Billionaire investor Druckenmiller sees U.S. dollar losing reserve status to crypto in 15 years
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(Kitco News) - The U.S. dollar has been able to maintain its dominance as the world's reserve currency as many investors see it as "the least dirty shirt in the laundry basket." However, according to one famed investor, this argument is reaching its limit as the U.S. continues to flood the economy and financial markets with unnecessary liquidity.
In an interview on CNBC "Squawk Box," famed billionaire investor Stanley Druckenmiller, former chairman and president of Duquesne Capital, reiterated his stance that the U.S. dollar will lose its reserve status within the next 15 years.
Druckenmiller said that fiscal and monetary stimulus are putting the U.S. dollar at risk. He added that to meet future debt obligations, the government would have to monetize its debt.
"When they monetize [the debt], it will have horrible implications for the dollar," he said. "I am worried for the first time that the U.S. dollar will lose its reserve status and all the benefits that have come with that."
While Druckenmiller supported central bank efforts to stabilize the global economy early on in the pandemic last year, he noted that they are now going above and beyond what is needed, especially as the U.S. economy picks up steam.
"The Fed made a reasonable bet, the government made a reasonable bet last March and April. I'm glad they did what they but by August, it was very clear these policies … were inappropriate," he said.
Druckenmiller added that investors can already see signs that investor appetite for U.S. bonds is starting to be satiated. He noted that currently, 60% of debt issuance is already being bought by the Federal Reserve.
"Last spring, in the middle of an equity market meltdown, the bond market went down 18 points one day. Everyone thought it was macro traders who were rejecting the implications of the CARES Act," he said. The Federal Reserve did a deep dive and in hindsight, foreigners sold a trillion dollars of treasures overnight. They have continued to sell treasures since."
Druckenmiller highlighted that for the last 20 years, U.S. Treasuries had been the go-to safe-haven asset.
Don't look to gold to retake its place on the world stage, Druckenmiller added that he could see ledger-based cryptocurrency as the world's next reserve currency. He noted that nobody trusts the Chinese yuan and the euro is "a complete mess."
"Five or six years ago, I said that crypto was a solution in search of a problem," he said. "Now the problem has been identified. It's Jerome Powell and the other central bankers."
As to the technology that will replace the U.S. dollar, Druckenmiller said that he doesn't think the cryptocurrency has been created yet and who knows what the marketplace will look like 15 years from now.