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Fleckenstein - Fed Takes Half Step, Will Be Forced to Act Again
With the Fed extending Operation Twist, today King World News interviewed Bill Fleckenstein, President of Fleckenstein Capital, to get his take on what the Fed has done. Fleckenstein was quite candid in his criticism of the Fed. He told KWN, “Bernanke has taken a half-step towards doing something aggressive,” but “The reality is the Fed’s optimism is misplaced because the Fed doesn’t understand that the Fed is the problem.” Here is what Fleckenstein had to say about today’s move by the Fed: “When we spoke after the last FOMC meeting, at that time everyone was concerned there would be no more easing of any kind because the Fed was so sanguine about its outlook. I suggested they were dead wrong about that and they would be back easing before long.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
June 20, 2012
Bill Fleckenstein continues:
“So Bernanke has taken a half-step towards doing something aggressive. The Fed has extended Operation Twist and left the door open for more. Maybe they didn’t do more because they are hoping things are going to get better here economically or because they are waiting to see what happens in Europe and they want to save some bullets.
If you think they are saving some bullets, that would mean they might be smart enough to plan in advance, which they really don’t seem to be able to do. What’s happened is they were wrong in their assessment of the economy once again. They thought it was getting better. It wasn’t....
Continue reading the Bill Fleckenstein interview below...
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“The economy wasn’t getting better because of the reasons you and I have discussed many times, having to do with the bubbles created by the Fed and the problems which have come with that. So here they are taking a step back in the direction of being easier, and they’ll probably have to get easier still.
The bubbles that the Fed created, the misallocation of capital, and the consequences of not preparing for the future, all of that together basically broke the economy and broke the financial system. They don’t understand that and the politicians sure don’t understand that. So the Fed puts some juice in the system and they get some action, but the structural problems that are still with us don’t get fixed or addressed.
Basically what the Fed is doing right now is they are monetizing. They sell bills as they buy bonds. That’s still creating money. It doesn’t do enough to fire up the animal spirits, but they have been on a path towards being easy for a very long time.
Every time they think they can stop easing and they start talking about an exit strategy, that’s flawed thinking and they wind up running back in the other direction (like we saw today). I believe we are going to eventually get to see what other tools Bernanke has in his tool kit. He professes still to have some and sometime in the next few months we are going to find out what they are.
The reality is the Fed’s optimism is misplaced because the Fed doesn’t understand that the Fed is the problem. They think that periodically bad things happen and they didn’t do enough. They don’t realize that the bad things were created by them.
Going forward, the economic data is not going to be very good, and the uncertainty through the election is not going to be helpful. So I think Bernanke will be forced to act again before the fall.”
Fleckenstein also added: “I will say this, at least Bernanke admitted today that the Fed was wrong regarding the economy. That’s something the egomaniac Greenspan never did. I don’t think Bernanke is a bad guy in the same way Greenspan is, I just think he’s misguided. Greenspan was just a duplicitous and incompetent egomaniac.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
The interviews with John Mauldin and Egon von Greyerz are available now. Also, be sure to listen to this week’s line-up of other KWN interviews which include Gerald Celente, John Embry, Bill Fleckenstein, MEP Nigel Farage, and Michael Pento by CLICKING HERE.
Eric King
