Tuesday, July 23, 2013

Ben Bernanke Is Going to Blow Up the House

"What all this clearly demonstrates is that everywhere you look, the language emanating from governments and central banks is becoming more and more difficult to sort out; and I am afraid there is a very simple reason for that: they have ventured into uncharted realms and have absolutely no idea how they will ever find their way back.

"The one thing I am certain of, though, is that the trip our so-called leaders are taking us on will end in disaster, and perhaps by using a disastrous outcome as the cipher key we may find that all the symbols fall neatly, if disturbingly, into place."
Grant Williams, chief investment strategist for Mauldin Economics

"Thus, when I contemplate the amount of damage that will be done by four years (and counting) of QE, I really just shudder in wonder at how big the disaster might be, though there is no doubt it will be a disaster. The Fed has expanded its balance sheet to $3.5 trillion and now owns over 20% of outstanding U.S. debt.

"Either it is going to continue to buy bonds forever, which is impossible, or there is going to be a massive dislocation at some moment in time because someone else is going to have to buy that debt when the Fed ultimately stops, even if it doesn't choose to sell anything (and just lets the debt run off). There will be no painless extrication from QE, and as I have said, I don't believe the Fed will be able to leave ZIRP willingly."
Bill Fleckenstein of Fleckenstein Capital