The Great Deformation: The Corruption of Capitalism in America

by David Stockman

Overview

A New York Times bestseller

The Great Deformation is a searing look at Washington's craven response to the recent myriad of financial crises and fiscal cliffs. It counters conventional wisdom with an eighty-year revisionist history of how the American state — especially the Federal Reserve — has fallen prey to the politics of crony capitalism and the ideologies of fiscal stimulus, monetary central planning, and financial bailouts. These forces have left the public sector teetering on the edge of political dysfunction and fiscal collapse and have caused America's private enterprise foundation to morph into a speculative casino that swindles the masses and enriches the few.

Defying right- and left-wing boxes, David Stockman provides a catalogue of corrupters and defenders of sound money, fiscal rectitude, and free markets. The former includes Franklin Roosevelt, who fathered crony capitalism; Richard Nixon, who destroyed national financial discipline and the Bretton Woods gold-backed dollar; Fed chairmen Greenspan and Bernanke, who fostered our present scourge of bubble finance and addiction to debt and speculation; George W. Bush, who repudiated fiscal rectitude and ballooned the warfare state via senseless wars; and Barack Obama, who revived failed Keynesian "borrow and spend" policies that have driven the national debt to perilous heights. By contrast, the book also traces a parade of statesmen who championed balanced budgets and financial market discipline including Carter Glass, Harry Truman, Dwight Eisenhower, Bill Simon, Paul Volcker, Bill Clinton, and Sheila Bair.

Stockman's analysis skewers Keynesian spenders and GOP tax-cutters alike, showing how they converged to bloat the welfare state, perpetuate the military-industrial complex, and deplete the revenue base — even as the Fed's massive money printing allowed politicians to enjoy "deficits without tears." But these policies have also fueled new financial bubbles and favored Wall Street with cheap money and rigged stock and bond markets, while crushing Main Street savers and punishing family budgets with soaring food and energy costs. The Great Deformation explains how we got here and why these warped, crony capitalist policies are an epochal threat to free market prosperity and American political democracy.

Product Details

ISBN-13:	9781610395236
Publisher:	PublicAffairs
Publication date:	09/02/2014
Edition description:	First Trade Paper Edition
Pages:	768
Sales rank:	1,121,286
Product dimensions:	6.10(w) x 9.10(h) x 2.00(d)

About the Author

David A. Stockman was elected as a Michigan congressman in 1976 and joined the Reagan White House in 1981. Serving as budget director, he was one of the key architects of the Reagan Revolution plan to reduce taxes, cut spending, and shrink the role of government. He joined Salomon Brothers in 1985 and later became one of the early partners of the Blackstone Group.

During nearly two decades at Blackstone and at a firm he founded, Stockman was a private equity investor. Stockman attended Michigan State University and Harvard Divinity School and then went to Washington as a congressional aide in 1970. He is also the author of the New York Times bestseller The Triumph of Politics: Why the Reagan Revolution Failed.

Table of Contents

Introduction ix

Part I The Blackberry Panic of 2008

1 Paulson's Folly: The Needless Rescue of AIG and Wall Street 3

2 False Legends of Dark ATMs and Failing Banks 19

3 Days of Crony Capitalist Plunder 35

Part II The Reagan Era Revisited: False Narratives of Our Times

4 The Reagan Revolution: Repudiations and Deformations 55

5 Triumph of the Warfare State: How the Budget Battle Was Lost 70

6 Triumph of the Welfare State: How the GOP Anti-Tax Religion Was Born 87

7 Why the Chickens Didn't Come Home to Roost: The Nixon Abomination of August 1971 108

Part III New Deal Legends and the Twilight of Sound Money

8 New Deal Myths of Recovery 137

9 The New Deal's True Legacy: Crony Capitalism and Fiscal Demise 169

10 War Finance and the Twilight of Sound Money 195

11 Eisenhower's Defense Minimum and the Last Age of Fiscal Rectitude 213

12 The American Empire and the End of Sound Money 235

13 Milton Friedman's Folly: Rise of the T-Bill Standard 260

Part IV The Age of Bubble Finance

14 Pork Bellies, Floating Money, and the Rise of Speculative Finance 281

15 Greenspan 2.0 320

16 Bull Market Culture and the Delusion of Quick Riches 343

17 Serial Bubbles 361

18 The Great Deformation of Capital Markets: How Wall Street Got Huge 382

19 From Washington to Wall Street: Roots of the Great Housing Deformation 404

20 How the Fed Brought the Gambling Mania to America's Neighborhoods 425

21 The Great Financial Engineering Binge 443

22 The Great Raid on Corporate Cash 455

23 The Rant That Shook the Eccles Building: How the Fed Got Cramer'd 475

24 When Giant LBOs Strip-Mined the Land 501

25 Deals Gone Wild: Rise of the Debt Zombies 520

26 Bonfires of Debt and the Road Not Taken 537

Part V Sundown in America: The End of Free Markets and Democracy

27 Willard M. Romney and the Truman Show of Bubble Finance 551

28 Bonfires of Folly: Bernanke's False Depression Call and the $800 Billion Obama Stimulus 577

29 Obama's Green Energy Capers: Crony Capitalist Larceny 598

30 The End of Free Markets: The Rampages of Crony Capitalism in the Auto Belt 613

31 No Recovery on Main Street 631

32 The Bernanke Bubble: Last Gift to the 1 Percent 649

33 Sundown in America: The State-Wreck Ahead 672

34 Another Road That Could Be Taken 706

Note on Sources 713

Index 719

About the Author 743

Editorial Reviews

Even as he indulges his spleen, Stockman produces a persuasive and deeply relevant indictment of a system dangerously akilter.

The Washington Post - Marcus Brauchli

Stockman, Ronald Reagan's director of the Office of Budget and Management, diagnoses America's political system as a "tyranny of incumbency and money politics" in this extensive treatise. The Troubled Asset Relief Program incited him to begin this history—government interventions being antithetical to the Reaganism—but he argues that short of "sweeping constitutional change," any solution "is so radical it can't happen." Stockman's narrative holds that the government caused the "Great Recession" by saving private entities like AIG, that the roots of the 2007-2008 housing crisis stretch back to the Bretton Woods conference, and that all this behavior is a revival of New Deal Keynesianism. He includes comprehensive lists of heroes and villains; with Ben Bernanke, Hank Paulson, and Alan Greenspan all named among the latter. After several hundred pages of deep analysis, he offers 13 suggestions for a way forward, but the book, otherwise focused and provocative, can't decide whether it is a history or a policy brief; his obsession with history overtakes the need to design a future, and instead of each option receiving due consideration, they're squeezed onto the end. Since Stockman convinced us the problems are nearly insoluble, a more balanced presentation would make this a more functional document. (Apr.)

Publishers Weekly

In The Great Deformation, David Stockman – former US congressman and budget director under Ronald Reagan – tells the story of the recent crisis, and takes direct aim at the conventional wisdom that credits government policy and Ben Bernanke with rescuing Americans from another Great Depression. In this he has made a seminal contribution. But he does much more than this. He offers a sweeping, revisionist account of US economic history from the New Deal to the present. He refutes widely held myths about the Reagan years and the demise of the Soviet Union. He covers the growth and expansion of the warfare state. He shows precisely how the Fed enriches the powerful and shelters them from free markets. He demonstrates the flimsiness of the present so-called recovery. Above all, he shows that attempts to blame our economic problems on "capitalism" are preposterous, and reveal a complete lack of understanding of how the economy has been deformed over the past several decades…Thanks to The Great Deformation, not a shred of the regime's propaganda is left standing. This is truly the book we have been waiting for, and we owe David Stockman a great debt.”

Booklist
“This thought-provoking book will contribute to important debates on these issues.”

Washington Post

“Stockman produces a persuasive and deeply relevant indictment of a system dangerously akilter…. What Stockman has written is a book that makes clear we are that future generation of the past, inheritors of all the wishful thinking, simple illogic and flawed compromises that produced the near-term benefits our parents and grandparents worried about but ultimately wanted. And now it's payback time.”

Steve Weinberg,USA Today
“Stockman devotes some of the book to the past five years, joining multiple previous authors who have presented their nominations for the villains and heroes of the 2008 economic collapse. As a book critic and investigative reporter, I have absorbed a dozen of those previous books. Stockman's is my favorite because of his original research, the context he presents (starting with the economic depression of the 1930s), his former insider status, and his apparent political non-partisanship during the endeavor.”

David Weigel, Slate
“I'd read this book 10 times before I read another possible presidential candidate's memoir of how his Real American Story schooled him in the Audacity of Hope. …a coherent vision of a World Without the Fed.”

Paul B. Farrell, Marketwatch

Kirkus Reviews
“Stockman performs a real service when he debunks the myths that have been associated with Reagan's conservatism and promotes Eisenhower's fiscal and military conservatism…. Stockman forcefully conveys enormous amounts of knowledge.”

LewRockwell.com

“His rhetoric in a recent New York Times op-ed piece ignites like Seal Team Six coming at you, flash grenades exploding, assault weapons blazing. No wonder he triggers wild angry, hatred and revenge. Yes, he's a truth-teller. And truth hurts, flushing out his enemies. Why? They're sucking trillions from Americans. So you hate him. Counterattack. Big mistake. Don't dismiss David Stockman. He's no Kim Jong-Un blow-hard.”

Bruce Krasting “This is a history book. It's a detailed account of the key events since the Depression that have shaped modern finance. I love history, and I'm familiar with those events. Stockman's spin on financial history makes for a very good read. There's something for everyone.”

Reuters Breakingviews
“For anyone whose economics are Austrian, and who agrees with Stockman that crony capitalism and corruption have led both fiscal and monetary policies into a cycle of ever-increasing stimulus and ziggurats of debt, ‘The Great Deformation' is gloomily persuasive – and bodes ill for the future.”

Townhall.com
“Agree with Stockman or not, one can't deny that he's a colorful writer!”

Rick Santelli, CNBC “Squawk on the Street”

From the Publisher

Former Michigan congressman and budget director for the Reagan administration Stockman (The Triumph of Politics: The Inside Story of the Reagan Revolution, 1986) tells "the real story [of]…how the nation's conservative party fostered the great fiscal breakdown now upon the land, and got away with it." The author laments the failure of officials to permit the financial collapse of 2008 to run its course. "Had this attack been allowed," he writes, "hundreds of billions in long-term debt and equity capital that underpinned the Wall Street–based speculation machines would have been wiped out." It also would have "implanted an abiding 1930s style generational lesson about the deadly dangers of leveraged speculation." The author insists that such an outcome would have been "a good thing" as well as "profoundly therapeutic," but Stockman fails to offer convincing refutation of the argument that things would have gotten out of control. He chastises Bernanke, Geithner, Paulson and others as agents for Wall Street's financial power, but the author's narrow focus on finance does not adequately address the real threat of a plunge into a depression worse than that of the 1930s. However, Stockman performs a real service when he debunks the myths that have been associated with Reagan's conservatism and promotes Eisenhower's fiscal and military conservatism. Two such myths, which provide the framework for this massive work, are specifically highlighted. First is his analysis of "where the Reagan Revolution's fiscal math hit the shoals," leaving a legacy of permanent "massive deficit finance" and the legend that "deficits didn't matter." Second, he traces the roots of perennial deficits back to Roosevelt's decision to take the country off the gold standard in 1933 and Nixon's ending of the dollar-to-gold convertibility in 1971. Stockman forcefully conveys enormous amounts of knowledge, but some assertions will be found to be contentious.

Kirkus Reviews