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Results 151–177
of 177 found.
Europe Is Running Fast to Stand Still
by Mohamed A. El-Erian of PIMCO,
The sequencing of Europe?s debt crisis is depressingly similar ? the plot stays the same, with a slightly different cast depending on the country in the spotlight. Yet, judging by the run-up to the meeting of European Union finance ministers in Brussels on Monday, European officials seem intent on repeating it over and over again.
Germany in a Lose-Lose Situation
by Mohamed A. El-Erian of PIMCO,
The problem is that Germany's current approach ? centered on dealing with liquidity problems now and solvency centered later ? is not working.
A liquidity approach that delays the day of reckoning may be good regional politics, but it's bad economics. It does not restore sustainable growth to the periphery, and it exposes the core to contamination. Rather than simply doubling up on a faltering liquidity approach, the time has come for Germany to lead a more holistic solution focused on addressing the periphery?s debt overhang and competitiveness problems.
Ireland Rescue Is Not a Game Changer
by Mohamed A. El-Erian of PIMCO,
Ireland's new liquidity package does little to deal with its debt overhang, or to reduce the embedded cost of its debt. Instead it aims to introduce stability into market conditions. It took time for Europe to recognize the severity of the peripheral debt crisis. Now it is also recognizing that liquidity support (while necessary) may not be enough.
Irish Crisis Demands New EU Response
by Mohamed A. El-Erian of PIMCO,
Advanced economies are not wired to operate at elevated levels of sovereign risk. The longer these spreads persist, the greater the decline in investment activity and employment. If things are left as they are the risk of further social unrest will rise, while tax revenues will collapse at a time when budgets are already under enormous strain. The policy responses of eurozone governments were supposed to buy a few years of calm, but ended up by delivering only a few months. A more effective and credible approach is now needed.
We've Voted. What's Next For the Economy?
by Mohamed A. El-Erian of PIMCO,
With the two chambers of Congress split between Democrats and Republicans, the conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today. Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities.
The Fed Feels Compelled to Experiment
by Mohamed A. El-Erian of PIMCO,
Judging from the minutes of the September 21 Federal Open Market Committee meeting, it is virtually a foregone conclusion now that the Federal Reserve will announce on November 3 that it is re-engaging in 'unconventional policies.' As a body, the FOMC recognizes that the benefits of quantitative easing come with potential costs and risks, including unintended consequences. Despite this tricky and uncertain balance, it feels compelled to act.
Stalled Post-crisis Reforms Must Be Restarted
by Mohamed A. El-Erian of PIMCO,
In the early part of this crisis, swift coordinated global policy action saw a painful economic collapse replaced by employment gains and greater financial stability. However, the marked failure to continue coordinated action reflects two critical weaknesses that now must be taken seriously: an insufficient appreciation of the mix of post-crisis forces; and a growing void at the center of the international system. For the IMF this means acting on long-standing governance and representation problems ? and doing so by going well beyond what is being currently contemplated.
Beyond Brinkmanship: A Better Economic Path for the U.S. and China
by Mohamed A. El-Erian of PIMCO,
It is in virtually no country's interest - including that of the United States - for China's economic development to derail. China is the world's strongest growth engine, its largest creditor and its biggest trade partner. Rather lecturing China on its exchange rate, the United States should be doing more to push its European allies to allow a larger Chinese voice in multilateral forums. Beijing, in turn, should think carefully about how it can help the United States and the global economy to bridge the hole of balance-sheet repair.
An Interesting Week Ahead
by Mohamed A. El-Erian of PIMCO,
The failure to reduce risk spreads in peripheral European countries means that the public sector bailout is not working. The list of industrial countries wishing to depreciate their currencies is not matched by a list of emerging economies happy to let their currencies appreciate significantly. As a result, foreign exchange tensions are mounting, and the price of gold has been driven to a new record level. This week will shed light on whether policymakers can do anything to deal with these two issues.
Judging Obama, Geithner and Goolsbee
by Mohamed A. El-Erian of PIMCO,
The Obama Administration's announcement Wednesday of its new economic policy initiative will be closely watched by markets and will likely impact equity and bond valuations around the world. A disappointing performance today would be met with even greater market skepticism, higher 'self-insurance' by households and companies and further disappointment among America's friends and allies.
Why Another Fiscal Stimulus Won't Do
by Mohamed A. El-Erian of PIMCO,
The main debate in Washington today is whether or not to do more of the same: another fiscal stimulus and another round of quantitative easing by the Federal Reserve. This conflicts with evidence that a broader and more holistic response is needed. Policymakers must address key structural issues, including the drivers of growth and employment creation; the high risk of skill erosion and lost labor productivity; financial deleveraging in the private sector; debt overhangs; the uncertain regulatory environment; and the unacceptably high risks facing the most vulnerable segments of society.
Deciphering Today's Violent Market Moves
by Mohamed A. El-Erian of PIMCO,
Tuesday's Federal Open Market Committee statement confirmed what the high frequency partial data have been signaling for a few weeks now: that the U.S. economic recovery has lost momentum. Expectations have evolved in an interesting manner - from the more familiar bell curve (a dominant mean and thin tails) to a much flatter distribution with fatter tails. In such a universe of expectations, short-term news can have a disproportionate impact on market valuations. When you are potentially on the road to deflation, a small change in probability will have an amplified impact on markets.
El-Erian on Why the Payrolls Report Matters
by Mohamed A. El-Erian of PIMCO,
The employment picture constitutes yet another headwind - and a significant one - to the already-faltering U.S. recovery. More Americans are struggling to earn enough to maintain their standard of living. The time has come for Washington to realize that the existing policy mix is not appropriate for the task at hand.
Stress Test Is No Shortcut to Stability
by Mohamed A. El-Erian of PIMCO,
Will the testing of 91 European banks by regulators stabilize the region's finances? After all, a similar approach in the U.S. last year may have helped normalize financial markets there. The U.S. stress test, however, applied to institutions that were the main cause of the financial instabilities, and the government had budgetary room to support the sector. Europe's concern about banks is a derived concern, reflecting worries about sovereign debt in some countries and the overall economic situation; and there are greater limits today on budgetary resources.
The Real Tragedy of Persistent Unemployment
by Mohamed A. El-Erian of PIMCO,
The US faces a low growth/high unemployment trap, which would have four consequences: erosion of skills in the labor force, pressure on social safety nets, dampened spending by those who are employed, and less risk-taking by companies. El-Erian suggests several policy initiatives to combat unemployment.
Mohammed El-Erian on a Disappointing G-20 Compromise
by Mohamed A. El-Erian of PIMCO,
Mohammed El-Erian digests the 'unusually long communiqu from the G-20 Summit in Toronto.' El-Erian expresses his concerns about the future of a post?global financial crisis world that is in desperate need of better cross-border policy coordination and harmonization.
Beyond the Growth Vs. Austerity Debate
by Mohamed A. El-Erian of PIMCO,
This weekend?s G-20 meeting will likely fuel, not resolve, the heated debate triggered by a combination of exploding debt and deficits in industrial countries, and the recognition that many now face a future of muted growth and high unemployment. In one corner stand the 'growth now' camp, arguing that expansion is a prerequisite to service their debt sustainably. Against them stand the 'austerity now' camp, who want budget cuts to lower risk premiums and stave off disruptive debt restructurings. The two sides are both right, and wrong.
Sovereign Wealth Funds in the New Normal
by Mohamed A. El-Erian of PIMCO,
Sovereign wealth funds are generally well-equipped to navigate financial markets after the crisis of 2008 and amid current fiscal strains in Europe. Yet they too face potential challenges, as the global economic recovery is unlikely to follow a straight and simple path. How these funds confront these challenges will speak directly to their effectiveness in investing national wealth to benefit current and future generations, as well as their contributions to stabilizing a fluid global economy.
On the Need to Listen Carefully to What the G-20 is Saying
by Mohamed A. El-Erian of PIMCO,
The recent G-20 communique is a further confirmation that structural and balance sheet realities are imposing themselves on the global economy. Compared to what the world has known for the last 40 years, this results in a highly unusual configuration of growth, debt and deficits. It also raises legitimate questions about the prospects for self-sustaining private sector recoveries in industrial countries. Finally, it loudly illustrates the limitations of cyclical policy responses and international coordination, as well as associated problems with unintended consequences and collateral damage.
Return of the Nervous Weekend
by Mohamed A. El-Erian of PIMCO,
Having over-romanticized the cyclical bounce, some investors are now scrambling to reposition their overextended portfolios now that structural problems are undeniable. The disruption in financial markets is not a garden-variety market fluctuation. Instead, it?s an overdue recognition that the global economy faces an uncertain future that involves slower growth and greater government regulation. Structural problems require structural solutions. The question is whether policymakers in Europe will acknowledge this, or remain hostage to hope for an immaculate recovery.
Difficult Choices Still Facing Europe
by Mohamed A. El-Erian of PIMCO,
The beneficial impact of last weekend?s $1 trillion 'shock and awe' intervention by Europe to save Greece and safeguard the euro is fading - even more quickly than officials had feared. This is the result of two main factors. First, having analyzed the news out of Europe in depth, markets recognize that the liquidity-based approach cannot sustainably address what is at heart a solvency problem. Second, markets are concerned that short-term stability is being pursued at the cost of long-term viability.
Driving Without a Spare
by Mohamed A. El-Erian of PIMCO,
Mohamed El-Erian recounts the results of last week's PIMCO Secular Forum on the three- to five-year outlook for the global economy and the markets. Participants concluded that we are heading toward a world that is re-regulated, de-levered, and growing less rapidly in the industrial countries. It will be a world in which concerns about the dark side of globalization temper enthusiasm for its net benefits, and in which politics matter a lot for markets and the economy. The drama playing out in Europe these days is a vivid illustration of this general secular characterization.
Understanding the Greek Aftershocks
by Mohamed A. El-Erian of PIMCO,
The Greek crisis has already morphed into a regional shock. It now stands on the verge of morphing into a more global phenomenon. Some countries will benefit, mainly on account of capital flows coming out of the euro area. The majority will not. And even those that do benefit should remain vigilant and responsive. Like most other countries in the world, they will also end up suffering from the consequences of lower international demand and renewed disruptions to the global banking system.
Many More Chapters Left in the Greece Drama
by Mohamed A. El-Erian of PIMCO,
Sunday's loan announcements from the European Union and the International Monetary Fund will not mark the end of the Greek debt crisis, nor will they constitute a much-needed turning point that can be sustained for many months. Instead, they will part of the multi-stage process that still has a few rounds left. If design and implementation issues emerge, future rounds may involve a reopening of negotiations and a recasting of the approach in some areas.
Greek Crisis Endangers Private Sector
by Mohamed A. El-Erian of PIMCO,
The Greek debt crisis has morphed into something that is potentially more sinister for Europe and the global economy. What started out as a public finance issue is quickly turning into a banking problem too; and what started out as a Greek issue has become a full-blown crisis for Europe. Absent some remarkable change in the next few days, things will get even more complex for the public sector. It may have no choice but to combine its own exceptional financing efforts with talks on a controversial approach that will be familiar to emerging market observers - private sector involvement.
Why the Greek Rescue Isn't Going According to Plan
by Mohamed A. El-Erian of PIMCO,
The triumphant announcement from Greece, the European Union and the International Monetary Fund a couple of weeks ago has not calmed markets, nor has it lowered Greek borrowing costs. Buoyed by a cyclical recovery, markets around the world have yet to recognize the complexity of this situation. When they do, it will also become apparent that Greece is part of a wider, and historically unfamiliar phenomenon ? that of a simultaneous and large disruption to the balance sheets of many industrial countries.
How to Handle the Sovereign Debt Explosion
by Mohamed A. El-Erian of PIMCO,
The simultaneous deterioration of public finances in many advanced economies represents a significant regime shift with consequential and long-lasting effects. In 2008 and 2009, governments had to step in to counter the simultaneous implosion of housing, finance and consumption, and now the world must deal with the consequences of how they did this. Governments will not be able to rely on growth or private sector holdings to overcome their debts. Policymakers will need to make difficult decisions about higher taxes and lower spending.
Results 151–177
of 177 found.
