德鲁肯米勒公开批评贝森特购债计划

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Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex [music] economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily podcast

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with Carol Massar and Tim Stenovec on Bloomberg Radio.

Hi everyone, welcome to the weekend edition of Bloomberg Business Week. I'm Tim Stenovec. Carol is off this week. This past week Treasury Secretary Scott Bessent declared a quote economic D-Day against Iran. The US-Canada trade fight escalated, and the Kansas City Fed's annual gathering in Jackson Hole put monetary policy front and center yet again. And then, of course, earnings from the world's most valuable company, Nvidia.

The chip maker announcing guidance expecting revenue to grow as much as 70% in the next fiscal year. For the latest on all that and more, head on over to the Bloomberg Terminal or to Bloomberg.com. Coming up this hour, we're going to examine how the Trump administration is reshaping market fundamentals, why Stanley Druckenmiller is calling Treasury Secretary Scott Bessent's bond buying a mistake, plus how the Trump family is fast-tracking a national bank charter for crypto-related financials.

All that to come, but we begin with a rare public rebuke from one of Wall Street's most influential investors. Treasury Secretary Scott Bessent has recently pledged to increase the Treasury's purchases of long-dated bonds.

We are going to continue deal with our regular program of auctions, so you will be hearing from us again the at the beginning of next quarter. We haven't bought a single bond yet. The next time we have an operation is September 9th. So, we we will see on September 9th.

However, billionaire investor Stanley Druckenmiller is now warning his former protege against trying to push down long-term yields. In a recent Wall Street Journal opinion column, Druckenmiller argued that policymakers should let the bond market do its job. For more, Nora Melinda and I turn to Eric Schatzker, editorial director for Bloomberg New Economy. He explained the history behind that warning and the risks that Druckenmiller sees in Bessant's bond strategy.

First of all, the Journal is the place that Stan Druckenmiller typically goes if he wants to make a public statement. So, that part of it is not unusual, but he does not do this very often. So, pay attention when he does. And why do we pay attention to Stan Druckenmiller? Because few people would argue that he is the best investor in modern history. Never a down year when he was running Duquesne Capital Management.

He was George Soros's chief investment officer. Um he hired Scott Bessant in 1991. He sent Scott Bessant to England. It was on the basis of information uh partly on the basis of information that Scott Bessant was providing working for Soros Fund Management in 19 in the early 1990s that Druckenmiller and Soros decided to bet against the British pound. They shorted it and broke the Bank of England. And it is that fundamental truth that governments defending prices against fundamentals always lose that was proven there and which Druckenmiller argues will once again be proven here.

So, take us to today. And well, actually to last week. Because

Okay. So, you know, we we we we we do need for the benefit of many to review what sparked, right, this disagreement? Yeah, at the very least. Or this right post from from Stan Druckenmiller, which by the way you cannot not look at as anything but a harsh scolding. Right? The mentor publicly admonishing his protege. Um And I would also add for those who haven't read it, go and read it. If you're lucky enough to have a Bloomberg terminal, it's simple NH space WSJ, put in Druckenmiller as a keyword, it'll come up.

You can of course read it in the Wall Street Journal. You would look you will look long and hard to find a piece of writing this savage and this devastating. I mean that. So, last week the Treasury announces that it is going to double the size of its long-term bond buyback program from $2 billion to $4 billion, and then Besant doubles down effectively and says, "Well, we might spend more than $4 billion." And Druckenmiller says $4 billion understates the gravity of this mistake.

And I have for my own purposes broken it down into four component parts. This is how Druckenmiller dismantles the argument behind a long-term bond buyback program. Number one, it's unwarranted. There is no crisis. Yes, yields are rising, but that is the market functioning the way it is supposed to function, right? Pricing in the growing risk of two things. One, inflation or more inflation. We have some already, obviously.

And two, the growing possibility of a US government default. This is what the bond market does. This is not March of 2020.

Mhm.

Mhm.

This is not the 2022 crisis in UK gilts, right, that cost Liz Truss her job as Prime Minister. Um there were, as Druckenmiller points out, no failed auctions, no dealer balance sheet seizure, no forced unwinds. Number two, it's hypocritical. Who was more critical of quantitative easing, maybe some people, but few more vocal and more aggressively so than Scott Besant? And Druckenmiller points out that this is effectively a version of QE, and so what you have what the other thing he hated about QE was that Bessent that is.

He made the case that it was a a blurring of the lines between fiscal policy and monetary policy. And here you have the Treasury Department, the Treasury Secretary usurping the authority of the Fed chairman. Number three, going back to this idea of fundamentals. It violates one of the cardinal laws of the financial universe, right? Governments will always lose when they try to fight fundamentals. Again, I mentioned that this is exactly what Druckenmiller and George Soros proved when they bet against the Bank of England.

And as Druckenmiller says, this is another useful quote to draw from this essay, "Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests." Well, that raises an inevitable question. If it's a fight effectively between the policymaker and the market, how much ammunition does the policymaker have? Not enough ammunition to defeat the market.

Well, it raises the question and this it's this the the journal piece doesn't go into this, but it raises the question about why the Treasury Secretary would do such a thing right now.

You describe it essentially as out of character given his past comments, and I think it's fair to say given his hedge fund history as well, why why do something like this?

Well, the most obvious answer to that question is that it's becoming awfully expensive for the federal government to issue long-term debt. The federal government needs to finance its deficit and its debt. And doing so means issuing Treasury bonds. Well, issuing Treasury bonds when your yield is at 470 is a whole lot more expensive, a whole lot more costly to the government and ultimately to the US taxpayer than it was when yields were at 370.

Uh, we could do the math, but it's the Let me just put it in Druckenmiller's words. The real problem is the fact that the government is running an outsized deficit. In fact, the real the the So, the nominal rate of growth, right, is approximate is actually higher than the yield on the 10-year Treasury. And he says that that historically is an accommodative circumstance. If anything, the market should be pricing yields higher because it fuels, you know, that financial accommodation or economic accommodation fuels inflation.

And the reason this is the most read story on the Bloomberg and the reason that this is transfixing Wall Street is because of the implications. And this is the fourth reason that Dru