Still printing money at full speed

By Bill Fleckenstein

A year after the market bottom, fear has faded, and stocks are up. But what happens if the printing presses stop rolling?

It's hard to believe a whole year has passed since we saw the market lows.

Obviously, there was a tremendous amount of fear at this time last year, but money printing by the government and the Federal Reserve has worked its magic, and stock prices have done what they have done.

That, compared with the weak job market, makes for quite a large dichotomy. Indeed, the scope of economic problems that need to be dealt with is still enormous.

Of course, because expectations were so dismal a year ago, a certain amount of improvement was due to take place.

Although central banks worldwide are beginning to contemplate removing the liquidity they've created, none of it has been removed thus far. If anything, backpedaling has been the order of the day.

We will soon see how far the Fed can go in its attempts to stop its quantitative easing, which has meant buying Treasurys and other assets to put money directly into the economy.

Which sort of leads us to Greece and the paradox known as the euro.

They've got only a garlic press

For many years, I and others thought that when times got tough, it would be virtually impossible for the European currency to hold together. That's because of foreseeable problems like the Germans not agreeing with the Greeks (as we're seeing now, in just one of any number of examples we could use). On the other hand, there is an attractiveness about the euro: No member country of the European Union can print it. And membership does come with rules, even if they are somewhat flexible.

The EU is doing exactly what it should do as its attempts to make Greece behave in a sensible fiscal fashion. Yet, as Portugal, Spain, Italy, etc., deal with their own fiscal imbalances, it's hard to see how the euro will manage to come out the other side intact.

My reason for delving into this subject: If one looks at the dollar, it's a piece of paper that answers to no rules. None, period.

Can you imagine the uproar in this country if the president proposed the sort of budget cuts and tax hikes that the Greek government is proposing, and that have Greeks taking to the streets? (That is not to say the Greeks don't have a lot of fat to cut.) But neither the president nor Congress will propose anything like that. It's the pressure being applied to the euro because of rules that is getting Greece to act. And, to repeat, we have no rules for the dollar.

So, as poor a currency as some folks want to believe the euro is, the dollar is that much worse.

The printing-press hangover

At some point, the consequences of money printing run amok will be forced upon us, and they will be painful. It will happen when the world funding crisis now playing out elsewhere eventually hits our shores. Quite likely, the United Kingdom will be the next to be taken to school. (For details on the U.S. funding crisis I expect, read "The next crisis has already begun.")For now, stock bulls have reason to cheer on "the copious amounts of money being created from thin air by the world's central banks. Money printing plus imagination are potent forces that can't solve our problems but can affect the stock market in such a way as to make it appear that the worst has passed." (From my April 6, 2009, column, "A bear rally in bull's clothing?")

In deference to those forces, I followed up with these comments: "Throughout the recent stock market rally, I have proclaimed my agnosticism about what might happen next, although I've been leaning toward the fact that money-printing may make stocks go higher (and thus have not wanted to be short)." (From an Aug. 13, 2009,

It seems that the view of billionaire commodity pro Jim Rogers is remarkably similar. That observation comes by way of a couple of interviews he's done with the Wall St. Cheat Sheet.

In a December conversation, he first took on suggestions by economist Nouriel Roubini, known as "Dr. Doom," that risky financial bubbles are building in the gold market and in China:

"I am flabbergasted at Mr. Roubini's comment about (gold and China) bubbles because there is not a single market in the world making all-time highs except gold, U.S. government bonds, cocoa and the Sri Lankan stock market. That's hardly reason to call for a bubble. So, I am most perplexed about this alleged bubble which is out there."