Stockman was right in the 1980s when he opined that the Reagan economic policy would end up with a government fiscal crisis ... which it did. People have short memories, and history gets rewritten.
By the end of the 2nd term of the Reagan presidency, expectation was that the US economic superpower status was over and it was going to be Japan that dominated the future. Reagan did some good things to restore American confidence in itself post Nixon and post Vietnam, but economic management was not something he did well at all. So much gets forgotten!
Today ... Thursday, November 4th, the stockmarket is going up to high levels in response to the diminished power of the democrats in Washington, good profits from the big business sector, and a large commitment by the US Fed to "QE2" ... shorthand for the 2nd Round of Quantitative Easing.
It appears that Stockman sees the current capital market euphoria as stupidity at its best ... my words, not his, but the idea is the same. The problem with the economy in the United States and in most of Europe is simply a structural mismatch between the jobs that need to be done, the money there is to do them and worker expectations. This is a toxic reality. What is going on in the capital markets is hope sitting on top of a mountain of paper money ... not even paper, really ... just electronic notations in supra-national level bookkeeping.
Stockman describes what is going on as monetary policy that is seriously like heroine addiction ... something that makes you feel good, but is devastating to you in every possible way ... and I could not agree more.
The capital markets ... the banking sector ... are still extremely fragile. This is on top of a US unemployment rate that stubbornly stays at an official level of about 9.5% ... and is way higher in many parts of the country and in certain demographic groups.
The Obama Presidency has delivered two years of stability, and improvement in the numbers that move stock markets higher ... like higher profits for big business. But the core foundation of the economy and society remains mired in depression with few signs that there is going to be much help from the economic elite and political leadership.
The global economy is moving ahead because there is true economic demand in the BRIC economies unlike the "faux demand" in the formerly rich economies with their continuing addiction to growth as the key metric about socio-economic performance. Profits in the corporate sector have been going up ... but now commodity prices (raw material costs) are going up in due course profits will come down ... and it is my guess most big corporations will solve that problem by further reduction in labor.
The big question is how to get the corporate sector to pay some attention to their role in making socio-economic progress as well as capital market progress!
It was a pleasure to hear what Stockman had to say ... on Bloomberg TV ... and I look forward to hearing some more.