Former Reagan Budget Director Argues Against Bailouts, for Financial Discipline – PBS Newshour 06-04-13

Salient to Investors:

David Stockman says:

  • We are in serial bubbles. Greenspan and Bernanke have inflated bubbles for years by keeping interest rates low. A system of bubble finance is geared towards massive borrowing and speculation on leverage, everyone will do it  – a gambler’s dream. Financial markets are full of speculators addicted to cheap debt.
  • Wall Street and Washington are broken. The Crash of 2008 was long overdue and  the market’s way of bringing discipline and resolution for reckless financial behavior. We should have let the crash continue, and not bail out the banks, AIG, GE Capital and the auto industry. We would have had a serious recession but no depression. Goldman Sachs and Morgan Stanley would have gone down. but the main street banks were in good shape. The common theory of the contagion theory was wrong as there is no economical basis in history for the idea of contagion
  • The government bailouts made a mockery of free markets and financial discipline and only makes matters worse. The consequence of the bailout of GM was we moved 40000 jobs from below the  Mason Dixon line to north of it – all about the electoral college and not about jobs. The purpose of Washington is to prop up the powerful, and not bail out small businesses in Indiana, an unfair system.
  • Bailing out leads to crony capitalism and total socialism, where money dominates everything. Money hires the lobbyists and lawyers.
  • Money printing is not sound economics and will fail.

Watch the full video at http://www.pbs.org/newshour/bb/business/jan-june13/stockman_06-04.html

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