Generational Theft

They gave you life
And in return you gave them hell
As cold as ice
I hope we live to tell the tale
--Tears for Fears

Insightful interview with legendary former hedge fund manager Stanley Druckenmiller. This is one of those chats that I like to listen to multiple times. Druckenmiller is a sharp guy with a proven track record--particularly during periods of social and market chaos. Moreover, because he's not comfortable in the public spotlight (as you might gather from this interview), this interview is a rare opportunity to learn what's on Druckenmiller's mind.

Although he shares his thoughts on a range of interesting topics including the importance of the next Fed chair and his current views on markets and investing, I want to focus here on the topic that motivated Druckenmiller's 'coming out' into the spotlight. This interview is actually a follow-up to a  tour Druckenmiller did earlier this year focused on our entitlement problem. We are spending more than we take in and borrowing to make up the difference. This burdens future generations with the bill for the current generation's consumption.

Druckenmiller calls this 'generational theft.' Entitlements are a classic Ponzi scheme, where benefits go to those who 'invest' in the system early, leaving the latecomers holding the bag. That many officials and their minions deny the Ponzi-esque nature of entitlement programs demonstrate how far off the rails we are.

Apparently, recent squabbles related to the 'sequester' convinced Druckenmiller that there is little chance that the political process as currently practiced will correct this problem. Perhaps one of the reasons that it took him so long to figure this out is that he voted for Obama. He notes in the interview that he bought into the Hope And Change rhetoric. I was pretty surprised by this revelation as it struck me as naive coming from a guy this smart.

Perhaps more naive is his proposed solution. He is spearheading a campaign to educate people, particularly college students and seniors, on the gravity of the problem with an emphasis on how their consumption today burdens the generations that follow. He thinks that the more people understand the numbers, the more they will gain a sense of the injustice that the system does to the young. Subsequently, they will vote for reform, thinks Druckenmiller.

Hope he's right but I'm not holding my breath. People are born economizers and seek the most benefit from the least cost. When they can recruit strong armed government agents to take resources from others on their behalf, they will be tempted to do so.

Nonetheless, it is good to see Druckenmiller on the circuit. Even if his approach seems pretty idealistic, he is pursuing a noble goal.