Fleckenstein - Central Banks & The Fed Are Close To Panic

Today Bill Fleckenstein told King World News, “...the central banks of the world, and in particular the Fed, are close to where they are going to panic and do something big.”  Fleckenstein, who is President of Fleckenstein Capital, also said, “What I am salivating over is the chance to really press my gold position.  I think the next leg is going to be really, really powerful.”  Here is what Fleckenstein had to say in what turned out to be a very powerful and timely interview:  “This all-paper experiment started in 1971, when Nixon closed the gold window.  We had horrendous inflation in the 70s, Volcker came in and saved the day, and created an environment of credibility whereby Greenspan could ruin things for the next 20 years.  He (Greenspan) then passed the baton to Bernanke, who is continuing the ruination.” 

Bill Fleckenstein continues:

“That same process is going on around the globe, ex a little foot-dragging in Europe.  I don’t know what the catalyst will be (to end this), but my belief is that at some point they will all start printing money.  At some point they will recognize we are not going to have a deflationary collapse, that we are not going to have a deflationary debt liquidation, which is really meant to say a dislocation to the downside.  

It’s going to be inflation, we’re going to print money and try to inflate the debts away....

“Eventually the bond markets will say, ‘Oh my God,’ and instead of paying governments to let them lend them the money, like you now see with negative short-rates in various countries around the world, the bond market will say, ‘Hey, you are going to cheat us.  We know you are going to cheat us, now we want you to compensate us for that.’ 

And the bond market or the currency market or a combination of the two will take the printing press away.  That’s how it will end.  That will be the end of the 40 year experiment with all paper money. 

People in America today talk about deflation.  There’s no deflation.  Housing prices have collapsed, but it still costs more every year to do what you used to do.  So there’s no deflation.  There’s not going to be deflation until they take the printing press away.

I think the central banks of the world, and in particular the Fed, are close to where they are going to panic and do something big ... If we get some serious stock market weakness, on top of the economic deterioration, then I think the Fed would panic right then.” 

Fleckenstein also added: “What I am salivating over is the chance to really press my gold position.  I think the next leg is going to be really, really powerful.  When I sense that the Fed is going to pull the trigger, I’m going to make my gold investments a lot more aggressive than they are right now ... The American people are going to realize at some point they need to own gold.  

The Fed’s track record is absolutely spectacular at one thing and that is destroying the value of the dollar.  And when the Americans start stampeding in, on top of the other people, and everybody finally gets the joke, which they are all going to get before this era of central bank money printing is ended, there is going to be the big, unridable phase of the bull market in gold that’s going to take place.  That’s in front of us.  It’s probably closer than most people think.”

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/7/12_Fleckenstein_-_Central_Banks_%26_The_Fed_Are_Close_To_Panic.html