“Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,”
That is the quote by hedge fund manager Paul Singer that’s been garnering a good deal of attention in recent days. What’s up with all of these ultra rich guys who are voicing their dissatisfaction with the world? According to independent data it’s the rich guys who should be happiest. But I am pretty sure this is just politics polluting what should be rational thought. The fact of the matter is that the data has not been faked. We know this because there are a huge number of private independent companies that report economic data. Let’s explore.
Has the growth been faked?
According to the Institute for Supply Management, the growth has been very real. In fact, we’re seeing some of the highest growth of the recovery at present:
Has the money been faked?
I am not sure what that means. Money is something that is created primarily when loans are made resulting in deposits. “Money” is mainly just an accounting construct. It’s something that’s created from thin air to account for various transactions in the economy. There’s nothing “real” about it. And the only people who seem to think “money” is a real thing are those who are obsessed with the myth that “real money” is something physical like dollar bills or bars of gold. But I presume that Mr. Singer is referring to QE and the “fake money” that the Fed has created. But the reality is that the US government and the Fed don’t create money in any meaningful sense. Most of the money in our system is created by the private banking system. See this more detailed explanation for more.
Have the jobs been faked?
According to ADP, a private collector of job information, the job growth has been very real:
Is the financial stability fake?
I don’t even know what that means actually. Is there even such a thing as “financial stability”? If you ask me the idea of “financial stability” is an illusion. The monetary system is an extremely dynamic and unstable system because it is primarily a function of dynamic and unstable participants. The idea of a stable monetary system is an illusion sold by people who construct linear models based on false ideas like rational expectations and “equilibrium”.
Have the inflation figures been faked?
According to the privately collected data by the Billion Prices Project inflation has been very low. Of course, the BPP doesn’t account for prices like all food and gas items, but those items are in a full blown deflation according to recent data.
Has the income growth been faked?
According to Bloomberg hedge fund pay increased by 5- 8% in the last year. Meanwhile, median incomes have been stagnant for the last 30 years. So yes, there’s been real income growth for hedge fund managers like Paul Singer. But not for the median income earner.
I don’t know why people let their politics cloud their judgment like this. Although the economy could be doing a lot better there’s really no reason to make totally outlandish comments that blatantly misrepresent the reality of our situation. If people would look at the data and the economy in a more objective manner we might have a much more productive policy debate that actually produces some results. Instead, we have two parties an ocean apart in large part because this sort of extremist thinking dominates the discussion today. What a shame.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.