Paul Singer Slams The Fake World: "Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers"

Tyler Durden's picture

Excerpted from Elliott Management's Paul Singer letter to investors,


Nobody knows when reality will overtake the rhetoric, lies, phony statistics, wishful thinking, fake prices and tiresome poseurs pretending to be world leaders. The situation is universal, a consequence of incompetent leaders and careless (or ignorant) citizenry. Global problems are continuing to mount, along with the risk that the consequences of years of bad policies and inept leadership compound (as sometimes happens) in a short window of time. Let us start by unpacking some current examples of fakery, and then try to explore the consequences.

Monetary policy.

Either out of ideology or incompetence, all major developed governments have given up (did they ever really try?) attempting to use solid, fundamental policies to create sustainable, strong growth in output, incomes, innovation, entrepreneurship and good jobs. The policies that are needed (in the areas of tax, regulatory, labor, education and training, energy, rule of law, and trade) are not unknown, nor are they too complicated for even the most simple-minded politician to understand. But in most developed countries, there is and has been complete policy paralysis on the growth-generation side, as elected officials have delegated the entirety of the task to central bankers.

For their part, the central bankers are proud and delighted to be providing the primary support for the global economy. Their training for this role took place in the decades before the 2008 financial crisis, when central bankers (led by “The Maestro,” Alan Greenspan) “deftly” headed off crisis after crisis. These policy responses “worked,” we were told, and they promised a new era of fine-tuning, moderation in markets and complete control of the economy by central bankers. The words in quotes are meant to be ironic, of course, because in fact, the Federal Reserve Board’s moves disguised hidden – but serious and real – future costs, which came due in 2008. The ensuing crisis introduced the term “moral hazard” (not meant to be ironic) into the mainstream, meaning that risks were taken by financial institutions and others seeking private reward, while the costs of the risks were borne primarily by the taxpayers. Central bank manipulation of prices and risk taking has become the norm over the last six years, because it is so hard for investors to see the downside. QE and ZIRP have been “free,” as far as most people are concerned, in terms of stability, asset price and economic growth, and economic recovery. “Free” in this context means devoid of future countervailing negative consequences. Unfortunately, this particular magic bullet is illusory – the negative consequences are in the early stages of revealing themselves.

Among the worst consequences of the delegation of responsibility from political leaders to central bankers has been the increasing arrogance of the latter group and their inability to understand the rapidly evolving nature of the world’s major financial institutions. Prior to the crisis, central bankers were unable to understand the risks that were building up in the global financial system and the economy. They did not see the 2008 collapse coming, nor did they perceive how fragile the system had become, or that the major financial institutions had become the largest and most leveraged hedge funds on earth.

This lapse was a catastrophic error, not just of execution but also of theory and structure. During the 2008 crisis, the central bankers (rightly) applied standard (more or less) responses to financial collapse (flooding the system with liquidity and reducing interest rates), which of course truncated the crisis and stabilized the system. But their inability to understand the financial system, or to take responsibility for their massive failures in causing/allowing the crisis to occur, has resulted in a seriously deficient economic recovery phase. Central bankers do not understand that it was their tinkering, manipulation, bailouts and false confidence that encouraged and enabled the insanity that led to the fragility and collapse. Partially as a result of that misunderstanding, the developed world has doubled down on the same policies, feeding the central bankers’ supreme self-confidence. Political leaders have been content to stand aside and watch the central bankers do their seemingly magical and magnificent work.

The believers in the wisdom of this central-banker-centric economic world have been crowing and gloating that those (like us) who have raised concerns about the risks posed by the post-crisis, monetary-dominated policy mix (inflation, distortions, growing inequality, lower growth) are just “wrong” and should apologize for a “massive error.” This, shall we say, “Krugmanization” of a substantial portion of the economics profession and punditocracy is in its triumphalist phase, and whether its smug non-stop “victory lap” ultimately represents an embarrassing high-water mark is for subsequent events to reveal.

However, let us look at the policies that have been implemented post-crisis (in the absence of the kind of solid pro-growth policies that we and others have been advocating) and compare them to the policies that were in place during the run-up to the 2008 crisis.

Pre-crisis, the Fed funds rate was 1% for 2-1/2 years. There was no asset buying by the central bank (QE), but the persistently low Fed funds rate fueled bubbles in leverage, real estate and structured products. The balance sheets and derivatives books of financial institutions went from crazy to colossally insane.


Following the crisis, the Fed funds rate has been effectively zero for six years, and QE has put several trillion dollars of government and mortgage debt on the books of the world’s major central banks. Indeed, a substantial portion of government spending in the past six years has been “financed” by QE. If the gibberish that passes for explanations of why this is not just money printing makes sense to you, then please give us a call so we can be educated. The explanation makes no sense to us.

ZIRP has allowed insolvent corporations to issue debt at almost no premium to government bond rates. Companies that should be shuttered or taken over and chopped up are instead able to pursue projects that should never have seen the light of day, and to create fake demand that essentially borrows growth (and jobs) from the future.

A good deal of the economic and jobs growth post-crisis is false growth, with little chance of being sustainable and self-reinforcing. It is based on fake money conjured by the Fed to buy assets at fake prices. What happens when interest rates are normalized and QE stops (and reverses) globally is a question that nobody wants to contemplate. The financial system is fragile, still ultra-leveraged and reliant upon a continuation of superlow interest rates. Thus, the appearance of stability and low volatility is also illusory.

Government economic data.

Some of the most important government data is unreliable, starting with inflation. Reported real GDP growth has been in the 2% annualized range for the last few years. The 4% annualized real growth rate reported for the second quarter of 2014 only reversed the terrible first quarter numbers, so year-over-year growth was still only in the 2% range for the twelve months ended June 30, 2014. Only if third and fourth quarter real GDP growth reaches 3% or higher, and only if that rate persists next year, will it be fair to say that the U.S. economy has finally recovered from the crisis (six tough years later).

But regardless of the purported results for the rest of 2014 and into 2015, all of the reported growth numbers are too high, because the official inflation number is too low. Over a long period of time, these figures have become politicized, always in the direction of under-reporting inflation. Constant repetition has resulted in most policymakers and economists now just accepting the adjustments and tricks that have become part of the reporting culture. From the notion that there is “core” and “non-core” inflation; to ignoring house prices and using “rental equivalence”; to “hedonic adjustments” according to which, if your computer is “better” than last year’s, then you should subtract an amount from the actual price every year to reflect that improvement, even though it is subjective and not really quantifiable; to a handful of other nonsensical adjustments, inflation is understated. Inflation is also distorted by the increasing gap between the spending basket of the well-off and that of the middle class (check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like).

Said differently, inflation is the degradation of the value of money. Money has no meaning beyond the value of the real things for which it can be exchanged. The inventions and tools of modern finance have made things look really complicated, but stripping inflation to its essence is critical to understanding what is real and what is false. The inflation that has infected asset prices is not to be ignored just because the middleclass spending bucket is not rising in price at the same rates as high-end real estate, stocks, bonds, art and other things that benefit from QE and ZIRP. Money is losing value in those areas. This is inflation, plain and simple. If and when the situation gets to be Argentina-like, with generalized increases across the entire spending spectrum, it will be clear to everyone. In the meantime, sadly, policymakers do not recognize the reality of the peculiar and sectoral inflation, in some cases massive and growing, that has been caused by money printing and bad policy.

Even apart from rising prices in high-end goods, all of this suggests that CPI inflation is being understated by some unknowable amount, which we estimate is between 1/2% and 1% per year. This is a big difference in a 2% or 2-1/2% per year reported real GDP growth environment. Middle class citizens who are paying more at the supermarket and for college tuition and for many other goods and services feel that inflation is higher than reported, but they lack access to reliable data. The well-off think that it is their exquisite good choices that enable them to sell their overpriced $10 million co-op apartment and buy a $20 million overpriced Hamptons beach home. Neither group is coming to grips with the insidious and tricky nature of modern inflation, and the government just uses its tone of complete confidence to ignore what citizens see with their own eyes.

Unemployment figures are also a source of faulty or misleading data. The headline currently reported unemployment rate of 5.9% is deeply misleading. A 35-year low in the workforce participation rate, a policy-driven transition from full-time to part-time jobs, and the transition from high-paying jobs to relatively low-paying service jobs, all combine to make the headline rate a poor measure of employment health. Support for our statement is provided by the data on real wages, which have been stagnant during the entire post-crisis period. These figures for trends in real wages avoid the distortions we have described above, and are consonant with the polling numbers which show that Americans believe their country is on the wrong track and that the future prospects for themselves and their children are poor.


The 16th Geneva Report on the World Economy (published in September of this year by the Centre for Economic Policy Research) says that the total burden of global non-financial debt, private and public, has risen from 60% of national income in 2001 to almost 200% after the crisis in 2009 and to 215% in 2013. Contrary to widely held beliefs, the world’s leading governments and financial institutions have not yet begun to de-lever, and the global debt-to-GDP ratio is still growing to record highs, even before taking into account entitlement programs.

*  *  *

Nobody can predict how long governments can get away with fake growth, fake money, fake financial stability, fake jobs, fake inflation numbers and fake income growth. Our feeling is that confidence, especially when it is unjustified, is quite a thin veneer. When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.

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LawsofPhysics's picture

Perhaps, but you can bet all that bailout money was and is very fucking real motherfuckers.

vmromk's picture

End that MISERABLE PIECE OF SHIT ENTITY called "the Federal Reserve" and prosperity will appear.

They are nothing but parasitic leeches on the American people.

kliguy38's picture

When CONfidence is lost then a very rough time is coming for all of us. True purging will come and most urban areas will become killing fields. That day of reckoning is not to be enjoyed.

rccalhoun's picture

why cant i borrow a trillion from the fed at zero and gamble on the markets until i have a few billion for myself and if my 'bets' fail, they'll lend me another trillion

Rememberweimar's picture

How about we enforce counterfeiting and usury laws


Arius's picture



that is at the very heart of americana ... that is america like it or not ... my man singer ... sorry to disappoint you, i know you have high standards :)

dontgoforit's picture

God is real.  I thank him for all the bennies, including the ability to discern the truth from the lies (most of the time).  Live every day like you're one heartbeat away from eternity because we all are one heartbeat away from eternity.

The food, the cars, the house, the kids, the grandkids, the beautiful wife, the fully-loaded gun safe, the gold, the silver, the vacations, the work, the new tire, tooth crown, arthritic shoulder and all the other stuff is REAL!

Shocker's picture

That is why we are where we are today...A mess

Current Layoff / Business Closing:



TruthInSunshine's picture

Print MOAR electronic yen and buy MOAR DEBT, Kuroda-san!

News Headline Summary

Japan's GDP declines for the first time since April, according to Nikkei

- Japan's gross domestic product for September likely dropped 0.3% on the month in real terms, falling for the first time in five months, the Japan Center for Economic Research said Tuesday.

Update details:
- As a guide, Japan's next GDP announcement is scheduled on the 16th of November. 

Print 18:16 - Economic Commentary - Source: BBG

James_Cole's picture


Paul Singer - one of the biggest welfare queens on earth - writes some words, one of those words being 'fake'. In other irrelevant news I hear Greenspan has criticism on low interest rates at the fed..


Bay of Pigs's picture

Not surprised you didn't read the article, nor the fact you attacked the messenger ad hom.

At least you are consistently full of shit James.

PrecipiceWatching's picture



You know nothing about America.

J S Bach's picture
"Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers"


Fake you!

JRobby's picture

the major financial institutions had become the largest and most leveraged hedge funds on earth

Only one possible outcome: FAIL

ajax's picture



Fake hot chocolate and fake tits are the worst fakes of all.

Bangalore Equity Trader's picture


I know because I worked there at Research Triangle Park USSA and I saw it first hand.

In America you can be big and successful if you are tribe. If you are not tribe then you can eat dirt and scrape by.

Perfect example
Facebook vs. Myspace. Myspace, no "LIKE" button so it's a big fat fail, yea right.

pods's picture

Well BET, if you ever come back to the RTP I will buy you a cold one.

At least that is real.


cheech_wizard's picture

Contracted at Qualcomm for 15 months. I quit when another company offered me full time with benefits. No counter offer from Qualcomm... They will use the open position to hire another H1B visa holder from India...(Yes, Qualcomm is a sweatshop, unless you are "tribe")

cnmcdee's picture

The only thing economical that is fake is tits.



Harbanger's picture

It's at the heart of the progressive (Nazi) West.  Fake Utopia.

TeethVillage88s's picture

Fakery abounds

Congress abdicated it's powers

- Fake Congress
- Fake Central Bank
- Fake integrity in Banking
- Fake Jobs Stimulus
- Fake Democracy
- Fake free enterprise & markets
- Fake incentive to build capital in USA (business expansion, CapEx)
- Fake concern for Main Street Jobs, Full Time hours, Savings
- Fake SOTU each year
- Fake GDP Stats, Fake Inflation Stats, Fake Employment Stats
- Fake concern about minorities, prision rate, where jobs are
- Fake lie about inequality and transfer of Wealth to the 1%
- Fake reasons for war, droning, DoD spending, Spying

Escrava Isaura's picture




With all the due respect, your post is nonsense because:

a) America is functioning exactly like an Empire is supposed to function

b) And your post distracts from the real ‘unsustainable’ problems:

Growing demographic

Finite energy

Growth by debt


Here’s an example:

In 1944, 29 reindeer were introduced to the island by the United States Coast Guard to provide an emergency food source. The coast guard abandoned the island a few years later, leaving the reindeer.

Subsequently, the reindeer population rose to about 6,000 by 1963 and then died off in the next two years to 42 animals.

A scientific study attributed the population crash to the limited food supply in interaction with climatic factors.

By the 1980s, the reindeer population had completely died out. Environmentalists see this as an issue of overpopulation.

For example, Garrett Hardin cited the "natural experiment" of St. Matthew Island of the reindeer population explosion and collapse as a paradigmatic example of the consequences of overpopulation in his essay An Ecolate View of the Human Predicament. 




The9thDoctor's picture

Fake fantasy football, lol.

Rememberweimar's picture

So many parasites... So little time...

The Big Ching-aso's picture

Fake boobs should be in there somewhere. But let's face it of all the fakery going on we seem to tolerate nippletism pretty well in workplace hiring practices.

CrazyCatLady's picture

Well it is handy for being able to identify the whores.

Peter Pan's picture

He forgot fake tits which might LOOK good but which eventually cause a lot of issues.

He also forgot fake politicians and their fake rhetoric.

And finally, fake gods which have created for an idolatrous consumer.

Occasional's picture

uh, but fake rhetoric is what 'real' politicians do!

Anyone presuming to speak the 'truth' about the reality of our making wouild not be elected, therefore, would not be a political office, which means they'd not be a politician, but instead a 'wannabe politician'.

Sorry for the parse, but the irony couldn't be passed up. 

cnmcdee's picture

The problem is everybody already has lost confidence but they cannot get out because they are either holding student debt or underwater mortgages.

So they hold on because they have no other choice.

The Limerick King's picture



We live in a world that is fake

Constructed by men on the take

Believing the fools

Who are making the rules

It's time my dear sleeple...awake!

Peter Pan's picture

About time we were graced with your wisdom.

Brng it on.

TeethVillage88s's picture

Don't fight the Trend.

More Limericks

Blankety Blank Blankety Blink
This Fringging Country goin' into the Sink
Behold the great wonder we have found
Fakery and forgery in USA abound
please Americans, Please People Think

There are many take the high road
But not in banking lawyering Code
See the Truth please see it now
Fed Congress Corps we can not bow
Stop Lobbying as principals corrode

Many charlatans take us to the brink
Congress maneuvers put us in the drink
No Jobs, no Savings, no savings rate
Racsism, police brutality creating hate
Now politics is like a strange kink

Set up to fail, set up to die
tell me work harder, gotta try
fraudulent stimulus, fake risk
see the coupling, bank and Fed Tryst
Not cake, let them eat pie

Trust the government you silly man
Trust the Fed and old Uncle Sam
Give us your retirement 401K
Promise you a new bright shining day
Now we are pennyless living on the lam

Call me old fashioned if you will
give us movies sports for a thrill
Take away our history and good pay
But know you can't hide on the last day
Crashing economies empty government tills

Liquid Courage's picture

A piece of advice for a would-be bard:
Rhyming is easy ... but rhythm is hard.

Clowns on Acid's picture

Where you been LK ? Are you now on parole ?

Occasional's picture


here here. 

Although the time to wake passed a long time ago. 


Groundhog Day's picture

When?....5 years give or take a few

The Sheep will only realize it when the football, baseball, hockey etc etc are not on tv and the beer has been seriously diluted

tarsubil's picture

What largely feeds the pro leagues? Poor kids tricked by the big salaries of a tiny minority of players. It is one of the biggest illisions of America. Total distraction and false hope manipulation. America will collapse before they go.

Groundhog Day's picture

the world is one big smoke and mirror.  if and when the citizens of the world realize how much they have been taken for, the elite better have a super super secret bug out island and hope they never get found.  Perhaps the space station

Harbanger's picture

"when the citizens of the world realize" Where did I hear that term before? Oh yes from the President of the World and his World citizen globalist friends.

GeezerGeek's picture

For prosperity to reappear in the USA it will take more than the demise of the Fed. Another facet of the poor business environment is government regulation. Diminish the powers and scope of the EPA, OSHA, IRS and scores of other government agencies and the economy might recover more quickly. Strangulation by regulation is every bit as responsible for the poor economic situation as the Fed's policies. Then end the entire nanny state structure. Etc., etc.

Dinero D. Profit's picture


How about cutting off trade with China/Asia unless they have EPA-like, OSHA-like, Collective Bargaining-like and Universal Healthcare-like laws and regulations.  


Competition becomes fair.  The people benifit.  And maybe the world won't asphixiate itself. 


FightingtheFed's picture



I had about 50G in AIG back in 2008 lost it all.. Goldman had about a 15 billion trade to cover and got bailed out by the Fed and ruling establishment.. Today they are making record profits and I'm merely eeking out a survival.


100 years ago they'd hang horse thieves. What they have stolen is far greater than a horse..


Not enough rope in Texas for the maggots imo!

ZH Snob's picture

all of this fakery is shameful. it's like getting pushed around by yosemite sam.

DaveyJones's picture

we can trace it back to fake breasts

the true beginning of our slippery slopes

Cathartes Aura's picture

heh, boob enhancement for the womens, boob reductions for the mens.

someone profits from cultural preferences.  always.

pods's picture

Well Cath, I am not a boob guy, either for guys or gals. But what is it with dudes carrying them now?

It is almost child abuse to see a baby at the beach drooling at the mouth while their dad is holding them.