Stanley Druckenmiller: 'We're Taking A Terrible Risk-Reward In Terms Of Zero Rates'

In the past few months, there has been a lot of debate among investors and policy makers regarding whether it's the appropriate time for the Federal Reserve to start raising rates. Many believe if the Fed continues to keep rates low even after the continuous improvement in the U.S. economy, there are chances of a repeat financial crisis.

Among these critics is legendary hedge-fund manager and the chairman and CEO of Duquesne Family Office, Stanley Druckenmiller. Druckenmiller was recently on Bloomberg to discuss why he feels the current situation is similar to 2003-04, leading up to the financial crisis of '07-'08.

Déjà Vu

"Back in late 2003, I remember we had 9 percent nominal growth, 7 percent real growth," Druckenmiller said. "The economy was very, very strong, but we had 1 percent interest rates, and we also had a tag on them – that they were going to remain there for a considerable period. And I just felt at the time that Fed policy was unnecessarily easy."

Related Link: Morgan Stanley: Fed Rate Hike Coming Sooner Than Predicted

He explained, "They wanted to ensure that the economic recovery got enough momentum. I was more fearful because, historically, I've done a lot of work analyzing central banks and subsequent activity, and we've had problems in the past when monetary policy was too easy, and I just thought it was unnecessary."

Terrible Risk

"Everyone keeps asking me, 'Well, how is this going to manifest itself?' I don't even know whether it is going to manifest itself. I just know that the rates are unnecessary. And, again, it's sort of the same language, 'Oh, the risk of going too early is greater than going too late. We need to ensure the recovery.'

"And I'm more worried about things down the road than looking in the near term, and I think a lot of the dialogue about this is far too myopic, rather than trying to look at things in a longer-term perspective," Druckenmiller concluded.