There are very few investment professionals voicing concern about the Federal Reserve’s easy monetary policies nowadays. Most economists still believe the Fed will likely raise the Fed Funds interest rate in June, or at least by September. The financial media takes it as a given that the United States economic recovery remains relatively robust, while China’s economy seems to be on the verge of disaster.
Enter Stanley Druckenmiller, one of the most successful hedge fund managers of the past thirty years. He has made big waves in the past month after a transcript of a speech he gave at a private club became public. In the speech, he explained that he is concerned that the economic climate is starting to look eerily similar to 2004 and the lead-up to the financial crisis.
Bloomberg TV just released a lengthy interview (see below) with Druckenmiller that delves more deeply into his concerns about the US economy. While he insists that he is not predicting a crash, he is also very clear that he does not like the risk-reward outlook of the Fed’s ongoing easy monetary policy. He doesn’t want to alarm investors, but at the same time it’s pretty obvious that he’s worried about the unprecedented amount of both domestic and global debt. He also thinks it’s ridiculous that interest rates are still at zero percent, but doesn’t see that changing anytime soon.
We’re not going to see anything for a year and half, because they set up metrics 8 or 9 months ago. They were met 3 or 4 months ago, so they changed the metrics. I have no confidence whatsoever that you’re going to see rate hikes in September or December or whenever. When they lay out metrics and then they change and then they change again and then they change again, who knows when they’re going to go. By then, how far will the financial engineering go and how far will the debt go?â€
Bloomberg emphasizes three forecasts from Druckenmiller that exactly match or are very similar to what Peter Schiff has been saying for some time. These include:
