Bill Fleckenstein: All This Money Printing Is Going To Lead To "A Train Wreck In The Currency And The Bond Market"

Bill Fleckenstein

“This printing money is going to lead to huge trouble. It’s going to lead to higher interest rates. It’s going to lead to more inflation and at some point there is going to be a train wreck in the currency and the bond market.”

Market commentator and money manager Bill Fleckenstein sat down for a recent interview with and opened fire with both barrels on the Fed and the monetary policy it’s pursuing.

He and I discuss the factors that enabled Bill to be one of the first to accurately identify and warn of the housing and credit bubbles – and how history is now repeating itself via the profligate printing of US dollars.

The interview covers a wide range of topics meaningful to the investor trying to make sense of where things are headed from here – including central banking culture, bubble psychology, high-frequency trading, inflation/deflation, and the true relative value of the dollar vs the Euro.

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In this podcast, Bill sheds light on why: 

  • The culture of the Fed reinforces a belief in its infallibility. That blinds it to the fact that its interventions cause market players to adopt irrational behaviour leading to misallocations of capital that eventually need to be corrected by the system (e.g., busts). 
  • Correlation between asset classes is the highest it’s been in 60 years. This is a result of the Fed flooding the market with liquidity. It makes it very hard for investors to be anything besides speculators.
  • The SEC has been asleep at the switch for the past 15 years, leaving the system vulnerable to exploitation – if which HFT programs are just the latest example.
  • A funding crisis looks inevitable:   at some point the bond market or the currency market will revolt, resulting in a weak dollar and increasing bond rates – despite whatever the Fed wants
  • It’s perverse for the US to be rewarded for using a printing press indiscriminately without making any fiscal changes, while Europe is painfully adopting austerity and yet gets penalised.

In Part 2: Outlook for 2011 (for enrolled members – click here to enroll), Bill gets specific about what he predicts will happen in the bond and currency markets, as well as his specific outlook for 2011. 

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