This page has been archived and commenting is disabled.

The "Do-Over" - Groupthink, Mass Delusion, And "Hell To Pay"

Tyler Durden's picture




 

Authored by Paul Singer, excerpted from Elliott Management's latest letter to investors,

As this letter is written, stock markets around the world are at or near all-time nominal highs, while global interest rates hover near record lows. A flood of newly-printed money has combined with zero percent interest rates to keep all the balls suspended in the air. Nonetheless, growth in the developed world (U.S., Europe and Japan) has been significantly subpar for the 5-1/2 years following the financial crisis. Businesses have been reluctant to invest and hire. The consumer is still “tapped out,” and there are significant suppressive forces from poor policy, including taxes and increased regulation. Governments (which are actually responsible for the feeble growth) are blaming the shortfall on “secular stagnation,” purportedly a long-term trend, which enables them to deny responsibility. As long as the politicians who encouraged and enabled consumers to take on too much debt before 2008 think they can ascribe the failure of bad government policies to the market system or exogenous factors, there will be an ample supply of such theories, which in all likelihood will lead to more bad government policies.

The orchestra conductors for this remarkable epoch are the central bankers in the U.S., U.K., Europe and Japan. The cost of debt of all maturities issued by every country, corporation and individual in the world (except outliers like Argentina) is in the process of converging at remarkably low rates. In Greece (for goodness sake), long-term government debt is trading with a yield just north of 5%. In France, 10-year bonds are trading at a yield of 1.67%.

Are these (and other) financial asset prices the result of the final and conclusive achievement of knowledge by world leaders about how to achieve strong, sustainable economic growth with uniformly low inflation and continued unshaken confidence in paper money into the long mists of the future? Wouldn’t that scenario be wonderful, and wouldn’t it be a perfectly justified extrapolation of the miraculous modern scientific wizardry that has given us tiny devices that fit in the palms of our hands and can tell us the history of the Spanish Civil War, make movie reservations and hail a cab while showing us on our little screen as it approaches?

Sadly, financial market conditions are not the result of the advancement of human knowledge in these matters. Rather, they are the result of policymakers engaging in groupthink and suffering from a mass delusion. By reducing interest rates to zero and having central banks purchase most of the debt issued by their respective governments, they think that inflation can be encouraged (but without any danger that it spins out of control) and that economic activity can thereby be supported and enhanced. We are 5-1/2 years into this global experiment, the kind that has never been tried in its current breadth and scope at any other time in history. Excuses by government leaders for the meager growth are easy to make (and some even contain nuggets of truth), but the bald fact is that the entire developed world is growing at a sluggish pace, if at all. But governments, media, academics politicians and central bankers refuse to state the obvious conclusion that their policies have failed and need to be revised. Instead, they all state, with the kind of confidence only present among the truly clueless, that in the absence of their current policies, things would be much worse.

This is ridiculous, but this is the state of affairs in this enlightened internet age when about a billion people around the planet are never more than ten seconds away from access to all the books ever written. The voices arrayed against the fetid mix of developed world policies are few, and they are drowned out by the loud roars of approval. After all, who does not like rising stock and bond prices and a recovery in real estate markets? And when the government tells you that this excess is all necessary and “working,” and central banks with their impenetrable and obscure verbiage lend an academic gloss to the tale, there is a hypnotic and tranquilizing effect that results from the seeming stability of it all. To be sure, the current comatose volatility in global markets all but whispers, “What are you worrying about?” to anyone who thinks something is deeply wrong with the combination of growth-suppressive policies, open-spigot money-printing and zero percent interest rates.

But it is worth worrying about the economy and the global financial system. The apparent stability of the world financial system is superficial – financial asset prices are not real, the equilibrium is temporary, the lack of volatility is a trap, and when the whole thing goes haywire, there will truly be hell to pay. Investors are “seeking yield” now in assets of lower and lower quality, with more and more leverage, and with less and less yield to compensate for risk. At the moment, investors engaging in this endeavor do not see any clouds on the horizon, and there is no major currency that has (yet) lost the confidence of investors, no major country which has (yet) lost the confidence of its people, and (despite the fact that some marginally-radical groups have gained a little bit of traction) nothing that would qualify as major social unrest in the developed world.

The policies that could generate much stronger growth are not unknown, nor are they complicated or arcane. Attractive tax regimes, understandable and efficient regulatory designs, the rule of law, solid infrastructure, low corruption and crime, a population of educated and willing workers, reasonable employment rules, low tort litigation risk, good educational systems, intelligent approaches to energy and the displacement caused by technological advancement, and policies that foster entrepreneurship, create attractive places to live, work and form or expand businesses. Progress in these areas creates virtuous cycles, attracting people who can reinforce and amplify the positive results.

None – we repeat, none – of the leaders of the developed world are pursuing the policies described in the preceding paragraph. The explanation for this failure involves plenty of blockheadedness and myopia, but there are two additional poisonous elements at work here: arrogance and ideology.

As for arrogance, the notion that their countries may be coasting on the glories of the past while heading for dim futures does not seem to occur to these policymakers. They point to the structures and forms built stone by stone in the construction phase of their civilizations as if those elements do not need protecting and refurbishing – and as if other people, countries and cultures were not breathing down their necks, wanting the same standard of living and competing in the same global markets for the growth that can generate those standards of living. All of the developed countries (either now or soon) need to compete in the global marketplace and not just rely upon cloistered internal markets for growth and prosperity. Furthermore, every country should provide the conditions for giving its citizenry the best chance possible of generating growth through the miracle of human creativity – the growth that comes from nothing more than a spark of invention or entrepreneurship.

The lack of sensible pro-growth policies would be bad enough for the developed world, but the more important reality is that things are a lot worse than we have illustrated above. For some time now, in a trend that has rapidly accelerated in the last few years, the developed world has granted (and keeps granting) a set of promises for payments in the future that cannot possibly be fulfilled regardless of future GDP growth or income tax rate hikes. Candidates for public office have had such success buying votes with these promises (in conjunction with short-term pledges to public-sector employees for pay, benefits and working conditions which are more generous than that of their private-sector counterparts) that these strategies generate value for such politicians ostensibly “gratis.” “Ostensibly” is the operative word here, of course, since there is nothing gratis about it. Indeed, the cost will be more than any citizen would voluntarily choose to pay, but it is hidden at the moment. In the near-to-medium term, the cost will take the form of higher inflation and lower growth than would be the case if good policies were pursued. Longer term, the impact will be far more insidious.

As for ideology, many of the current leaders of the developed world appear to be motivated by ideologies according to which wealth is not created by effort, entrepreneurism or creativity. Rather, they believe that wealth held by private individuals is either ill-gotten or should be redistributed, as a matter of “social justice,” to groups that do not have it.

Let us skip over the moral piece of this equation, in which effort and achievement exist on the same moral plane as dependency, and in which wealth is deemed undeserved whether it was stolen, acquired by birth or stolen. Instead, we will move right to the practical aspects of this governing philosophy, which prescribes a government fiat solution to the problem of inequality. This so-called solution always seems to leave government cronies swimming in wealth. Practically speaking, countries that welcome investors and workers with supportive policies (tax, quality of life, rule of law, labor, education, regulatory and others), will attract people who work, achieve and build. The corollary is that those governments that think their citizens have no choice other than to “stay and pay” are being really shortsighted as well as venal. As and when some of this latter group’s most productive citizens move themselves, their families and their capital offshore, those remaining will likely simply say “good riddance.” In fact, as the real standard of living suffers, the blame for the failure to grow and for the shortfall of good jobs will probably be ascribed to everything except the counterproductive policies that drove out those who created both jobs and demand for goods and services. By contrast, the places where capital and ambitious people are welcomed will be doing better and will be providing brighter prospects for their people.

Of course, all of these observations are relative, not absolute. There is no place that is purely “free” in the developed world. There are taxes and rules everywhere, and there is no “pure” modern developed society where all income is retained and where those who cannot (or do not want to) provide for themselves are left to fend for themselves. Nor should there be. The “relative” aspects of the “attractiveness” scale is why apartment and house prices in London, New York, Miami, Aspen and the Hamptons have leaped to the moon and beyond, despite their poor policy landscapes. Why do Latin American, Russian and Middle Eastern investors pay top dollar to buy properties in those places? Because they are afraid of the rule of law (or lack thereof) in their own countries. But American politicians do not draw sensible conclusions from this phenomenon. Instead, they act as if no amount of hostility toward capital will cause businesspeople and/or investors to take their capital elsewhere. The reality is that this current “safe haven” status for the U.S. (and U.K.) is not permanent, and politicians who think it is may be in for a rude awakening.

Groupthink in the current coalescence of views as to which places are safe and which are not is a complicating factor. An important corollary is that the conclusions of groupthink are unanimous, and when they shift, they shift abruptly and uniformly. In the era of modern communications, this phenomenon has broad implications for financial markets. If and when the prices of highend assets (stocks and bonds, homes in Aspen, “contemporary” art created by unknowns and costing millions) change direction, they will likely all change direction at the same time, like the Rockettes – except rather than pirouetting gracefully around the stage, they will be tumbling in unison into the orchestra pit.

*  *  *

We will now pull together the elements described above and hold them to the light to see what they may mean.

The leaders of the developed world have eschewed policies that would make their economies grow at acceptable/historical rates, resorting instead to encouraging their “independent” central banks to reduce interest rates to zero and print money. The money printed by the central banks is used to buy up bonds, public and private, and recently also to purchase stocks. At the same time, politicians in these countries, far from getting a grip on the unsustainable promises of benefit payments that have been made to their citizens, have allowed those promises to accelerate dangerously. Such promises are a powerful form of debt that is growing exponentially, adding to collective government balance sheets that are already severely overleveraged. Simultaneously, the ability of the developed world (particularly America, the Power Formerly Known As “Super”) to impose order on the global geopolitical and military matrix has meaningfully declined, and is in the process of diminishing further.

In America, people who own financial assets are spending stock market gains on high-end goods, while many middle- and lower-income people are either borrowing to maintain current spending or becoming/remaining dependent on the government. This pattern is unsustainable from both a moral and practical standpoint. And the country’s long-term entitlement obligations are utterly unpayable as currently structured.

Your guess is as good as ours as to how this fantastic mix of elements and policies comes undone, but it is not rational to think that the current apparent stability and low volatility will go on forever. Nobody can predict when things will unravel, how the unraveling will take place, or what the world will look like after the next crisis. But the numbers (debt, derivatives, and promises) are extraordinarily large, the dysfunction very powerful, and the leadership throughout the developed world very weak.

We state this case not to be provocative or colorful. We are trying to figure it out, because we think that what happens next has the potential to challenge the historical episodes of the most transformational vector changes in modern times. Investors need to try to understand how to survive the evolution of these factors into financial, economic or societal changes. After all, the reason that nobody has been able to compound money over the last 300 years or so at even a mere 3% return through generations and generations is quite simple: There is always some war, invasion, collapse, confiscation, tyranny, revolution or inflation to reshuffle the deck and require a “do-over.” We may be close to such a transformational period.

Freedom, technology, entrepreneurship and the human brain and spirit are forces that could bring human societies to more widespread and powerful growth and prosperity.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 08/02/2014 - 15:04 | 5038191 Minge
Minge's picture

Is it getting solipsistic in here or is it just me?

Sat, 08/02/2014 - 15:10 | 5038208 Escrava Isaura
Escrava Isaura's picture

There are varying degrees of solipsism that parallel the varying degrees of serious skepticism.

Could you please clarify yours?

Sat, 08/02/2014 - 15:13 | 5038219 Minge
Minge's picture

I could, but outside of myself you likely don't exist.  That said, let's call it an "inside joke." :)

Sat, 08/02/2014 - 15:48 | 5038302 Minge
Minge's picture

Escrava, I didn't downvote you.  These days on ZH people really like to toss out the downvote.  Even on a topic as benign as a joke.  So much so that the red arrow has lost it's meaning.  If it had one in the first place.

Sat, 08/02/2014 - 17:49 | 5038683 Minge
Minge's picture

Lovin' it!

Sat, 08/02/2014 - 18:54 | 5038851 Escrava Isaura
Escrava Isaura's picture

You asked for complements... And you got it, Buddy!

Sat, 08/02/2014 - 15:48 | 5038305 Ralph Spoilsport
Ralph Spoilsport's picture

"Could you please clarify yours?"

Can you elaborate on why this is important to you? How do you feel when asking people to clarify their thoughts?

Sat, 08/02/2014 - 17:43 | 5038670 MalteseFalcon
MalteseFalcon's picture

SPOILER ALERT:

 

The only thing that has changed since 2008 is that CBs all over the world are printing money and buying everything in sight.  They know this will fail ultimately.  They are ready and they will have ample warning.  Good luck to you and yours.

 

The End.

Sat, 08/02/2014 - 20:05 | 5039007 TeethVillage88s
TeethVillage88s's picture

I just got an ad that says "Please Spay & Neuter your pets".

I wonder if we can apply that to CBs & Congressmen.

A National Referendum might advance Ideas to reduce or Stabilize the World's Population of Diplomats, Central Bankers, Community Trade & Economics Representatives... But how to share this will Europe who already allow these diplomats special privileges like tax-free earnings.

Not sure if there is any other ideas here.

- Limit Number of Central Bank Employees to current level or lower, same for Sovereign Governments that leave all Job Growth Efforts to Central Banks
- Establish Disconnect from the Money Required to Investigate, Sue, Impeach, Audit Political & Court Appointees at the Federal Level (so that there are no Barriers to poor people seeking redress in Congress or the Courts)
- Establish Prohibition Against Secret Courts and Audit Methods to monitor this activity
- Establish the Fact that Federal Secrets are over-whelming "Truth", "Democracy", and "Transparency Required for Informed Voters"... that Federal Secrets begin to Serve Themselves & Create Empires... that Federal Officials & Congress likely are corrupted by the marriage of money & secrets & Government Contracting (3-way marriage)
- Establish that Big Organizations "Tend to Grow into Corrupted Institutions" which is easily provable by most average citizens given the background material, facts, world history, flows of money, hidden financial relationships, shell companies, use of US Banking & other banks to protect illegal & covert government activities, and that spreading responsibility to many is a common trick to allow the Public Leaders to say they had "No Idea" what was going on (Like the Iraqi War WMDs)
- Establish that the Wealthy have always cut costs as a business practice and it naturally follows that they would seek tax havens, off-shore labor, incorporate overseas, pressure congress with millions of dollars to do their bidding including the establishment of a Central Bank which presumably would prevent loss fiscal policy and a down grade of our federal government & US Dollar.

Sat, 08/02/2014 - 20:29 | 5039062 TeethVillage88s
TeethVillage88s's picture

What are the Assumptions?

A) USA is Military Republic at least since 1945
B) Bankers have control over the US Currency since 1913, and this pushed us into WWI, WWII, and probably Vietnam, Iraq, Afghanistan, and Iraq II
C) US bankers have moved us away from gold to Oil establishing Treaties for monopoly US Dollar Oil Purchases, and a global US Force to Explore & Develop Oil Rights
D) US Military Polices the Oceans & Shipping Routes, and enforces US Interests in Trade including Oil (Goes back to 19th Century)
E) US Military Republic now is a kind of Fascism proven out by Dirty Wars (Look it up), and NSA Spying.
F) US Empire picks up where British Empire Stopped... and perhaps where all Empires Stopped
G) Mesopotamia was situated on top of Bitumen & Tar, but not Mining Resources, ...It is said that Semitics at the time used Bitumen for Medicine and to Create Products like Synthetic Gems indicating a Sophisticated Civilization, Not only that but the laws were exactly like today including contract law, slavery, assets or property, and the worth of a person

https://en.wikipedia.org/wiki/Code_of_Ur-Nammu
https://en.wikipedia.org/wiki/Code_of_Hammurabi

Ancient Sumer was based on Petroleum, just as Today is.

Nothing has changed, Wealthy, Educated, Elites know more about Technology & History than they "Teach" in the USA. Actually if you meet people from Europe or Asia you will be impressed often.

How Do we Control Our People? That is the Next Blog.

Sat, 08/02/2014 - 20:44 | 5039099 TeethVillage88s
TeethVillage88s's picture

Capital Controls?

Isn't that how we catch Terrorist or Drug Dealers. Well, no we let banks do their illegal transactions, then we hit them with some small percent as the cost of doing business.

We can Control Capital & Capital Flight, but Globalism is about unleashing USA Capital to go anywhere to cut costs of doing business... while other strategies make capital cheap for TBTF Banks & Our European Allies. How much did we loan to Europe after the 2008 Financial Crisis...$10 Trillion?

The Wealthy Interest Groups don't want Capital Controls or Import Taxes... and really don't want Income taxes. They don't mind that the Federal Government Spends money. They don't. They often lobby to cut taxes, but never say where the revenues for the government should come from since it always means higher taxes on individuals. But of course corporations lay people off, off shore production, and then off shore the incorporation to avoid all US Taxes.

So, there are good Capital Controls & there are bad Capital Controls. And of course it depends on if you have a fascist government making the decisions. USA allows:

1) Drug Transactions
2) Covert Spy Agency Transactions
3) Crony Transactions
4) Capital Flight from the USA
5) Foreign Investment in the USA to $26 Trillion and growing
6) Growing Poor Class, Shrinking Middle Class, so that the Wealthy grow in power in the courts, in the market place, in shipping, in distribution, in travel costs, in labor costs, in Tax Liability, in energy/water/resources costs through government subsidies
7) More Complexity of all US Systems that allow the Inner Elite or Cronies or Wealthy to navigate while the poor or the middle class incur large financial liabilities
8) Who can fight Federal Government & Federal Rulings... while power, influence, status, wealthy, and legal & Lobbying representatives tell the story in what could have been a democracy.

Sat, 08/02/2014 - 21:05 | 5039147 TeethVillage88s
TeethVillage88s's picture

How Do we Control Our People?

This is really a lesson from the Stasi or USSR.

A) Everyone is recruited to Spy on other citizens
B) Electronic Surveillance
C) DHS, TSA work the roads, highways, concerts, public events, FBI build the system under Herbert Hoover and with Cointel-Pro spying on democratic activism, but also they used Agents Provocateurs to provoke arrests and infiltrate groups.
D) But we control Secrets, We control the News that runs in MSM, do you know about the US Military Intervention in the 19th Century to enforce US interest in Fruit or Produce in the Caribbean, Central America, or South America??

MAYBE we learned about Secrets & Spying From Bankers.

Allen Dulles and his family were already involved in Banking before he got involved in Spying. And if you look at the Swiss in WWII they knew about money flows, relationships, deals, industry, and power players... and it almost cost them the closing of the BIS in 1944 as International groups disapproved of Nazi Transactions.

Bankers are primo businessmen, and primo spies. But they also are masters at survival as they escape prosecution or punishment in illegal activity.

But US Forces also wanted to capitalize on Science and Technology and even management & propaganda techniques after the World War II. So we saved Nazi & Japanese war criminals.

Almost like the knights of Europe. The means justifies the ends like the Jesuits. And we take all our Military & Government Traditions and History from Europe to make our Empire Strong.

Police State solves the problems of citizens wanting to contact Elected Officials. NSA spying helps to intimidate and indoctrinate. So sorry for US Tech Industries. So sorry for US Financial Industries after the AAA Rated Toxic Asset Sales.

So sad for Bail-Ins for Cyprus. It is written into Dodd Frank & England & EU are on Board to suppress the common poor guy through Bail-ins, High Court Costs, Complicated Government Rules, Complicated Taxes, and unforeseeable monopolies from China, Big US Corporations, Unforeseeable Federal Legislation in regards to many, many things including immigration & Health Care.

Do I want to Buy A Business? Hell No. Harry Reid Might want my land or have investors coming into the country!!!

Sat, 08/02/2014 - 17:43 | 5038671 MalteseFalcon
MalteseFalcon's picture

SPOILER ALERT:

 

The only thing that has changed since 2008 is that CBs all over the world are printing money and buying everything in sight.  They know this will fail ultimately.  They are ready and they will have ample warning.  Good luck to you and yours.

 

The End.

Sat, 08/02/2014 - 19:01 | 5038860 Escrava Isaura
Escrava Isaura's picture

Ralph Spoilsport, you asked: "Can you elaborate on why this is important to you?

To make sure they have a functioning brain.

That they actually had put some thought, instead regurgitating nonsense that they were told; or made believe.

That’s all.

Sat, 08/02/2014 - 15:14 | 5038215 Bear
Bear's picture

solipsism ... That's my middle name "I Solipsistic Bear"

Sat, 08/02/2014 - 15:16 | 5038231 junction
junction's picture

This same Paul Singer is now being accused by the Argentinian press of orchestrating that government's bond default in order to collect on the credit default swaps his hedge fund took out on these bonds.  If the Argentine finance minister can get the ISDA to investigate Singer's playing both ends against the middle, Singer may have to do some 'splaining.  Judge Griesa may also have to do some fast talking to justify his decision if it turns out that Singer went into court as a subterfuge to collect on the CDS insurance he took out on his Argentinian bonds.

----  

From Forbes magazine: Beyond that, Argentina alleges that the same vulture funds (I’m using Argentina’s terminology here) have bought credit default swaps in order to profit from Argentina’s default, thus playing both sides of the trade to the disadvantage of Argentina itself.

This is where things are going to get a bit more complicated, because now, the International Swaps and Derivatives Association and the National Securities Commission of Argentina may find themselves dragged in to matters – Argentina has certainly notified its own securities commission, and says it has “requested an immediate and thorough investigation to determine whether this case isn’t actually the facade of a speculative maneuver to favor vulture funds, intended to benefit from the defaulted bonds they bought at a vile price, but also from the financial derivatives that are paid out when the ISDA association decides so.”

If the hold-out investors have indeed bought derivatives to benefit from a default that they themselves have orchestrated at the expense of a national economy, things could become a lot muddier; and even if there is nothing illegal involved, it becomes a lot harder to agree with the moral position of the hold-outs and a lot easier to sympathise with Argentina.

 

Sat, 08/02/2014 - 15:34 | 5038276 Minge
Minge's picture

"If the hold-out investors have indeed bought derivatives to benefit from a default that they themselves have orchestrated at the expense of a national economy, things could become a lot muddier; and even if there is nothing illegal involved, it becomes a lot harder to agree with the moral position of the hold-outs and a lot easier to sympathise with Argentina."

That is very true in regards to the moral position.  But for as long as I can remember (and my hedge fund experience dates back to 1987) taking both sides of a trade has been standard practice.  Call it a straddle on Argentine bonds.  Buying CDS isn't cheap, particularly on these bonds.  If he paid for his default "insurance," it's not so different from buying homeowner's insurance.  You want the value of your home to rise, but you are placing a bet that pays handsomely if the home burns down and becomes worthless.

Singer is a unique dude, whatever one might think of him.  Recall that two years ago he tracked the course of a Argentine navy ship, Libertad. When it arrived in Ghana, he persuaded one of the country's judges to hold the vessel in port until he was paid the millions owed to him from the original bond settlement (which he refused to accept). Argentina won their ship back, successfully arguing in the International Tribunal for the Law of the Sea that the ship should be returned.

If nothing else, he's got grapes, money, and the willingness to use them both in a most creative manner.

I had the chance to meet him in 1992, and my takeaway was that, while he was quirky, his intellect and reasoning abilities were in rarified air.

Sat, 08/02/2014 - 15:58 | 5038335 BadKiTTy
BadKiTTy's picture

Taking both sides of a trade I can understand (as a hedge) - Isnt the point though that by holding out he is FORCING a defaul and my guess is that there is more upside for him in the case of a default (alegedly) 

 

 

Sat, 08/02/2014 - 18:30 | 5038803 Minge
Minge's picture

As funny as it may be, it's just a poker game with larger stakes.  He likes his hand, placed some insurance on it, and is pressing the other players to go all-in or fold.  We can debate whether it's a hedge or if it's a power play, but it makes so little difference.  This is the way things are done in the world in which we live.  I personally don't like it, but I accept it as the reality of today.  C'est La Vie.

Sat, 08/02/2014 - 17:25 | 5038618 therover
therover's picture

" If he paid for his default "insurance," it's not so different from buying homeowner's insurance.  You want the value of your home to rise, but you are placing a bet that pays handsomely if the home burns down and becomes worthless."

Yeah, but you are not supposed to help burn the house down.

 

Sat, 08/02/2014 - 17:52 | 5038686 Minge
Minge's picture

Perhaps Argentina lit the match.

Sun, 08/03/2014 - 10:32 | 5040106 Pumpkin
Pumpkin's picture

The debtor is a servant to the creditor.  This sums up all the above, and sums up the fiat economy as a whole, top to bottom.  This ploy has been known for thousands of years.  It is nothing new.  The politicians that allow this to happen are never held accountable and until they are, this will happen over and over.  Bankers and politicians are an evil duo, and they should be forever seperated.  A hedge fund owe the duty to the invester, and 'hedge' is what they do.  They are living up to their duty.  The politician however is the culprit.  His duty left with his morality.

Mon, 08/04/2014 - 01:20 | 5042705 goldsansstandard
goldsansstandard's picture

The problem is our currency. No one can tell the counterfeit money from the money gained by productive work exchanged for other productive work

As more and more of the currency comes from counterfeiting, the productive people are systemically robbed, and naturally the real economy of productive work exchanged for productive work is depleted due to chronic theft.

Meanwhile the counterfeiters get rich.

This is one of the most enlightening links I have had the pleasure of learning from, and was posted earlier today by ?

http://ocsure.blogspot.com/2014/05/inflation-or-deflation-of-currency.html

Sat, 08/02/2014 - 15:28 | 5038264 29.5 hours
29.5 hours's picture

 

 

It appears you just learned a new word and want to practice it. Meanwhile, look up "Mrs. Malaprop" in intertube search...

 

 

Sat, 08/02/2014 - 15:40 | 5038290 Minge
Minge's picture

Please accept my apology for possessing a vocabulary and the willingness to use it in a joking manner.

Sat, 08/02/2014 - 16:36 | 5038465 hairball48
hairball48's picture

No need to apologize. "Solipsism" is a perfectly good word. I learned the word in the 8th grade.

Sat, 08/02/2014 - 18:01 | 5038718 Minge
Minge's picture

I applaud the quality of your middle school education and your retention of vocabulary.

Sat, 08/02/2014 - 18:20 | 5038770 Minge
Minge's picture

I've just had my second (Knob Creek) Manhattan so I (probably against my sober judgement) decided to addess your malaprop comment. Since a malaprop is placing an incorrect word with a word of a similar sound resulting in a non-sensical, yet humourous result... how does my comment on solipsm fit that definition?  Here's my challenge...  Use the flaw in my comment in a reply as if you are Yogi Berra -- the undisputed King of malaprop.  That would be awesome!  Otherwise, accept a joke as a joke and stop taking yourself so seriously.

Sat, 08/02/2014 - 18:29 | 5038799 29.5 hours
29.5 hours's picture

 

 

"Here's my challenge...  Use the flaw in my comment in a reply as if you are Yogi Berra -- the undisputed King of malaprop."

Your manhattan-inspired post using "solipsism" is just filled with solecisms.

 

 

Sat, 08/02/2014 - 18:41 | 5038810 Minge
Minge's picture

Please.  Feel free to expose my grammatical errors to the ZH community.  I will then humbly accept my comeuppance.

Sun, 08/03/2014 - 06:54 | 5039845 grekko
grekko's picture

This must be the Deja Vu that we've heard about, all over again.

Sun, 08/03/2014 - 07:18 | 5039866 doctor10
doctor10's picture

Somebody has penned a clever "diversion"-a classic media gambit to take the discussion about him or his down a different pathway than it might otherwise travel

Sat, 08/02/2014 - 15:04 | 5038192 ToNYC
ToNYC's picture

Like Eisenhower said on 1-17-61, that's where you stop it from becoming the big reset.

Sat, 08/02/2014 - 15:54 | 5038326 Urban Redneck
Urban Redneck's picture

Orgy at the SCO House!!!

India, Pakistan, Iran and Mongolia are in, now they're up to 10...

Sat, 08/02/2014 - 15:09 | 5038203 Bendromeda Strain
Bendromeda Strain's picture

You know what else is frothy Paul? Sucking chest wounds... how pissed at Christina are you, anyway?

Sat, 08/02/2014 - 15:14 | 5038214 Coke and Hookers
Coke and Hookers's picture

Hey Paul, how much coke did you snort before penning this rambling drivel? One line or two?

Sat, 08/02/2014 - 15:10 | 5038207 Bear
Bear's picture

When all is said and done, it's energy ... energy that fuels growth. High cost energy stymies growth, low cost stimulates it. As we approach a plateau or peak in cheap energy, grown will necessarily have to diminish.

Sat, 08/02/2014 - 15:11 | 5038211 Escrava Isaura
Escrava Isaura's picture

Are you telling us that, We're finished?

Sat, 08/02/2014 - 15:15 | 5038222 Bear
Bear's picture

No, but 'living large' may be coming to an end.

Sat, 08/02/2014 - 15:33 | 5038273 Escrava Isaura
Escrava Isaura's picture

Darn.

Sat, 08/02/2014 - 15:22 | 5038217 29.5 hours
29.5 hours's picture

 

 

Paul Singer, you are a traitor to your class. You are condemned, henceforth, never to be quoted in the New York Times.

"...the numbers (debt, derivatives, and promises) are extraordinarily large, the dysfunction very powerful, and the leadership throughout the developed world very weak"

"There is always some war, invasion, collapse, confiscation, tyranny, revolution or inflation to reshuffle the deck and require a do-over.  We may be close to such a transformational period."

 

 

Sat, 08/02/2014 - 15:22 | 5038251 Coke and Hookers
Coke and Hookers's picture

There are problems and there are solutions. The problem is that the world has been sucked dry of real wealth by debt organized and controlled by a cabal of sociopaths. The solution is a total reset on all fronts, where among other things, a large part of debt must be wiped out along with the sociopaths. As a purveyor of debt, Paul is a part of the problem. I'm not sure why he is writing this. Maybe it's a form of marketing himself as a "rebel" or something, but we are not fooled. Besides, this text is basically obviousness arranged as word salad with zero insight.

Sat, 08/02/2014 - 15:39 | 5038277 29.5 hours
29.5 hours's picture

 

 

Well, I agree there is zero new insight in the originally posted essay. But it is not just word salad (like the phrase!). Neither, as you say, are there solutions here. However, sometimes the significance of a bundle of words is not in what they say, but who is saying them. When some of the thieves and skimmers begin to reject the foundations of the system which benefits them, then something is happening--or beginning to happen.

 

 

 

Sat, 08/02/2014 - 15:16 | 5038229 kchrisc
kchrisc's picture

Ironically, this time even if you get out and save your capital you will still loose everything to supernova-inflation.

Sat, 08/02/2014 - 15:28 | 5038254 ekm1
ekm1's picture

Groupthink is ineherent to any civilisation. That's why people choose leaders, so they don't have to think.

 

There are only two choices of leadership


- Bank lobby

- Neocons


Choose one. Can't have both. They hate each other to death

 

Obama, being banklobby's tool, is trying to clean up Neocons, with some success.

 

Neocons are mounting a comeback now.

 

That's what Putin, Jinping and Khamenei are taking advantage of, this civil war between Bank Lobby and Neocons.

 

Neocons will win, if you asked me

Sat, 08/02/2014 - 15:54 | 5038318 Goldilocks
Goldilocks's picture

Aram Khachaturian - Sabre Dance
http://www.youtube.com/watch?v=ejIk_Za-q4Y (2:56)

Sat, 08/02/2014 - 15:59 | 5038343 I Write Code
I Write Code's picture

Pretty good overall, I agree with the sentiments if not every detail, but maybe this:

growth in the developed world (U.S., Europe and Japan) has been significantly subpar for the 5-1/2 years following the financial crisis.

Well yes it has because much of the growth of the past 20-40 years has been "bubble" growth, and most of that old bubble is now popped. 

We have also been spending an average of a couple hundred billion a year making inefficient war with Islam.  And since 2009 the US has been lead by a moron who dumps money into stuff like Solyndra while not building pipelines or reactors that would help.

Which is of course the main point of your article, we are not doing stuff we could and should be doing.  Amen.

 

 

Sat, 08/02/2014 - 17:22 | 5038612 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

 

 

Hello!  Hello!

I am sure the author is a very bright man, but has he ever heard of the international banking cartel!?  Most upper level politicians in most countries throughout the world have been bought and paid for by the New World Order "Demonati".  As for the good old U S of A, it has been hijacked by a bunch of AINOS (Americans in Name Only).  They care nothing about economic growth, prosperity and feedom.  Their only objective is greed, power and control and care not about what negative effects this has on the world at large and the citizens therein!

Tuco

Sat, 08/02/2014 - 16:04 | 5038355 Fuku Ben
Fuku Ben's picture

Time to bring down the house

Sat, 08/02/2014 - 16:04 | 5038358 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

The human brain, and spirit, are the forces that destroyed 'prosperity'

and 'widespred growth' throughout the entire world. This destruction

was purposeful in so far as American Hegemony has been brought down worldwide and will _never_ return, ever. Americans are failing to realize that the systems of oppression that Americans normalized are the same systems that will destroy the entire United States of America

in short order. Do not delude yourselves into thinking that you or anyone else can stop the demise of the USA systems of oppression

that characterized it as a 'super-power'. The USA harmed the entire world population for over half a century and would not stop their aggression. No state actor could bring down the USA and the continued assaults on the entire global village were a significant part of USA Hegemony in terms of tactics. Tactically, the USA has been brought low through the aggression and violence that they had planned to inflict on the world through policy of the Council on Foreign Relations. American had planned to assault and oppress every country in the world with the exception of the USA. It was greed and hubris that brought Lehman Brothers and the United States of America to it's knees. And now 'we the people' can start

kicking America in the balls and teeth until America is as oppressed

as they had intended to oppress the entire world. The USA is going down for the count with my boot firmly planted on the neck of a beast that did not know when to back off, motherfucker. The USA

crossed the thin line of humanity and that is a line one does not cross without getting a severe beating and ultimately, death.

 

You fucked with the wrong world, USA.

PAY UP, MOTHERFUCKER, or DIE!

Sat, 08/02/2014 - 16:15 | 5038393 falak pema
falak pema's picture

hell to pay by whom ?

By the devil or by those other "poor devils", like the people of Gaza, who run to not be the hindmost to catch his fire and brimstone like he were the IDF? 

Sat, 08/02/2014 - 16:18 | 5038404 Latitude25
Latitude25's picture

Did your CDSs pay off on Argentinea?

Sat, 08/02/2014 - 16:35 | 5038452 Jstanley011
Jstanley011's picture

In Greece (for goodness sake), long-term government debt is trading with a yield just north of 5%. In France, 10-year bonds are trading at a yield of 1.67%.

Which implies, not that inflation is coming, but deflation. If the banksters get their way, that is. Because a 5% yield works out to 25% in real terms at a -20% Greek inflation rate. And 1.67% becomes 11.67% at a -10% rate in France. Et cetera.

Since it is the banksters and their buddies who hold bonds, when TSHTF again, they're going to be insisting that the central banks deflate (to protect the value of their bonds) even as the politicos demand that the central banks print (to protect their necks from being stretched).

When Goldilocks finally choaks on QE, is the point when the politico/bankster alliance will bust up, and the central banks will finally have to decide whether to deflate or inflate directly.

Sat, 08/02/2014 - 16:42 | 5038478 hairball48
hairball48's picture

Why hate on Paul Singer? The Argentine's hubris is what got them in trouble--once again. As long as the Argentines keep FUCKING UP, they'll have to keep paying up.

Of course this applies to us here in Amerika too--and one day the sheep and muppets are going to find out.

Sat, 08/02/2014 - 16:40 | 5038479 fuu
fuu's picture

Raped any children today Paul?

Sat, 08/02/2014 - 16:47 | 5038512 Wilcox1
Wilcox1's picture

A tremendous amount of clear thinking in that post by Paul Singer.  I would have to call that forward guidance.

Sat, 08/02/2014 - 17:19 | 5038519 Snake
Snake's picture

Checkmate ... to Singer and his kind ... .

 

 

Sat, 08/02/2014 - 17:03 | 5038562 Jstanley011
Jstanley011's picture

"It is morally wrong to allow a sucker to keep his money." -W.C. Fields

Sat, 08/02/2014 - 17:16 | 5038592 syntaxterror
syntaxterror's picture

Go back to Israel you fucking cry baby.

Sat, 08/02/2014 - 19:01 | 5038871 Atomizer
Atomizer's picture

Well said. Don't forget, when will we receive our next round of taxpayer foreign aid contribution? The tribe over here is trigger happy. 

 

Sat, 08/02/2014 - 19:42 | 5038967 RMolineaux
RMolineaux's picture

Singer apparently wants to accelerate the coming of "Hell to pay" by joining with other hedge funds in forcing Argentina to default on its debt.  Greed....insatiable greed is the ultimate cause of the coming collapse.

Sat, 08/02/2014 - 21:33 | 5039200 Yen Cross
Yen Cross's picture

  We spend our lives trying to articulate thoughts and ideas.  Basically to justify our own existence.

  Humanity want's approval, and will do anything to gain it!

   Do you think a murderous regime doesn't want approval? It's all about how those objectives are met.

Sun, 08/03/2014 - 01:51 | 5039675 bunnyswanson
bunnyswanson's picture

Humanity wants to "fit in" or be accepted as perfectly normal.  Who decides that?  Media/Hollywood.  The glory goes to the rich kids, sport stars and pretty/smart people and that tends to make us realize how it is.  Which is tragic really.

Sun, 08/03/2014 - 03:48 | 5039742 damicol
damicol's picture

When all bubbles are at peak and  can be inflated no more and and that occurs whenever confidence in that bubble asset evaporates, the the one last great final and totally predicable bubble will grow exponentially until it too busts spectacularly.

Inflation.  All currencies end with hyper inflation as no more asst class is available to bubble up.

Inflation is coming , its already here disguised, lied about , called deflation,  spun twisted, tweaked,denied explained away, and once in motion can be never be reversed.

Everyone can feel it, in their declining living standards, their costs of living, their rate of savings and in the poverty levels rising about them.

This is inflation. real and hard and effective.

And it can grow  as no bubble can be deflated by  attempting to blow up another bubble  that is already at or near its peak.

Real assets like property can be considered, but there lies the danger too, as once bought  any failure to  rise in value means that wealth is locked into an unsaleable asset unless again horrendous losses are incurred and then you are only attempting to find a greater fool or you are at the mercy of a predator, who is all too well aware of your predicament and will beat you down mercilessly.

Real goods, will become scarcer,  the companies that manufacture will see input prices rise and wage demands escalate and the shortages will follow through.

As purchasing power declines, not just by the rate of what it declines today , but what it could be in a week or a month or a year from now as it becomes more and more important to factor in time. Time from order to delivery, time to plan an expense  and delivery of that plan, investment in capital  or any other part of the whole infrastructure of business.

the spiral upwards begins and the ability to plan ahead diminishes faster every day.

In extremis you cannot even plan ahead to buy a loaf of bread tomorrow because you cannot forecast its price tomorrow.

Measure real inflation by the level of  poverty you see around you the number of food-stamps in the system, as another inflationary unearned ponzi part of the system, and what  you cannot buy today that you could buy last week, or last month or last year.

I bought my first house t 19, my second a detached house at 22  but now you cannot do that,

It is inflation, unseen denied and renamed as a positive force to benefit a sub class in the property development world.

That same house bought from a what was a pretty good salary for a 19 yr old at the time is unaffordable today for almost anyone, but the real value of that house has not increased one iota. It is exactly the same pile of bricks and concrete but you cannot exchange it for the same amount of labor.

Real inflation can be disguised and reallocated to laughingly called assets,  but it is still inflation, ans in real terms it is growing at ever faster rates, and an inflection point will arrive when the only possible recourse to keep trying to move forward is when real cash and banknote printing starts in earnest.

It is coming, and it is coming to offset and make good the claims on the gigantic promises and issues in bonds and paper a s the demand for cash  increases.

10 year may go to 1% yield, I don't know,, or  foreign policy by China and the BRICS may change the landscape overnight by  actions and policy there.

Whatever happens it creates uncertainty, and I would not personally bet my grandchildren future on holding 30 year paper.

I want something safer that fiat or govt IOU's for that, and this is not a call to gold or silver, it it true it has stood the test of time.

For me I want assets where others do not look for them, something that is outside the reach of bankers regulators and the IRS.

I found it and not only does it feel safe it feels secure and it has all the hallmarks of integrity I want to see. it is usable every day, has real benefits in ownership and it does not degrade and it is not gold or stocks or bonds.

In short inflation on a massive scale is not only here like the tide  but coming like a great wave just over the horizon, like it or not, and the only way to control it is to raise the cost of money, or interest rates.

But how to do that now,

You cannot without bankrupting every western asshole govt at a stroke.

So you print and inflate away and regulate. It really is the only option.

 

 

 

 

 

 

 

 

 

Sun, 08/03/2014 - 06:21 | 5039826 grekko
grekko's picture

If Singer runs for President on the Independent ticket, he's got my vote.

Do NOT follow this link or you will be banned from the site!