David Alan Stockman: former director of the Office of Budget and Management in the Reagan administration:
The Fed has destroyed the money market. It has destroyed the capital markets. They
have something that you can see on the screen called an "interest
rate." That isn't a market price of money or a market price of
five-year debt capital. That is an administered price that the Fed has
set and that every trader watches by the minute to make sure that he's
still in a positive spread. And you can't have capitalism if the
capital markets are dead, if the capital markets are simply a branch
office – branch casino – of the central bank. That's essentially what
we have today.
The budget deficit isn't going to be addressed, and we have not had a two-way market of
supply and demand. We now have what I call a "monetary roach motel,"
where the bonds come in and never come out. I think
we're at the last days of the artificial interlude and we're going to
be entering the real days.
We're basically following the same path as the
Greeks and the rest of Europe, and there's going to be a great day of
reckoning, of reawakening. Once that starts, there could be a rapid,
severe and even violent adjustment.