Trumped! A Nation on the Brink of Ruin... And How to Bring It Back

by David A. Stockman

In TRUMPED! A Nation on the Brink of Ruin… And How to Bring It Back, David Stockman brings us an insider-turned-iconoclast’s report on how 30 years of financial and political misrule by the Washington/Wall Street elites have brought the U.S. to the brink of ruin.

He shows that the Fed’s destructive ZIRP and QE policies have buried Flyover America in debt while clobbering it with shrinking real wages and vanishing job opportunities. At the same time, the bicoastal elites have prospered mightily from the massive inflation of financial assets in the Wall Street casino and the debt-fueled expansion of Imperial Washington’s domestic rackets and global interventions.

Stockman argues that Donald Trump’s improbable candidacy happened because Flyover America has had enough of a rigged system that benefits the few but has failed to delivery economic recovery and real prosperity at home and a safer and more stable world abroad.

Stockman’s book is no testimonial on behalf of Trump’s candidacy, and contends that much of what he advocates is wrong-headed or downright reprehensible. But it does salute him as the rallying force for Main Street political insurrection because the existing regime of Bubble Finance on Wall Street and statist aggrandizement in Washington threatens incalculable harm.

Stockman also argues that there remains a way forward. He suggests the “political outlaw” who considers himself to be the world’s greatest dealmaker would need to “make ten great deals” to bring American back from the brink. These include a Peace Deal, a Jobs Deal, a Sound Money Deal, a Super Glass-Steagall Deal, A Liberty Deal and five more.

In this trenchant, wide-ranging and unvarnished account, Stockman draws on his unique 40-year career in Washington and Wall Street. After a career as a Capitol Hill staffer, two-term member of Congress and ultimately as President Ronald Reagan’s budget director, Stockman then went to Wall Street. For two decades as an investment banker and private equity investor he had a front row seat as the nation’s financial markets mutated into today’s Bubble Finance casinos.

Genres: Politics, Economics, American History, Nonfiction, History

535 pages, Kindle Edition

First published September 17, 2016

About the author

David Alan Stockman is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985).

Reviews

[Athan Tolis · Rating 3 out of 5]

A few months ago, I took my son to Speakers’ Corner for the first time. George is but seven years old, and he found the experience unsettling. We’re not going back for some time. Especially post-Brexit.

Much as David Stockman’s 700 page opus, “The Great Deformation,” was undeniably the most significant non-fiction book of 2013, it made the rantings of all the lunatics at Speakers’ Corner sound at once coherent and concise. To get anything out of Stockman’s magnum opus, you needed the patience of a saint.

On the other hand, if you could make it past page 400, your perseverance was rewarded with the best ever explanation of how three factors that had never before coexisted in time (namely (i) the advantage the tax code has always conferred to raising capital via debt, (ii) the advantageous tax treatment of capital gains versus income ushered by George W. Bush and (iii) the Greenspan Fed’s elixir of near-zero administered rates) fostered the phenomenon of “Corporate Equity Withdrawal” in its various guises, including but not limited to the Tyco-style M&A accounting monsters, the housing bubble, the Private Equity doomsday machine and the interplay of stock buybacks with CEO compensation.

In short, “The Great Deformation” was poorly written (and often very wrong; again in this book the author goes with his own, twisted, meaning for the word “Keynesian” for example), but it was essential. Three years later it remains the only book that explains Corporate Equity Withdrawal.

“Trumped,” while very comfortably more repetitive and rabid than the most addled harangue my poor George was exposed to when we went to Speakers’ Corner, is actually much better written than “The Great Deformation.” Rather than “rantings of a madman,” it’s more like “angry blogger.”

It is far from unthinkable that Stockman hired an editor for it. Not that this makes it remotely pardonable from the angle of the reader, but if you look carefully enough you will indeed notice that all repetition in “Trumped” can be explained away by the need to make every chapter stand alone.

In contrast to “The Great Deformation,” on the other hand, the book does not really hang together. It does not have a theme running through it. I would go as far as to say it’s got very little to do with Trump.

So yes, there is a tremendous first chapter which explains (with prescience, at the time it was written) why Trump won. In 48 pages, Stockman takes you through the decline of “Flyover America” with charts, facts and figures that leave you with zero doubt that a large number of Americans have been very poorly served by the establishment and that in any process remotely related to “one-man, one-vote” the end was nigh for the 36 year succession of Bushes and Clintons at the helm since GHWB first became VP. He even rolls his own CPI that he considers more appropriate to “Flyover America” to show that the bits of the map that are colored red have had to deal with both lower growth and higher inflation than the blue bits.

Those 48 pages, however, are followed by an additional 350 pages whose only binding theme is that overborrowing is bad.

World to David Stockman: WE KNOW!

We have all figured out that QE does not help anybody but the one percenters, let alone that 25bp in interest rates are neither here nor there.

Absolutely everybody knows that lower rates in the US chiefly drive malinvestment, both in the US and into the emerging markets, rather than prosperity at home. There are conferences held among mainstream economists these days about the destabilizing flows of investment to and from emerging markets.

The point from his previous book regarding the fact that the Fed is a “prosperity-mandated politburo” is actually toned down here because Stockman has figured out that this is actually the law of the land. But I guess there is no harm in somebody repeating that having the government set the price of money in a market economy is only a couple steps away from having it set the price of everything else…

Perhaps not everybody actually fully understands that Draghi’s “monetary policy” of QE and negative interest rates is a fiscal transfer from Germany to Italy, or how TARGET 2 works, but for example my mom sure does.

Perhaps she is better placed than most to understand this, though, since the Bundesbank impolitely wired back all her money to her domestic Greek Alpha bank account when the Bobls matured we had prudently parked with the Finanzagentur. Our newly-minted domestic Greek EUR do not go anywhere as far as the real German-based EUR in terms of their ability to buy real estate in Greece. (Not that my family needs any more Greek real estate, but the fact that there is an exchange rate between the two allegedly equivalent EUR currencies speaks louder than rants about TARGET 2)

Everybody except Brad deLong and Larry Summers appreciates that if we need -5% rates to restore consumption to its previous path, then perhaps consumption will not be what drives the US economy forward in the future. They probably know it too and are too stubborn to admit it.

Everybody including Brad deLong and Larry Summers acknowledge that the merger of Travelers and Citibank (that made it “necessary” to get rid of Glass Steagall) was, in retrospect, unwise.

Everybody knows that, at one quadrillion dollars (that’s a million billion to you and me) there are a few too many derivatives contracts out there, and Stockman actually misses a trick in this book by failing to mention the banks should have been collapsed into one big nationalized bad bank, which would have drastically cut that number, as most trading is between them. But perhaps free-market ideology blinded him to this obvious solution.

There’s also a deep dive somewhere in there about a good five or six ways we are manipulating the accounting of the government’s budget to hide the fact that we cannot afford the entitlements that have been promised to the boomers. Well, you know what? We may not understand, Mr. Stockman (only you and Peter Orzag do) but we know! How about that? Nice of you to lay out the detail, but everybody knows he cannot count on Social Security. How we will be disenfranchised and whether we should be is not a matter that gets anybody’s pulse going. The world’s capacity to worry for things that will happen later is these days mainly directed to the environment, and then not really 

The last chapter in this section is dedicated to the ongoing train-wreck in China. Except Jim Chanos has been evangelizing about the Chinese bubble for a good three years now. Better than David Stockman (and I don’t mean to take anything away from Stockman, as he does not employ a team of analysts to back him up) Also, ask any luxury manufacturer how things have been going: not well.

The other thing about all these rants is that they are exactly that: rants.

To say that under the gold standard XYZ would not have happened is like saying that kids used to play with each other before computer games were devised. Well, that’s good to know, but it does not really help me terribly much with my kids, does it? We’re not going back to the gold standard because it comes with its own set of problems that we do not wish to revisit.

We are most certainly not going back to the original trade-related credits the Fed used to discount either. That’s a truly weird idea and not one Stockman can honestly advocate while dedicating pages in the same book explaining that domestic industrial capacity is a meaningless concept in a world economy with on-demand supply of hotel rooms via airBnb, for example. It’s one or the other, you can’t be right about both!

I can go on. But I won’t. If any of the above observations are news to you, then by all means buy the book and read it.

If contrary to my advice you do, and if you can deal with the author’s non-stop angriness, you actually will be rewarded by a couple chapters you actually won’t find in too many best sellers, because the guy is genuinely anti-establishment.

So there is an entire chapter on the attempt by vulture funds (he is careful not to call them that) to eat one more time from the trough that’s called Fannie Mae. They bought its decimated preferred for nothing, ramped it up to create the story, then they put on the full-court press on CNBC regarding how this public-private partnership has always supported the American way of life. And he explains very well that this is a con, because:
1. The only reason Fannie did not default is because the government stood behind it in the crisis, and therefore the business model is totally bogus
2. The only reason Fannie can still sell paper is because the part of government called the Fed has bought more than a trillion of its paper, making it possible for its debt to be rolled
3. The “profits” Fannie is showing are of the same quality as its pre-bankruptcy profits: no provision is made for future defaults
Perry Capital (RIP) and its friends are therefore shown to still be in the business of private profit and public losses which we hoped had died in 2008. He spares no punches on Obama’s government either, which is refusing to consolidate Fannie and is banking its “profits” to reduce the budget deficit, thereby ceding part of the moral high ground to the hedge funds.

The article on FANGS is hilarious too. It makes the point that even if you like the companies and even if they survive this period of crazy valuation, the valuation is just that: crazy. He quotes Cisco as an example. Its profits today are more than three times its profits back in the internet mania years, but its stock market price is one quarter. And he reminds us of the Nifty Fifty and the four horses of the Internet apocalypse, modulo which the market was already falling a year before the corresponding crashes, exactly as it happening with the FANGS right now.

The author’s true anti-establishment colors show when he decides to take on Hillary and expose her for the establishment figure that she has become, revolutionary roots notwithstanding. In practice, though, Stockman does not bring true expertise to this.

So in “the Great Deformation,” he totally (and hyper-convincingly) rips apart Mitt Romney. But that was a candidate Stockman, a former private-equity man himself, knew EXACTLY how to pick off. He went through his seven biggest deals and exposed them all, one-for-one to be ripoffs. With Hillary he cannot pull it off because his hippie credentials are, if anything, worse than hers. He served under Reagan, for crying out loud! So yes, he does show her to be a hypocrite, but, again, that is not news to anybody.

In the last 75 pages of the book, the author boomerangs back to Trump, but in a funny way: he offers a concise (by his standards) summary of his well-known beef with the military-industrial complex and the expensive wars of choice.

And he expresses the wish that Trump will go back to the pre-Woodrow Wilson days of isolationism. To which I say “good luck with that.” The F-35 is made in, dunno, 35 states. And the guys buying alongside the US military are the ones he hopes we will cut our ties to.

Not to be pessimistic, but I think it’s a better chance Trump will reform finance than that he will roll back 100+ years of international policy and domestic pork all rolled into one.

But perhaps I’m just talking my book here:

As a Greek, whose parents’ country was twice saved by America –once from the Nazis and immediately after from the communists—I feel a great debt to interventionist America, quite possibly the only superpower in history guided by ethics, even if it often gets them wrong. So I would be sad to see the US go back to isolationism. I think my mom and dad have more than paid their debt back to the US through the hundreds of thousands of dollars the spent on college tuition, for example. It’s just that there is no ledger to record this.

Anyway, same way Obama did 90% of what history needed him to do when he walked up to the dais to deliver his acceptance speech (perhaps even enough to counterbalance the 8 rather unproductive years that ensued), it is far from unthinkable that Trump, in delivering us from the prospect of Chelsea vs Barbara in 2028, has also pretty much completed his contribution to the republic.

Meantime, he’s delivered David Stockman with a title for a book I otherwise would not have bought and, for all the charm of its non-sequitur factoids (example: did you know the wife of the Saudi ambassador wired USD 75k to the September 11 pilots’ handlers?) I frankly should not have read.

[Carolyn · Rating 5 out of 5]

This book was written before the election. Stockman is no fan of Trump, but expected his election, and explains it with great clarity. I wish every American would read it.

It's the economy, stupid! - Truer than ever. Few know it as well as Stockman, and I've never read a better explanation. Debt is the great problem, and Trump is more likely to deal with it sanely than Hillary would have been. Alan Greenspan began the great bubble, and Bernanke and Yellen have further inflated it. Nearly all of the nations of the world have joined the money-printing party, which is unsustainable, although no one knows when to expect the end. Stockman says months, or quarters, not years. Remember when Fed Chairman Paul Volker said that his job was to take away the punchbowl when the party was going strong? Instead, Greenspan and his heirs spiked the punch. The coming global crash is going to be bloody. It will likely start in China, which is responsible for the worst of the inflationary malinvestment. Did you know that in three years (2012-14) China used as much cement as the whole U.S. used in the entire 20th century? That cement was used to build enormous numbers of office and residence units, nearly all of which now sit empty. The developers went bankrupt, and the government bailed them out.

Stockman analyzes the conventional wisdom and, for the most part, rejects it. He offers President Trump his well-considered advice, some of which, in the area of foreign relations shocked me, but most of which I heartily wish the president would heed.

I really can't recommend this book highly enough. Readers will become far more educated citizens with its help.

[m · Rating 3 out of 5]

Good book, the contents of which first appeared at his website as blog posts, the links to most of which, unfortunately, have been removed.

Stockman often repeats himself, but I'm largely persuaded by his reading of history. Here's an excerpt from a recent blog post that can serve as a précis of his thinking:

[Janet Yellen, Ben Bernanke & Alan Greenspan] put the Donald in the Oval Office by a policy of cheap debt that inflated Wall Street, strip-mined main street and sent American production and jobs off-shore. That's because the essence of Bubble Finance was the prevention of a market based regime of high interest rates, low consumption and the deflationary cleansing that was necessary to keep the US economy competitive in a mercantilist, statist and credit bloated global economy.

The problem which would result from his recommended "deflationary cleansing," which he discusses only in his first book, "The Triumph of Politics," is that such a policy is politically unpalatable—which doesn't discredit his diagnosis, but it often leaves me wondering how his recommendation could have been implemented.

http://davidstockmanscontracorner.com...

[Reza Amiri Praramadhan · Rating 3 out of 5]

Written in anticipation of Trump vs Clinton election. The author asserts that America was well on its way of being Trumped, with economies that favors the Bicoastal elites and foreign policy that catered to military-industrial complex, plunging America into needless wars while keeping the war machines well-oiled. And Middle America had to bear the brunt of it, having their jobs taken and outsourced into foreign countries, their salaries were routinely reduced, while Wall Street businessmen irresponsibly plunged the world into global recession yet were bailed by the government, and America was losing its global leadership, especially economically, to China. And in Donald Trump, Middle America had its trump card.

The solutions to be taken though, are unsurprisingly generics. More laissez-faire economics, less government meddling, dismantle the legislations that benefits the big corporations and banks, and pull off America’s military from all of its global commitments. A rather boring discussion for me. However, I would like to see of his evaluation of Trump’s first presidency, and his predictions of Biden.

[David Medders · Rating 3 out of 5]

This is an interesting polemic on two fronts - the impending economic collapse of both the United States and the global economy and the recklessly irresponsible leadership of the political and economic elite who have created and fed the inexorable drive to this impending fiasco.

Stockman gives detailed analysis of unsustainable in at times criminal, economic and monetary decisions that created the fiat currency-based culture of the modern economy and how this has in turn created the current economic bubble economy inexorably poised for a major collapse.

It is filled with many examples from both the economic and political waterfront that provide compelling proof of his prognosis and convicting challenge to pause and consider how we arrived at this perilous moment in time. From the hindsight of future history, this may be considered a most prescient landmark study.

[Bogumil K Baranowski · Rating 5 out of 5]

Eye opening and refreshing

A detailed account of all the major trends in the U.S. and around the world. A great follow-up to Mr. Stockman's earlier book - Deformation of capitalism.

[XRay RMA · Rating 4 out of 5]

Going home now but I'm not gonna lie I was just thinking about the same thing I have no clue why you say that it will be the same as well as much as I was just thinking about the

Future development in every time I have a great day at school of medicine for the first time in the history books

[Sheri · Rating 2 out of 5]

I think that this is a very narrow view of both history and issues the play upon our current economic situation. Mr. Stockman seems to not realize that there were issues with the economy well before the Reagan administration.

[Mike Harry · Rating 4 out of 5]

not to be confused with an epistle in support of the Donald, it is a thorough damnation of the central banks of the world and their tsunami of liquidity and credit. It is much scarier than any financial publication portrays!

[John · Rating 3 out of 5]

There are lots of books around at the moment about Donald Trump. Some, such as Trump Revealed, are very good. Others, such as Fire and Fury, are not so good. But, while many books tend to focus on Trump himself as the whirl of events surrounding him, surprisingly few try to answer the question 'Why did Americans vote for this guy?'

This book makes the argument that it was the economy, stupid. Stockman makes the case that, in recent years, 'Flyover America' has seen its living standards squeezed between stagnant wages and rising living costs. With more of the same offered by both main parties, the country turned to Trump for something different.

The book starts better than it finishes. Indeed, you could probably get away with reading just the first chapter. It is barely edited collection of blog posts, apparently, so it is often repetitious and slapdash. That said, to the extent that 'the economy' provides one of the explanations for Trump's victory, this books makes a decent bid to explain exactly why.

[Abdelhamid · Rating 5 out of 5]

David Stockman provides an overview of all the economic troubles that face our country and cause many of its citizens to be disappointed and angry at their government. The book is not an endorsement of Trump but it explains the deep problems caused by Washington DC's policies that enabled the rise of Trump.

Stockman provides a mix of economic analysis and history to explain the current problems such as slow growth, low labor participation rates and debt. He explains how the easy money policies of the federal reserve since 1987 enabled a lot of misallocation of resources and finances the growing government debt and trade deficit.

The last few chapters focus on foreign policy and advocates for reduced intervention abroad and explain how the neoconservatives in both parties expanded the warfare state post the Cold War.

[George Haun · Rating 5 out of 5]

Stockman's repetition and relentlessly critical tone can be annoying, but his insights are plentiful, often unique, and well supported with data. I highly recommend this to anyone who wants to challenge their own perceptions about what is really going on in the world. Too bad the entire US electorate does not have the knowledge and willingness to do this!

[Bryon Brandt]

I was gifted this book by a friend, who was too shocked by its contents to keep reading it.