Source: Druckenmiller: "I've Had A Terrible Year... It’s Going To Be My First Down Year In Currencies Ever"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.
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
Comments
Post a Comment