Billionaire investor Stanley Druckenmiller said Tuesday that reckless government spending allowed by the Federal Reserve is hurting ordinary Americans and jeopardizing President Joe Biden's re-election chances.
During an appearance on CNBC's “Squawk Box,” the head of the Duquesne family office, which made his name betting against the British pound in the early 1990s, criticized fiscal and monetary authorities, including Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.
In addition, he described the “penny economy” as a failure and said that consumers are paying the price in terms of high inflation.
“There seems to be a lot more recognition… of the financial situation facing us. Everyone seems to understand it except Yellen, who continues to spend and spend,” Druckenmiller said. “I think that's politically stupid because it causes inflation and it doesn't take a genius to figure out that the average American is hurting by inflation.”
Druckenmiller's comments come as the Federal Reserve continues to try to lower inflation, with policymakers dashing investors' hopes for deep interest rate cuts this year.
He added that getting markets excited about lowering interest rates was a mistake because it inflamed financial conditions.
“It seemed to me that the Fed was in an ideal position. Inflation was falling, and financial conditions were tightening,” he said. “To some extent, I feel like they fumbled at the five-yard line.”
Fed error
Although Druckenmiller said his company was a “major beneficiary” of the jump in asset prices and easing conditions, he still believes the Fed will pivot in late 2023 to push more forcefully on the idea that interest rate cuts were wrong. At that point, the Fed raised its unofficial forecast from two cuts to just three. However, investors interpreted Powell's comments in December to mean there was significant easing in monetary policy ahead.
Elected officials generally welcome lower interest rates. Druckenmiller said Powell did Biden no favors.
Biden is locked in a heated battle with former President Donald Trump before the November elections.
“If I were a bioeconomics professor, I would give it an F,” Druckenmiller said. “Basically, they misdiagnosed Covid and thought (the economy) was on its way to a depression. And the Fed did, too.”
“The Treasury is still acting as if we are in a recession,” he added. “They have spent and spent and spent, and my fear now is that the spending and the resulting interest rates on the debt that has been created will crowd out some of the innovation that would otherwise have occurred.”
The beginning of the pandemic occurred under the Trump administration, which signed a $2.3 trillion coronavirus relief package into law in 2020. Biden then signed another relief package worth nearly $2 trillion in 2021.
Druckenmiller also didn't have many good things to say about Trump, who he said would likely see inflation under his presidency as well.
During his time in office, Trump was a fierce critic of the Fed, repeatedly urging Powell and his colleagues to lower interest rates. In addition, Trump has called for steep tariffs and indicated he would do so again if he wins in November.
“With Biden, I'm more concerned about stagflation, with all the government spending, with all the tricks Yellen is using to manipulate the yield curve, and with the way the Fed seems to have reignited financial conditions. I think the outcome could be inflationary,” Druckenmiller said. “Be there.” “But I also fear organization and everything else that inhibits productivity.”
“So, I'm basically a man without a filter,” he added. “I'm old-fashioned Reagan, free markets, pro-immigration and anti-tariffs.”
