The Federal Reserve's plans to jolt the economy with monetary-stimulus tools will artificially pump up stock prices by weakening the dollar, said real-estate mogul and investor Donald Trump.
The Fed announced that it would buy $40 billion in mortgage-backed securities held by banks a month, a monetary policy tool known as quantitative easing (QE), with the latest being the third round the U.S. central bank has rolled out since the 2008 financial crisis.
The Fed added it would continue to sell its short-term Treasury holdings in the market and buy longer-term instruments simultaneously with the aim of further pushing down interest rates across the economy.
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
Combined, the efforts will inject a total of $85 billion a month into the financial system, with the $40 billion from QE being freshly printed money, all aiming to spur investing and hiring — with a weaker dollar and higher stock prices serving as side effects.
"From a stock standpoint, you're creating basically false numbers. You're devaluing the dollar, and as Ronald Reagan would say, 'here we go again,'" Trump told CNBC.
"That's exactly what's happening. The numbers are false. They're being created. People like me may benefit, but it's not ultimately good for the economy."
By pushing down already low interest rates even lower, QE might make purchasing a home a really good investment choice, but only for those who qualify for financing.
"Mortgage rates are very low, but the banks aren't lending, so it doesn't make any difference," Trump said.
"The mortgage rates are already at record-low numbers. I'm seeing numbers that I've never seen before, but banks don't lend to people, even with good credit. They're not loaning money."
But for those who do qualify, now is a good time to get in the market.
"Well, I think it's a great time to buy a house, and I've been saying that for a long time now," Trump said.
"Try buying the house from a bank, because if you buy it from a bank, they'll loan you the money to buy it because they want to get it off their books, so it's a great time to buy a house. Pick a beautiful house, enjoy yourselves and try buying it from a bank."
Past QE measures pumped a combined $2.3 trillion into the economy. Under QE1, the Fed bought $1.7 trillion in largely mortgage-backed securities from banks, while the Fed bought $600 billion in Treasury holdings under QE2.
Both of those amounts were announced beforehand.
QE3 comes as an open-ended strategy, meaning the Fed plans to buy $40 billion in assets a month from banks until the economy shows more sustained improvement, especially in the labor market.
"The weak job market is a concern to every American. High unemployment imposes hardship on millions of people and it entails a tremendous waste of human skills and talents," Fed Chairman Ben Bernanke told a news conference, according to The Associated Press.
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
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