Druckenmiller Sees ‘Massive’ Debt Fueling Next Financial Crisis

Billionaire investor Stan Druckenmiller says the next financial crisis will be worse than the last due to soaring levels of debt.

Krista Gmelich

29 Sep 2018, 10:10 PM IST

Druckenmiller Sees ‘Massive’ Debt Fueling Next Financial Crisis

Stanley “Stan” Druckenmiller, chairman and chief investment officer of Duquesne Family Office LLC, speaks during a television interview at the Robin Hood investors Conference in New York, U.S. (Photographer: Peter Foley/Bloomberg)

(Bloomberg) -- Billionaire investor Stan Druckenmiller says the next financial crisis will be worse than the last due to soaring levels of debt.

“We have this massive debt problem,” Druckenmiller said an interview with Kiril Sokoloff, chairman of 13D Global Strategy & Research. “We tripled down on what caused the crisis. And we tripled down on it globally.”

Druckenmiller joins a growing list of Wall Street financiers and money managers who have predicted debt will trigger a crisis. Citadel’s Ken Griffin earlier this week cautioned that a debt-fueled buying binge is laying the seeds for the next economic downturn. DoubleLine Capital’s Jeffrey Gundlach said in June that the soaring U.S. budget deficit at a time of rising rates may be setting the stage for fiscal trouble.

Key Insights

The Federal Reserve has passed up on "many golden opportunities" to raise rates, Druckenmiller said. “I would raise rates every meeting as long as I could. And the minute you got substantial disruption, I would back off.”
Debt is a much more challenging issue now. The reason “debt has exploded” is that “there’s no hurdle rate for investment. And when you can borrow money at zero, of course, debt is going to explode.”

Digging Deeper

Even with regulatory hurdles, Druckenmiller said he isn’t ready to sell Google, citing the company’s leadership in artificial intelligence and its "unbelievable search machine."
Druckenmiller said he has built his career on trading the bonds and currency markets because they’re liquid markets that trade 24 hours a day. That has appeal, he said, “because I could change my mind” on bets.

Druckenmiller gave the interview on Sept. 6 in New York and a transcript was published Friday by Real Vision, a subscription video service.

Business Insider earlier reported on the interview.

To contact the reporter on this story: Krista Gmelich in New York at kgmelich1@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alan Mirabella, Vincent Bielski