Reflecting on exactly what was said yesterday, Duquesne's Stanley Druckenmiller is initially perplexed as Bernanke explained 'financial conditions' - not interest rates - have prompted the decision to forestall any taper. His confusion is that financial conditions are actually slightly better than they were in June and "a stock market at an all-time high would suggest we don't have a problem with financial conditions." While he dismisses surveys, the big-money was betting that they were going to taper as is clear from the moves in gold, bonds, and stocks; and it appears the Fed "lost their nerve." In fact, Druck continues, the Fed "blew it... they had a freebie," they could have started the process to "get us off the dope." This action, or inaction, he warns "is going to make it so much harder for the next Chairman to start the process." In fact, he concludes, that from beginning to end - once markets adjust from these subsidized prices - that the wealth effect of QE will have been negative not positive.



His discussion focuses on the transparency mistakes, the cornering they have managed, and the concerns he has over QE in general...



QE1 he supported as a crisis-fighting tool at the time - but from QE2 onwards and 5 years and he "doesn't think the academics at the Fed understand the unintended consequences of the exit."



At around 13:45 he also provides a clear explanation of the 'other side' of the Fed's expanding balance sheet - the average investor who is 'forced' to sell them the bonds and take on more risk... this has forced us to buy securities at subsidized prices and when they adjust, at whatever point in the future, they will adjust immediately and on no volume.



In fact, he concludes, that from beginning to end - once markets adjust - that the wealth effect of QE will have been negative not positive.



At 15:00, he explains how this is the biggest redistribution of wealth from the middle class and the poor to the rich ever - "who owns assets" he asks rhetorically...





Druckenmiller begins at 8:03...