Paul Singer: The Financial System Is Not Sound (Video)
Billionaire investor Paul Singer says the financial system is no more sound than it was in 2008. In fact, he contends that in many cases, it is more leveraged than it was leading up to the 2008 crash.
During an interview at the Bloomberg Invest New York summit, he pinned the blame squarely on what he calls extreme central bank monetary policy and growth suppressing government actions. And he warned it’s going to create a “ruckus” when the bubble pops.
I’m very concerned about where we are in terms of the financial system, the economy, the American economy, the global economy. After nine years of what I consider to be a distorted set of policies, completely oriented towards what I regard as monetary extremism – the quantitative easing that has put about $15 trillion dollars of bonds, and now stocks on the books of the developed country’s central banks, zero percent and negative interest rates; emergency monetary policy persisting for eight years after the emergency is over, combined with what I consider to be growth restrictive fiscal policies – regulatory, tax. So, I think it’s created a distorted recovery.”
Singer said the unequal and incomplete recovery has created middle class stress around the world. We see the effects of this in the explosion of political populism and the rise of new political movements.
Singer also expressed concern about the asset bubbles created by the Federal Reserve and other central banks.
After nine years of this artificial levitation on the part of financial assets – high-end real estate, art, the things that rich people buy – I think what we have today is a global financial system that’s just about as leveraged, and in many cases more leveraged than before 2008. And I don’t think the financial system is more sound. And I don’t think the fixes that have been put into place have actually created a sound financial system.”
Singer questioned why people still have confidence in the central planners. He said the trust is misplaced and that it could evaporate in quick fashion. At that point, we can expect “a ruckus.”
I don’t believe the confidence is justified in policymakers and central bankers. The fact that 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 ruckus in bond markets, stock markets and in financial institutions.”
Of course, there is no way to know when the bubble will pop. Singer led off the interview with some sage advice.
I have strong views about certain aspects of the macro-environment, but I don’t let these views infect my desire to be hedged all the time…We never make massive timing bets on the timing of bear markets or downturns.”
In other words, always be prepared.
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