As The Fantasy Dies, Panic Will Ensue & Gold Will Soar

As The Fantasy Dies, Panic Will Ensue & Gold Will Soar

Today Bill Fleckenstein warned King World News that “as the fantasy dies,” panic will ensue and gold will soar.  Fleckenstein also predicted that the staggering 24% unemployment in the United States will get much worse in the future as people realize the Fed is trapped and the great unwind finally begins.  Below is what Fleckenstein, who is President of Fleckenstein Capital, had to say in this powerful interview. 

Eric King:  “How will the economy handle higher interest rates in the long-run?”

Fleckenstein:  “It’s not going to handle it.  That’s why if the Fed tapers and the bonds start acting funny, they will end tapering because they will start thinking, ‘Geez, we can’t have this happen.’  Then, more people will see that the Fed is trapped.

The purest reading of the market’s response to what the Fed does would be if the Fed doesn’t taper, and then the bond market really doesn’t go very far and shortly starts to sink again.  Then, what will people say?

“They will only be able to draw one conclusion -- that is the fact that the Fed has overdone it.

Now, not everyone will conclude that and they won’t conclude it right away.  And the Fed will fight that, and they will keep printing, but we will be on our way to the 1970s.  Maybe people will start to look at the stagflationary environment that we actually have, the horrendous job growth, weak GDP, and inflation that’s probably twice as high as whatever real GDP is, and it will be seen as stagflation, and that will have consequences.

But right now, people continue to believe that the same idiots that created all of these problems, namely the central banks, are going to somehow get us out of it with the exact same policies that got us into it, only at a much higher (aggressive) level of pursuing those policies.

We’ve had so much artificial stimulus, and we’ve misallocated so much capital.  And over the couple of decades we’ve been doing this we’ve kind of broken the economy and the financial system.  So, I don’t think you can worry about what’s on the other side.  We haven’t even gotten people to understand the charade that we have.

What the masses have done over and over again is to believe one more time that it’s all going to be OK ... We are in a unique moment in history.  The whole world is printing confetti, and (yet) people seem to think that’s going to work out fine.”

Eric King:  “John Williams says that the real unemployment in near (a staggering) 24% in the US.  Bill, when the fantasy ends, is it going to get (even) worse?”

Fleckenstein:  “Of course.  The longer you keep pursuing insane policies, the more you pile (them) on top of each other, the worse it gets ... So, when the Fed can’t print money and we have to deal with this, it’s going to be brutal.”

Here is a small portion of what Fleckenstein had to say regarding gold and silver:  “Americans see no need to own it (gold).  We’ve got massive debasement going on around the world.  All of your listeners (and readers) understand the bull case for the metals.
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