Book review: Bursting America’s bubble

Book review: The Great DeformationDavid A Stockman is well-placed to write with authority on America's recurring financial bubbles, says Matthew Partridge.


By David A Stockman

Published by PublicAffairs

"Most 742-page jeremiads aren't much fun to read," writes Daniel Gross on The Daily Beast. But David Stockman's The Great Deformation is an exception. The ex-congressman and Ronald Reagan-era budget official's "revisionist history of the past 100 years of capitalism American-style, is a spirited, occasionally gleeful skewering of many of our most widely held assumptions and most lionised figures", by a man who "knows the world of which he writes from the inside out".

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The broad argument of the book, notes Marcus Brauchli in The Washington Post, is that since America abandoned all vestiges of the gold standard in the 1970s, loose monetary policy, chronic deficits, and a tax system that encourages speculation have resulted in recurring financial bubbles.

These include "the bubble in global oil and commodity prices in the 1970s, then the bubble in US stocks in the 1980s, the Tokyo bubble of the late 1980s, the Asian bubbles of the 1990s, the tech bubble at the millennium and finally the housing finance bubble that imploded so catastrophically in 2007".

The fact that on each occasion the world's central banks have just "doused the smouldering ruins with a flood of yet more cheap cash" has "softened the earth for the emergence of the next asset bubble".

Despite his background as a Republican, Stockman isn't out to score partisan political points, says Gross: "Few escape his opprobrium current and past policymakers, Roosevelt and Reagan, Democrats and Republicans, leveraged buyout titans, and corporate CEOs". And it's a powerful argument, which has won the book many admirers.

Stockman's scholarship is "top-notch", says Russell Winter in The Wall Street Examiner. The book packs in a "tremendous amount of highly informative historical context". Stockman "brilliantly connects the dots as to why the economy is functioning poorly and paints a picture of a future that will only become worse". It's good to see that "someone of influence finally had the fortitude to say what needs to be said".

Of course, not everyone agrees. "Some [of Stockman's] assertions will be found to be contentious," writes Kirkus Reviews. The book is certainly not without its flaws, says Brauchli. Stockman "has a curious predilection to believe conspiracies and assume the worst motivations in many people he writes about".

And surely, contrary to what he argues, "massive job losses, a non-functioning financial system and a shell-shocked nation aren't constructive', even if they might finally stir policymakers to consider another path". However, in all, this is an argument "worth hearing and heeding".

The Great Deformation by David A. Stockman. Published by PublicAffairs (£19.99).

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri