Stockman:  “The markets are just irrationally thrashing around in response to a Fed that has lost control of policy.  They have been working their way to the edge of a cliff, I think, for years now with this massive money printing, bond buying, and zero interest rates.

They are saying through 2015 we are not going to tighten the short-term interest rate, which means it will be zero for (a total of) six years.  That is just crazy, almost lunatic....

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“Therefore, the markets no longer function as honest capital markets or money markets.  They are simply a lot of boys and girls and algorithms running around trying to trade whatever they think the Fed is going to do next based on word clouds and these massive daily purchases. 

So we have a totally broken financial system and we can expect this kind of turmoil in every one of the major securities markets to get worse as we move towards the final blowoff of this third bubble that we’re in in the 21st century ... and it’s only a matter of time before this one blows as well.

The financial markets are highly dangerous and unstable ... I’m arguing that when the unwind comes it’s going to ricochet (violently) through all markets.  So therefore it’s dangerous to be in these markets, even if you can make another 2%, 4%, or 5% in the short-run before it blows.

When the markets fall apart it will be so violent and so fast that it will be very difficult for the average investor to get out of the way.  We saw that clearly in 2000, we saw it (again) in 2008.  I don’t know why this time it should be any different.  In fact it’s likely to be even more violent and more severe when the correction comes.”

Eric King:  “David, you were there, you remember what it was like in 1979/1980 when we had that mania in gold.  There was panic because people around the world thought the U.S. dollar was going into oblivion.  I’m just wondering, do we face something like that in the future?  When you talk about this event where it’s going to ricochet through all of the markets and there is going to be this tremendous violence, it almost sounds like we are going to see a repeat of that type of mania we saw in gold.”

Stockman:  “Yes, but it will be worse because then the mania was led by a Fed that was completely out of control under Burns and then Miller, and it was ultimately corrected by Volcker.  But today all of the central banks of the world have adopted the same money printing, zero interest rate policy.  Therefore this is not just an issue in the U.S. capital and financial markets, or in the dollar, instead it’s global.

Look at what the Bank of Japan is doing, and the Bank of China has also been massively printing money to peg their currency for decades.  The ECB is doing the same thing and the Bank of England is an embarrassment with the rate at which its balance sheet is expanding.

So this is worldwide, and therefore there will be a monetary breakdown, and at some point gold will be the one place that people will go to as they lose confidence in all currencies.”

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.   

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 Gerald Celente, Andrew Maguire, John Mauldin, Dr. Paul Craig Roberts, Art Cashin, William Kaye, Marc Faber, Stephen Leeb, Dr. Benn Steil, Eric Sprott, John Hathaway and Nigel Farage are available now.  Also, other outstanding recent KWN interviews include Jim Grant and Felix Zulauf to listen CLICKING HERE.

Eric King

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