Bill Fleckenstein and Barton Biggs of Traxis Partners spoke to Bloomberg Television about the the Federal Reserve’s decision on QE2.
- 0:40 Fleckenstein doesn’t want the Fed acting as a politburo deciding interest rates in a room. He lists the reasons why: in the last 15 years the Fed blew and equity bubble, then a housing bubble, and now they want to print our way to prosperity. He refers to the FOMC members as “idiots.”
- 1:35 He then questions the hosts assessment that the market is in a good mood post QE2, saying they were right before the housing bubble and the equities bubble burst.
- 3:05 Fleckenstein says the short run policy may make people happy now, but the long run may not work. Much like the housing bubble. The money printing rally will end in disaster. This is not good policy.
- 3:50 He then says this isn’t going to be hyperinflation, but instead there will be serious inflation problems outside the CPI.
- 4:40 Barton Biggs of Traxis Partners then steps into the conversation. He asks what Fleckenstein would have done in the same situation. He notes that the Fed is doing its best to combat deflation.
- 5:40 Fleckenstein says we wouldn’t have the bubbles we had if he was Fed president. Biggs cuts him off a bit, but he goes further. He can accept that we needed to do things to fight the financial crisis. But the Fed’s job isn’t to stimulate growth. And that’s what QE2 is.
- 7:00 Barton rebuts, saying that the global economy isn’t strong. And this strategy is to fight the deflation threat. He says Bernanke is getting what he wants, a higher stock market.
- 7:55 Fleckenstein says the easy money gets markets up, but easy money doesn’t necessary solve the problem.
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