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https://www.manhattan-institute.org/html/2018-alexander-hamilton-awards-langone-and-druckenmiller-11214.html 1/7
5/26/2018 2018 Alexander Hamilton Awards: Langone and Druckenmiller | Manhattan Institute
Geoff Canada is here tonight, and I know he would agree with me, that Geoff had
this wonderful dream called the Harlem Children’s Zone, and when he matched
up with Stan, it was absolutely certain that HCZ would go far beyond Geoff’s
wildest dreams. HCZ today is one of the great examples of the ability to help
people help themselves in depressed areas of America, in this case, Harlem.
Geoff’s vision and Geoff’s dream was made possible, and I know he would agree
with me, in part not only through Stanley’s generosity, but through Stanley’s time
and talent. Our board meetings are at 7:00 in the morning and Stanley never
misses one. He was chairman, and he still is chairman, of HCZ. His commitment
is total. He is also chairman and a founder of Blue Meridian, an organization
committed to moving the needle in social problems in America. And he has made
a major, major financial commitment to that cause.
So, here we are tonight honoring a man who understands the importance of
giving back, but who also understands the importance of initiative, and capitalism,
and free markets, and indeed democracy. The selection committee has made a
very wise choice in selecting Stan for this honor and I am humbled to have the
honor to introduce him. Thank you very much.
Stanley Druckenmiller: Thank you, Ken. That was very, very nice. I have had so
much good fortune in my life, but can you imagine having known that man and
having him as a mentor for 42 years? Pretty cool. And then on top of that I met
and married Fiona Biggs thirty years ago. To have a partner and the love of my life
like Fiona and friends like Ken and Geoff Canada, I really count my blessings.
I am humbled to stand before you tonight and accept an award named after
Hamilton, Alexander Hamilton. I am a bit of a Hamilton nut. I am also a bit odd to
be in line with the past recipients. I was in awe enough and then I saw the co-
honoree was Nikki Haley, wow. When I saw the line, the past recipients, I was
thinking maybe Paul had perhaps called me bleary-eyed after a sleepless night,
taking on another foreign government for their failed financial practices. But
seriously, amid all the vitriol and divisions in our countries, there can be no debate
about one thing: Alexander Hamilton is the most important non-president to
shape the contours and the character of what would become the greatest nation
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5/26/2018 2018 Alexander Hamilton Awards: Langone and Druckenmiller | Manhattan Institute
in the history of civilization. And, frankly, he is actually a lot more important than
most who ascended to the highest office in the land in terms of the success of
our republic.
I actually grew up in a small town in South Jersey and at the age of 9 in the early
‘60s I moved to Richmond, Virginia. Now, Virginia had their own sense of their
history and ours, at least back then. I took three years of American history when I
was in the land of Jefferson and what I learned about Alexander Hamilton is he
was shot by Aaron Burr. That was about it. I mean, who knew that a rap musical
was going to be more informative about our founding father than the curriculum of
the Virginia school system? Then I went to Bowdoin College in Southern Maine
and I was lucky enough to take American history there, and it is there that I
learned about this amazing man and his great and good contributions to our
republic. I take particular pleasure in receiving this award because it is bestowed
by the Manhattan Institute. Its positive impact on this city over the years has been
literally immeasurable, and specifically the institute’s contributions to the cause of
real reform and education in this city and beyond.
These contributions have given me one of the greatest joys of my life, watching
Geoffrey Canada create and build the Harlem Children’s Zone. Geoff, you out
there? And let me say this: The institute’s promotion of free markets, free trade,
limited government, and the rule of law have never been more important than
today, never. It is not the first time this country has been divided in a war of ideas
and ideals, and probably not the most precarious, but it is certainly the most
consequential in my lifetime, and I can’t think of better proponents of the way
forward out of this mess than the people assembled in this room. This nation has
emerged from turmoil before and it is critical, absolutely critical we take the right
path again. And now a few comments of my own on the way forward.
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5/26/2018 2018 Alexander Hamilton Awards: Langone and Druckenmiller | Manhattan Institute
two. And now there is China. And it is their turn, with their new leader for life,
centralized decision-making on economic matters through 2025 and beyond.
In each of these cases, illiberal statists in our own country are most impressed by
the top-down designs of foreign powers than our own track record of free market
capitalism here at home, sort of a Wizard of Oz trumps the invisible hand
narrative. But I actually believe it is an unfair comparison. Capitalism is under
attack, but we have been moving further and further away from capitalism with
each passing presidential administration. So, my advice is simple. Thank you, I
wasn’t expecting a lot of applause tonight. So, my advice is simple. Can we try
capitalism? Real capitalism. Give it a chance. Not the increasingly bastardized
version we have been practicing the last two decades. And then let’s just see
whether a capitalist economic system is the most effective way to bring about
broad-based prosperity and the flourishing of human dignity.
For eight years I watched the Obama administration disparage the efficacy and
fairness of capitalism, the influence of government increased in every aspect of
our lives, the cost of regulation doubled, corporate America was attacked in the
name of social equality, and our healthcare system, hard to believe, was made
even more inefficient. Now, I did not support Donald Trump. But, after he was
elected, I was at least hopeful that it would represent an inflection point in the
trend away from capitalism. And while there has been some relief on the
regulatory front, and of course we have gotten a corporate tax cut, some of the
more egregious trends away from capitalism are continuing and, frankly, new
elements that violate the principles of capitalism have been added.
For starters, free trade is under assault, but I see no need to lecture the people in
this room on the merits of comparative advantage. Next, Hamilton had a very
deep respect for the rule of law as opposed to the rule of man. The best tech
companies in the world are in the U.S. because of a mix of education,
immigration, finance, and meritocracy. The central pillar that bolsters this mix and
makes our economic system successful is a respect for the rule of law. Is there a
better example of this than Amazon? Its founder is a Hamilton-inspired adopted
son of an immigrant who is literally revolutionizing the way business is done. It is
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5/26/2018 2018 Alexander Hamilton Awards: Langone and Druckenmiller | Manhattan Institute
I spent two years of my life going to liberal and conservative universities to try and
get young people energized about the looming explosion entitlements as well as
their looming decreasing share of the economic pie. I even asked Geoff Canada
to go with me so the students would show up. I got incredibly enthusiastic
responses from ultra-liberal Berkeley to conservative USC. I even did a TED talk,
and I was so effective in terms of the national debate that the only thing that
Donald Trump and Hillary Clinton agreed on was that entitlements shouldn’t be
touched. Good going, Stan.
But then we missed the golden opportunity to offset some revenue loss and
address generational equity when Congress passed tax reform. Instead,
government debt, which has doubled over the last decade, is set to increase to
levels only reached during World War II over the next decade, so we will have
sacrificed our future during a relatively peaceful economic period with no postwar
reduction simply because politicians can’t say no. This does not exactly measure
up to spending to defeat fascism and defend the world’s freedom. Finally, let me
address a distortion that is one of the greatest threats to a properly functioning
capitalist system. For years now a mix of central – sorry – for years now a mix of
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5/26/2018 2018 Alexander Hamilton Awards: Langone and Druckenmiller | Manhattan Institute
financial repression and central bank intervention has made long-term interest
rates largely determined by government fiat.
The excuse of this radical monetary policy has been the obsession with a fixed
2.0% inflation targeting rule. The decimal point shows the absurdity of the
exercise. Anything below 2.0% was a failure and risked deflation, the boogeyman
of the 1930s, to be avoided at all costs. This has meant that years after the Great
Recession ended the Fed has not only kept interest rates below inflation but have
accumulated an unprecedented $4.5 trillion on their balance sheet by doing QE.
Global central banks, in part to keep their currencies from appreciating of these
overabundant dollars, have followed with $10 trillion of their own. Now, the irony
of this is over the last 700 years inflation has averaged barely over 1% and interest
rates have averaged just under 6%. So, we are seeing an unprecedented, ultra-
monetary, radical monetary expansion during a time of average, average inflation
over the last number of centuries. Moreover, the three most pernicious
deflationary periods of the past century did not start because inflation was too
close to zero. They were preceded by asset bubbles.
If I were trying to create a deflationary bust, I would do exact exactly what the
world’s central bankers have been doing the last six years. I shudder to think that
the malinvestment that occurred over this period. Corporate debt has soared, but
most of it has been used for financial engineering. Bankruptcies have been
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5/26/2018 2018 Alexander Hamilton Awards: Langone and Druckenmiller | Manhattan Institute
minimal in the most disruptive economy since the Industrial Revolution. Who
knows how many corporate zombies are out there because free money is keeping
them alive? Individuals have plowed ever-increasing amounts of money into
assets at ever-increasing prices, and it is not only the private sector that is getting
the wrong message, but Congress as well. I have no doubt we would have not
gotten such a big increase in fiscal deficits if policy had been normalized already.
Of all the interventions by the not-so-invisible hand, not allowing the market to set
the hurdle rate for investment is the one I see with the highest costs. Competition
is a better tool than price control for protecting consumers. That applies to
Amazon and the bond market. The government should get out of the business of
manipulating long-term interest rates and canceling market signals. One final
thought: During Obama’s tenure, I was disheartened by the lack of criticism from
the Left. Frankly, I think it would have carried a lot more weight than criticism from
the Right.
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