Citadel’s Ken Griffin sees high inflation lasting for decades

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Billionaire Ken Griffin, head of the Miami-based hedge-fund manager Citadel, said higher baseline inflation may go on for decades, caused by structural changes that are pushing the world toward de-globalization.

Speaking at a Bloomberg forum in Singapore on Thursday, Griffin said this will have an impact on the cost of funding the U.S. deficit. He added that the U.S. is “spending on the government level like a drunken sailor,” and that higher interest rates are something the government hadn’t counted on “when we went on the spending spree.” The country had more than $33 trillion in national debt as of September and a fiscal deficit of almost $1.7 trillion for the fiscal year to date since October 2022.

Griffin’s comments came ahead of Thursday afternoon’s 30-year Treasury bond auction, which went badly and produced weaker-than-expected demand. Thursday’s sale was one of a trio of government auctions that have taken place since Tuesday, totaling $112 billion.

The U.S.’s current fiscal situation is unsustainable and Americans realize “something is not quite right,” Griffin said, according to Bloomberg.

Meanwhile, he said, there are multiple trends “that are pushing us toward de-globalization.” Griffin referred to what he calls the “peace dividend,” or economic boost that countries enjoy during periods of peace, and said that’s “clearly at the end of the road” given wars between Russia-Ukraine and Israel-Hamas. “We are likely to see higher real rates and we’re likely to see higher nominal rates.”

Treasury yields jumped on Thursday, sending the policy-sensitive 2-year rate BX:TMUBMUSD02Y to its highest 3 p.m. Eastern time level since Oct. 31 as investors focused on the possibility of more action by the Federal Reserve. Meanwhile, all three major stock indexes DJIA SPX COMP ended the day lower.

Speaking at a separate event earlier this week, Griffin said that investors need to invest in China since it’s no longer preferable to be only in U.S. companies. Also this week, he told the Financial Times that the Securities and Exchange Commission should focus on banks instead of hedge funds in tackling the risks arising from basis trades.