The Billionaire Price Index

Paul Singer, a billionaire, believes inflation is a serious problem and he is dumfounded by government data that show otherwise. According to him, the evidence before his eyes shows there is a high rate of inflation. He tells us that he has personally witnessed a dizzying increase in the price of up-scale real estate and high-end art prices.

Obviously, this is a silly conclusion based on the most fragmentary evidence, but why is it a business ethics problem?

Simple. Mr. Singer is a billionaire, for many, a fount of wisdom. And the fact is, he is far more influential than thousands of voters (or bloggers). Politicians shake with fear that he might give to their opponents and hope upon hope that he will give to them. Financial publications, business television and newspapers breathlessly publish his words as if he were a newly minted Old Testament Prophet.

But here, he, a major figure in the financial world, shows that he does not understand inflation. What’s wrong with his analysis?

First, the top 1% are doing extremely well right now having captured the lion’s share of the income gains since the financial crisis of 2007. So, obviously prices will increase for high end items when high end incomes are increasing dramatically. That’s pretty simple.

But his analysis is worse. If you’re looking for inflation outside the numbers presented by the CPI, such analysis would seem to include a look at major nation wide prices on such things as energy. Further, if there is an actual high rate of inflation, shouldn’t it be reflected in the currency markets as well as in the countless economic transactions like those on the Chicago Mercantile?

Reasoning and logic are basic to business ethics. Before you can analysis the ethical and unethical, it is a necessity to understand what’s going on. Mr. Singer is calling for dramatic changes in economic policy. These would have the effect of more protection for already accumulated capital and make the labor market more difficult across the country causing hardship for millions. His reasoning is nonsensical but his influence is vast.

It seems to me that disregarding evidence and making policy based on that disregard is irresponsible and unethical.

It also implies that the “ruling class,” the “beltway,” and the “very serious people” (all very much the same group) have a loose grip on reasoning but a hard and strong grip on ideas that favor protecting their interests.

James Pilant

An Excerpt from The Washington Post –

This billionaire thinks the Fed is missing the hyperinflation in the Hamptons – The Washington Post

Which brings us to Paul Singer. He’s the hedge fund billionaire who’s made a small part of his fortune buying bonds from countries on the edge of default, and then suing them to get paid in full.* (This hasn’t worked quite as well with Argentina). Well, it turns out that he has some very idiosyncratic ideas about what inflation actually looks like. His latest investor letter recycles all these ideas, inveighing against the Fed’s “fake prices,” “fake money,” and “fake jobs,” before zeroing in on where inflation is really showing up — his wallet:

Check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like.

That’s right: Paul Singer thinks Weimar-style inflation might be coming because he has to pay more for his posh vacation homes and art pieces.

via This billionaire thinks the Fed is missing the hyperinflation in the Hamptons – The Washington Post.