Stanley Druckenmiller: Total Debt Could Be $211 Trillion [VIDEO]

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own are exposed. by a falling economy. let’s take the other case. let’s say given big inflation, i own a lot of companies out there, because they have a 3% yield. 3% seems pretty good. okay? what if rates go to 6% or 7% or 8%, what do you think those stocks i own with these steady 3% yields are going to go? again i’m not talking about you asked me the question. i don’t know when it’s going to be. but, i just know when you get this kind of rigging inhis manipulation that it should end badly. kevin you know everyone on the fed. you saw the little — the scuttle but when a coupl ofe the guys stepped down and said maybe some of the adverse consequences are starting to outweigh the efficacy, and then we came back and we’ve decided bernanke is the guy and he doesn’t think that way and he’s the one that controls it. do you have any idea how long — so i don’t know. i’m not privy to their discussions. i’ll be my two years of parole will be over in april. but i would say markets seem to be confused about who’s running the show down there. chairman bernanke is. the minutes continue to put out noise and market participants think that the fed is conspiring to send signs about what the next steps will be. i think the chairman is, for better or worse, calling it the best he can see it, and his judgment out there is that he is going to continue to provide extraordinary monetary accommodation until these labor markets in his own words are substantially improved. so the trick for central banks is always to figure out when to exit and i think he has told us and told your viewers that he’s going to wait until he’s darn sure this economy has real legs, and i think what you’ve heard from these other guests over the course of the last hour is this economy does not appear to any of us here to be showing the kind of extraordinary growth that has marked virtually every recession since the second world war. so we do not see growth that is moving well above trend, and as a result, i think the fed is prepared to keep at this level of combination for a very, very long time. can i just comment on that fo one second. the thought that you c exit by wherever the balance sheet will be at that time, 4 trillion, wherever it is, in an orderly manner the chairman testified that will give the market plenty of warning, do you know what guys like me are going to do when they sell the first bond out of 4 trillion? and don’t think that letting the bonds run off isn’t selling. that debt has to be refinanced. if you do not — if you just let all the bonds run off that is still 4 trillion in selling. and it’s not till they actually sell the first one, it’s till you get the whiff — what do you think — what do you think the markets are going to do when they figure out the exit. look what happened in qe-1 and qe-2 ended which is why i don’t think this sever going to end. that’s what buffet told us yesterday, too. that the fomc minutes was something like a very light match, actually see the cigarette of bernanke starting to burn on that everybody’s going to run to the excite. totally apropos what ken said bear in mind the real unemployment number is not 7.9. it’s a hell of a lot higher than that. much higher. what would the real bond ten-year yield be? i hear what you’re saying. there have been times it’s started backing up the yields and either we’ve had problems in europe or a spring swoon here in the economy and it almost looks like the rates come back down on their own. it doesn’t look like it’s all the fed. what do you think the real rate of the ten-year would be if there was no qe? i have no idea. you sure it would be higher? no, no, we might already be in a bust. i have no idea. but it’s — all we know is that it’s not a real — it’s not a market driven number? and we know the longer you keep it there, the greater the misallocation, and the greater the pain. there’s been some commentary about ’01 and ’02. and what happened, and not being fair to workers. i can promise you, had we had a tighter monetary policy than we did in ’02 and ’03, it’s true, we wouldn’t have had the boom in ’04 and ’05 and ’06 we had. it’s also true that we wouldn’t have had half the subprime mortgages written, people thrown out of their homes, so many people unemployed. so you take a little less prosperity in the near-term, or even, god forbid, a minor recession as opposed to just keeping the party going, because when the party ends, we all know about drinking. the hangover is a lot worse if you drink a lot more. how much would simpson-bowles have solved the looming crisis, at all? i think it would have helped. we need even more than that. and we’re nowhere — we’re not even close to doing that. all this discussion goes back to the kids. who’s really going to be hurt by this happening? what can we really e to do? hold it. we’ve got to figure a way out to energize these kids to understand, they’re at the greatest risk of all. look. there isn’t a hell of a lot that’s going to change in my life or my wife’s life until we go. thank god we’ve done very well. and we live comfortably and we live sensibly. these poor kids haven’t even started yet, and when you think about the implications of frustration of not being able to get a job these kids have graduated in may of this year. they still can’t get jobs. okay? so there you go. i know. i see all the problems — by the way i want to say one more thing. 15 seconds. hold it. i’m bragging on — hold it — we’re — thank you. unbelievably — gentlemen, thank you so much.

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