Sunday, July 25, 2021

The Coming Inflation

For further edification on the state of the current economy we turn to Stanley Druckenmiller, notable hedge fund billionaire. A few days ago we looked at the views of money manager extraordinaire, Jeremy Grantham. Today, we can refer to a Zero Hedge report about a Druckenmiller appearance on MSNBC. 

He, like Grantham and Larry Summers, is most concerned about inflation. So much for modern monetary theory. Druck remarks that inflation is a tax on the poor. So, naturally, it makes sense that a Democratic president and Democratic Congress would be supporting it:

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." 

So, the current Democratic infrastructure spending plan would do nothing more than-- hold your breath-- destroy the American economy. When the economy is doing very well, the worst thing you can do is to spend aggressively. Tell that to AOC. Keep in mind, the man leans left politically:

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 off of that. Frankly, we now have both. This is the biggest bubble I've seen in my career."

So, Druck wants Democrats to delay their infrastructure spending plan. 

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 rural 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.

Stephanie Ruhle was the MSNBC interviewer. Clearly she was in way over her head.

Druck responded:

"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 in the digital infrastructure. There's a lot of other stuff im okay with."

As for Ruhle’s notion that only the rich would be impacted by a market crash, Druck corrected her poor understanding of economic history:

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."

It’s worth your attention.

No comments: