Central Banks Caused Inflation, Debt Ceiling Deal Is ‘Total Scam,’ Reagan Economist David Stockman Says

The inflationary environment gripping the U.S. and global economies was driven by central banks worldwide distorting the economy through fiat credit expansion, resulting in sky-high inflation and financial bubbles, according to David Stockman, the former director of the Office of Management and Budget under President Ronald Reagan.

During the coronavirus pandemic in 2020 and 2021, governments and central banks unleashed immense fiscal and monetary stimulus and relief packages, flooding the marketplace with trillions in liquidity. Then, after claiming that high inflation was transitory, policymakers abandoned this view, reversed course, and raised interest rates from historically low levels.

“So you have to understand that the big problem in the world today is the Fed, the central banks, all of them have sort of gotten in some big money printers’ convoy,” Stockman said on EpochTV’s “American Thought Leaders.”

The Fed has boosted the benchmark federal funds rate by 500 basis points since March 2022, up from nearly zero. The tightening cycle lifted the target range to its highest level since the global financial crisis in 2008. Other central banks, from the Bank of Canada to the European Central Bank, have adopted similar tightening mechanisms.

Because of everything that has transpired before, during, and after the pandemic, Stockman recommended a “house cleaning from top to bottom” at the Fed and other central banks.

“None of this was really sustainable,” he said. “It didn’t represent what I would call sound economics, or sound money, or sound public finance. It was all kind of a fantasy. And now you’re going to have to deal with the consequences.”

The House of Representatives passed the bipartisan debt ceiling agreement crafted by President Joe Biden, House Speaker Kevin McCarthy (R-Calif.), and their teams of negotiators. It would suspend the debt limit through Jan. 1, 2025.

Seventy-one Republicans and 46 Democrats opposed the Biden-McCarthy package. Members of the GOP caucus argued that it doesn’t go far enough; the progressive wing of the Democratic Party countered that it went too far.

Stockman, the bestselling author of “The Great Deformation” and “The Great Money Bubble,” described the plan as “a shell game” and “a total scam.”

“They didn’t save anything. They actually spent a lot more money to save a little bit,” he said. “But on net, in terms of the big picture that we’re talking about here, it’s a total scam. This is what the bill is riddled with: scams. Scam after scam conjured up. That’s all there is in here.”

But Stockman said he doesn’t think this package addresses the fundamental long-term contributors to the budget and drivers of the national debt: defense, entitlements, and interest.

“That’s over 85 percent of the entire projected spending stream of $80 trillion over the next 10 years,” Stockman noted, adding that these measures “accomplish a rounding error at best.”

It will also be difficult because of the “self-licking ice cream cone,” as officials will continue to justify spending money to support a cause, which is “the problem that we have today,” he said. The only way to rectify it is through grassroots political revolution and imposing term limits—Stockman proposes six years in the House, one term in the Senate, and six years for a president without reelection.

“That is a sweeping change,” Stockman said. “That is a change in the basic rhythm and structure of how our political system works. And it may sound a little radical and impossible, but unless we do something like that, the system isn’t going to change.”

The debt limit bill will now head to the Senate, and leaders are urging the upper chamber to pass the agreement as soon as possible.