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Benjamin A. Pace, managing director and CIO of Deutsche Bank Private Wealth Management, spoke to Kellogg Executive MBA students April 24 about the outlook for capital markets.

Ben Pace

Global warming?

Deutsche Bank CIO Benjamin Pace tells Executive MBA students that the global economy is ‘not fully thawed’

By Rachel Farrell

4/27/2009 - Economists accurately predicted an “economic winter” in 2008. But has the season passed?

“We’re thawing, but we’re not fully thawed yet,” said Benjamin A. Pace, managing director and chief investment officer of Deutsche Bank Private Wealth Management. Pace delivered the lecture “Economic and Capital Markets Outlook” at the Kellogg School on April 24. “Hopefully the worst is over — that’s our prediction right now.”

The latest speaker featured in the Kellogg EMBA Luncheon Speaker Series, Pace provided an overview of the global economic crisis and offered predictions for what’s next in the world economy.

Pace believes that the BRIC countries — Brazil, Russia, India and China — will weather the global downturn well. “They were strong going into this, and will regain their strength pretty quickly,” he said. “And they’re going to have to, because they’re going to be the shifting sources of growth for a long time.”

By contrast, the overall potential growth rate in the United States is slowing. In the 1990s, the U.S. had a strong potential growth rate as a result of new technologies like the PC. However, the growth rate has declined during the past 10 years — and it doesn’t look as if it’s going to pick up anytime soon. “Less investment spending, less leverage, suppressed demand and negative demographic trends point to a further downward movement,” he said.

On the plus side, Pace said that he isn’t concerned about rapidly rising inflation, because globalization is an inherently deflationary phenomenon. However, he is concerned about a reversal of globalization in terms of trade, a mistake that some countries made during the Great Depression. “People ratcheted back and put out bad protectionist policies,” he said. “If those nationalistic tendencies take over in the U.S., that could be a problem for the world economy.”

A student-run initiative, the EMBA Luncheon Speaker Series invites senior executives from a variety of business fields to address EMBA students in the James L. Allen Center. Previous speakers include Rick Lenny, former CEO of the Hershey Company (Jan. 16), Sam Calagione, founder and president of Dogfish Head Craft Brewery (Jan. 23), and Aylwin Lewis, CEO of Potbelly Sandwich Works (Feb. 13).