Druckenmiller says core PCE was 1.5% when Greenspan raised rates from 4.75%, now it's 1.7% at 1.5% Fed funds.
“I look back and the core PCE was one and a half in '98 and '99 when Greenspan started raising rates again from 475 is currently one seven and he's got them at 1.5.”
Druckenmiller calls Powell a weaker version of Yellen without the monetary framework Bernanke had.
“He's a weaker version of Yellen without the monetary framework. Bernanke and I philosophically disagree about easy money and helicopter money.”
Druckenmiller blames financial crisis on easy money bubbles and questions current low interest rate levels.
“I will go to my grave believing that that financial crisis happened because of bubbles created by easy money. And I just don't understand why we need interest rates where they are now.”
Druckenmiller notes 12 of 14 inflation measures are above 2%, questions Fed focus on 1.7% core PCE.
“Well, first of all, there's 14 recognized measures of inflation. 12 of them are above 2%. Their preferred measure, the core PCE, is at 1.7%.”
Druckenmiller says negative rates are the most anti-capitalist idea and that Trump has clearly influenced Powell despite media claims otherwise.
“It's the most anti capitalist idea I could ever dream up. And he's pushing Powell. You know, I didn't want to believe this, but it's pretty clear now that he's had an effect on Powell.”
Druckenmiller notes the US is running a trillion dollar deficit at full employment alongside negative real rates globally.
“We're running a trillion dollar deficit at full employment. Apparently, we're gonna have some sort of green stimulus in Europe, and we have negative real rates everywhere and negative absolute rates a lot of places.”
Druckenmiller says negative rates are most anti-capitalist idea and Trump has clearly influenced Powell despite media claims.
“It's the most anti capitalist idea I could ever dream up, and he's pushing Powell.”
Druckenmiller says current Fed funds rate of 1.5% is absurd given economic conditions; appropriate level would be 3.5%.
“If I came down from Mars and you showed me the the broad landscape and asked me where Fed funds would be, probably would guess three and a half, somewhere in there.”
Druckenmiller blames the financial crisis on easy money bubbles and questions current low interest rate policy.
“I will go to my grave believing that that financial crisis happened because of bubbles created by easy money. And I just don't understand why we need interest rates where they are now.”
Druckenmiller cites $30 trillion in global QE and $18 trillion negative-yielding debt before 8% inflation.
“I think globally we had 30,000,000,000,000 of QE. Even as late as, I think a year ago, was 18,000,000,000,000 of debt that was still negative yielding when the world was about to experience 8% inflation.”
Druckenmiller says this is the most complicated and unanalyzable economic situation he's ever seen.
“this is the most complicated non roadmap unanalyzable situation I've ever seen in terms of having a lot of confidence in an economic prediction going forward.”
Druckenmiller expects 800 billion in treasury issuance by year-end as liquidity conditions reverse from earlier stimulus.
“So you're going to probably about 800,000,000,000 in treasuries issued between now and year end. The Fed will be continuing on with QT.”