Bloomberg News: Druckenmiller Sees Massive Debt Fueling Next Financial Crisis

Article by Krista Gmelich on Bloomberg News

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.”

To read this article on Bloomberg News, click here