Global economic outlook: Putin, Africa and Frosty's revenge

April 30, 2014

What do Hillary Clinton’s intelligence, bodybuilding and interest rates have in common?  

Almost nothing, unless you are David Rubenstein, the co-chief of one America’s most powerful private equity firms and the moderator of a panel of similarly powerful politicians and executives at the Milken Institute Global Conference.  

Global Economic Outlook

Steering the Global Overview session, the Carlyle Group executive used his bully pulpit to tease, cajole, and sometimes embarrass his guests into funny and revealing tidbits about their view of the world, though he always got around to asking them about financial matters. To set the right tone, he started by trying to get former British Prime Minister Tony Blair to choose whether Hillary Clinton, Angela Merkel, or Barack Obama is the smartest.  

“I’d be the dumbest person in the world if I answered that question,” Blair said with a wry smile.  

Rubenstein did query Blair about whether the European Union would eventually join the United States in imposing tougher economic sanctions on Russia for its actions in Ukraine. Blair pointed out that opinion remains divided within Europe over how hard to push. However, he said European leaders understand the threat that Russia’s dismantling of Ukraine would pose. Blair said he believed “in the end, Europe will line up with America on this.”

Asked to describe Putin, Blair responded, “He is a Russian nationalist. The one thing that isn’t complicated is what is motivating him.” 

In talk show fashion, Rubenstein turned his attention to Scott Minerd, the global chief investment officer of Guggenheim Partners, who was asked his view on interest rates and bodybuilding. Minerd, who apparently bench-presses 495 pounds, explained that bodybuilding was a healthy release from the rigors of high finance and held surprising health benefits. For example, bodybuilders have lower rates of cancer. On the interest-rate question, he said Federal Reserve chief Janet Yellen had made it clear that “rates were on hold until the second half of 2015.” 

Citi economist Willem Buiter didn’t escape Rubenstein’s pointed questions. When asked why economists routinely make such bad forecasts, Buiter said, with a hint of a smile, that it was because investors have such a “desperate desire” for “anything that has a chance of penetrating the fog of the future” that even the demand for “lousy forecasts” is huge. Then he went on to provide his forecast for the U.S. economy. After a sluggish first quarter – which he called “Frosty’s revenge,” he expects growth to stay below 3 percent for the coming year and probably the next.  

On a more serious note, Rubenstein and others gave fellow panelist Paul Kagame, the Rwandan president, an enthusiastic audience for his pitch on investing in Rwanda, which has emerged from its bloody past to become one of Africa’s economic success stories. Rubenstein, whose firm just launched a sub-Saharan Africa fund, and Minerd both said they were bullish on Africa, which is home to some of the world’s fastest-growing economies and an expanding middle class. 

Asked why Japan had not produced more game-changing entrepreneurs like Sony founder Akio Morita, Osamu Nagayama, the chairman of Sony Corp. and chairman and CEO of Chugai Pharmaceutical, expressed hope that more budding Moritas were waiting in the wings, empowered by new technology. “It is important for old people like me to encourage young people,” he said. “We are not forgiving enough of failure.” 

Rubenstein was also curious whether the sushi at Sukiyabashi Jiro – the restaurant President Obama visited during his recent stop in Tokyo – is really worth its high price.

“I don’t know,” Nagayama answered. “It’s too expensive for me.”


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