The Federal Reserve’s latest gambit to spark U.S. economic growth with more bond buying is little more than “artificial” support for key asset markets, billionaire real estate entrepreneur Donald Trump told CNBC Tuesday.
Echoing comments made by Dallas Fed President Richard Fisher that an open-ended quantitative easing, or QE3, would do little to help revive the economy, Trump said only stocks, real estate, and the investors who owned them would benefit from the move.
“Everything is artificial, there’s nothing that’s real,” the mogul said on CNBC’s “Squawk Box.” Stock markets — which recently surged to multi-year peaks — are on the rise less because of fundamentals, and more because of the expected liquidity from the Fed that will filter into asset markets. (Read more: Pimco’s Gross: Central Banks ‘Where Bad Bonds Go to Die.’)
Trump warned that the Fed’s $40 billion a monthmortgage-backed security buying program would lead to inflation. He also suggested wealthy asset owners would be the biggest beneficiaries of a potential surge in prices.
“I should be very happy about [inflation] in theory … but I’m not happy because ultimately it will come home to roost, and it’s going to be very, very unfortunate in the form of [higher] interest rates and some very severe things happening later on with the economy,” said Trump.
In the wake of the Fed’s announcement last week, inflation-sensitive bellwethers have flashed signals that some investors are reacting to the possibility of rising prices.
Gold has surged to a 6-1/2 month high, while the dollar has tumbled to a seven month low against the euro. Meanwhile, the interest rate spread between U.S. Treasurys and Treasury Inflation-Protected Securities has widened.
“Inflation is a great friend at a certain level of real estate. I’ve loved inflation, but I don’t like it for the country. But as an individual, inflation has made me very rich,” he said. (Read more: Home Builders Bullish for Fifth Straight Month.)
Dallas Fed President Richard Fisher, who was a guest host on CNBC Tuesday, retorted that the central bank would seek to curb inflation before it reared its head. “We going to do everything in our power to make sure it doesn’t help you,” Fisher joked to Trump.