Take Cover-----Now Comes The Gong Show

It was a bad hair night for the Beltway. Among the roughly 515,000 votes cast in the New Hampshire primaries, about 55% or 280,000 went to Bernie, the Donald and Senator Cruz. That is, the preponderance of Republican, Democrat and independent votes alike went for the anti-establishment candidates.

Since the latter are basically campaigning against the Imperial City and all of its careerists, cronies and corruptions, the first impulse is to cheer them on. After all, nothing could be worse than the self-perpetuating gang of war mongers, welfare statists, K-Street lobbyists and pork-barreling politicians who rule the nation today from their permanent berths in Washington DC.

Unfortunately, there is something worse. When you combine the mindless raw populism of Bernie and The Donald with the rapidly advancing lunacy and desperation of Janet and her baleful band of money printers you have a combustible recipe for abrupt system failure. American capitalism and democracy as we have known it could blow sky high by the time this election cycle is complete and a new President settles into office.

Before elaborating on that dismal note, however, let me first dispatch with Senator Ted Cruz. He unfortunately has the Ronald Reagan mutation when it comes to his political genome. I admire his resolute opposition to Big Government at home and his demonstration in Iowa that you can standup to a big, thieving special interest group like the Ethanol Lobby, and still win elections.

On that score, I recall my third election to Congress in 1980 from a small town district in Michigan. Even though it was a hotbed of Chrysler supplier plants and evangelical right-to-lifers, I helped lead the charge against the Chrysler bailout on the House floor and voted against the Hyde anti-abortion amendment dozens of times, thereby earning the wrath of Chrysler CEO Lee Iacocca in Detroit and the so-called pro-life lobby in Washington.

As it happened, I also got 70% of the vote in that election, and a real chance---in theory----to take on the Leviathan when I shortly thereafter joined Ronald Reagan's team in the White House. But, needless to say, it never happened; and for the same reason that Ted Cruz is destined to fail.

To wit, Reagan was a one-armed anti-statist who couldn't get enough Big Government on the Pentagon side of the Potomac. Indeed, it was his massive and completely unnecessary build-up of the US conventional force armada------ships, planes, tanks and cruise missiles-----capable of power projection and wars of invasion and occupation, as opposed to strategic nuclear deterrence of the rotting Soviet Empire, that paved the way for the Bush Dynasty's destructive wars in the middle east.

Now after 25 years of interventionist meddling, military mayhem and raining death from the skies on millions of civilians from Afghanistan to Libya, we are confronted with Washington-fostered failed states in Iraq, Syria, Yemen, Libya, Somalia, Egypt and elsewhere, and the resulting jihadist blowback and sectarian violence across most of the region.

Yet instead of learning a lesson from this abysmal and destructive policy of failure, like Ronald Reagan did when he bugged out of Lebanon, Senator Cruz wants to dramatically increases the defense budget and make the deserts glow in the dark.

Worse still, he takes his foreign policy counsel from two neocon fanatics, Elliot Abrams and James Woolsey, whose policy history is so sordid that they might as well be considered war criminals. So you can't give Senator Cruz a pass on his foreign policy jingoism and huffing and puffing about border security and terrorist hobgoblins allegedly stalking the land on the grounds his is just trying to win the election.

As Ron Paul pointedly told a reporter last week, the Texas Senator is a Warfare State neocon at heart who would end up perpetuating the Big Government status quo in order to feed the beast on the Virginia side of the Potomac. Even though I agree with him that gold is real money and that the Wall Street casino has become the enemy of honest capitalism, there is no point in Reagan Redux. And at least the Gipper was not coming from a place of anger and kept his religion to himself.

Beyond Ted Cruz, however, the anti-establishment campaign is a horror show. Even as the nation endured FDR's New Deal and Truman's Fair Deal in the last century, it would now have to face Bernie's Scary Deal and The Donald's Hairy Deal this time around.

As to Bernie, what you hear is what you get. To wit, unadulterated statism and redistributionism that would be the death knell for what remains of American prosperity and capitalism. But the Sanderista campaign is rooted in irony.

It is gaining surprising traction on the claim that the economy is rigged in behalf of the 1% and Wall Street, and that's actually correct. But this baleful reality is not owing to the inherent tendencies of unregulated capitalism, as Bernie contends; it arises from the very opposite. Namely, the Fed's destruction of honest price discovery in the financial markets.

Needless to say, there is not a chance in the world that a Sanders Administration would rein-in the Fed. Nor would it eliminate its endless free money subsidies to Wall Street gamblers and cheap debt extensions to the C-suite financial engineers who are strip-mining the balance sheets of corporate America in order to goose their stock prices and options winnings.

It's hard to imagine, but under Bernie's Scary Deal, the Fed would likely go straight into the helicopter drop business, dispensing cash based on social security numbers. Then we would have real QE for the people-----until the whole financial system imploded, and not before long.

That brings us to the Hairy Deal. There is no redeeming virtue in The Donald's candidacy, even if he talks up a populist-sounding storm and rebukes Imperial Washington with the insolence it richly deserves. That's because Trump is a rude, crude bag of wind who thinks the nation's ills stem from incompetent politicians making bad deals.

No they are not, and no it doesn't!

The problem is bad policies and destructive ideas in the hands of politicians who are extremely competent at orchestrating the machinery of the state against the liberty and prosperity of citizens who once enjoyed the blessings of a robust capitalism and a free society.

Thus, in the hierarchy of things screaming out for radical change, the Donald's favorite whipping boys-------NAFTA, China's trade practices, illegal aliens and the danger of Muslim refugees-------don't even rank. Nor do safeguarding the Second Amendment or building a horizontal version of Trump Towers on the Rio Grande.

The fact is, Trump has fashioned his platform by opportunistically scratching the most fearful and bigoted itches roiling the electorate. He has absolutely no semblance of a coherent program------or even an incoherent one for that matter.

Instead, his pitch is comprised of pure bombast and bile. It's based on the exceedingly dangerous proposition that what Washington needs is a smart deal maker who can make the government agencies and bureaus run better at home and foreign leaders run for cover abroad.

You could call it the Man-on-the-White Horse syndrome, and pity the horse. Yet there is surely nothing more menacing at this fraught stage of American history than Trump's content free bluster and megalomania, and his fatuous promise to "make America great again".

He can't do it. Nor can anyone else. That's because the nation is well advanced on the path to fiscal bankruptcy after 34 years of kicking down the road the public debt can that Ronald Reagan let loose in 1981.

Too be sure, the Gipper can't be blamed for trying to shrink the Welfare State, slash taxes and rebuild the national defense as he understood the need. But once it became evident that the math didn't remotely work, he earned everlasting blame for stubbornly denying the truth.

And the truth of it could not be gainsaid. What happened was that the domestic spending cuts were too small because the Congressional GOP blocked and diluted them; the revenue loss was too deep because to get supply side rate cuts the tax bill was turned into a Christmas tree of corporate welfare and tax loophole giveaways; and the defense build-up became so ungodly expensive that it dwarfed the relative pittance of savings which were actually achieved on the domestic side.

And then when the fiscal furies were unleashed, Reagan's GOP successors mythologized the deficit-driven Keynesian boom that materialized in the mid-1980s; and, worse still, eventually embraced Dick Cheney's scurrilous proclamation that Reagan proved deficits don't matter.

So here we are in 2016 facing a metastasizing fiscal cancer-----even as the demographic aberration of the baby boom generation piles into the retirement ranks at the rate of 10,000 per day. Yet there is not a prayer of relieving its deadly spread unless Washington ends its imperial pretensions and drastically shrinks its destructive war machine; and simultaneously repudiates they myth of social insurance and drastically curtails medicare and social security through a severe and thorough-going means test.

Needless to say, the two GOP presidential candidates who even hinted at an intention to grapple with the Gippper's baleful legacy never got more than single-digits in the polls and are already out of the race. Governor Christies did mention social security reform and he's now gone. Rand Paul sometimes tilted against too much interventionism and militarism and never got off the ground.

So we are left with The Donald's content-free silence on both matters, and indeed on anything which resembles cognizance of the fiscal firestorm just around the bend. Indeed, the idea that fiscal frugality and Donald Trump belong in the same policy universe strains credulity.

To wit, Mexico has already politely demurred as to financing the Trump Wall. Likewise, giving the unfortunate veterans of America's pointless post-1950 wars their due will cost hundreds of billions more; and the same goes for restoring a military "second to none", slashing corporate taxes, rebuilding the infrastructure, replacing Obamacare and the rest of Trumps random promises.

But here's the thing. The Donald's campaign promise due bill and studious avoidance of the third rail of politics as entitlements are known isn't the half of it. Even the Keynesian debt deniers at CBO have now conceded that the temporary days of modestly falling deficits are over, and that we are heading back toward trillion dollar deficit-land.

By their lights, the current year's red ink will rise to $550 billion from last year's mere(!) deficit of $450 billion, and then climb steadily higher as far as the eye can see. Yet these worshippers of Rosy Scenario presume that the US and world economy will remain recession free through 2027.

That's right. Our Cool-Aid drinking Keynesian budget mavens purport to believe there will be no recession for nearly 20 years. They thereby fail to inform the Congress that the incremental public debt in the next decade will be at least $15 trillion on top of the near $20 trillion we already have. That is, we are heading for a 140% debt-to-GDP ratio, at minimum.

So there will be another recession, and it is coming even before the polls close next November, as we attempt to document day after day. And that's when the Gong Show goes full retard.

Janet Yellen and her clueless band of money printers will be discredited, out of dry powder and quarrelling incoherently in public---------meaning that the casino will be crashing.

At that point the Fed will be desperately promoting negative interest rates as a last resort rescue option, causing the long suffering main street savers and retirees to finally don their torches and pitchforks.

Which leading candidate for the White House will weigh into this combustible mix with even more outlandish bursts of demagoguery and incoherence?

It won't be Bush III or that insufferable Brat-in-the-Bubble-------the boy Senator from Florida--------- who loves to babble about guns, bombs and neocon delusions on the American Imperium.

No, it will be a loud-mouth demagogue who is so hopelessly uninformed that he doesn't know that the $150 billion Obama purportedly "gave" to the Iranians in return for a "horrible deal" on nukes was actually their money. We stole it and froze it-----an act of bullying that The Donald is perhaps constitutionally incapable of recognizing.

In any event, a witches brew of recession, a plunging stock market, a desperate act of NIRP financial lunacy by the Fed and a revolt against the war on savers and cash are fast coming down the pike, even as the Hairy Deal heads hard toward the White House.

You might want to call the resulting spectacle a Gong Show. And most certainly you need to get out of the casino and take financial cover at the earliest opportunity.







David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

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