Eric King:  “This disaster that you’ve described, how will it be different than what we went through in the 1970s, when inflation was roaring and gold went up 25-fold?”

Stockman:  “There was a different issue then (during the 1970s crisis).  (Today) this central banking disaster is not only a United States problem -- it has spread to the entire world.  All of the central banks are doing the same thing....

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“Massive central bank intervention to prop-up risk assets is being done by all of the central banks of the world.  In fact, the Bank of Japan is even worse.  The ECB is doing it, the Bank of England.  The Chinese central bank has been doing it for decades.

So this time the disease, the outbreak of destructive central bank policy, is global.  That wasn’t true in the 1970s.  In the 1970s it was led by the Fed, once it was unshackled from the Bretton Woods system and the discipline of the Gold Standard in August, 1971. 

It (the Fed) massively expanded credit in the US economy.  It did start an inflation of goods and labor prices that led to the great inflation, and then (there was) the trauma of trying to stop it, both in the 1975 recession, and then the big one that Volcker finally stood up to in 1981.

The financial markets actually lagged behind the goods inflation in the real economy.  Therefore, we didn’t have disastrous crashes, although gold soared.  I think that is a much different scenario than we face now.  Instead, the inflation has gone into financial assets. 

It has spread worldwide and that’s why we can see evidence of bubbles everywhere, and evidence that bubbles are beginning to burst, starting with the emerging market economies.  We have had, since the taper talk started, disasters unfolding in India, Indonesia and Turkey.

So it’s a very different circumstance, but this time the heart of the distortion is in the financial markets and in asset inflation.  In the 1970s it was in the real economy, goods and labor inflation.  What we have now is far more destructive, far more destabilizing in terms of how the correction plays out vs what we had in the 1970s and early 1980s -- which was bad enough.”

Stockman added: “I do know that when people lose confidence in government money, and in the government state run monetary regime, they will look for a safe haven.  That was obviously gold in the 1970s, when inflation, which historically, in peace time, never registered at more than 1% or 2%, suddenly shot (up) in the early and mid-1970s into the double-digit range. 

That was shocking to the world then, and so there was a massive flight into gold as a form of protection or safety.  I think that will eventually happen this time around (as well).”

IMPORTANT - The information above is only a small portion of what Stockman had to say in his extraordinary audio interview.  The KWN audio interview with David Stockman discussing financial collapse, a coming flight to gold, the end game and more is available now and you can listen to it by CLICKING HERE.   

UPDATE - This is Part II in a series of written interviews which have now been released with David Stockman. 

David A. Stockman: Former Dir. of the US Office of Management and Budget, Economic Policy Maker, Politician, Financier & Acclaimed Author of New York Times best-seller, “The Great Deformation: The Corruption of Capitalism in America. To order from Amazon CLICK HERE.

© 2013 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 audio interviews with Bill Fleckenstein, David Stockman, Robin Griffiths, Jim Grant, Gerald Celente, William Kaye, Dr. Paul Craig Roberts, Chris Powell, Michael Pento, Eric Sprott, Andrew Maguire and Grant Williams are available now. Also, other recent KWN interviews include Marc Faber and Felix Zulauf to listen CLICKING HERE.

Eric King

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