Lloyd C. Blankfein, chief executive officer of Goldman Sachs Group Inc. (GS), said he would invest in real estate as central banks around the world focus on avoiding deflation.
“I accept that invitation to have higher asset prices, and so I would go long more the real assets,” including real estate, Blankfein, who turns 58 tomorrow, said in a discussion today with Royal Bank of Canada (RY) CEO Gordon Nixon, at an event hosted by the Canadian Club of Toronto.
The Bank of Japan (8301) today joined the Federal Reserve and European Central Bank in acting against threats of an economic contraction five years after the U.S. mortgage meltdown derailed the global economy. The BOJ expanded its asset-purchase fund by 10 trillion yen ($127 billion). The Fed said last week it would buy $40 billion a month of mortgage debt in a third round of so- called quantitative easing.
“The central banks are obviously putting a real penalty on holding cash and are trying to incentivize everybody into going into higher assets,” Blankfein said. “They may be unsuccessful, but I tell you if more inflationary expectations seeped into the world, that would be very positive today for the economic system.”
Blankfein said he would “follow the will of the central banks,” which are trying to avoid deflation even at the risk of spurring inflation. “They want asset prices to inflate,” he said.
Goldman Sachs, the most profitable securities firm in Wall Street history before converting to a bank in 2008, announced a new round of cost-cutting in July after reporting the lowest first-half revenue in seven years. In a research report last week, Goldman Sachs’s bank analysts said the industry’s decline in profit has been driven primarily by increased capital requirements and regulation, rather than the economic slowdown.
Blankfein’s discussion today follows appearances at the Economic Club of Washington, the St. Petersburg International Economic Forum, the Chicago Club and on MSNBC earlier this year. Goldman Sachs is based in New York.
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