THE GLOBAL ECONOMY BETWEEN ECONOMIC SHOCKS? Star hedge fund manager thinks it’s not over

The government tells us America is now out of the Great Recession and that we, and other industrialized nations, are on the way to recovery.

A well-known hedge fund manager disagrees.

David Einhorn, co-founder and president of the nearly $7 Billion hedge fund Greenlight Capital believes the global economy is “in a period between crises,” according to a new report in thestreet.com.

The report says Einhorn thinks the global economy is in a period where things for the moment seem relatively stable but that there's still a lot of “unfinished business” from the last crisis that will cause another global crisis.

Einhorn was interviewed on the Charlie Rose Show on PBS last week and predicted that at some point in the future a crisis not unlike the 2008-2009 recession will be triggered by growing problems not in the private sector but in the public sector.

He said on that show, “"I think what we did in the last crisis in resolving it was rather than go to the root of the crisis, tally up the damage, allot the losses, clean up, fix things, and move on, I feel like a lot of what we did was sort of sweep things under the rug and put short-term bandage fixes on things…we managed to transfer a lot of the problems sort of from the private sector to the public sector. The problem is that it's such a large problem that eventually, I'm concerned that will eventually threaten the public sector as well.”

Einhorn claims that what happened in the economic crash of 08" is that government papered over the real problems.

“We bailed out a lot of institutions…a lot of people that had positioned themselves incorrectly -- ostensibly incorrectly in the crisis, whether it was individuals, whether it was institutions, whether it's investors and so forth. And because we weren't willing to go through that, we haven't been able to effectively clean up that mess, and it's created a very, very large budget deficit. And it's created a monetary policy that is extremely easy, and it seems to be perpetuating itself into a way that I think is going to eventually come to a tough spot."

And that tough spot he says, the next recession type event, will be caused this time by countries bankrupting themselves because of huge budget deficits.


Source: Sky valley chronicle
www.skyvalleychronicle.com