- The billionaire CEO of Starwood Capital Group, Barry Sternlicht, has spoken out with strong criticism of the handling of the US Federal Reserve this year.
- For the month of September, Sternlicht would have stated that the Fed is making use of “old data” in order to attack the economy with an unnecessary increase in interest rates.
- “They missed their moment during the crazy casino of 2021 when Gamestop was $350, the stock and the crypto world was worth $3 trillion,” adding, “It’s too late to fix it now.”
The billionaire CEO of Starwood Capital Group, Barry Sternlicht, has spoken out with strong criticism of the handling of the US Federal Reserve this year.
For the month of September, Sternlicht would have stated that the Fed is making use of “old data” in order to attack the economy with an unnecessary increase in interest rates. Now the billionaire is arguing that the economy is “cracking hard” while borrowing costs are soaring, spelling an inevitable recession.
In an interview with Fortune this week, Sternlicht said that if the Fed continues to raise interest rates the way it has done five times this year, there will be destructive consequences that will put the entire capitalist system at risk. Sternlicht stated:
“So the rich guy who loses 30%, he’s still rich, right? But the poor guy who’s working an hourly job, who loses that job, is going to say, ‘Capitalism is broken, it didn’t work for me. I lost my job. And this whole system has to go out the door.’”
“You’re going to have social unrest… And it’s just because of Jay Powell and his merry band of lunatics.”
Sternlicht’s statements are not surprising, as many other investors agree with the businessman that the increase in interest rates will undoubtedly lead to a recession. Fortune quoted economist Steve Hanke who also reportedly told the media that the Fed was “incompetent” and that it would effectively lead the country into a period of stagflation or recession.
For his part, the CEO of JP Morgan, Jamie Dimon, also stated that the United States will reach a recession due to interest rate increases by the Federal Reserve. While Mohamed El-Erian, president of Queens’ College, Cambridge, has also reiterated that the Fed has had a very slow response to inflation last year, saying earlier this month that this would lead to a risk of inflation “uncomfortably high”.
Knotted to this, investors assure that this increase in interest will also affect the actions, which will bring a not-so-pleasant market compared to the bull market of 2020 and 2021.
Now, Sternlicht says the Fed is relying on lagged inflation data for its decision to raise interest rates, while they should really be looking at the “real-time” statistics.
The billionaire, who owns around 250,000 residential properties in the country, says rents are “slowing down” across the board, but the consumer price index (CPI) still factors in increases in home prices. rentals that occurred more than six months ago, which gives the Fed an inaccurate perception of the real state of inflation in the economy.
For Sternlicht, the Fed missed its opportunity to end inflation in 2021 and is now trying to fix past mistakes, “They missed their moment during the crazy casino of 2021, when Gamestop was at $350, the stock and the world of cryptocurrency was worth $3 trillion,” adding, “It’s too late to fix it now.”
The cited medium indicates that Sternlicht also pointed out that the fall in the prices of raw materials is evidence that inflation is beginning to cool down. Notably, the CRB commodity index, which is a broad measure of global commodity prices, is down 20% from its all-time high in July.
Finally, Sternlicht assures that the Fed must pause the rises in rates and wait for the effects to begin to be felt in the economy before making a decision on how to proceed later. Sternlicht asserted:
“I think maybe they are not up to the task… Maybe they are not smart enough to understand the impact of their actions. This is like, and I’m not kidding, the inmates running the asylum. I think they are wrong.”
