Billionaire Paul Singer: The U.S. Has A Big Debt Problem And The FedRes Is Making It Worse!

• Billionaire Paul Singer: The U.S. Has A Big Debt Problem And The FedRes Is Making It Worse! 
  by Agustino Fontevecchia, http://www.forbes.com/ 
  Billionaire hedge fund manager Paul Singer warned that rich countries are insolvent, with U.S. debt to GDP levels actually around 500% given the cost of entitlements.  The head of Elliott Management warned of the massive levels of leverage at major global banks, and at the perils of quantitative easing which is masked money printing, telling investors to be weary of holding U.S., European, or Japanese bonds.
  –
  Paul Singer is well known for his aggressive bets against emerging country debt and for activist investment stances in poorly run companies.  On Wednesday, though, he took a complete different role at the Ira Sohn Conference.
  –
  “What you have in legacy countries,” he said speaking of the U.S., Europe, and Japan, “is long-term insolvency.”  Including entitlement programs like social security, countries like Japan have a debt load that is about 800% of GDP, while the U.S. and Europe are closer to 500%, Singer said, suggesting those who fear Rogoff and Reinhart’s 90% debt-to-GDP limit should re-do their math.
  –
  And not only are these major countries broke, but banks are essentially broken.  “Banks used to be banks, they used to make loans […], now, leveraged trading and derivatives has basically taken over a very large, or total, [role] in the context of profitability and the business plans of major financial institutions.”
  –
  Referencing major global banks like JPMorgan Chase, Citigroup, Deutsche Bank, or Barclays, Singer said they hold on average between $50 and $80 trillion in notional amounts of derivatives.  “There is no usable set of information that will allow you to see what portion of those $50 to $80 trillion are positions” held by the banks, what portions are “customer facilitation match trades,” he added.
  –
  With legacy countries in a state of long-term insolvency, and major banks highly leveraged and with opaque balance sheets sitting on trillions in liabilities, policymakers have resorted to one of the most dangerous solutions in the aftermath of the financial crisis: money printing.  “The primary, and up to now only, methodology to support recovery and growth has been on the monetary side,” the hedge fund manager said, “none of the country blocks I mentioned has adopted a solid set of structural pro growth policies in the tax, regulatory, labor, trade, and education, to unlock growth.”
  –
  read more!

end