Billionaire hedge fund manager Stanley Druckenmiller pulled no punches during a fireside chat with legendary trader Paul Tudor Jones at a recent Robin Hood Foundation event, slamming Treasury Secretary Janet Yellen.
In his view, Yellen made the worst mistake in the history of the Treasury, by not issuing more long-dated government bonds before the Fed began hiking rates early last year. And that, Druck believes has helped pave the way for a debt disaster.
"When rates were practically zero, every Tom, Dick, Harry, and Mary in the United States refinanced their mortgage," Druckenmiller said.
"Unfortunately we had one entity that did not, and that was the US Treasury."
"Janet Yellen — I guess because political myopia, whatever — was issuing two years at 15 basis points when she could have issued 10 years at 70 basis points or 30 years at 180 basis points," Druckenmiller continued.
But he wasn't done, making it clear the scale of the problem she has created:
"I literally think if you go back to Alexander Hamilton, it was the biggest blunder in the history of the Treasury. I have no idea why she's not been called out on this, she has no right to still be in that job after that," Druckenmiller said.
Who could have seen that coming?
"Every caddy I knew, every locker-room person, everybody in America was refinancing their mortgages, every corporation was extending their debt," he added.
One look at the market's perception of USA's sovereign credit risk tells you all you need to know about Yellen and her inane sponsorship of Bidenomics... wrecking America's financial situation - evidenced by UST yields are rising along with USA sovereign risk's sudden surge...
And it's not going to get any better...
"The politicians that are telling you and think they're not going to cut entitlements, it's just an outright lie, the numbers absolutely don't work, it's a fantasy," he said.
"Honestly, I think the math has gone crazy."
Watch the full discussion here:
And, as Rabobank's Michael Every noted, it appears Yellen is at it again based on yesterday's announcement on Treasury's borrowing target (and the make-up of that debt issuance being more bill-based once again)
Yes, more bill issuance might take upwards pressure off longer-dated bond yields.
However, Yellen would be doing it to splurge on spending over the next 12 months to try to ensure she stays in the job for another 62.
In which case, US GDP growth will keep looking like it did in Q3, as will inflation, and the Fed may have to act again, raising both T-bill rates and Treasury bond yields.
Worse still for the softly-spoken Ivory-Tower dweller, her own husband - Nobel Prize winning economist George Akerlof - pointed out in June 2020 how the economic profession's descent into irrelevance is highlighted by its failure to predict the Great Financial Crisis...
As Professor Akerlof observes:
In the aftermath of the financial crisis of 2008, economists asked the question why no one had predicted it, at least exactly as it happened. Rajan (2011) said that such a prediction had not been made since it would have required detailed knowledge of theory and institutions in the disparate specialties of finance, real estate and macroeconomics...
There were incentives to present the key pieces of the puzzle, but none to put them together.
Following Caballero (2010), regarding theory, a model with all the pieces could not have been published; it would have been considered too far from precise, simple ideas (such as those that motivate simple new Keynesian or DSGE models); and, in this way, too Soft to merit publication.
Interestingly, the Economics profession also shunned individuals who did put the key pieces together and predicted the crisis in papers published by the BIS.
The lack of a mathematical model made it easy to dismiss these papers too.
Professor Akerlof goes on to explain how the preoccupation with math effectively blocks the Economics profession from understanding financial crises.
Suppose the paradigm not only describes the subject matter of the field; suppose it also describes the field’s appropriate methodology. In this case, observations that contradict the existing paradigm will be dismissed if they violate the prescribed methodology. The Hardness police will rule them out, as inadmissible evidence.
Shorter, if you cannot express it with a mathematical equation, Economists aren’t interested...
Not exactly resounding support for his wife's profession... or ability to forecast anything at all.
Remember this beauty from 2017...
Damn it, Janet!
In light of Druckenmiller's (and PTJ's) views on Yellen's
uselessness inability to do her job well, they both appear to think owning more gold and bitcoin makes sense...
What happens when 100 billionaires decide they want to put 10% of their wealth into #bitcoin? pic.twitter.com/WV9mBm7YQB— Bitcoin Mindset 🟠 🧠 (@80IQmindset) October 31, 2023
Stanley Druckenmiller and Paul Tudor Jones will quickly realize they don’t own enough #bitcoin.
First you start at 1%.