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Don’t know how rate cuts will help fight coronavirus: Schwarzman

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The global economy and some industries would face disruption and there could be a significant negative impact on global growth, at least in the short term, with Covid-19 spreading beyond mainland China, Blackstone chief executive Stephen Schwarzman said on Wednesday. “I think there is no doubt that the epidemic will have a significant negative impact on global growth.

So the question is, how long will that continue? And there doesn’t appear to be any shortterm cure for sure,” Schwarzman said in a media interaction in Mumbai. His comment comes in the backdrop of a rising number of Covid-19 cases: About 93,000 people have been affected, with the death toll reaching 3,201. However, the Blackstone co-founder, also US President Donald Trump’s confidante on Wall Street, said the Federal Reserve’s latest rate cut might not help much. “I don’t really know how these interest rate cuts will help fight the coronavirus.

I think the way markets were off afterwards, was an indicator of how the stimulated economy will work in such a context,” Schwarzman said. The US Federal Reserve cut interest rates on Tuesday by half a percentage point in an attempt to boost the economy. However, President Trump called on the Fed to cut rates even more.

The Fed “must further ease and, most importantly, come into line with other countries/competitors,” Trump tweeted. “Although the Federal Reserve used its power to inject confidence through a rate cut, it didn’t work – at least this time.

Lower interest rates will make it more difficult for financial institutions to survive,” Schwarzman said. The 73-year-old deal maker, known as much for throwing raucous birthday parties as for his billion-dollar leveraged buyouts, scholarship programmes, philanthropy and collection of European impressionists, has always been a harsh critic of using monetary policy to lift sentiment. “Lower and lower rates do not necessarily result in sustained economic growth.

It is not an effective way to stimulate economies or growth,” he told ET last September right after the Federal Reserve had cut rates then.

“It hurts savers, retired people.

It also hurts financial institutions since they lose the yield curves and their spreads get impacted and they can’t grow their capital at the rate at which they would like to.” India, for Blackstone, is one of the most successful investment destinations globally and will continue to be one of the key markets for the firm. “Our results from India have been our strongest from any place in the world.

There are issues — that the economy has slowed down a bit, inflation is higher and (there are) issues surrounding the banking system generally.

But India, on a longer-term basis, has some really remarkable assets, which are its people.

Its educational system is rapidly improving,” he said. Blackstone has deployed nearly $16 billion in India across multiple asset classes including private equity, real estate and alternative credit after it opened its first office in the country in 2005. Calls for breaking up big technology companies like Facebook, Google and Amazon based in America have been growing louder with democratic candidates Bernie Sanders and Elizabeth Warren supporting the idea.

This is following concern from American voters over the power these companies wield over their personal information.

At a function on Wednesday evening, Schwarzman said he did not agree with this idea.

He said, “I am personally not in favour of it.

I think that the heads of almost all large technology companies from the United States are asking to be regulated.

There are various reasons for this, one of which is the Europeans are attempting to regulate American companies.” He said European technology companies in terms of scale are not as big as American companies.

CEOs are aware of issues related to privacy and are working to fix them, he added.




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