Stanley Druckenmiller Sparks Inflation Discussions, Hinting at Further Crypto Upside

Stanley Druckenmiller believes cryptocurrency is taking a prime position to replace the U.S dollar. Let’s shed some light on why he believes this could be happening.


A notable personality in the Forex industry, Stanley Druckenmiller has stated that the U.S dollar will eventually lose its status as the global reserve currency in the coming years. However, this statement was well-received by crypto enthusiasts as it could lead to more rise in cryptocurrency interest.

Druckenmiller Discusses an Impending Collapse of the U.S Dollar 

Hedge fund manager and philanthropist Stanley Druckenmiller has expressed his belief concerning the U.S dollar and cryptocurrencies. The Forex titan believes that the U.S dollar will “most likely” be replaced by crypto assets as the global reserve currency. According to him, the Federal Reserve policy alongside U.S. deficit spending will eventually cause the currency to decline. In an interview with CNBC’s Joe Kernen on Tuesday, 11th May 2021, he declared that the U.S. dollar would “more likely than not” lose its status as the global reserve currency within fifteen years. 

His belief is a hint at the increased adoption of cryptocurrencies. Without a doubt, crypto advocates have been against the U.S dollar as a reserve currency, and his comments are a huge boost towards more interest in cryptocurrencies. Druckenmiller does not see any other fiat currency replacing the U.S dollar. With the euro and the yuan having some questionable tenets, he thinks a “crypto ledger system” is the most likely replacement for the U.S dollar. 

Inflation and What It Means For Cryptocurrencies

Druckenmiller was the brain behind George Soros’ legendary shorting of the British Pound in 1992 and is considered one of the greatest traders in Forex history. With these accolades in mind, his approval of cryptocurrencies is going to affect how influential figures view fiat currency. 

Before now, inflation has been termed as “too little” a problem for the US economy to be correctly handled, with the issue being brushed aside for decades. However, with the recent pandemic, governmental spending has pushed debts and the U.S deficit to record highs, leading to fear of inflation. Inflation plays a considerable role in dollar-based investments. It can create financial instability since it deteriorates investors’ profits and holdings. Although wages may increase with inflation, it is also a problem for both workers and consumers as they see prices of services and products skyrocketing.

According to the International Monetary Fund (IMF), the U.S dollar occupies over 60% of the national foreign exchange reserves worldwide. This means that a large chunk of U.S banknotes are held abroad. In essence, if the U.S dollar becomes unattractive for traders and foreign governments, its global reserve will decline, which may be catastrophic for the U.S as a financial powerhouse. 

The statistics above suggest that any attempt to sell these positions could lead to a drop in the value of the U.S dollar. 

Druckenmiller Believes That Government’s Relief Spending Is Irresponsible 

The recent pandemic forced the government to turn to relief spending to revive the economy. Although Druckenmiller doesn’t neglect the need for relief spending, he believes it is irresponsible and will eventually hurt everyone with the current lack of foresight. According to him, the continuous U.S recovery is very tough on the economy, such that extra relief spending is risky and unnecessary.  However, the relief spending was crucial to the creation of the recovery process, creating a negative loop in which the government’s hands are tied in certain respects. Many believe that relief spending helped tackle the pandemic through compensation as the demand for broad collapses were increased. 

From Drunckenmiller’s point of view, relief spending will only favor workers who have less say in investments. When they – the consumers – gain more from relief spending, there is inflation. Both investors and the wealthy tend to lose more from inflation, causing a devaluation in the U.S dollar. This creates a pickle for governing figures: if the relief spending ends, consumers will suffer in the short term, but if the spending continues, long-term consequences could be devastating. 

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