Stanley Druckenmiller is the former manager of Duquesne Capital, one of the most successful hedge funds ever. He recently gave a rare interview with CNBC in which he spoke about entitlement reform and the implications of our unsustainable national debt.
Washington DC has a serious spending problem. One that will eventually lead to a dollar crisis and a significantly reduced standard of living for many Americans. While most blame the politicians, and some blame the voters who put them there, Druckenmiller points out that:
“Congress is not getting the market signal we talked about in the article so you can scream all you want about congress and the president being clowns, I can’t think of any political system anywhere where they acted without interest rates going up. When did greece act? When the bond market blew up. When did Spain act? When the bond market blew up. What was Clinton’s famous response to Rubin, “you mean the f’ing bond market is in control of the situation”? Doing what they are doing the politicians have no incentive.”
On February 20th, Axel Merk of Merk Investments made a similar observation:
“The Eurozone experience showed that the only language policy makers might be listening to is that of the bond market. That is, only when pressured by the bond market do policy makers engage in meaningful reform; the moment the pressure abates, the motivation to implement reform abates. In my assessment, U.S. policy makers will only tackle entitlement reform, urgently necessary to make deficits sustainable, once pressured to do so by the bond market.”
All of which means we have a very serious problem because the Federal Reserve is the bond market. QE to infinity will not end voluntarily as it is singlehandedly propping up the banking apparatus that dominates Europe and America. And as G. Edward Griffin notes, the Federal Reserve System is nothing more than a banking cartel. Holders of dollars and US treasuries take note – this will not end well.