We’re told the Federal Reserve has “ended easy money”. I’m not sure that’s true. Yes, the US Central Bank announced last Wednesday that its gargantuan money-printing habit is soon to be scaled back. Instead of creating $85bn per month ex nihilo, the Fed will from January conjure up just $75bn. That’s still a massive base money expansion of $900bn a year.
At the same time, in a move apparently meant to help cash-strapped US mortgage-payers, but actually aimed at global financial markets, Ben Bernanke bolstered his “forward guidance”. America’s benchmark interest rate is likely to stay near zero “well past the time when the jobless rate declines below 6.5pc”, the Fed Chairman told the world. So US monetary policy remains ultra-loose but is now slightly less ultra-loose than before. Maybe.
“As a practitioner of markets, I love this stuff,” said Stanley Druckenmiller. “This stuff is fantastic for every rich person. It’s the biggest distribution of wealth from the poor and the middle classes to the rich ever.”
Druckenmiller is among Wall Street’s most fabled investors. He started Duquesne Capital in the early 1980s then teamed up with George Soros, running the legendary Quantum Fund. Together they made billions by “breaking the Bank of England”, shorting the pound in massive volumes and forcing sterling out of the Exchange Rate Mechanism. That was in 1992.
The quotation above is more recent. Druckenmiller said these words on CNBC television last Thursday and the “stuff” was quantitative easing. While extremely critical of America’s $85bn-a-month money-printing habit, Druckenmiller is at least decent enough to acknowledge that, as a wealthy chap with a bucket-load of equities, the Federal Reserve’s asset-buying programme has made him even richer.