David Einhorn Predicts Another Crisis In Coming Years

“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. And I think 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.

What we decided to do was sort of paper over the problems. We bailed out a lot of institutions. We bailed out 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.”

David Einhorn