Rubin: Internet has not repealed laws of economics

A former US Secretary of Treasury has warned that eceonomic growth fuelled by information technology and the Internet is not immune from the historic laws of economics.

          Though there is a good chance that with sound fiscal policies the US economy can continue to grow without being hurt by inflation, no one should assume that historic laws of economics have been repealed, Robert Rubin, chairman of the executive committee at Citigroup and former US Secretary of Treasury said here Thursday.

          At an InternetWorld keynote address, Rubin said that information technology and the Internet have fueled economic growth, but cautioned that in a historical context, current stock valuations are high. Rubin helped steer the U.S. economy as Secretary of Treasury from 1995 to 1999; before that he was an executive with Goldman Sachs & Co.

          "I don’t think that there is any question that the Internet is one of the most important economic, cultural and social events of my lifetime," Rubin said.

          The efficiencies brought by IT, including the ability for buyers to easily compare prices from many different suppliers, will help lessen the risk of inflation as the economy grows, Rubin said.

          "But it behooves us not to underestimate the challenges ahead," he cautioned.

          Rubin noted that personal savings are at a low point and stock prices are at a high point in terms of historic levels.

          "These factors could all turn out to be harmless if, for example, we have an exceedingly high rate of growth in years ahead; on the other hand they could also -- and this seems to me to be the more likely possibility -- they could also reflect excessive reactions to the very real strengths of the United States economy."

          Rubin also noted that he has seen internal Citigroup demonstrations of new Internet-based home banking services and that he expects those services to be rolled out, possibly in the next few months.

          (More to come.)

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