Billionaire Barry Sternlicht’s resolution to inflation: ‘Inform Congress to cease spending cash like drunken sailors’

Barry Sternlicht, CEO of Starwood Capital Group, on an episode of Bloomberg Wealth With David Rubenstein, in New York, June 28, 2023. Victor J. Blue—Bloomberg/Getty Photos

Federal Reserve Chairman Jerome Powell has anguished over the rise of inflation for greater than two years now. And regardless of having some success in taming shopper value will increase that reached a four-decade excessive above 9% in June 2022, the Fed chair reiterated in congressional testimony this week that continued progress “just isn’t assured.”

However don’t fear: Barry Sternlicht, the outspoken billionaire cofounder and CEO of real-estate large Starwood Capital, has an answer to Powell’s greatest downside.

“What he actually must do is stroll throughout the road and inform Congress to cease spending cash like drunken sailors,” Sternlicht stated in a brand new interview on the globally syndicated TV present In Depth With Graham Bensinger.

Whereas the Fed has been making an attempt to clamp down on inflation with rate of interest hikes, Sternlicht—in his typical, considerably acerbic fashion—famous Congress and the Biden administration have made that job a problem by dramatically growing federal spending and the nationwide deficit, at the very least in contrast with the pre-COVID period. 

“You may have one a part of the federal government with a foot on the brake—the Federal Reserve and Powell—after which you’ve got the opposite a part of the federal government—the legislature—spending as a lot cash as they’ll,” he stated.

Sternlicht, who began his profession as a Wall Road dealer and now boasts a web price of $3.8 billion, has lengthy argued the Fed’s primary technique for coping with inflation—elevating rates of interest—simply doesn’t work. 

Final March, the billionaire CEO stated central banks’ rate of interest hikes have been like “utilizing a steamroller to get the value of milk down two cents” or to “kill a small fly.” Just some months after that, Sternlicht warned the actual property trade, significantly workplace actual property, was in the course of a “Class 5 hurricane” owing to the Fed’s coverage. And in October 2022, he even informed Fortune that Jerome Powell and his “merry band of lunatics” have been destroying the financial system and risking “social unrest.”

Now, although, with the financial system proving its resilience regardless of greater charges, Sternlicht appears to have shifted his view. As a substitute of destroying the financial system, the Fed’s price hikes haven’t finished sufficient, he says.

“Increased rates of interest aren’t slowing the financial system. Folks suppose they’re, however they’re not,” Sternlicht informed Bensinger. “As a result of if you happen to have a look at the roles market, it’s well being care, authorities, and schooling [that] are including tons of jobs, and so they don’t get impacted by rates of interest.”

Sternlicht argued curiosity hikes are an “arcane” and inappropriate technique to battle inflation. However as a substitute of warning the U.S. financial system is being destroyed by these price hikes—he’s beforehand argued it’s “braking exhausting,” known as price hikes “suicide,” and the checklist goes on—Sternlicht now appears to consider Powell’s instruments are simply devastating key segments of the financial system, together with the one he operates in.

In the case of actual property, Sternlicht argued we’re going by a once-in-a-lifetime disaster. “I’ve been by 5 – 6 crises. This one feels the worst,” he stated, including that “often we screw up the worldwide financial system, the actual property trade … This time we didn’t. We have been simply collateral harm.”