During his recent interview with CNBC, Stanley Druckenmiller explained why he will be stunned if we don’t have a recession in 2023. Here’s an excerpt from the interview:
Druckenmiller: Let me just say this. I will be stunned if we don’t have a recession in ’23. Don’t know the timing, but certainly by the end of ’23. I will not be surprised if it’s not larger than the so-called average garden variety, and I don’t rule out — not my forecast, but I don’t rule out something really bad. Why? Because, if you look at the liquidity situation that has driven this, we’re going to go from all this QE to QT, we’re following an asset bubble.
We’ve been doing all this running down the SPR, which is now — that’s the Strategic Petroleum Reserve. It’s now below ’84 levels, even though obviously oil consumption is much higher. We’ve had a bunch of myopic policies that have actually delayed the liquidity shrinkage.
QT has been almost entirely offset by Janet Yellen running down the Treasury savings account. By the way, pretty amazing policy. She could have sold ten years for under 1 percent during this time. Instead, she runs down the Treasury savings account.
So all of that has mass liquidity shrinkage, but it really comes into full gear, and she can continue this for a while. We can do the SPR for a while, stimulative stuff. But by the first quarter of ’23, it kind of goes the other way. So our central case is a hard landing by the end of ’23.
But I don’t know, I’ve been wrong on a lot of things. I could be wrong on this, but since I do it for a living, that’s our forecast, which is a recession in ’23.
You can watch the entire discussion here:
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