A series of warnings about the looming stock market crash made the headlines again this week, as the market moves closer and closer to the epic burst of the greatest bubble of all time. Notably, the billionaire investor and Duquesne Family Office chief, Stanley Druckenmiller, shared a gloomy forecast: if the U.S. government keeps spending trillions upon trillions, we may witness not only a devastating crash but a financial crisis that will deeply hurt millions of Americans. In May, the veteran investor said that the current bull market was looking like something he had seen in the past, and back then, things did not end well. “I have no doubt that we are in a raging mania in all assets,” he said. “I also have no doubt that I don’t have a clue when that’s going to end. I knew we were in a raging mania in ’99, but it kept going on, and if you had shorted the tech stocks in mid-’99, you were out of business by the end of the year,” Druckenmiller added, comparing today’s market to the dot-com boom.
That wasn’t the first time the billionaire investor cautioned Wall Street investors that U.S. markets were caught up in a “speculative frenzy” fostered by the trillions of dollars in government spending. Most recently, the market expert made a brief appearance on MSNBC’s Morning Show with Stephanie Ruhle, who seemed a little unprepared to respond to his arguments about why the new government multi-trillion infrastructure plan will end up financially hurting America’s working poor. Druckenmiller argued that the U.S. economy is experiencing some sort of “V-shaped” recovery right now, and it has been the sharpest rebound in history. However, he noted that it took more than a decade for the American economy to attain the same gains after the start of the Great Depression. The main problem of this rapid upturn is that the almost $6 trillion allocated by Congress to combat the economic impact of the health crisis has been spent after the economy concluded its rebound. The alarming growth of inflation and small and medium-sized businesses’ inability to hike wages to hire new workers are definitely consequences of this imbalanced ‘recovery’.
The financial expert explained that the biggest economic crises that occurred over the past 100 years have been mainly caused by asset bubbles and inflation. “Inflation is a tax the poor can’t afford or avoid,” Druck stressed, adding that any further stimulus spending will be directed to fix a problem that, in Druck’s words, “doesn’t exist anymore”, meaning that there’s no need for the economy to be artificially stimulated anymore. “If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in the middle of an already hot economy. You usually get a bubble out of that, and you get inflation out of that. Frankly, we now have both. This is the biggest bubble I’ve seen in my career,” he said. Druckenmiller also reminded investors that the bubble doesn’t just include stocks, but cryptocurrencies and housing markets too. “What are we going to get out of this? You’re going to get a sugar high, the higher inflation, then an economic bust,” the billionaire warned.
During the interview, when Druck said the government should postpone the issuance of the new infrastructure spending plan, Ruhle interjected, arguing that poor people do not care whether or not Bitcoin will crash, since they don’t own that much crypto or stocks anyway. She maintained that the infrastructure plan would help all Americans, particularly those with the fewest resources. The investor then replied saying: “I don’t think we need to do anything, we need to take a step back take a breath, and see where we are. I think any net spending is a problem”. He said that there are many exciting things inside the plan, such as investments in the digital infrastructure. However, it isn’t something our economy could afford to bear at this moment. Druck pointed out that the growing retail exposure to equities means that a stock market crash will impact Main Street even more quickly and even harder this time around. It doesn’t matter whether they do or don’t hold financial securities or crypto assets, they will still be impacted by the economic downturn, as Druck laid out: “It’s going to cause a financial crisis, it’s going to cause inflation and nothing is going to hurt the poor more than that”. Back in May, the expert predicted that we would see a crash before year’s end. “I will be surprised if we’re not out of the stock market by the end of the year, just because the bubbles can’t last that long,” he said.