Hedge fund Elliott Management sees world on path to hyperinflation and worst crisis since WWII

Published Thu, Nov 3 20226:53 PM EDTUpdated Fri, Nov 4 20228:03 AM EDT

Elliott Management, one of the world's biggest hedge funds, issued a dire warning on the markets and the economy, saying the world could be headed toward its worst crisis since World War II. "[A]n extraordinary confluence of extremes and problems have made possible a set of outcomes that would be at or beyond the boundaries of the entire post-WWII period," Elliott said in its latest investor letter, obtained by CNBC. "Investors should not assume that they have 'seen everything' on account of experiencing the 1973 to 1974 bear market and oil embargo, the 1987 crash, the dot-com crash, or the 2007 to 2008 [global financial crisis]." The hedge fund, with $56 billion in assets under management at the end of September, said the Federal Reserve is tightening amid a struggling economy, which could cause a recession and in turn prompt still more fiscal stimulus. That vicious circle risks a long period of accelerating price pressures, Elliott, founded by billionaire Paul Elliott Singer, said. "The world is on the path to hyperinflation, which is the direct route to global societal collapse and civil or international strife. It is not baked, but that is the path that we are treading," Elliott said. Stocks staged a major comeback last month with the S & P 500 rallying nearly 8% and the blue-chip Dow Jones Industrial Average notching its best month since 1976. But the S & P 500 has already fallen 4.6% this week through Thursday as the Fed raised interest rates for a sixth time this year, bringing the benchmark's 2022 loss to nearly 22%. "The current situation contains so many frightening and seriously negative possibilities that it is difficult to avoid the conclusion that a seriously adverse unwind of the everything-bubble is 'baked,'" Elliott said in the letter. The Fed on Wednesday approved a fourth consecutive three-quarter point interest rate hike , bringing the short-term borrowing rate to the highest level since January 2008. The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high. Elliott said the steep losses in asset prices this year are simply not enough to accurately reflect the "current mess" and "extremely challenging" environment the global economy finds itself in, due to "the serious mistakes in public policy." — CNBC's Michael Bloom contributed reporting.