Taps Coogan – May 5th 2021,

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Sam Zell, real-estate mogul and Chairman of Equity Group Investments, recently spoke with Bloomberg to discuss the prospect of rising inflation, noting that he sees it “everywhere” in his diverse business holdings, that supplemental unemployment insurance and stimulus checks are making it hard for businesses to find workers, and that he is buying gold for the first time in his career.

 

Some excerpts from Sam Zell:

“We’re seeing (inflation) in all of our businesses. The obvious bottle necks in the supply chain arena are pushing up prices. It’s very reminiscent of the 1970s.”

“I see the (inflation) pressures everywhere and I don’t see what’s going to make it temporary… Everything that you’re doing has to include the assumption that costs are going up. The fact that there is a shortage of employment, whether it be homebuilding or many other industries, they can’t fill the jobs that they have. We’ve created a welfare society that is really discouraging people. When you can make almost as much if not more collecting unemployment insurance and supplemental this and supplemental that, that’s pretty dangerous stuff and clearly we are having trouble getting everybody back into the workforce because the alternative is so attractive.”

“…The whole issue of fiat currencies is a very real issue. The United States is not the only country in the world that is printing too much money. Obviously, one of the natural reactions is to buy gold, which I’ve actually done for the first time in my career and it feels very funny because I’ve spent my career talking about ‘Why would you want to own gold, it has no income and costs to store.’ And yet when you see the debasement of the currency, you say ‘What am I going to hold on to?'”

Here is the paradox. Transitory inflation will be persistent so long as the Fed believes that it is transitory. The moment the Fed starts worrying that inflation is persistent, it will prove transitory.

The most powerful deflationary force in the financial universe is the collision of a highly indebted & over-financialized economy and rising interest rates. 

Are we headed for too much inflation or deflation? We’re headed for both and in that order. 

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