Paul Singer: The financial system isn't more sound than it was during the crisis
Hedge fund billionaire Paul Singer, the founder of $34 billion Elliott Management, doesn’t think the financial system in the U.S. is safer than before the financial crisis.
“I’m very concerned about where we are in terms of the financial system, the economy, the American economy, the global economy,” Singer said at the Bloomberg Invest Summit.
He went on to slam the last 9 years of monetary policy or what he regards as “monetary extremism.” In his view, quantitative easing and near-zero interest rates combined with “growth suppressant fiscal policies,” regulatory and tax, have made for unnatural economic growth.
“I think it’s created a distorted recovery that’s been partially responsible for this augmentation, exacerbation of inequality,” Singer said. “A combination of that and an incomplete recovery — has caused this middle class stress and edginess around the world, which has led to some fringe parties, fringe thoughts, populism.”
He added that the last 9 years has created an “artificial levitation” of financial assets such as high-end real estate and art, a.k.a. “things rich people buy.”
“I think what we have today is a global financial system that is just about as leveraged and in many cases more leveraged than before 2008,” Singer said. “I don’t think the financial system is more sound. I don’t think the fixes that have been put into place have actually created a sound system.”
He doesn’t believe the confidence is justified in policymakers and in central bankers.
“And the fact confidence has not been lost up to now is obvious, but if and when confidence is lost, I think it could be lost in a very abrupt fashion, causing conceivably a raucous in bond markets, stock markets.”
Singer noted that he doesn’t let these sorts of views affect his desire to be hedged all the time. While he’s concerned about the state of things, he’s not betting that a downturn is imminent. He told the audience he never makes massive bets on the timing of bear markets.
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Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.
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