By JAMES FREEMAN: The Wall Street Journal
At the height of the housing bubble, hedge-fund manager Paul Singer was shorting subprime mortgages. By the spring of 2007, he was warning regulators on both sides of the Atlantic that the world was facing a major financial crisis.
They ignored him. Now the founder of Elliott Management says the biggest banks are headed for another credit meltdown. Among the likely triggers for the next crisis, Mr. Singer sees one leading candidate: Monetary policy "is extremely risky," he says, "the risk being massive inflation."
Mr. Singer further warns that investors shouldn't misinterpret apparently bullish signals from a rising market. "Of course printing money is going to support asset prices," but "it's very dangerous" and is not a substitute for trade, tax and regulatory reforms that make America an attractive place for job creation.
"What would a loss of confidence in the dollar actually look like? Gold going absolutely nuts," adds Mr. Singer, who is also a major donor to conservative intellectual causes and think tanks such as the Manhattan Institute. He observes that prices for many commodities are already near all-time highs, even with "kind of a soft recovery" in the U.S. and Europe, and robust growth in Asia. "Imagine if hoarding, speculation, investment positions in [hard assets] accumulate to cause commodities and gold to go rocketing up. Wages, prices will follow," he says. LINK...
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