"Paul Singer’s Elliott Management Corp. said optimism on U.S. growth is misguided as economic data understate inflation and overstate growth, and central bank policies of the past six years aren’t sustainable.
The market turmoil in the first half of October may be a “coming attractions” ...if investors lose confidence in the effectiveness of monetary stimulus, Elliott wrote in a third-quarter letter to investors...
“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,” New York-based Elliott wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”
...“We do not think this optimism is warranted, and we think a lot of the data is cooked or misleading,” Elliott, which manages $25.4 billion...
“A good deal of the economic and jobs growth since the crisis has been fake growth, with very little chance of being self-reinforcing and sustainable.”
...the official inflation number is understating actual inflation by as much as 1 percent a year. That’s because economists focus on measures such as core inflation or make “hedonic adjustments” for improvements in the quality of consumer goods. Inflation is also distorted “by the increasing gap between the spending basket of the well-off and that of the middle class,” the firm said.
...“The inflation that has infected asset prices is not to be ignored just because the middle-class spending bucket is not rising in price at the same rates as high-end real estate, stocks, bonds, art and other things that benefit from” quantitative easing, Elliott wrote.
...Bill Gross, in his second investment outlook since joining Janus Capital Group Inc., said yesterday that fiscal spending may be needed to fight the “growing possibility” of deflation, because central bank policies have pushed up only asset prices and not prices in the real economy.
Elliott ...said that while central banks have lifted asset prices, there have been no “significant structural improvements” since the financial crisis that would allow the developed economies to grow faster.
“Our belief is that the global economy and financial system are in a kind of artificial stupor in which nobody (including ourselves) has a good picture of what the next environment will look like,” the firm wrote."
Telegraph; "History will surely see QE as a major mistake"