The global economic cycle is worsening as series of negative data indicate and may be headed for another major crisis, but the problem is that there are few options left to reverse the trend, said David M. Rubenstein, Co-Founder and Co-CEO of The Carlyle Group, one of the world`s largest private equity firms.
He referred to policy bind that has been grappling governments and central banks struggling with common challenges with their economies.
“We need to lower the interest rate to stimulate the economy, but we cannot do so because it is already too low,” he said during the opening session of three-day World Knowledge Forum in Seoul
He cited low growth, low interest rate, low inflation and debt as common challenges for the global economy. “The problem is that we cannot lower the interest rate even in the face of a global economic crisis.”
“While I was working under the Carter administration, we had double-digit inflation. While double-digit inflation is not good, around 3 to 4 percent inflation is actually pretty good for the economy,” he also said. “Unfortunately, the global economy has been growing with a relatively low inflation rate. The inflation in the U.S. might be under 1 percent this year, and Japan and Europe may be under 1 percent as well.
“Another problem is the amount of debt,” he said as governments in both the advanced and emerging economies have borrowed heavily to finance their stimuli campaigns following the 2008 financial crisis.
The outcome of the U.S. presidential elections due next month will also likely affect the global economy.
“The impact of who is going to win and the makeup of new Congress will affect the economy differently, but whoever wins the election will face such problems as tax reform, infrastructure, immigration, border security, global trade, income inequality, and national security issues.
Regarding Korea’s attractiveness of investment, Rubenstein said: “Generally, I think South Korea is viewed as an increasingly attractive place to invest. It was seen as an emerging market, but now it is seen as a developed market characterized by high and still consistent per capita GDP growth, reasonable levels of inflation, relatively stable currency, highly educated workforces, strong work ethics and stable government.
By Lee Yu-sup and Chae Jong-won
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