Sam Zell Says Trump to Slash Interest Rates Could End in ‘a Disaster’

via CNBC:

  • Sam Zell agrees with President Donald Trump that cutting interest rates by 1 percentage point would be great for the economy, but only at first.
  • Doing so, he said, would threaten the dollar’s status as the world’s reserve currency.

Investor Sam Zell agrees with President Donald Trump that slashing interest rates would make the economy take off rapidly. The consequences of that, though, could be “a disaster,” he said.

The president recently suggested that the Federal Reserve cut its benchmark rate by 1 percentage point, which would take it to a range of 1.25% to 1.5%. Trump said doing so would make the U.S. economy take off “like a rocket ship.”

Zell agrees, but indicated Wednesday that the long-range impact could not be good.

“I don’t think that there’s any justification for any kind of a significant increase,” Zell said at the SALT 2019 hedge fund conference in Las Vegas. “I think he’s right. If we reduced interest rates by 100 basis points, I think the economy would soar and so would inflation and so would the dollar fall accordingly.”

That expected tumble in the dollar would threaten the greenback’s status as the world’s reserve currency.

He said there already are threats to the U.S. currency’s global standing, such as China and Syria “swapping oil for yuan” and Russia’s attempts to get the ruble more widely circulated.

“There is an attempt to take the dollar out of the reserve currency status,” Zell said. “I think that would be a disaster to the U.S. I think that would be the biggest risk of playing with interest rates.”

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