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Sternlicht cautions Trump against “overheating economy”

Starwood Capital chief warns tax cuts, increased spending can be "dangerous game"

February 17, 2017 08:00AM

Barry Sternlicht believes President Trump should be concerned about the pace of multiple stimuli, warning that cutting taxes and increasing spending can be a “dangerous game.”

Sternlicht, who heads Connecticut-based fund manager Starwood Capital Group, told Bloomberg that Trump needs to be wary of interest rates jumping too quickly.

“We might go down before we go up in terms of tax receipts, If he cuts corporate taxes and cuts individual taxes,” Sternlicht said. “I guess the hope is the economy accelerates enough that other taxes will replace those tax cuts and we’ll grow. It’s a leap of faith.”

He added that he supports what he calls “re-regulation,” adding the banking industry has been strangled by excessive regulation and that corporate tax cuts will be useful to some extent. However, he warned that Trump should be careful about “overheating” the economy.

“If rates rise too fast, and at the same time you put trade barriers on China and they are angry at us and they don’t buy our debt, rates could spike suddenly — hard,” he said. “That would be bad for the equity markets.”

He welcomes infrastructure spending, but would prefer money to be spent on schools, over a the Wall. [Bloomberg]Miriam Hall

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