All Credibility Lost: Bernanke and Fed Face Tough Criticism by Hedge Fund Manager

The once venerable title of Fed Chairman has been reduced to nothing more than a joke. At one time, direct criticism of the Fed and its members was taboo for most investment professionals and the media. But how times have changed, thanks to Zimbabwe Ben and his money printing ways. Today, respected hedge fund manager Paul Singer of $15 billion Elliott Management publicy derided QE and warned that the US could suffer inflation that "no American can imagine." Furthermore, he rejected the notion that QE does anything positive for the economy. All QE has done is juice the stock market in nominal terms. Monetary policy cannot solve the problems facing America, including high employment, loss of competitiveness, and stifling regulation.

Mr.Singer made these comments at the New York Hedge Fund Roundtable in front of over 100 hedge fund industry participants. He went on to say that the threat of a Weimar Republic style hyperinflation keeps him up at night. The challenge for money managers is not only about simply generating returns, but also about staying ahead of inflation in real terms. He notes " the path [of inflation] can be torturous. It is not a straight line, but it is a road  with lots of twists and turns." This dynamic makes it very hard for managers who do not want simply to buy billions of dollars in gold and sit tight.

The fact that it is now acceptable to openly mock the Fed shows how far the US has fallen as it spirals down to Third World status. It really doubtful that we have any rational or good intentioned officials left. Instead, we only seem to have corrupt bureaucrats who make their money by looting the taxpayers. The situation has become so endemic that it no longer makes headlines--people have come to accept it. Even when prominent people criticize these insane and misguided policies, it makes no difference since those who are in control no longer pretend to care what the people think. "Back in the day," officials at least used to pretend they cared, but they are now quite open about their disdain for the public. The Fed is clearly printing money to monetize the debt and create inflation. As if we have not had enough inflation over the last 75 years! Now the Fed openly states that higher inflation is the goal. Inflation is the secret confiscation of our wealth by government (or its sidekick The Fed).

 The Fed's credibility is now on par with that of the Reserve Bank of Zimbabwe when it comes to inflation and  currency debasement.  Every time Bernanke opens his mouth, gold and other hard assets rise, signaling the market's complete loss of faith in the Chairman and the Fed. QE may work for boosting stocks in nominal terms, but beware of the stock market's performance in real terms. Down, Down, Down. Depending on what measure of inflation you use (let's just use the CPI to make it easy), the market is down more than 30% over the last 10 years. With commodity prices surging, and gold at new all time highs, we are told deflation is the threat-- not inflation. I don't know about you, but most most Americans cannot afford any more of this new style of "deflation"--$3.70 copper, $80 oil despite record inventories, and $1350 gold. Deflation? It's a nice concept but an elusive one in the real world. At least during the Depression,  prices actually fell significantly to compensate for lower wages.

This time around, we face the opposite scenario: declining wages and rising commodity prices. The worst of both worlds, courtesy of Bernanke and his bankster friends. If Bernanke wants inflation so desperately, he might revert back to the 1990 method of calculating the CPI, which is currently showing 5% inflation (Shadowstats). 

Black Swan Insights


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