Skip to main content

Druckenmiller on the Zero Interest Rates - Zerohedge

Druckenmiller: If you took the taylor rule a normal interest rate given our economic circumstances would be 4% interestingly. We’re at 1%. In europe, it would be 2%. They’re at minus 40%. In sweden, it would be 3.75%. They’re at minus 50%. That doesn’t even count the bond buying we’re talking. But this is all in the name of this 2% inflation target.
Evans: if they’re keeping rates in this country, you know, barely above zero, in other countries, below zero, what are the consequences of all of this?
Druckenmiller: well the consequences are huge because we’ve distorted market signals and we’re causing all sorts of what i would call misallocation of resources.
Evans: Like bitcoin? or is that unrelated?
Druckenmiller: No, it’s not unrelated at all. Bitcoin, art, wine, equities, credit, you name it. everything is one way up and there are huge distortions taking place, and it’s all in the name of this 2% inflation target. And when you get a misallocation of resources, it really hinders growth over the longer term.
Source: Druckenmiller: "I've Had A Terrible Year... It’s Going To Be My First Down Year In Currencies Ever"

Comments

Post a Comment

Popular posts from this blog

How The Economic Machine Works by Ray Dalio - Bridgewater

Source: How The Economic Machine Works by Ray Dalio
Post a Comment
Read more

Letter: Why the geopolitics of international currency choice matters - FT

This coincidence must alert readers that a tempest is brewing on subjects noted: lurking inflation, increasing debt, suppressed interest rates and the shifting of hegemonic power.  There are only two important questions in investing that also apply to subjects impacting the future stability of the world — tell me why and tell me when.  Plender gives us the “why”, the ever-increasing “intolerable burden” of government debt and suppressed rates leveraging the global financial system. He gives us the tipping point.  What we await is “the when”, as in when do we know we have “tipped”.  Paul Hackett Madison,  NJ, US    Letter: Why the geopolitics of international currency choice matters
Post a Comment
Read more

Enough cool heads are pulling back from the brink - John Authers - Bloomberg

  Beyond the duration of the shock, we also need to monitor the impact on central banks and on the macroeconomy. Societe Generale’s Manish Kabra lays out the criteria as follows: An exogenous shock lasts beyond a week, but oil spikes usually peak in three months. That’s the timeline and only two things matter: 1) shock duration and 2) the Fed’s reaction function. Alternatively, Henry Allen of Deutsche Bank suggests that for a risk-off bear market to follow an oil shock, three conditions need to be met: 1. Large and sustained oil price spike: An oil price spike of at least +50-100% that is sustained over several months. 2. Hawkish policy response: The shock forces a sharp, hawkish pivot from central banks to fight the resulting inflation (e.g. 1979, 2022). 3. Broader macro damage: The shock is big enough to tip an already-slowing economy into recession.   Iran Oil Panic: Enough Cool Heads Are Pulling Back From the Brink - Bloomberg  
Post a Comment
Read more