Sam Zell, the billionaire made famous by his real estate deals, said that central bank actions to flood the market with money in recent years are coming back to bite the economy.
He urged Federal Reserve Chair Jerome Powell to raise rates by as much as 75 basis points and “break the inflation mentality.”
“We have to reduce that liquidity and, in the process, we’ve created significant inflation that I think is only controllable by raising interest rates and maybe putting us into a recession,” Zell said in an episode of “Bloomberg Wealth with David Rubenstein.”
Inflation at a nearly four-decade high has sparked concerns that the Federal Reserve might have to act even more aggressively to temper price gains. Economists and traders expect the central bank to raise the benchmark rate by another 75 basis points this month.
Zell said he doesn’t think the US is currently in a recession.
“Interest rates could go up a couple hundred basis points and not throw us in a recession,” he said.
Zell, the chairman and founder of Equity Group Investments, spoke with Rubenstein on June 22 about the state of the US economy, the real estate market and investing tips.
The interview has been edited and condensed.
Do you think there’s going to be less need for office space in the United States compared to what we had before Covid? Or do you think the population is expanding so much so that eventually we’re gonna need the space we have now?
What we have is we have an inventory of office space that in some cases is truly obsolete. So the excess of its existence is really a foregone conclusion, whether everybody comes back to work or not.
And it’s indicative of the fact that even in this, what I would call, an oversupplied office market across the country, the new buildings with the new ventilation, the new everything are filled.
And you have problems like a South Street or maybe Sixth Avenue in New York, or Third Avenue in New York. And the question is: What’s going to happen to them?
I still feel very strongly that businesses succeed because they eventually figure out how to communicate, and how to share risk, and how to share ideas better. I don’t think you can motivate by modem. And consequently, in every one of our businesses, we’ve encouraged people back to work.
If the president of the United States called you and said, “Give me some advice of what I could do to make the economy more robust than it is.” What would you say? And do you ever get involved with politicians with that kind of advice?
Not very often but sometimes. If the president called me today, my theme is that we’re spending too much time and money on all kinds of things that we can’t afford and that the rules of economics haven’t been suspended. The United States can’t continue to run deficits and maintain our standard of living, and maintain the supremacy of the dollar.