The idea of a technical default by the U.S is becoming more mainstream by the day. According to Katya Wachtel of BusinessInsider billionaire hedge fund manager Stanley Druckenmiller advocated the view in the WSJ last month, which reportedly had a massive impact on Republicans. Druckenmiller, who closed his $12 billion Duquesne Capital Management to investors last year, said he'd prefer to see a technical default over a quick raising of the debt ceiling.
"I think technical default would be horrible," he told the WSJ. "But I don't think it's going to be the end of the world. It's not going to be catastrophic. What's going to be catastrophic is if we don't solve the real problem."
But there's two things you should remember about Mr. Druckenmiller when he advocates technical default:
1. This is a guy who knows how to profit from sovereign debt crises. The man made his name and his money by betting on the collapse of the British pound. Druckenmiller is credited with executing George Soros' legendary shorting of the British Pound in 1992.
2. Druckenmiller basically telegraphed that he'd profit from a crisis in the US: He told the WSJ in mid-May: Markets know the difference between a default in which a country will not repay its debts and a technical default, in which investors may have to wait a short period for a particular interest payment….
All of which makes us wonder if Soros won't be making billions more than he made betting against the British pound. Wont' the Republicans be delighted to help their one of their favorites. Stay tuned sportsfans!
Read more at:
http://www.businessinsider.com/stanley-druckenmiller-technical-default-treasuries-bonds-long-2011-6
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