David Rubenstein, co-founder and co-CEO at The Carlyle Group, joined hosts Stephanie Ruhle and David Westin on Bloomberg TV’s new flagship morning program, Bloomberg <GO>. Rubenstein discussed his call for one or two percent U.S. growth in the next year and explains why the country can expect a recession within the next three years. He also spoke about a transformation taking place in China and unrealistic expectations for 10 percent growth in the nation’s economy.

Rubenstein told Bloomberg TV that a U.S. recession is “inevitable.” He said “We have not really had a recession in six years.  We came out of the last recession in June of 2009. We tend to have recessions every seven years, more or less in the United States, since World War II.  So at some point in the next year or two or three, you can expect a recession.”

On the outlook for this year, Rubenstein said: “I do not think we’re likely to grow at more than 2 percent or so in the United States this year. Europe will be about 1 percent.  China is slowing down to probably really 6 percent.”

David Rubenstein

Rubenstein: U.S. Can Expect Recession in One-Three Years

Rubenstein Warns of Slow U.S. Growth, Recession

Rubenstein: China Transforming, 10%$ Growth Unrealistic

DAVID WESTINLet’s come back to David Rubenstein. Everyone knows you as a cofounder and co-CEO of Carlisle.  A couple of things they may not be aware are No. 1, you are a recovering lawyer.  You actually started out as a lawyer –

STEPHANIE RUHLE: So are you.

WESTIN: Yeah. I’m trying to recover. And the second thing is, you are a real history buff and you own four – count them — four copies of the Declaration of Independence, a copy of the Magna Carta, and two copies of the Emancipation Proclamation.  Isn’t that amazing?

RUHLE: Have you seem “Hamilton” yet?

DAVID RUBENSTEIN: I have seen it and I’ve read the book on which it was based. It’s a great play. Great book.

WESTIN: Great book. Great play. Exactly. So you’ve heard from Matt, we woke up this morning to hearing it’s a $2.5 trillion rally in equity markets.  Oil is up and things. All good news.  So let me try to go to the dark side.

RUBENSTEIN: OK.

WESTIN: As you look around the world, David, what are you most concerned about.? What are the weak points, do you think, as you look out?

RUBENSTEIN: Well I think you have to put it in context. We have not really had a recession in six years.  We came out of the last recession in June of 2009. We tend to have recessions every seven years, more or less in the United States, since World War II.  So at some point in the next year or two or three, you can expect a recession.

I do not think we are here now.  I don’t think there’s any indication of it. But you do expect some slowdown after pretty good growth we’ve had the last couple of years.  I do not think we’re likely to grow at more than 2 percent or so in the United States this year.  Europe will be about 1 percent.  China is slowing down to probably really 6 percent.  So there has been some slowdown. But I do not think we are going into the precipice where it will be a recession.  I just think it will be modest growth for a while.

RUHLE: And generally speaking, are you a buyer or a seller right now?

RUBENSTEIN: Well, we are always a buyer and a seller in our business. But it’s been very difficult to buy things the last couple years around the world in our business because prices have been relatively high.  The average cash flow multiple in which buyouts have been done in the United States have been almost 10 times the last couple of years.  Now it is going down a little bit.  So I think it’s going to be better to buy things the next year or so than it has been and it will be a little bit tougher to sell things at the prices you want to get.

WESTIN: But if – recession or the possibility likelihood of a recession in the next few years is a concern. Are you also concerned about what tools or weapons central banks, governments have to address that?

RUBENSTEIN: Right. Well I do not want to say that I am predicting recession, I am just saying it’s inevitable.

WESTIN: No, no. I was just —

RUBENSTEIN: At some point there would be one. I’d say that the Federal Reserve doesn’t have the tool available to it that is normally has. Normally if you worry about a recession you lower interest rates.  Now you cannot lower them any longer.

RUHLE: They put themselves in this position, though.

RUBENSTEIN: Well, I don’t think they anticipated this — I think they’d like to get out of this and every time they say they’re going to increase interest rates, something comes along that makes it difficult to do that.

I think the Federal Reserve really wanted to increase interest rates this year, but the recent employment numbers made it more difficult for that to happen I think.

RUHLE: But then should they have done it already? I mean the Fed has always been data dependent, but it is just a  matter of acting, getting gutsy and say I’m going to go for it. So did the window close? Should they have acted?  Because there were many moments where it seemed like, really?  You’re concerned whether – I mean, it seemed like every other thing, well, we are going to wait because of this, wait because of that.  At some point you just have to step in.

RUBENSTEIN: Well, I do not want to second-guess the Fed.  I would say maybe you should be a member of the Fed.

RUHLE: No, no, no, no —

RUBENSTEIN: But I’d say it’s very difficult when you get all the data to really figure out exactly what’s going on in the economy. Maybe they have too much date in some respects. But generally, I think the Fed has done a pretty good job.  And I know you had Ben Bernanke on this week, and I would recommend highly his book, which I’ve now read – His book and what he did when he was at the Fed are really spectacular. I think Ben really helped save the U.S. economy that time along with others that were involved with it, and I think Janet Yellen has done a pretty good job in a difficult situation.

WESTIN: Yeah and as you say, Ben has a terrific book out.  But one of the things I think I took away from the book was there is a limit to what monetary policy can do.

RUBENSTEIN: That’s correct.

WESTIN: And given the situation where in this country, and largely around the world with central banks and the interest rate levels, at some point you have to look at fiscal policy, don’t you?  And we also had Larry Summers on who said there should be a lot of investment in infrastructure, for example.

RUBENSTEIN: Yes. Larry has been talking about, you know, secular stagnation. I think

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