U.S. inflation is headed higher, thanks to the humongous government debt burden and coming wage demands, says David Rubenstein, co-founder of private equity titan Carlyle Group.
He joked to Fortune magazine that he’s an expert on inflation, having served as a junior domestic policy adviser to President Jimmy Carter when inflation reached 19 percent.
“For the past 20-plus years we've had about 2.5 percent inflation,” Rubenstein explained.
“I suspect that in the next two or three years, as the excess capacity is absorbed, and people begin to want higher wages, and we begin to pay off this enormous debt, you'll see inflation go to 4 to 5 percent."
As for the U.S. economy, Rubenstein sees growth of 2 to 3 percent this year.
“The most important thing to remember is that the U.S. economy went through more or less a heart attack,” he said.
“A heart attack is not fatal these days — it's something we can correct — but we still have massive unemployment (9.7 percent).”
And then there are the huge budget deficit and debt burden.
“So we have a lot of problems to work out before we're back to an economy we can be proud of again.”
Rubenstein apparently is more worried about inflation than the Federal Reserve.
The Fed said in its most recent policy statement, “With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”
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