On March 30, the New York Times published an opinion piece by David Stockman, Ronald Reagan's budget director, and the article has set off a firestorm of discussion about America's economic future. Mr. Stockman presents a case that culminates in the economic collapse of the U.S. He rightfully puts forth different reasons attributable to both political parties, but there is a common theme.
Foundationally, he lays the blame on our departure from the gold standard and an unrelenting monetary printing press that is giving us only the appearance of economic growth. Underneath there is a decay of the middle class that will eventually undermine the entire economic system. It is a dark piece, but insightful and well worth the read.
There are valuable statements to be sure; for example, he flatly states, "The modern Keynesian state is broke and paralyzed." He is also correct when he writes that the Main Street banking system was never in serious jeopardy in 2008 and that all the bailout activity -- at the expense of U.S. taxpayers -- was for the benefit of Wall Street.
ITR Economics has been warning people about the coming Great Depression. The ideas discussed in Mr. Stockman's article are wholly consistent with our long-range forecast. The Great Depression will show where the State has failed in its promises, and it will hopefully provide an opportunity for business and not-for-profit groups to show that they have not failed society.
Business leaders will employ as many as needed, provide for the community as best as they can, and slowly rebuild the economy wrecked by Keynesian methodology. Capitalism, it is hoped, will be seen as a system that "works" and "provides" for people because it creates opportunities for improving the standard of living.
A fuller treatment from ITR Economics on the themes from Mr. Stockman's article will appear in this month's edition of our ITR Advisor. Brian and I are also writing a book on the coming Great Depression. We will present its causes and more importantly, how different people of different ages can successfully prepare for the event. Critical thinking and planning now will save you and your business from the economic hardships we see down the road.