Druckenmiller anticipates a “significant role” for cryptocurrencies as central bank confidence declines
The Bank of England reversed quantitative tightening by rescuing U.K. pension plans, delaying the inevitable.
Stanley Druckenmiller, a renowned investor, said that bitcoin might play a “significant role” as people seek alternatives to the conventional currency.
The remarks were made during an interview on CNBC with presenter Joe Kernen, in which the duo examined the macroeconomic environment, including the Bank of England’s (BoE) unexpected switch to quantitative easing.
On September 23, U.K. Chancellor Kwasi Kwarteng unveiled a package of tax cuts intended to stimulate the economy.
The package includes reductions in income tax, stamp duty (property acquisition tax), and expected increases in business rates. Kwarteng said that the “small budget” will enhance the United Kingdom’s competitiveness and stimulate employment and corporate investment.
To support the tax cuts, the Treasury indicated that government borrowing will rise by £72 billion ($78.08 billion).
The BoE was compelled to purchase £65 billion ($70.6 billion) of these bonds on September 28 to prevent a drop in the price of U.K. government bonds. The move was prompted by a liquidity issue in pension funds’ Liability Driven Investment funds. These funds would have fallen bankrupt if not for the intervention.
However, opponents cautioned that the expense of saving the pension plans will be borne by taxpayers. In addition, opponents claim that the intervention constituted a 180-degree turn from the monetary policy that was intended to curb inflation.
@BTC Archive pointed to the BoE’s need to interfere, adding that other central banks would soon be compelled to implement similar steps.
The BoE’s reversal on quantitative tightening implies that it cannot remove years of money printing and low-interest rates without causing a disaster. Wednesday’s action has just delayed the inevitable.
Druckenmiller claimed that public confidence in the financial sector is waning. Consequently, he views bitcoin as a component of the transition to a better strategy.
Druckenmiller informed Kernen that he does not hold any cryptocurrency, particularly at a period of quantitative tightening.
The U.S. central bank has maintained its hawkish attitude so far. Druckenmiller acknowledged that further suffering is possible, but he only hopes that “people stick to their guns.”