To Spare Us From a Crisis, Can Republicans For Once Act Like Republicans?

It’s apparent Stanley Druckenmiller never invested his bottomless national debt pessimism. The previous truth was revealed in his Wall Street Journal takedown of U.S. Treasury secretary Scott Bessent.

While Druckenmiller was correct that “Governments defending prices against fundamentals always lose,” and that “Markets aggregate information no committee possesses,” implied in his correct critique of Bessent’s intervention in the marketplace is that market signals have long been reflecting his persistently dour narrative about the national debt. Quite the opposite, as the falling yield on the 10-year Treasury note (what Druckenmiller deems “the most important price in the world”) amid decades of rising debt has revealed in blindingly bright fashion.

So, whatever Druckenmiller’s skill as a trader (those who know claim he’s quite good, and markets agree…), the previous skill is not informed by his macro knowledge. To read his analyses over the years has been to read a man stalked by fallacy.

Still, Druckenmiller has made a crucial point that the Wall Street Journal editorial page should be cheered for allowing onto its pages, and one that Republicans would be wise to internalize: pure market signals are a crucial blessing that Republicans would be wise to finally embrace.

Think back to 2008. About it, the deeply held speculation here is that in 2038, and surely by 2048 and 2058, the word “financial” will not longer precede “crisis” when 2008 is revisited. And that’s because 2008 was many things, none of them a “financial crisis.”

The crisis was one of intervention as George W. Bush, Henry Paulson, and Ben Bernanke decided they didn’t like the message of the markets. Never explained by any of the names mentioned, nor by a media that adapted the "crisis" narrative, is why pure market signals ignite crisis.

It all speaks to the problems with Republicans in control of Washington. Since they’re rhetorically for “free markets,” they feel it’s ok to intervene in those same markets. It’s not. Central planning doesn’t gain validity and nobility in relatively turbulent times that it plainly lacks in more tranquil ones.

Which means that when Bernanke promised a “crisis” if government didn’t intervene, his panic was self-fulfilling. Markets complied in earthquake fashion as the experts in government substituted themselves for the markets. Yes, intervention is a crisis.

Fast forward to 2020, and it was once again the rhetorically “free market” Republicans led by Donald Trump who decided the people (meaning the market) needed intervention again. Thus the lockdowns that caused soaring unemployment and bankruptcy stateside, alongside a surge in starvation globally. When Americans needed Republicans to act like Republicans, they acted like central planners once again. A pattern is emerging.

It can be seen in Scott Bessent’s Treasury-yield hysteria that is in a sense mirrored by Druckenmiller's. Which is really not the point.

Incorrect as Druckenmiller and Bessent almost certainly are about the Treasury yield message (“Markets aggregate information no committee possesses”), Druckenmiller at least grasps the Albert Jay Nock truth that any government tampering with market forces "must have its consequences, and the only recourse for escaping them is such as entails worse consequences.”

It’s a truth that Bessent is seemingly ignoring, along with his partisans (they know who they are) in a – yes – increasingly conservative media: market signals are crucial, and they’re most crucial during less tranquil periods. Meaning, Bessent et al don't need to do as Republicans always do when they don't like the market's message. Put another way: Dear Republicans, to spare us from a crisis can you just for once act like Republicans?

Originally published on Real Clear Markets.