Binomics has another critic. Stanley Druckenmiller, the famous billionaire investor who made his money alongside George Soros, was extremely dissatisfied with President Joe Biden's economic policies.
“Bidenomics, if I were a professor, I would give it an 'F,'” Druckenmiller told CNBC on Tuesday.
Druckenmiller was particularly upset by what he saw as a misinterpretation of the macroeconomic landscape by Biden, the Federal Reserve and the Treasury Department. According to Druckenmiller, all three overestimated the severity of the economic crisis caused by the pandemic – and therefore implemented the wrong measures.
The government “misdiagnosed COVID and thought we were going into a depression,” Druckenmiller said. “The Fed did it too. I was worried about this at first too. The Fed finally did a U-turn – better late than never. The Treasury still behaves as if we are in a depression.”
The country would have been able to pull itself out of the economic downturn, which at one point was technically a recession, without Bidenomics' level of government spending, Druckenmiller said — and now that the recovery is almost complete, some have His policies did so causing the deficit to skyrocket.
Bidenomics was structured to expend massive government resources across the country to keep money flowing in the economy and stimulate economic growth. But critics say this has led to a record-high $34 trillion national debt attributable to total government spending. An analysis by researchers at the University of Pennsylvania estimates that the U.S. has about 20 years before its debt becomes unsustainable.
Bidenomics also faces increasing concerns that it could ultimately lead to inflation, as the additional government spending will drive up prices at a time when the Federal Reserve is trying to curb inflation. The truth is probably somewhere in the middle. It is still too early to know the full extent of Biden's economic policies, considering that it will take years for manufacturing and infrastructure subsidies to come to fruition due to the long lead times in these industries.
In the here and now, however, Druckenmiller remains frustrated. He also criticized the Fed and its Chairman Jerome Powell for overexciting the market late last year when they began announcing looming interest rate cuts when inflation had fallen significantly from June 2022's 9%. But there was still a chance that inflation could either rise again or remain extremely stubborn in the last mile. It certainly wasn't because of the Fed's 2% target. In fact, Powell himself later said that he needed more data to indicate that the price was moving to these levels. Instead, Powell jumped the gun and predicted up to three rate cuts at the time.
“In some ways I feel like they fumbled at the five-yard line with the game on the line,” Druckenmiller said.
The market cheered after Powell's prediction, assuming the current cycle of monetary tightening was over. Overjoyed economists predicted up to six interest rate cuts in 2024, sending the Dow Jones soaring to record levels and bulls claiming a recession had definitely been avoided.
“They have upended the financial conditions again,” Druckenmiller said.
Throughout his interview, Druckenmiller was particularly angry at Powell, whom he continued to chide for talking too much in public. Parsing the Federal Reserve chairman's thoughtful words – known as “Fed Speak” – has become an art in itself. For Druckenmiller, however, it was simply a bad decision.
“Don’t continue on 60 Minutes,” Druckenmiller said, referring to Powell’s February interview with the show. “You’re not a rock star – okay. You are the Fed Chairman. They should conduct monetary policy for the good of the country.”
Druckenmiller's words come at a time when the merits of an independent Fed are under intense scrutiny. An April Wall Street Journal report detailed how former President Donald Trump's campaign was working on plans to limit the central bank's independence, even floating the idea that the president would set interest rates. While Trump was in office, he regularly publicly criticized Powell for pursuing monetary policies he didn't like. This in itself was a virtually unknown practice.
However, Druckenmiller held the opposite opinion of the former president. In his opinion, the Fed should be even more independent and not make any forecasts for the future at all. “I would just say nothing and do what the Fed chair used to do,” he said. “If you have to raise rates, raise them; If you have to cut them, cut them.”
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