“Probably the best way to explain the resource curse is to take the opposite, that is, Israel. They have no resources. They have dramatically outperformed the rest of the Middle East who has all the resources”
The reserve currency is an unbelievable privilege. Unfortunately, that privilege, while you have it, allows you, if you choose to do so, to run very myopic policies that don’t address the long-term and allows you to behave in a way because markets don’t check you because you’re being funded by outside sources. Everything we just described: the fiscal recklessness, the monetary recklessness, all that. No other country could have pulled that off. And it’s fun, and it’s great while it lasts. But it enables you to keep digging and digging into a deeper hole until the consequences come to bear, and ironically, it probably to some extent, you do it enough, you lose the privilege, and then you only have the consequences. So that’s why I call it the curse of the reserve currency.”
“When Britain tried to do fiscal stimulus with Liz Trust [former British PM], the market immediately shut them down, and they immediately went to a more responsible form of government. [In contrast], we have no check on us. All this craziness we just talked about when in ‘21 and ‘22, the dollar went up. In any other place, the market would have rejected it, and we would’ve gotten our house in order immediately. [But] when you’re the reserve currency, you can keep digging your own grave until finally you’re dead and you’re under the soil.” — Stanley Druckenmiller.
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