fed does, or doesn’t do, in terms of policy. Not so with Danielle DiMartino Booth, author of “Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America,” who attacks the culture of the Fed, starting from the bottom up.

    She takes on the research staffs of elite, Ph.D. economists — “the MIT mafia” — who are married to their mathematical models and focused on publishing in peer-reviewed journals. She exposes the institutional groupthink — “groupstink,” she calls it — and disdain for dissenting views. And she reserves her most strident criticism for those at the very top.

    She came armed with an M.B.A., not a Ph.D., which made her suspect in the eyes of staff economists as she gradually worked her way up to Class I Clearance, with access to all policy-related material and briefings.

    In her columns, DiMartino Booth had warned about lax mortgage-lending standards, a housing bubble and escalating systemic risk. Once ensconced at the Fed, she was left to wonder why so many “highly educated and well-paid economists” were “oblivious as the worst financial crisis since the Great Depression was about to break over their heads.” (One of the main reasons is the Fed’s reliance on econometric models that don’t include anything related to the financial system, such as debt or credit.)

    Janet Yellen, the current Fed chairwoman, is subject to withering criticism in the book. From 2004-2010, Yellen was president of the San Francisco Fed, whose district encompasses nine Western states and was ground zero for the housing bubble and subsequent bust. DiMartino Booth portrays Yellen as an uber-dove and devout Keynesian, someone who was “oblivious as the housing market in her region imploded on multiple fronts.”

    The Fed regularly publishes a summary of economic conditions in the 12 federal reserve districts, but when real-world information contradicts the Fed’s econometric model, the model wins. DiMartino Booth provided Fisher with real-time information — not seasonally adjusted, to the consternation of the staff — gleaned from an array of market sources and data sets.

    http://www.marketwatch.com/story/fed-up-exposes-the-elite-rot-inside-the-federal-reserve-2017-02-14?

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