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Eric King:  “What are your thoughts on what the ECB has done here?”

Fleckenstein:  “They are trying to jump-start their economies via money printing.  They haven’t quite embraced QE, but it is important that they will now charge a fee to savers of the world.  They also have the two LTRO’s, and they are not sterilizing purchases now....

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“So it’s a variation of QE.  It’s just more of what all these central banks are doing and it is stimulative of some things.  But all of these measure are more likely to produce additional misallocation of capital than any real economic activity.  QE doesn’t work.  We can see it doesn’t work because we are 5 years into it here in the United States and the economy has gone nowhere.  But this is just the ECB following the other central banks and trying to stimulate things.”

Eric King:  “What about the impact of the ECB’s negative interest rate policy?”

Fleckenstein:  “It depends on how it filters down into the banking system.  Are some of these banks actually going to make loans?  That’s what the ECB is trying to get them to do.  That’s why they have done the two LTRO’s and the other moves they have made -- they are trying to unclog the banking system.  What’s interesting is that 5 years after 2008, the banking system is still clogged up over in Europe.  But will this create a little more economic activity?  Probably.  Will it create even more speculation?  Most likely. 

But the big story is the ECB is trying to stimulate while the U.S. is trying to taper, and at some point the market is going to hit an elevator shaft.  That will then upend all of these so-called great ideas that central banks have employed.  But until that happens, I guess people just continue to speculate.”

Eric King:  “The ECB is claiming they are trying to fight deflation in Europe.”

Fleckenstein:  “Deflation is the worst joke in the world.  If we were going to have deflation, we would have had it in 2008, 2009, and 2010.  We didn’t.  If the stock market goes down, that’s not deflation.  If the real estate market goes down, that’s not deflation.  If most everything goes down against your currency, that’s deflation.

Does deflation tend to be associated with periods of economic depression?  Yes, but not always.  Productivity and advances in electronics cause the price of electronics drop all the time but people don’t call that deflation, especially when the cost of everything else people buy is rising in price.  Deflation is not anything to fear.  A depression is something to fear, but they are not synonymous and that’s the mistake a lot of people make.

The problem we have in the world is these idiot central bankers.  They make mistakes and then they try to fix their mistakes by doing what they already did but only in bigger size, and we are in the third iteration here in the United States.  This won’t work, but until it doesn’t work the central banks and the public believe that driving markets artificially higher is something positive.  Remember, in 1999 we had the ‘New Era.’  And then we had the real estate boom that central banks thought was so great.  It’s just nonsense.

And the fear of deflation is really  that the consequences of these burst bubbles could lead to depressions and deflation.  But this will not happen, yet, with activist central banks and a fiat currency system.  So the headlines everywhere about fears of deflation are just crap.  All of these guys are inflating by debasing their currencies and then the mainstream media runs headlines about deflation.  It’s hysterical to some degree, but despite all the misplaced hope, it will end very badly at some point.”

IMPORTANT - KWN will be releasing many more interviews today.

© 2014 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 David Stockman, Bill Fleckenstein, MEP Nigel Farage, Michael Pento, Dr. Paul Craig Roberts, Gerald Celente, John Mauldin, Eric Sprott, James Dines, Andrew Maguire, Art Cashin and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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