Reckless government spending enabled by the Federal Reserve is hurting average Americans and threatening President Joe Biden’s chances of being re-elected, billionaire investor Stanley Druckenmiller said Tuesday.
During an appearance on CNBC’s “Squawk Box,” the head of the Duquesne Family Office, who made his name betting against the British pound in the early 1990s, criticized financial and monetary authorities, including Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell.
Additionally, he called “Bidenomics” a failure and said consumers would pay the price in the form of higher inflation.
“The financial situation we are facing seems to be getting a lot more recognition. Everyone seems to get it except Yellen, who just keeps spending,” Druckenmiller said. “I think it’s politically stupid because it causes inflation and it doesn’t take a genius to figure out that the average American is hurt by inflation.”
Druckenmiller’s comments come as the Fed is still trying to lower inflation as policymakers dashed investors’ hopes of aggressive rate cuts this year.
It was a mistake to get markets excited about cutting interest rates because it would “set financial conditions on fire,” he said.
“It seemed to me that the Fed was in a perfect position. Inflation fell, financial conditions tightened,” he said. “In some ways I feel like they fumbled at the five-yard line.”
The Fed’s mistake
Although Druckenmiller said his company was “a big beneficiary” of the rise in asset prices and easing conditions, he still thinks it was a mistake that the Fed decided in late 2023 to push harder on the idea that rate cuts were imminent. At this point, the Fed simply increased its unofficial forecast from two to three rate cuts. However, investors interpreted Powell’s comments in December to mean that significant monetary easing was imminent.
Elected officials generally welcome low interest rates. Druckenmiller said Powell did Biden no favors.
Biden is in a tough battle with former President Donald Trump ahead of the November election.
“Bidenomics, if I were a professor, I would give it an ‘F,'” Druckenmiller said. “Basically they misdiagnosed and misjudged Covid [the economy] was in a depression. The Fed did too.”
“The Treasury is still behaving as if we are in a depression,” he added. “They spent and spent and spent, and my new fear now is that the spending and the resulting interest rates on the debt created will crowd out some of the innovation that otherwise would have taken place.”
The pandemic outbreak occurred under the Trump administration, which signed a $2.3 trillion coronavirus relief package in 2020. Biden then signed another nearly $2 trillion relief package in 2021.
Druckenmiller also didn’t have much good to say about Trump, who he said would also likely experience inflation under his presidency.
During his time in office, Trump was a harsh Fed critic and repeatedly called on Powell and his colleagues to cut interest rates. Additionally, Trump has supported high tariffs and has indicated he would do so again if he wins the election in November.
“With Biden, I’m more worried about the stagflation, about all the government spending, about all the tricks Yellen has used to manipulate the yield curve, about the way the Fed seems to have brought financial conditions back up has. I think the inflationary consequences could be there,” Druckenmiller said. “But I’m also afraid of regulation and anything else that affects productivity.”
“So I’m basically a guy with no candidates,” he added. “I am an old-style Reagan, a free market supporter, an immigration supporter and an anti-tariff Republican.”
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2024-05-07 13:17:26
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