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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?....

Continue reading the Bill Fleckenstein interview below...


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“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 is 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. 

I think the bear market that had been going on for a couple of years ended in late June, and now it’s the early stages of a bull market (in gold).  When it is going to do something more sensational on the upside I can’t say.  We’ve rallied 20% off the bottom, and now gold is backing and filling. 

What will be the catalyst for the next leg up?  Probably something that revolves around the FOMC Meeting.  Either they (the Fed) will taper slightly and the market will go down a little, or not if people realize that the tapering has (already) been discounted.  Or they won’t taper and people will finally realize how trapped they (central planners) are, and it (gold) will go wild (to the upside).

The fact of the matter is Americans, in the aggregate, don’t see any reason to own metal.  They believe in the lunatics at the Fed, and the rest of the Western world is that way (as well).  Obviously Asia doesn’t quite see it that way.  But it’s understandable why the average American doesn’t buy gold -- If they believe in a fantasy, why would they need it?  As the fantasy dies, then they will understand the need to own gold.”

© 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.

IMPORTANT - This was one of Bill Fleckenstein’s best audio interviews ever.  The above section was just a small portion of what Bill had to say as he discussed the coming financial chaos, gold, silver and much more.  The extraordinary audio interview with Bill Fleckenstein is available now and you can listen to it by CLICKING HERE. 

The audio interviews with Bill Fleckenstein, Pierre Lassonde, Dr. Paul Craig Roberts, Art Cashin, James Turk, Eric Sprott, Egon von Greyerz, James Dines, William Kaye, Hugo Salinas Price and Marc Faber 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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