Hedge fund investor and long time deficit hawk Stanley Druckenmiller reportedly said the current deadlock over the debt ceiling is dwarfed by the dangers of unchecked future government spending.
What Happened: Druckenmiller said on Monday, "The fiscal recklessness of the last decade has been like watching a horror movie unfold.” He said this during a speech at the University of Southern California Marshall School of Business, according to a Bloomberg report.
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The ace investor said in a follow-up email to Bloomberg that he hopes the U.S. government doesn't go into default, "but honestly, all this focus on the debt ceiling instead of the future fiscal issue is like sitting on the beach at Santa Monica worrying about whether a 30-foot wave will damage the pier when you know there's a 200-foot tsunami just 10 miles out."
Meanwhile, the White House on Tuesday once again reiterated that President Joe Biden will not negotiate over the default during his meeting with the four top congressional leaders next week. Biden said in his tweet that the U.S. has never failed to repay its debt but the country was being held hostage by MAGA Republicans.
Fed Action: Druckenmiller also questioned the actions of the Federal Reserve, saying the institution's easy-money policies over the past decades led to reckless behavior in financial markets, government and banks.
"Unfortunately, by still owning a large amount of government debt, the Fed continues to create the false illusion that it can help with our fiscal problems," he said, according to the report.
Market participants are now keenly awaiting the Fed's policy announcement. According to the CME FedWatch Tool, traders are factoring-in an 89% probability of a 25 basis points hike.
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