Stanley Druckenmiller: Fiscal Recklessness Of The Last Decade Like Watching A Horror Movie

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During his recent presentation at USC Marshall, Stanley Druckenmiller explained why the fiscal recklessness of the last decade has been like watching a horror movie. Here’s are some excerpts from the presentation:

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Stan Druckenmiller

Druckenmiller: Let me give you some facts. The share of fiscal spending going to seniors has been growing dramatically since the 1960’s when Medicaid and Medicare joined social security as federal entitlements.

Today we spend 6x more per senior than per child in the US. Think social security vs education. Almost 40% of all our taxes are spent on seniors, and this trend is only starting.

We are just getting under way in terms of the fiscal consequences of the grey boom. In 25 years, spending on seniors will grow to take 70% of all taxes. Effectively, with entitlements compounding away, everything else gets squeezed.

In this context, the fiscal recklessness of the last decade has been like watching a horror movie unfold.

During the last decade, our debt grew from $15T to $31T today… a level of indebtment only comparable to that after WWII. But what is worse is that this debt does not account for what the government has promised it will pay you
in terms of social security and Medicare.

It actually assumes these payments will be ZERO.

In the 1950s this “off‐the‐book” debt was small as baby boomers were just being born so actual debt was a reasonable measure of the country’s indebtedness. Not anymore.

There are credible estimates that if you assume the government will pay the same to seniors in the future as it is paying today, the present value of that debt approaches $200T.

That’s trillion with a “T”.

You can listen to the entire discussion here:

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Article by The Acquirer’s Multiple.

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Tobias Carlisle is the founder of The Acquirer’s Multiple®. He is also the founder of Acquirers Funds®. The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates.