"I believe we no longer have free market capitalism and we no longer have a democracy," says David Stockman, the blunt-talking former Michigan Congressman and Director of the OMB during the Reagan administration.
What now exists at the heart of the U.S. economy, Stockman argues, is "crony capitalism" - a system that benefits and even rigs the system in favor of America's banks and bankers at the cost of average Americans. It's a system built on the back of government-issued bailouts and free money. "The Fed is the great enabler" through its free money policies, which "generate results the market wouldn't otherwise provide for," he says.
For example, banks - which caused the 2008 economic and financial crisis - are enjoying profits once again as so-called "risk assets" reflate. Meanwhile, well-meaning members of the middle class intent on saving cash continue to get "savaged" (Stockman's word) when they keep money in low-yielding savings accounts and rely on a dollar that continues to lose value.
When Bernanke & Co. allow banks to borrow money at no cost for so long it turns "capital markets into a rip-roaring casino that really is not productive for the real main street economy and is generating windfall gains for to a very limited number of people for no good purpose," Stockman tells Dan Gross in the accompanying interview.
These policies are nothing new, Stockman says, but "crony capitalism" hit new levels of absurdity in the recent past with the bank bailouts and the auto bailouts.
How do we get back on track?
According to Stockman, the Fed should raise rates immediately and end the possibility of more bailouts.
Is he right?
See also: David Stockman: Deficit Reduction "Flamflam & Swindle" Taxes Must Rise