Gary Kaltbaum on Breitbart News Radio: Markets Are Crashing As Fiscal Steroids Wear Off

The Associated Press
The Associated Press

Gary Kaltbaum, president of Kaltbaum Capital Management and a Fox News contributor, appeared on Breitbart News Saturday to discuss the state of the economy. He advised against buying into the media spin that recent economic news has been good for the Obama legacy.

“Let me be clear about one thing: if George Bush was still president right now, the media would be talking about we’re in a depression, and I mean that seriously,” said Kaltbaum. “But since their guy is running the show, everything’s fabulous. But everything isn’t.”

The best analogy I can give you is the professional athlete who decides to do steroids,” he said about the state of the economy.  “What he basically does is make himself faster, stronger, everything quicker in the short run, in order to make things look better, do better, get bigger contracts… and then, of course if you put that to politics, get elected.  But eventually steroids have a diminishing return, and eventually all heck breaks loose as things start to shrivel.

He compared the past seven years of President Obama’s economic policies to an athlete pumping steroids, then hitting that point of diminishing returns: “This President, $8.4 trillion of new debt flushing itself into the economy, and central banks that have printed $5 trillion of money to help out. But this is all a mirage and can never last long-term, but can keep things afloat. What’s happening now is, we’re getting the diminishing returns, and you’re seeing a GDP number that’s basically flat here.”

Kaltbaum found it disingenuous of the President to congratulate himself on a dip in the headline unemployment rate last month, a figure that measures only the success of active job seekers, when the overall labor participation rate has “crashed” during his presidency.

“The unemployment rate is really eight percent, and now, the economies here and around the globe are heading south because of those diminishing returns,” he warned. “Markets around the world are imploding right now, and they’re a very good forecaster of things to come.”

Breitbart News host Stephen K. Bannon brought up an alarming Citicorp report this week, which portrayed the world as teetering on “the edge of potentially an economic and financial collapse,” which tracks with warnings Kaltbaum was issuing several months ago. Kaltbaum said he was surprised a big company like Citicorp would issue such a dire proclamation.

“You have what is known as simple deflation in everything except your health insurance bills,” he explained. “Deflation simply means that people are selling everything, and nobody wants to buy, and anybody who’s thinking of buying is waiting, because they know things are going lower.”

Kaltbaum noted that the worst areas of the market lately have included retail sales and automobile sales, which have both been “crashing,” while the strongest stocks are “recession-resistant” areas such as food and household goods.

“The markets are yelling and screaming right now that the economy, not only here but across the globe, is basically falling off a cliff right now, and I’m not so sure there’s any net underneath to save us,” he said.  “I’m keeping my fingers crossed that there is, but I’m not so sure at this point in time.”

Kaltbaum noted there has been plenty of Republican complicity in running up the national debt: “You can’t get to $19 trillion in debt without both parties, and there was a massive debt buildup under Bush.  But of course, Barack Obama gets the championship belt since he’s been president.”

He strongly disagreed with the attitude among almost all Democrats, and many Republicans, that government debt isn’t a big problem, comparing it to the kind of thinking that leads people to ruin with gambling, drugs, and other addictions.  At each milestone on our path to $20 trillion in debt, the political class has decided everything seemed to be working all right, so they could get away with throwing another trillion dollars on the pile.

“The problem with debt, as you go throughout the history of every country that got out of hand with debt, is there’s always been a debt implosion,” Kaltbaum said.  “Now, in places like Greece, where they can’t print money, they get in big, big trouble, and they have to refinance their debt, they have to go into bankruptcy, they have to screw the bondholders.  Here, all we’ve been able to do is print money to get ourselves out of trouble, but that’s in the short run.  My big worry is the long run.  What is the ultimate outcome of a country that continues to spend itself into debt and not even talk about it?”

He found it astounding that any media organization could report on supposedly good economic news, such as last month’s job report, without mentioning the incredible amount of government debt that has been accumulated during the Obama years.  With a few exceptions, such as Neil Cavuto of Fox News, the media has simply stopped talking about the national debt and its ramifications.

The media has also done a poor job of explaining the dangers of deflation, which might be the catalyst for the looming global economic meltdown.  Kaltbaum noted that casual news consumers might be tempted to view deflation as a positive development, because it brings retail prices down… but it also begins depressing wages and wiping out jobs, as corporations struggle to turn a profit.  As business operations close down and jobs are eliminated, few consumers with less money to spend leads to another round of deflation – a vicious cycle that can swiftly consume even an economy as large as America’s.

“Just keep in mind, this has all occurred because the central banks – not only here, but the lemmings around the globe – refuse to get out of the way of the great and hard work of the American people,” Kaltbaum charged, nothing that government spending has risen from about $1.8 trillion at the end of the Clinton presidency to $4 trillion today.  That’s an enormous sum to transfer out of the private sector, and into the hands of “inefficient, ineffective” government that doesn’t care about how much money its operations lose.

He warned that central bank support for the housing and stock markets was ending, and when the housing market collapses again, we will lose the “wealth effect” – the ability of poor and middle-class Americans to build positive net worth by purchasing a home.

Kaltbaum faulted the activist Federal Reserve that began under Alan Greenspan for trying to become “the heroes of the world,” by propping up the economy with easy money policies.  “We would not have had the housing bubble without Alan Greenspan and Ben Bernanke,” he said, because easy money made it possible for unqualified borrowers to take out huge loans.

“Ben Bernanke, the same guy who was the cause of the problem, was looked to for the solution,” Kaltbaum marveled.  “So not only did he go easy with zero percent, he decided to print four, five trillion dollars of money, which is just asinine, which led to all these other central banks printing money.”  He figured the total amount of money printed around the globe since the 2008 financial crisis would add up to fifteen or twenty trillion U.S. dollars.

The return of low interest rates for unqualified buyers threatens to create another loan bubble in Kaltbaum’s opinion.  “My big point is, they never stop interfering with A, our hard work, and B, the fear and greed of investors to do what they want to do in the markets,” he said.  “It’s a never-ending cycle of interference by these ex-tenured professors that have never worked a day of their life in the real world, never hired anybody, and don’t have any understanding of the markets.”

A particularly galling example of such interference was President Obama’s proposal for slapping a huge new tax on oil, at a moment when low prices have finally given middle-class consumers a break.  “It’s just amazing to watch how he works against the American public, literally on a daily basis,” said Kaltbaum.





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