El-Erian fears doom, but hopes for the good enough

Mohammed El-Erian has just published a book, The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse. He says the world economy is on a road heading for a "T junction," to use a British phrase. We must soon choose between the two roads. One leads to total destruction (depression, social disorder) and the other to some sort of survival. He assigns a 50% likelihood to each outcome. To achieve the latter somewhat better outcome, far-sighted, enlightened and public-spirited actions are required from our leaders. (It is unclear how he gets a 50% likelihood that this will happen. It's rather like Samuel Johnson's definition of a second marriage, "the triumph of hope over experience.")

As for the central banks, we have reached the point where a continuation of extraordinary measures (ZIRP, QE) is counterproductive, and even destructive. He goes so far as to say that apart from the emergency measures during the crisis, the central bank monetary manipulation experiment has not worked.

Yesterday my wife listened to El-Erian's hour-long interview on Tom Ashbrook's show "On Point" in the morning. She insisted I hear the replay in the evening, but I resisted as I was reading a book. I did, however, subsequently download and listen to the podcast. It is well worth hearing. It is anything but the party line.

The link: http://onpoint.wbur.org/2016/02/16/economic-market-crash-prediction


Yours truly,
Lincoln