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Tuesday, March 31, 2009

Bill Fleckenstein on PPIP, inflation

MSN Money's resident contrarian, Bill Fleckenstein, has some thoughts on inflation and the Treasury's trillion-dollar toxic assets plan (aka, "PPIP") in his most recent MSN columns.

In his latest piece, "Bank plan a cure-all? Don't bet on it", Fleckenstein notes that the Treasury plan to rid banks of their most troubled assets may prove feasible if the government can convince them to start shedding a certain percentage of their "impaired" assets.

However, the very well-known problems of the financial sector may soon be overshadowed by problems in the larger economy:

"But I believe that as bad as the financial problem is, the economic problem is worse. I don't see how the Treasury's program and other facilities would alleviate the economic problem.

None of these maneuvers to plug the holes in the dike of the United States' and the world's financial systems will necessarily do all that much for the overall economy. Thus, as the pure financial crisis recedes from center stage, the economic crisis lies front and center."

Fleck also has some thoughts on the dollar, inflation, and the ultimate fate of fiat money. Here's an excerpt from, "Got gold? You're right on the money":

"I'd like to take a few moments to talk about the Federal Reserve's latest act of irresponsibility in a continuing series of irresponsible actions (i.e., buying $300 billion in longer-term Treasurys, an additional $750 billion in mortgage-backed securities and -- just for grins -- $100 billion of government-sponsored-enterprise debt).

As a friend noted, Wednesday was the functional equivalent of Pearl Harbor for the U.S. dollar and fiat currencies in general. He said -- referencing that people might pay less for their mortgages -- that they'll pay much, much more for everything else. I would certainly agree..."

Check out the full piece for Fleck's summary of how we got into this mess, and why quantitative easing won't solve our problems.

Related articles and posts:

1. Interview w/ Bill Fleckenstein - FSN via Finance Trends.

2. On PPIP and Geitner's amazing power grab - Finance Trends.