Video: CNBC's Steve Liesman reports there were three reasons
the Fed decided to delay tapering its bond-buying program. And Stanley
Druckenmiller, Duquesne Capital Management former chairman, and Jimmy Dunne,
Sandler O'Neill, weigh in on how the Fed's policy ...
The Federal Reserve isn't just inflating markets. It's also shifting a massive
amount of wealth from the middle-class and poor to the rich, according to
billionaire hedge fund manager Stanley Druckenmiller.
In an interview on "Squawk Box," the founder of hedge fund Duquesne Capital said
that the Federal Reserve's policy of quantitative easing was inflating stocks
and other assets held by wealthy investors like himself. But the price of making
the rich richer will be paid by future generations.
"This is fantastic for every rich person," he said Thursday, a day after the
Fed's stunning decision to delay tightening its monetary policy. "This is the
biggest redistribution of wealth from the middle class and the poor to the rich
"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, whose net worth is estimated at more than $2 billion, said that
the implication of the Fed's policy is that the rich will spend their wealth and
create jobs—essentially betting on "trickle-down economics."
"I mean, maybe this trickle-down monetary policy that gives money to
billionaires and hopefully we go spend it is going to work," he said. "But it
hasn't worked for five years."
The big debate
Economists and academics are divided on whether the Fed's policies have truly
helped the rich at the expense of the rest of America. Many point out that the
Fed's policies have lowered interest rates for all Americans, which have helped
boost housing sales and values. They also say unemployment and the economy would
be a lot worse if the Fed didn't continue its huge monthly bond purchases.
Yet others say the Fed's policies have mainly juiced asset prices—and the
wealthy hold most of the assets. There is no reliable data on the wealth of the
top 1 percent for the past two years, when markets have surged. But as of 2010,
the mean and median net worth of Americans was still down 50 percent in 2010
from the pre-crisis peak, mainly due to the decline in home values, according to
Edward Wolff, a professor of economics at New York University.
By contrast, the number of millionaires—households worth $1 million or more,
including homes—hit an all-time record in 2010, according to Wolff. Separate
studies of millionaire populations from Spectrem Group and Capgemini also show
that the population of millionaires hit an all-time record in 2012.
The top 1 percent of Americans hold 35 percent of the nation's wealth—up
slightly since 2007. The top 10 percent of Americans own more than 80 percent of
all stocks and more than half of all individual financial assets in the U.S.,
according to the Federal Reserve and Wolff.
1% gets 95%
A stream of new data on inequality also suggest that the gap between the wealthy
and the non-wealthy is growing, due largely to rising stock markets. New data
from Emmanuel Saez, an economist at the University of California Berkeley, found
that the top 1 percent captured 95 percent of the gains during the recovery.
According to the Census Bureau, incomes for the middle class have largely
remained flat while the wealthy have gained. The income top 10 percent earns
nearly 12 times as much as the bottom 10 percent, up from a little more than 10
percent in 1999.
A report from The Associated Press recently finds that unemployment remains much
higher for the middle and lower class than in higher-income groups.
The wealth of America's top 400 billionaires grew by $300 billion in the past
year, hitting $2 trillion, according to Forbes.
A study by the Bank of England found that the bank's quantitative easing
policies—akin to the Fed's—were mainly helping the wealthy. It found that 40
percent of the gains from easing went to the top 5 percent of British
Economist Anthony Randazzo of the Reason Foundation wrote last year that QE "is
fundamentally a regressive redistribution program that has been boosting wealth
for those already engaged in the financial sector or those who already own
homes, but passing little along to the rest of the economy. It is a primary
driver of income inequality."
And then there's Donald Trump—not usually one for distributional analyses of
monetary policy. He said on CNBC last year that "People like me will benefit
—By CNBC's Robert Frank.