Posted on 07/23/2021 12:48:24 PM PDT by blam
This isn’t the first time billionaire investor Stanley Druckenmiller has warned that US markets are caught up in a “raging mania” fostered by the trillions of dollars in government spending. Druck, an acolyte of George Soros known for his macro investing prowess (even as he complains that contemporary Fed-backstopped markets “make no sense”) is a frequent guest on CNBC. But on Friday morning, he made a brief appearance on MSNBC’s Morning Show with Stephanie Ruhle, who seemed ill-equipped to respond to Druck’s arguments about why the Dems’ multi-trillion two-part infrastructure plan will end up hurting America’s poorest citizens.
Druckenmiller
As Druck explains, the “V-shaped” economic recovery has been “the sharpest recovery in history,” noting that it took 10 years for the American economy to achieve the same gains following the start of the Great Depression.
The problem is that the nearly $6 trillion allocated by Congress to combat the economic impact of COVID has been spent after the economy already finished recovering. The accelerating pace of inflation, and inability of certain businesses to hire lower-wage workers, are but byproducts of this.
Source: Committee for a Responsible Federal Budget
Moving on, Druck pointed out that the biggest economic crises of the last 100 years have largely been caused by asset bubbles and inflation. “Inflation is a tax the poor can’t afford or avoid,” Druck added.
Any further stimulus spending is intended to fix a problem that, in Druck’s words, “doesn’t exist anymore.” He added: “If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in the middle of an already hot economy.”
“You usually get a bubble out of that, and you get inflation of of that. Frankly, we now have both. This is the biggest bubble I’ve seen in my career.”
And it’s not just stocks: Druck pointed to the state of crypto and housing markets.
“What are we going to get out of this? You’re going to get a sugar high, the higher inflation, then an economic bust,” Druck warned.
When Druck added that he would prefer Dems postpone their infrastructure spending plans (even though he said he supports many of the provisions of the Demcoratic plan, including improving high-speed infrastructure access in rurual areas), Ruhle interjected. Poor people don’t care about bitcoin crashing, since they don’t own that much bitcoin (or stocks) anyway. But the infrastructure plan will help all Americans, especially those with the fewest resources, Ruhle argued.
“I dont think we need to do anything, we need to take a step back take a breath and see where we are…I think any net spending is a problem. I love a lot of stuff in the infrastructure plan particularly the investments int he digital infrastrucutre. There’s a lot of other stuff im okay with.”
First of all, Druck argued that the growing retail exposure to equities means a market crash will impact main street even more quickly this time around. And even if they own no financial securities or crypto assets, they will still be impacted by the economic declines, as Druck explains: “It’s going to cause a financial crisis, it’s going to cause inflation and nothing is going to hurt the poor more than that.”
That be the commie plan
Not til I get back in! ;)
Any further stimulus spending is intended to fix a problem that, in Druck’s words, “doesn’t exist anymore.” He added: “If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in the middle of an already hot economy.”
If you thought the real-estate bubble bust decade ago was big, this money printing bust will make that one look like Sunday school picnic.
Are there any examples of countries who created long term prosperity with excess money printing made necessary due to excessive budget deficits?
Weimar tried it, Zimbabwe tried it, Argentina tried it, so where is their long term prosperity?
$28 trillion national debt, sky high stock market valuations, rising inflation. What could go wrong?
“Are there any examples of countries who created long term prosperity with excess money printing made necessary due to excessive budget deficits?”
I’ll give you two of the biggest success stories.
1) The British Empire
2) The American Empire
We clear debt and pay our bills. While adding new debt for future prosperity.
Never forget debt keeps people working and productive.
Druck gets in and out of the market with much aplomb about every six months or so.
It’s a very old trick.
The Roman Empire debased their coinage.
In the early empire a denarius was 90% silver. Late empire it was barely 5% silver.
You’re correct.
Like you said:
“oldest trick in the book.”
There is a canyon size difference between prudent debt and debt accumulated for UNPRODUCTIVE purposes. Buying a house with mortgage is prudent. Buying a Corvette on borrowed money is not prudent debt.
“There is a canyon size difference between prudent debt and debt accumulated for UNPRODUCTIVE purposes. Buying a house with mortgage is prudent. Buying a Corvette on borrowed money is not prudent debt.”
True.
Neither of those purchases are blowing up the economy though. Unless you compounded those purchases massively.
Besides, if I buy inflated real estate in a deflationary environment, it could take me 15 to 30 years to clear the mortgage.
The corvette depending on model & year would be easier to pay off, during the same deflationary time period.
Bigger than Clinton’s Bubble ?
it’s not 28 trillion..
it’s about 230 trillion.. people always leave out unfunded liabilities.
Look at the federal budget with focus. MAJORITY OF SPENDING IS for welfare in various forms. $600/week bonus for remaining unemployed?
Monday afternoon is the time AMD gives their quarterly results.
Looking good but....too many times the stock goes up a bit then down again and just meanders. Their $35 billion purchase of another company has been approved by the US and EU this year so hopefully on tuesday morning the stock zooms up and up.
If Trump was president the economy would be roaring along.
Is NOW the time I should be investing in Frozen Orange Juice Futures? ;)
A huge swath of the spending is social security and healthcare for elderly Americans.
Good luck cutting those expenditures.(I’m against hurting the elderly BTW.) So massive cuts for old timers is a non starter.
The unemployment benefits and PPP loans are temporary.(so far)
When those cash infusions run out, individuals and businesses will have to “sink or swim.”
Many of them will drown.
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