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David Stockman: Unfiltered

David Stockman
AP
David Stockman

I got a harsh—if not intriguing—wake up call from former Republican David Stockman this morning. The man doesn't hold back, even pre-caffeine.

We’re doomed on both sides of the pond, he told me on the set of “Worldwide Exchange,” and he didn’t hold back in name-calling the “lunatics” responsible for our global fiscal mess—especially the EU and the IMF.

In Europe, Stockman raged against a dichotomy of tax and debt slavery created by the EU: “They're attempting to go turn the prudent Europeans of the north into permanent tax slaves in order to bail out the big banks in France and Germany and elsewhere who don't deserve a bailout,” he said, adding that, “In order to accomplish that, they will attempt to turn the millions the of people who live in southern Europe into permanent debt slaves in order to pay the piper from the guarantees coming from the north.”

Gloomy. And as the adage goes—for Stockman anyway—history repeats itself, a fact that we can’t afford to overlook. “I don't think that's viable. I don't think anyone with a real political sense of history thinks that that can go on year after year,” he said.

His outlook for the United States wasn’t any sunnier, and he called out the IMF on its recklessness in contributing $7 billion to the first round of the $40 billion EU bailouts when we’re already bankrupt.

“Last week, we had the Republican ad committee cutting a program for poor infants and women by 35 percent, and yet we're going to spend $7 billion, send it to the EC bureaucrats so they can shovel it out to the big banks in Europe and make sure that Joseph Ackerman still gets his bonus?”

Ouch. He said that this careless “shoveling” of money could lead to a default here in the U.S.— and suggested that the first default will be on our payments to the IMF. He told me about a "Bernanke put option,” where investors are banking on the Fed to not let us fail—but trade is too crowded.

“The IMF is an absurd institution,” he said. “It's destructive. It's the source of holding this whole thing together with bailing wire.”

“And the sooner their number is called, he said, “The better off I think we'll all be.”

So what would Stockman do if he were still in Washington? First off, as an investor, he’s short bonds and warned me of “bond Armageddon,” where rates could potentially go up to five percent. He told me he’d expire the Bush Era tax cuts and raise taxes—including a switch to means testing where the more you make, the more you pay. He’d also cut defense spending— after all, he told me, "Osama is dead!"

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