Tuesday, October 20, 2015

Developed Countries Are Hopelessly And Utterly Insolvent Says Billionaire Hedge Fund Manager ...........

Developed Countries Are Hopelessly And Utterly Insolvent Says Billionaire Hedge Fund Manager  

Billionaire hedge fund manager Paul Singer, founder of the $27 billion Elliott Management, went off on central-bank monetary policy at a hedge fund conference last Wednesday.

Speaking at the inaugural Tel Aviv Sohn Conference, Singer said that since the 2008 financial crisis developed, countries had been propped up by a "cult" of central bankers.

Singer said the balance sheets of developed economies were hopelessly and utterly insolvent once long-term entitlements were added in.

Singer has previously said prices of stocks and bonds have been "distorted" by central-bank monetary policy.

And if central banks decide they need to do more — such as another round of stimulus through quantitative easing — Singer thinks everything will go to hell. 

Here's an excerpt from his fund's second-quarter letter:

Central bankers may not have the tools to combat a renewed slump. 

After all, with interest rates already at or near zero almost everywhere in the developed world, what would be the effects of new rounds of QE, other forms of money printing, or negative interest rates in more places? Is there no level of monetary extremism (a substitute everywhere in the developed world for the sound, sustainable pro-growth policies which are nowhere to be seen) that would cause a riot point in investor confidence in governments and paper money? 

Unfortunately, history has shown that governments that have abused the power to create "money" have always, eventually, paid a huge price for their profligacy. That is certainly a chapter yet to be written in this ongoing extraordinary story. Governments and central bankers need to pray (if they are not quietly doing so already) that there will not be a new recession or serious market dislocation before the economies of the developed world somehow suddenly rise with much more robust growth rates than we are seeing at present.

At the Sohn Conference, Singer recommended that investors own gold to protect against inflation. He said it was an investable asset that had been treated "unfairly." 

"Gold is the only real money," Singer told conference attendees, according to Reuters. He recommended that investors allocate about 5% of their portfolio to gold.

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