Podcast

David Stockman: Blame the Fed!

Friday, September 30, 2011, 11:07 AM

David Stockman, former U.S. Representative and Director of the Office of Management and Budget under Reagan, does not mince words. He sees the monetary systems of the world coming apart.

How did we get here? He identifies the root cause as the intentional over-leveraging of world economies by central planners in a misguided effort to enjoy growth without consequence.

I blame it on the Fed. I blame it on the 1971 decision by Nixon to close the gold window and let the dollar float. Because out of that has evolved -- or morphed -- a central banking policy in the world that absorbs unlimited amounts of government debt. And so we went on what I call the "T-bill standard" or the "federal debt standard." And the other central banks of the emerging mercantilist Asian economies -- Japan, Korea, and now, especially, the People’s Printing Press of China -- have absorbed this massive emission of debt that otherwise would’ve created powerful negative consequences that would’ve forced politicians to act long ago. In other words, higher interest rates, pressure for inflationary monetary policy, and the actual appearance of price inflation. But because all the bonds on the margin were being absorbed by the central banks, we got away for twenty or twenty-five years with “deficits without tears.”

And he's just getting started. The only thing more impressive than Stockman's CV of insider roles in public economics and private finance is his talent for colorful metaphor.

On the Fed

As far as I’m concerned, Bernanke is the monetary Darth Vader. He has destroyed the bond market. Because fundamentally, in a healthy capitalist system, the interest rate in the money market and in the longer-term capital market is the price of money and the price of capital. And if the pricing system isn’t working, if it’s been totally crushed, disabled, manipulated, rigged, medicated, everything that the Fed has done with QE1, QE2, zero interest rates, Operation Twist -- all the rest of this insanity -- then we’ve destroyed the ability of the capital market to function and we’re giving false signals in every direction.    

On the Economy

We effectively had, over the last thirty years, a national LBO -- a leveraged buyout of the whole economy. And this is important because if you look at the difference between our historic leverage ratio [1.6 times debt-to-GDP], which seemed to be compatible with a stable and usually growing economy, not withstanding periods, obviously, of boom and bust. But at 1.6 times, we would have about $22 trillion of debt -- public and private -- on the U.S. economy today. We actually have $52 at 3.6 times. So the extra two turns have put on the economy -- households, business, government, we can go through the different sectors -- roughly $30 trillion in debt that’s being lugged around by the U.S. economy as it struggles to stay even, to say nothing of recovery today. And until that massive over-leveraging is worked down and reduced and liquidated, which will take years and years in a painful process, we’re not going to get back on track as an economy.

On Our Political Leadership

It’s hard enough for politicians to face the music, to dispense bad news, to make hard choices, allocate pain to constituencies, whether it’s spending cut or tax increase. But when the Fed destroys the bond market, which is the benchmark for the whole capital market, and tells the Congress that you can borrow money for two years at eighteen basis points, which is -- as far as Washington’s concerned -- that’s a rounding error. It’s the same as free. 

When you’re giving that kind of signal, then there is no incentive, there’s no motivation for people to walk the plank and face down this monster of a fiscal deficit and imbalance that we have.

Washington thinks you can kick the can down the road, the debt is more or less free, and we’ll get around to solving the problem. But today, let’s not make any tough choices. That’s where we are.     

On the Banks 

The banking system has been saved on the back of the savers of the United States. We have totally destroyed any incentive for thrift, for deferred gratification. The Fed has become more Keynesian than Keynes.

Now, the fact is, if you were going to bail out the banking system with this kind of transfer -- I calculate it at $300 or $400 billion a year -- the suppression of interest rates on depositors, on the $7 trillion or so of deposit base that we have, is at least $300 or $400 billion a year. And that’s the same thing as taxing the public by $300 or $400 billion and redistributing it to banks based on the distribution of their deposit base. That wouldn’t get one vote. Okay, in other words, what I’m saying is if it were done in a proper way as a fiscal transfer put before the democracy to review and vote up or down, it would be voted down overwhelmingly. It would be shouted down. It would not even see the light of day out of committee, to say nothing of the floor of the House or Senate.

On Peak Oil

I think that is being totally ignored. It is another one of the headwinds or constraints that we’re facing along with the demographic time bomb of this huge generation retiring. And if you look at all of these, there’s no reason to expect much economic growth for the next ten or twenty years, even if you had a healthy monetary and fiscal situation. But given the situation that we’ve described and given the massive excess private leverage that was built up in the thirty-year debt spree, we have sort of added insult to injury. We have maybe an inevitable question of the rising real cost of the BTU being added to the demographic question being added to the totally distorted world labor market that the central banks have produced, which is another whole topic. But when you put all those together, the headwinds are truly frightening

On Gold

Gold is becoming the de facto money. We’re going to be back to a gold standard, one way or another, through the back door in only a matter of time, simply because the central banks are dominated by the ritual incantation of dying Keynesian theory. And therefore, I would say that’s what someone needs to do to protect themselves.

The above are small samples from this wide-ranging and deeply penetrating interview between Chris and David. Among other territory, the two get into David's view of the stock, bond, and commodity markets, and what action concerned individuals should be considering at this time.

Click the play button below to listen to Chris' interview with David Stockman (runtime 47m:17s):

 

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Or click here to read the full transcript.


Mr. Stockman is the founding partner of Heartland Industrial Partners. He was formerly a senior managing director of The Blackstone Group. Prior to joining Blackstone, Mr. Stockman was a managing director at Salomon Brothers, Inc.

He served as the director of the Office of Management and Budget in the Reagan administration and was the youngest Cabinet member of the twentieth century. From 1976 to 1981, Mr. Stockman represented Michigan in the House of Representatives.

He is also the author of the book "Triumph of Politics: The Inside Story of the Reagan Revolution".


Our series of podcast interviews with notable minds includes:

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40 Comments

goes211's picture
goes211
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Fantastic Interview!

Hard to believe this guy was ever in government.  He must have felt like the only adult in a daycare center.

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Doug
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Stockman

I remember Stockman well from his Reagan days.  I thought of him then as the devil incarnate, as the architect of "trickle down" economics, just another project to enrich the rich.  He seems to have learned something and left the Republican party behind since then.  

Doug

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LG
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Stockman Interview

Mr. Martenson.

I have always liked David Stockman. He appears to be in touch, As for your interview, best one yet, First Class. You appear to have lost weight, but you are obviously still growing. Keep up the good work.

LG

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Doug wrote: I remember

Doug wrote:

I remember Stockman well from his Reagan days.  I thought of him then as the devil incarnate, as the architect of "trickle down" economics, just another project to enrich the rich.  He seems to have learned something and left the Republican party behind since then.  

Doug

From en.wikipedia.org/wiki/David_Stockman#Office_of_Management_and_Budget

After Stockman's first year at OMB and after "being taken to the woodshed by the president" due to his candor with Atlantic Monthly's William Greider, Stockman became inspired with the projected trend of increasingly large federal deficits and the rapidly expanding national debt. On 1 August 1985, he resigned OMB and later wrote a memoir of his experience in the Reagan Administration titled The Triumph of Politics: Why the Reagan Revolution Failed (ISBN 0060155604), in which he specifically criticized the failure of congressional Republicans to endorse a reduction of government spending as necessary offsets to the large tax decreases, in order to avoid the creation of large deficits and an increasing national debt.

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clarification

kugs cheese

I should have clarified that most of what I've heard from Stockman in recent years I agree with, and Chris's interview was great.  But, since I trace much of our economic disaster to the Nixon and Reagan administrations, I'm a little hesitant to trust someone who was once so disastrously wrong.

I haven't read his book, but I long ago concluded the Reagan revolution won.  He got what he wanted.  Vastly increased military spending and the deficits be damned.  Spending and borrowing got its start under that administration.  The spin that it was the Congressional Republicans who betrayed Reagan seems a little revisionist.

Doug

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return performance

Mr. Stockman,

Thank you for participating in this interview with Chris.  I found it very interesting.

You mentioned that you were willing to talk further about dismantling the war machine.  I hope Chris will invite you back for that discussion.  It would be most interesting.

Many thanks ... dons

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SagerXX
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Excellent stuff!

Awesome interview with somebody who was once as "insider" as it gets. Thanks!

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butterflywoman
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the interview was going

the interview was going great--historical  til it got political.then it lost credibility , well facts got lost as opinion overshadowed them.opinion becoming current election  garble

neither side has the answer so let's let the pendulum swing a few more times and kickthe can down the road sort of idea--it keeps the public interested and distracted

leave politics out please....as you have mostly done....politics are a red flag to me as i see them as a very big part of the great lie that has been stringing us along since 1929 or earlier. leverage anyone?

the idea of the 2 party system is the 2 parent system....good cop bad cop...good parent bad parent...it separates the public into 3 groups...for and against and independent....with for and against flipping as needed.

ok that is fine....it means that if the public can be divided into 3 groups , there can never be a majority to revolt. or agree to anything, and always an excuse or alibi.or whatever you want as you need it......liars flexibilty

those of you on ss think of this....more was given to you...entitlement under bush2 with prescription drug benefit and more were killed under obama than bush in wars against arabs.....just 2 quick examples that the opposite happens under the left and right administrations...checkit  out

but no, this is about the financial system and a couple of other systerm as we knewn them are gone and it's time for us to move and and evolve....not argue.

we need to unite as intelligent people , not divide

we are going to need everything we can all pool to get thru this

politics are a red flag

Johnny Oxygen's picture
Johnny Oxygen
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I have only three words

Darth Witch Doctor!

Arthur Robey's picture
Arthur Robey
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A different perspective.

Mr Stockman is obviously intelligent and articulate.

He is comfortable discussing economics, but I am more a physical reality guy. When asked to discuss exponential depletion of natural resources my understanding of his response was to emphasise the need to let a free market fix the problem.

Without a miracle breakthrough such as Rossi's nuclear device to enable us to obtain ever lower grade resources with plenty of energy to remove the "other stuff"," the market" is just another useless meme, a broken and illigitimate model of reality.

And then there are the results of my favourite model. "Limits to Growth. The 2000 update."

Doubling of the resource base causes pollution to go asymptotic and a higher peak in population and a steeper dropoff on the downside.

Mr Stockman is right. There is no free lunch.

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Brilliant interview Chris

Your questions were very sharp and Stockman's answers were like knock-out punches on what the Status Quo really is.

I cannot believe the military industrial complex would want to pass an increased budget after all the debt ceiling fiasco we just went through.

Paralysis and 'twilight zone' are the right words to describe this.

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Another Interview

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Damnthematrix
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On Peak Oil
On Peak Oil

I think that is being totally ignored. It is another one of the headwinds or constraints that we’re facing along with the demographic time bomb of this huge generation retiring. And if you look at all of these, there’s no reason to expect much economic growth for the next ten or twenty years

Why do people, even those "in the know" keep saying this?  What makes any of them think there will be growth any time for the next one or two hundred years when population will crash and fewer people will be consuming ever fewer goods?

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Doug wrote: kugs cheese I

Doug wrote:

kugs cheese

I should have clarified that most of what I've heard from Stockman in recent years I agree with, and Chris's interview was great.  But, since I trace much of our economic disaster to the Nixon and Reagan administrations, I'm a little hesitant to trust someone who was once so disastrously wrong.

I haven't read his book, but I long ago concluded the Reagan revolution won.  He got what he wanted.  Vastly increased military spending and the deficits be damned.  Spending and borrowing got its start under that administration.  The spin that it was the Congressional Republicans who betrayed Reagan seems a little revisionist.

Doug

You really need to index back to LBJ.   Getting into Vietnam in a big way, from wikipedia "It was Johnson who began America's direct involvement in the ground war in Vietnam. By 1968, over 550,000 American soldiers were inside Vietnam; in 1967 and 1968 they were being killed at the rate of over 1,000 a month."

The war machine was locked in place after this, this was the sign.   All presidents since then have been in sense a puppet only.   Just look at how a naive Obama back-tracked on his campaign platform.

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Arthur Robey wrote: Mr

Arthur Robey wrote:

Mr Stockman is obviously intelligent and articulate.

He is comfortable discussing economics, but I am more a physical reality guy. When asked to discuss exponential depletion of natural resources my understanding of his response was to emphasise the need to let a free market fix the problem.

Without a miracle breakthrough such as Rossi's nuclear device to enable us to obtain ever lower grade resources with plenty of energy to remove the "other stuff"," the market" is just another useless meme, a broken and illigitimate model of reality.

And then there are the results of my favourite model. "Limits to Growth. The 2000 update."

Doubling of the resource base causes pollution to go asymptotic and a higher peak in population and a steeper dropoff on the downside.

Mr Stockman is right. There is no free lunch.

All we have are the free markets to signal where resources should go; nothing is better, cetainly not Putin.   Things become easier to understand once one accepts man is an animal in nature.

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Resources

The free market for resources is highly distorted by many factors. First and foremost, resource companies (mining, oil, and so on) pay nothing for the environmental damage done by the production or use of their products. If every gallon of gas, plastic bottle, brick, or DVD player's price included the cost of repairing the environmental damage done by it's production pricing of everything would be entirely different. Wind turbines would probably be a far better deal than gasoline when costed out over 10 years. Imagine for example if BP had to pay to bring the ocean back to pristine condition after it's recent oil spill and add that cost to every gallon of gas - that alone would bring the cost of gasoline to god knows what. Imagine if the Japanese nuclear power company had to pay for all of the damage they did in full. Nuclear power in Japan would have a cost that would be so high that it would be unfeasible to continue. Instead, because corporations never wind up paying for the damage they do (they hire lawyers, and pay off politicians instead), the free market is completely distorted. Things that have a high cost (such as the Fukushima reactor, or offshore drilling) produce products at a very low cost, whilst things that actually have a much lower total cost have are unaffordable.

This type of distortion of the free market mean that political influence drives pricing, and drives what in the long run are far cheaper products out of the market.

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tjlupton wrote: The free

tjlupton wrote:

The free market for resources is highly distorted by many factors. First and foremost, resource companies (mining, oil, and so on) pay nothing for the environmental damage done by the production or use of their products. If every gallon of gas, plastic bottle, brick, or DVD player's price included the cost of repairing the environmental damage done by it's production pricing of everything would be entirely different. Wind turbines would probably be a far better deal than gasoline when costed out over 10 years. Imagine for example if BP had to pay to bring the ocean back to pristine condition after it's recent oil spill and add that cost to every gallon of gas - that alone would bring the cost of gasoline to god knows what. Imagine if the Japanese nuclear power company had to pay for all of the damage they did in full. Nuclear power in Japan would have a cost that would be so high that it would be unfeasible to continue. Instead, because corporations never wind up paying for the damage they do (they hire lawyers, and pay off politicians instead), the free market is completely distorted. Things that have a high cost (such as the Fukushima reactor, or offshore drilling) produce products at a very low cost, whilst things that actually have a much lower total cost have are unaffordable.

This type of distortion of the free market mean that political influence drives pricing, and drives what in the long run are far cheaper products out of the market.

Good first post tjlupton.

Welcome to CM

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excellent observation

tjlupton wrote:

This type of distortion of the free market mean that political influence drives pricing, and drives what in the long run are far cheaper products out of the market.

Is there an implicit assumption that in a free market, libertarian society - the people running private corporations and the government are totally incorruptible?

Because only with such an assumption I can see that such a society can peacefully co-exist with the earth. And this assumption that people are incorruptible is so flawed.

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Who pays the costs?

tjlupton,

Welcome to CM.com. Baptism by fire is the most sincere welcome mat around here.

tjlupton wrote:

The free market for resources is highly distorted by many factors. First and foremost, resource companies (mining, oil, and so on) pay nothing for the environmental damage done by the production or use of their products. If every gallon of gas, plastic bottle, brick, or DVD player's price included the cost of repairing the environmental damage done by it's production pricing of everything would be entirely different.

Should the producer of the product be responsible for its entire consumption journey? Where does my responsibility begin and end?

tjlupton wrote:
Wind turbines would probably be a far better deal than gasoline when costed out over 10 years.

There are shortcomings with wind and photovoltaic as well. Are you willing to only use electricity when the wind blows or the sun shines? If not, you'll have to invest in backup systems and/or batteries. Backup systems such as hydroelectric or gas/oil/coal fired generators need quite a bit of time to ramp up or down. Given the fickle nature of wind and clouds, excess energy needs to be generated to insure sufficient supply. Eventhough the wind/solar generators get paid for what they produce (at a subsidized rate,) only a fraction actually gets consumed.

tjlupton wrote:
Imagine for example if BP had to pay to bring the ocean back to pristine condition after it's recent oil spill and add that cost to every gallon of gas - that alone would bring the cost of gasoline to god knows what. Imagine if the Japanese nuclear power company had to pay for all of the damage they did in full. Nuclear power in Japan would have a cost that would be so high that it would be unfeasible to continue.

I'm not excusing BP's actions regarding the massive spill. From my understanding, it was negligence and shortcutting that were major contributors to the events that lead up to the disaster. Should we punish all producers because of the potential damage they could cause? Should we bankrupt BP by requiring them to return the Gulf to pristine conditions? Was it really pristine before the accident?

You can't build anything that will not eventually fail. The trick is to factor in the likelihood of catastrophic events over the project's life and then build accordingly. That is exceedingly difficult. It is easy to play Monday morning quarterback and say that a higher engineering standard should have been followed. It is much harder to convince users to pay additional costs before the catastrophe to build to this elevated standard. Either way, the locals pay.

tjlupton wrote:
Instead, because corporations never wind up paying for the damage they do (they hire lawyers, and pay off politicians instead), the free market is completely distorted. Things that have a high cost (such as the Fukushima reactor, or offshore drilling) produce products at a very low cost, whilst things that actually have a much lower total cost have are unaffordable.

I won't argue that BP or TEPCO paid all the costs associated with the disasters. They did pay some of the costs, as have the locals who benefitted from the economic activity generated by these facilities. Was the cost fairly distributed according to benefit received - highly unlikely.

tjlupton wrote:
This type of distortion of the free market mean that political influence drives pricing, and drives what in the long run are far cheaper products out of the market.

I challenge you to tell me the entire cost of anything. (I know that I can't.) There are too many interdependent variables to determine what is the "cheapest" product, let alone the best one. It is up to you and me to decide which products are the best for ourselves. If you don't approve of BP or TEPCO, do your best to avoid supporting them.

Grover

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Grover wrote: Should the

Grover wrote:

Should the producer of the product be responsible for its entire consumption journey? Where does my responsibility begin and end?

I am not quite sure what you mean by producer. If you mean the mine that brought the materials from the ground, yes they should be responsible for the damage they cause. If you mean the factory that built the product, yes they should be responsible for whatever damage they cause during the entire production process. Or if you mean the company that supplies the product, yes they should be responsible for whatever damage they casue during receiving, shipping, storing and retailing. In other words every company and person should be responsible for whatever part they play in producing any product.

Grover wrote:

 Should we bankrupt BP by requiring them to return the Gulf to pristine conditions? Was it really pristine before the accident?

ABSOLUTELY !  If they did not have the werewithal to pay out of pocket to clean up the entire mess THEY MADE then we the people should bankrupt them sell the assets and recoup as much as possible as quickly as possible. What you are advocating is that its Ok to screw up the planet and hardly anything will be done because you have friends in the right places. And as for the pristine comment thats akin to me telling my 5 year old that she doesn't have to clean up the ceral she spilled because I haven't swept the floor in a couple of days. Ludicrous.

I can't remember or find who posted on this topic but they felt that corporations should be treated as people, after all the supreme court says they are people so they should be subject to the same laws we are. If a corp commits harm put the corp into jai/receiveship and don't let the stockholders get paid until compensation has been paid. If someone can find this post please post it here.

Whether its a corporation or a person they should always be held responsible for any and all harm they cause.

Rich

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willing consumer ostriches...

 *dupe*

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  Whether its a

Whether its a corporation or a person they should always be held responsible for any and all harm they cause.

you missed out the vital person.. the consumer.

They don't "intend" any harm.. they just want cheap energy.. none of that expensive, organic hippy fairtrade sh*t .. the cheapest...

The road to hell.. paved with smart consumers...... willing to scapegoat the nasty oil companies ,,. until they shrug.

and they sure as hell don't want nasty nuclear.. they want  safe, clean, cheap energy from unicorns.. and the skittle flux...

fracking.. no thanks! - we've seen gasland .. we know it's not PERFECT !!

atomkraft - nein danke!

hey..   who turned out the lights ?

do sheeple dream of electric unicorns ?

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Clarifications

doorwarrior wrote:

Grover wrote:

Should the producer of the product be responsible for its entire consumption journey? Where does my responsibility begin and end?

I am not quite sure what you mean by producer. If you mean the mine that brought the materials from the ground, yes they should be responsible for the damage they cause. If you mean the factory that built the product, yes they should be responsible for whatever damage they cause during the entire production process. Or if you mean the company that supplies the product, yes they should be responsible for whatever damage they casue during receiving, shipping, storing and retailing. In other words every company and person should be responsible for whatever part they play in producing any product.

Hi Rich,

You took my comment slightly out of context. I was questioning "tjlupton" on his/her statement that resource companies should pay for the "environmental damage done by the production or use of their products." I inferred that "tjlupton" felt that the extraction companies are somehow responsible for the ultimate disposition of their raw products and that this disposition must somehow be factored into the price of their products. I was trying to give "tjlupton" an out by asking if that is what was meant. I agree that one's product becomes consumed by a subsequent manufacturer ad nauseum until the end consumer receives it. It is ludicrous to expect the miner of the ore to factor into the price, all the possible permutations and uses of their product. I agree with your last sentence in the snip above.

doorwarrior wrote:

Grover wrote:

 Should we bankrupt BP by requiring them to return the Gulf to pristine conditions? Was it really pristine before the accident?

ABSOLUTELY !  If they did not have the werewithal to pay out of pocket to clean up the entire mess THEY MADE then we the people should bankrupt them sell the assets and recoup as much as possible as quickly as possible. What you are advocating is that its Ok to screw up the planet and hardly anything will be done because you have friends in the right places. And as for the pristine comment thats akin to me telling my 5 year old that she doesn't have to clean up the ceral she spilled because I haven't swept the floor in a couple of days. Ludicrous.

Again, you are taking one of my comments slightly out of context. "tjlupton" seemed to advocate for the costs of the oil spill being added to each gallon of gasoline. I took the context of his/her segment as a punitive tax on the end users. If it were only applied to BP gasoline products, it would price them out of the market and it would result in bankruptcy. I was questioning his/her intent. What would bankruptcy accomplish?

I was using the word pristine because "tjlupton" used it. The word, pristine, evokes an image that is unspoilt by man. Is it fair to expect your daughter to clean the cereal, mop, wax and buff the floor so it is restored to a lustrous, pristine shine when you haven't bothered to sweep it for a couple of days? The same standard should be applied to BP - nothing more, nothing less. The Gulf of Mexico has been used/abused by man for centuries. It is hardly pristine. If BP can clean up the damage and restore the environment to pre-spill conditions, shouldn't that suffice?

doorwarrior wrote:

I can't remember or find who posted on this topic but they felt that corporations should be treated as people, after all the supreme court says they are people so they should be subject to the same laws we are. If a corp commits harm put the corp into jai/receiveship and don't let the stockholders get paid until compensation has been paid. If someone can find this post please post it here.

Whether its a corporation or a person they should always be held responsible for any and all harm they cause.

Rich

It wasn't me who posted that statement. (As soon as Texas hangs one for murder, I'll reassess my position.) I believe that a corporation should be viewed as chattel for the stockholders. The corporation is a convenient vessel to conduct business. It has no voice; however, the people in the corporation do. Since it has no voice and cannot vote, it shouldn't be subject to taxation. Corporations have physical presence and therefore impact the communities. Fees for traffic, utilities, etc. based on usage can be assessed by the communities. The board of directors are responsible for the actions of the corporation. They make the decisions, enjoy the profits, and suffer the consequences.

In my world, the board of directors would have their necks and wallets on the line.

Grover

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Doug, I concur with your

Doug,

I concur with your comments, in part.  I find it a bit hypocritical of someone like Stockman to come out blasting this notion of deficit spending when it was under his watch during the massive explosion of (military) deficit spending that the US realized it's Potemkin village form of "Morning in America". 

A mere mia culpa would be appreciated before you start scolding the actions of others that simply reflect your own.

And while I'm at it, when is this site going to get some useful knowledge and insights from someone other than middle-aged, white men????

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Grover I went back and

Grover

I went back and reread tjlupton's post and see what you mean. Many of the statements can be taken several different ways. Your absolutely right about the pristine part, they should only be responsible for the damage they caused. Give my daughter a couple of more years and she will be responsible for the whole floor.

My mistake about the corps. being people comment, I wasn't clear.  The context was the recent Supreme Court decision. The poster wasn't saying (neither am I) that corps are people, they were just saying that if the courts thought they were people they should be subject to the same laws and penalties we are. If the corp commits a crime put it "jail" by not allowing any of the profits flow to the shareholders for a period of time. I agree with the board having their necks and wallets on the line.

I found the post by Poet

Well, here's another thought. Perhaps corporations should begin being treated like individual entities just like humans are. There are so many who fight for the right of a corporation to be an entity, though there is nothing in the Constitution about that. If it were a real entity, then if a corporation's actions or negligence result in a person being injured or a law being broken, treat it like a person. Maybe it should be put into receivership for several years, with executive leadership fired, and all profits during that time go to the victim and government - just like a prisoner in prison. If a corporation's criminal actions results in a person's death, maybe the corporation should be liquidated, with all proceeds going to the victim's family and the government. Employees can be sued or punished. And if there are not enough assets in the corporation, then reach-through should include the financial assets of investors.

http://www.peakprosperity.com/forum/future-tax-increase/56545?page=5

Thanks for clairfying, I think we agree on quite a bit.

Rich

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Doug
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Posts: 2736
re: corporations as people

I have posted about this a couple times in the past.  There are actually 2 SC decisions that have pretty much cooked our goose for ever again having any control over corporations.

1976 Buckley v. Vallejo made money equal to speech in terms of free speech protection.  And the recent Citizens United case making corporations equal to people.  The sum total is that corporations have a free speech right to dump as much money as they please on politicians.  This, of course, completely distorts the political process in favor of the wealthy, particularly Wall St types whose mouths say free markets...;free markets...free markets, but whose eyes say gimmee more...gimmee more...gimmee more.

Doug

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lmgaiter
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Mr. Stockman

David Stockman was one of the authors of Voodoo Economics, also known as the infamous Trickle Down Economics during his tenure in the Reagan Administration. Which is still the basis of the Republican's Pary econimic plan.

Now that he found Jesus, he want to criticize  current politicians for their lack of courage. Where was his voice when this mess began? When the American people needed a voice of economic sanity.

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Arthur Robey
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Posts: 2309
Pollution cleanup? No problem.

The Markets will clean up the Planet.

The Markets are a wonder to behold. All hail the Markets. Let go shopping!  Brother, I have seen the light.

Mr Market is coming with his mop and bucket. He will be here soon.

Just you wait and see.

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Johnny Oxygen
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Posts: 1441
Re: Pollution cleanup? No problem.

Mr Market is coming with his mop and bucket. He will be here soon.

Well make sure he gets the mess in the hall that the dog left.

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janb
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Posts: 55
Thank you, Doug.  That's it

Thank you, Doug.  That's it in a nutshell. To me, it seems those decisions make buying influence legal.  Do you see any solution?  Jan

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Mark_BC
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Joined: Apr 30 2010
Posts: 240
Of course the end user

Of course the end user (consumer) should be penalized for the externalities associated with bringing that product to market. How else is demand going to drop for such products if price doesn't also go up? It's the consumer that drives the supply / demand curves. Government scientists need to come up with estimates of how much degradation is caused by producing a gallon of gasoline and jack up the price by that much via taxes (yes, I know our governments are corrupt but no one else is going to do this -- it's about taking control of our governments back from Wall Street and co.). And a similar tax would be applied to natural gas so that every step of the way extra costs are added to bring the final price up to a more fair number truly representative of its environmental degradation.

Concerns over these increased prices causing the economy to crash? Well, hellooooo, that's the ultimate problem isn't it? How to maintain vibrant growing economies with low prices, in a world of finite and depleting resources? Or in other words, how to violate the laws of physics? Ain't gonna happen. It's going to end, one way or another.

Sorry consumers, I can't have too much sympathy for your desire to keep consuming the planet away and justify it because the mainstream media propaganda says you should. Consumption of non-renewable resources will eventually deplete them and cause prices to rise. Deal with it.

plato1965 wrote:

The road to hell.. paved with smart consumers...... willing to scapegoat the nasty oil companies ,,. until they shrug.

Yes, the nasty oil companies are an integral part of keeping consumers addicted to fossil fuels, which they know are in short supply so therefore the price will rocket soon once that fundamental gets priced into the market -- the oil companies just need to keep everyone addicted till that point comes.

plato1965 wrote:

and they sure as hell don't want nasty nuclear.. they want  safe, clean, cheap energy from unicorns.. and the skittle flux...

fracking.. no thanks! - we've seen gasland .. we know it's not PERFECT !!

Right. We don't want nuclear (except fusion if someone can ever figure that out), we don't want gas, we don't want unicorn nose oil either. We want the remaining oil deposits to be used to produce an amount of solar panels measuring 400 km x 400 km, to be placed strategically around the world in mid latitude deserts. This would provide enough power to run the entire world. I want a Nissan Leaf electric car, which is just as good, even better, than a regular car, to be powered by this solar power. And in terms of total cost of ownership, these electric cars shall, and already do, cost less than their ICE powered competition. I want a Leaf that has solar panels impregnated into the bodywork to power it 20 km a day for free when parked in the sun.

In winter time I want a Sterling engine electricity generator attached to my wood stove to provide electricity from wood. In summer I want solar panels on the roof to provide electricity that way.

TOTALLY do-able.

plato1965 wrote:

hey..   who turned out the lights ?

Not necessary. I'd have a sterling engine electricity generator on my wood stove and solar panels on my roof to provide electricity to charge up my electric car for as long as I want, until someone steals my solar panels off my roof.

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therooster
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Posts: 10
The FED introduced the real-time monetary paradigm

The development of the free-floating dollar was a necessary evil in order to arrive at free-floating gold currency, measured as weight. The fixed peg of BW had to be removed for gold to be set free and then remonetized at a later date .... in REAL-TIME !
No free floating dollar development would have meant no free floating "gold-as-money" in REAL-TIME. Some evils are necessary in "the script" where the measure and the weight are eventually united in real-time.

The FED is the creator of the real-time measure you 20th century dinosaurs call "the dollar". The dollar is only a currency within the fiat paradigm. Within the real-time gold-as-money paradigm, the dollar is not a currency but acts as the necessary real-time measure for gold payment that can be made with bullion for the things that are priced in a fiat currency. Something has to bridge the two paradigms in the transition from fiat to gold weight. The FED has set the stage. Give thanks , buy gold and watch the market slowly monetize it. The monetization is ongoing. It is not a top-down event, but a market driven transition, bottom-up.

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crazy horse
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Posts: 13
Free Markets

I noticed the perennial argument against free markets get raised. Namely, the negative externals created when people freely contract for their personal benefit.

To me the answer lies in robust private property rights. Such rights would allow a third party harmed to pursue damages which would then be a powerful consideration for people involved in a voluntary exchange to consider. Contrast the BP oil spill and Fukushima events where the liability of the companies and company owners is limited. Indeed, governments often provide support for these companies.

Secondly, the argument against free markets presumes the virtuosity of the state. This is a dangerous illusion. Currently in Australia we have governments supporting coal seam gas exploration licences in national parks and on 'private property' because they stand to gain financially. This is a classic illustration of the consequences of weak property rights and the myopic perspective of governments.

A commercial market absent sound property rights is not a free market. Central banking, fractional reserve banking, state owned currency and currency laws are all founded on weak property rights and so destroy a free market. Free markets are not of themselves 'good' but would seem to provide the best framework for advanciing civilisation. Conversely, the results of government intervention are a breakdown of property rights and a gradual collapse into poverty for the masses while the minority linked to government wildly prosper.

I found this interview with Dave Stockman one of Chris's best.

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plato1965
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Joined: Feb 18 2009
Posts: 615
To me the answer lies in

To me the answer lies in robust private property rights. Such rights would allow a third party harmed to pursue damages which would then be a powerful consideration for people involved in a voluntary exchange to consider.

Ah.. if only it were that simple..

Consider this..

The biosphere has no vote.. cannot lobby congress.. can't even occupy wall street... and sure as hell can't file a class action lawsuit..

Even if we assume human beings (properly accredited) are the final measure.. and that our environment is sullen passive clay to be moulded as we see fit..

Your libertarian, legalist solution only applies to current human beings.. neither the future, nor the past can petition, speak, lobby or vote..

No faith in government, yet faith in human defined law.. feh !

"property" especially where it concerns living creatures, land, or natural resources is a fatal conceit...

libertarianism is fine applied to the natural rights of the individual creature... trying to apply it as a universal panacea is a rapid route to epic fail.

right to life ? Tell it to the dodo..

render to the individual what belongs to the individual.

render to the community what belongs to the community.

render to the earth what belongs to the earth.

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jpitre
Status: Gold Member (Offline)
Joined: Mar 3 2009
Posts: 366
Free market & property rights

I second the recent comments by Plato. Well stated !

Our free-market has run amok and the Corporatocracy has taken over the control of the government, thus subverting democracy and the will of the people. The idea that the free market is a solution to our problems is as bad the idea that big government is our solution. So far the best we have found is a blend of the two, each keeping the other somewhat in check with an involved citizenry effectively exercising its rights via political oversight. Unfortunately, corruption is now so rampant that there seems nothing left to stop the thieves and Banksters of Wall Street except an uprising by the 99% of us being left behind, The convoluted mess we find ourselves in is  a result of so-called free market principles allowed to go to the extreme of controlling  the political and regulatory systems designed to keep the economic forces in check along with maintaining a semblance of ethics and honesty . 

The free market will always head for monopoly as is so skillfully orchestrated by the  "free marketers" of today that have/are creating the governmental rules to suit their best interests - and not the best interests of the country or its citizens.

Anyone wondering what a free market should look like needs to study Adam Smith and those of his persuasion

Jim

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