Fleckenstein: Global Mimics of US Economic Policy Are Doomed to Same End Result

Tuesday, 14 May 2013 07:54 AM

By John Morgan

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Central banks around the world are pursuing the same wanton monetary policies as the United States, and the result will mean widespread financial ruin, according to veteran hedge fund manager Bill Fleckenstein.

Fleckenstein, proprietor of Fleckenstein Capital and author of "Greenspan's Bubbles: The Age of Innocence at the Federal Reserve," wrote in a contributor column on MSN Money that investors have been conditioned to ignore the perils of government fiscal policies.

"Inflation, dislocations in stock and bond prices and instability of financial institutions are all problems more likely to mount as a result of Fed policy. Yet, since stock markets continue to rise (on weak fundamentals) and there is no widespread concern about inflation (yet), many investors seem content to believe that our problems are being resolved," he said.

Editor's Note:
Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

The recklessness of central bank policy extends beyond American borders, according to Fleckenstein.

"In addition to rampant money printing by the Fed, the Bank of Japan, the Swiss National Bank, the Bank of England, the European Central Bank (in word, if not deed) and, just last week, the central banks of Australia and South Korea have all joined the party."

The amount of global monetary stimulus is "unfathomable," Fleckenstein noted.

"It would seem that world governments are in the process of concluding that their stimulative policies are solving all problems and have no negative consequences (thus we are going to see more of them)."

Because the U.S. stock market is exploring new highs even as the nation runs trillion-dollar deficits, Fleckenstein explained that European governments in particular are encouraged to follow suit.

Fleckenstein endorsed similar conclusions of another well-known hedge fund manager, Paul Singer, whose comments were recently published by Zero Hedge.

Singer said the Fed is "lost in the wilderness" and that the U.S. financial system has surpassed the ability of the central bank to understand it.

Under Fed Chairman Ben Bernanke, the central bank has become the province of an "ineffective collection of frantically flailing, over-educated, posturing bureaucrats engaged in ever-more astounding experiments in monetary extremism," Singer wrote.

Bernanke's policy path "is one of lower and lower discipline, less and less conservative stewardship of the precious confidence that is all that stands between fiat currency and monetary ruin. Monetary debasement in its chronic form erodes people's savings."

Fleckenstein concluded: "It is impossible to say when all this will unravel, but one thing I am certain of is that those who think it won't be painful are in for yet another rude surprise."

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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