Michelle Smith: “Druckenmiller: Fed Is Making Rich Richer” – Money News

Posted on :Sep 25, 2013

By: Michelle Smith

Money News

September 25, 2013

Rich people should not be upset the Federal Reserve didn’t taper its  quantitative easing (QE) last week. That means the Fed will shift more money  from the poor and middle class to the wealthy, says Stanley Druckenmiller,  founder of Duquesne Capital.

Many claimed to be disappointed when the  Fed announced it would not taper its $85-billion per month bond-buying programs.  But Druckenmiller told CNBC the news “is fantastic  for every rich person.”
Part of the Fed’s QE strategy is to drive money  out of U.S. bonds. Its approach of purchasing massive quantities of Treasurys  drives down interest rates, making the debt an unattractive investment option  for yield seekers. They, in turn, put their money into riskier assets.  Editor’s Note:  Seniors Scoop Up  Unclaimed $20,500 Checks? (See If You Qualify)

“Who  owns assets — the rich, the billionaires. You think Warren Buffett hates this  stuff? You think I hate this stuff? I had a very good day yesterday,”  Druckenmiller told CNBC after the Fed decision.
“This is the biggest  redistribution of wealth from the middle class and the poor to the rich ever” he  said.
Critics have long pointed out that inflating the stock market does  little for the average American.
The top 10 percent of Americans in  terms of wealth own more than 80 percent of stocks and over half of all  individual financial assets in the United States, according to data from the  Federal Reserve and New York University economics professor Edward Wolff, CNBC  reported.

Meanwhile, as financial assets have soared, the interest on  savings — a traditional source of yield for the average household — has dried  up.
Call it “Operation Reverse Robin Hood” said the New  York Post, noting that the Fed’s “$3 trillion covert op” allows it rob  the poor and middle class while underwriting the wealthy, big banks and big  business.
Putting it into perspective, the Post said an individual with  $1,000 in a JP Morgan or Citibank savings account four years ago would have  $1,010 as of March 2013. If bank fees were added into the equation, the  individual would likely be in the red, with a balance closer to $950. Yet, banks  are posting record profits.
Low interest rates were also supposed to  help Americans by making it cheaper to borrow. This was supposed to drive demand  for housing and boost home values, which the Fed believes helps make people feel  richer.
This plan has largely backfired as the Fed had no means to make  credit more available and banks proved to be tight-fisted with loans.
As  QE boosted wealth, spending was supposed to improve, driving demand in a broad  range of categories thereby creating jobs.

According to Druckenmiller,  the track record of “trickle-down economics” doesn’t warrant optimism.
“I mean, maybe this trickle-down monetary policy that gives money to  billionaires and hopefully we go spend it is going to work. But it hasn’t worked  for five years,” he argued.

Editor’s Note: Seniors Scoop Up  Unclaimed $20,500 Checks? (See If You  Qualify)
Related Stories:
Former  FDIC Chief William Isaac to Moneynews: Fed’s QE Not Working, Causing More  Confusion
Dallas  Fed Chief: QE Has Only Made ‘Rich People Richer

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