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Stockman Warns of Crash Of Fed-Fueled Bubble Economy




The U.S. economy is in a bubble inflated by “phony money” from the Federal Reserve and will burst within a few years, warned David Stockman , who was budget director for President Ronald Reagan .

In an essay published yesterday in the New York Times (NYT) , Stockman wrote that the Fed’s quantitative easing policies in the aftermath of the credit crisis have flooded stock markets with cash even while the “Main Street economy” remains weak. The combination, he wrote, is “unsustainable.” “When it bursts, there will be no new round of bailouts like the ones the banks got in 2008,” wrote Stockman, a former senior managing director at Blackstone Group LP (BX) and a former Republican congressman from Michigan . “Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.” Stockman, 66, is the author of “The Great Deformation: The Corruption of Capitalism in America,” which will be published tomorrow. In a previous book published after he resigned as budget director in 1985, Stockman criticized his former Reagan administration colleagues for failing to cut spending along with the supply-side tax cuts they enacted. “We’re borrowing money and burying the future generations in debt,” he said in an interview today on Bloomberg Television. Ben Bernanke The Fed, led by Ben S. Bernanke , is purchasing $85 billion in assets every month. The Fed is leaving its key interest rate near zero while it tries to reduce unemployment […]


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