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CNBC: Stanley Druckenmiller Says the Fed is Endangering the Dollar's Global Reserve Status

May 19, 2021
Image for CNBC: Stanley Druckenmiller Says the Fed is Endangering the Dollar's Global Reserve Status

Article by Jeff Cox in CNBC financial

Federal Reserve policies aimed at keeping markets and the economy afloat during the pandemic could end up threatening the long-term health of the U.S. dollar, investing magnate Stanley Druckenmiller told CNBC on Tuesday.

The chairman and CEO of Duquesne Family Office said the Fed’s insistence on holding interest rates down and buying trillions in bonds even though markets are thriving and the economy is booming is a long-term risk.

“I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one,” Druckenmiller said during a”Squawk Box” interview.

Though he does not take issue with the Fed’s initial actions to combat the pandemic-related threats, Druckenmiller said the central bank has kept its foot on the accelerator too long.

He asserted that the Fed has continued its policies to help underwrite the spending binge in Congress, which has allocated more than $5 trillion in stimulus and is contemplating trillions more in infrastructure-related spending.

Over the long haul, he said, the policies and the heavy debts and deficits they support will threaten the dollar’s standing as the world’s reserve currency.

“If they want to do all this and risk our reserve currency status, risk an asset bubble blowing up, so be it. But I think we ought to at least have a conversation about it,” Druckenmiller said.

“If we’re going to monetize our debt and we’re going to enable more and more of this spending, that’s why I’m worried now for the first time that within 15 years we lose reserve currency status and of course all the unbelievable benefits that have accrued with it,” he added.

To be sure, others have warned in the past that Fed excesses could threaten the dollar, but the greenback has retained its position in the world.

Druckenmiller noted that in the early days of the pandemic, other foreign governments already voiced their concerns about the dollar by selling Treasurys, the opposite of what normally would happen in a crisis when ultra-safe U.S. debt is generally seen as a haven.

Indeed, foreign holdings of government bills, notes and bonds actually have decreased, falling by .....

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