May 1st, 2012
02:27 PM ET

El-Erian: Germany’s neighborhood watch

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets CollideFor more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

On a recent trip to Germany, I was struck by two distinct narratives. One narrative features a robust German economy with low unemployment, strong finances, and the right competitive position to exploit the most dynamic segments of global demand. The other narrative describes an economy that is encumbered by never-ending European debt crises whose perpetrators seek to shift their responsibility – and their financing needs – onto Germany’s pristine balance sheet.

Both narratives are understandable. But they cannot co-exist forever. After all, it is difficult to be a good house in a deteriorating neighborhood. Either the neighborhood improves, or the value of the house declines. And it matters a great deal which narrative prevails – for Germany, for Europe, and for the global economy. FULL POST

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Topics: Economy • Europe • Germany
March 23rd, 2012
02:00 PM ET

El-Erian: The American recovery

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets CollideFor more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

The United States has gone through an arduous period of intervention and rehabilitation since the global financial crisis in 2008 sent it to the economic equivalent of the emergency room. It moved from the intensive-care unit to the recovery room and, just recently, was discharged from the hospital. The question now is whether the US economy is ready not just to walk, but also to run and sprint. The answer will powerfully influence global economic prospects.

It is easy to forget how critical things were back in the fourth quarter of 2008 and the first quarter of 2009. Having suffered what economists call a “sudden stop,” many parts of the US economy were imploding or had ceased to function – to extend the medical metaphor, even the most vital organs were threatened. FULL POST

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Topics: Economy • United States
February 15th, 2012
12:03 PM ET

El-Erian: From Argentina to Athens?

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

Let me set the scene: an increasingly discredited economic policy approach gives rise to growing domestic social and political opposition, street protests and violence, disagreements among official creditors, and mounting concerns among private creditors about a disorderly default. In the midst of all of this, national leaders commit to more of the same harsh austerity measures that they have been unable to implement for two years. Official creditors express skepticism, in private and public, but hold their collective nose and get ready to disburse yet another tranche of money into what they fear is a bottomless pit.

Sound familiar? It should, but not just because it encapsulates Greece today. It is also what Argentina faced in 2001. Unless Europe reflects on key lessons from that experience, the parallels that extend to Greece may also end up including a financial meltdown, a deep output collapse, and social and political turmoil. FULL POST

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Topics: Economy • Europe • Greece
January 23rd, 2012
10:17 PM ET

El-Erian: Egypt’s unfinished revolution will succeed

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

A year ago, Egyptians of all ages and religions took to the streets and, in just 18 days of relatively peaceful protests, removed a regime that had ruled over them with an iron fist for 30 years. Empowered by an impressive yet leaderless movement – largely of young people – the country’s citizens overcame decades of fear to reclaim a voice in their future.

While much has been achieved since those euphoric times, Egypt’s revolution today is, unfortunately, incomplete and imperfect – so much so that some now doubt whether it will fully succeed. I believe that the doubters will be proven wrong. FULL POST

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Topics: Egypt
January 20th, 2012
03:30 PM ET

El-Erian: Repairing the global plumbing

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

More than three years after the global financial crisis, the world still has a nasty plumbing problem. Credit pipes remain clogged, and only central banks are working to clear them. But their ability to do so is waning, posing yet another set of risks for Western economies blocked by too little growth, too much unemployment, deepening inequality, and debt in all the wrong places. Fortunately, it is not too late to build broader pipes that compliment and replace the damaged infrastructure.

The current situation embodies two narratives that seem contradictory, but are not. One speaks to the reality that most large companies with access to capital markets have no problem securing new funding. In fact, they have been remarkably successful in lengthening their debt maturities, accumulating cash, and lowering their future interest payments. In sum, they now have “fortress” balance sheets. FULL POST

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Topics: Economy • Global
December 21st, 2011
10:30 AM ET

El-Erian: The new international economic disorder

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

A new economic order is taking shape before our eyes, and it is one that includes accelerated convergence between the old Western powers and the emerging world’s major new players. But the forces driving this convergence have little to do with what generations of economists envisaged when they pointed out the inadequacy of the old order; and these forces’ implications may be equally unsettling.

For decades, many people lamented the extent to which the West dominated the global economic system. From the governance of multilateral organizations to the design of financial services, the global infrastructure was seen as favoring Western interests. While there was much talk of reform, Western countries repeatedly countered serious efforts that would result in meaningful erosion of their entitlements. FULL POST

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Topics: Economy • Global • Perspectives
November 18th, 2011
01:00 PM ET

El-Erian: The anatomy of global economic uncertainty

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

The sense of uncertainty prevailing in the West is palpable, and rightly so. People are worried about their futures, with a record number now fearing that their children may end up worse off than them. Unfortunately, things will become even more unsettling in the months ahead.

The United States is having difficulties returning its economy to the path of high growth and vigorous job creation. Thousands of people have taken to the streets of U.S. cities, and thousands of others in Europe, to demand a fairer system. In the Euro Zone, financial crises have forced out two governments, replacing elected representative with appointed technocrats charged with restoring order. Concern about the institutional integrity of the Euro Zone – key to the architecture of modern Europe – continues to mount.

This uncertainty extends beyond countries and regions. Those looking around the next corner also worry about the stability of an international economic order in which the difficulties faced by the system’s Western core are gradually eroding global public goods. FULL POST

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Topics: Economy • Global
October 19th, 2011
04:30 PM ET

America at stall speed?

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

Judging from the skittishness of both markets and “consensus expectations,” the United States’ economic prospects are confusing. One day, the country is on the brink of a double-dip recession; the next, it is on the verge of a turbo-charged recovery, powered by resilient consumers and US multinationals starting to deploy, at long last, their massive cash reserves. In the process, markets take investors on a wild rollercoaster ride, with the European crisis (riddled with even more confusion and volatility) serving to aggravate their queasiness.

This situation is both understandable and increasingly unsettling for America’s well-being and that of the global economy. It reflects the impact of fundamental (and historic) economic and financial re-alignments, insufficient policy responses, and system-wide rigidities that frustrate structural change. As a result, there are now legitimate questions about the underlying functioning of the US economy and, therefore, its evolution in the months and years ahead. FULL POST

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Topics: Economy • United States
Countering the contagious West
September 19th, 2011
04:45 PM ET

Countering the contagious West

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian, Project Syndicate

Imagine for a moment that you are the chief policymaker in a successful emerging-market country. You are watching with legitimate concern (and a mixture of astonishment and anger) as Europe’s crippling debt crisis spreads and America’s dysfunctional politics leave it unable to revive its moribund economy. Would you draw comfort from your country’s impressive internal resilience and offset the deflationary winds blowing from the West; or would you play it safe and increase your country’s precautionary reserves?

That is the question facing several emerging-market economies, and its impact extends well beyond their borders. Indeed, it is a question that also speaks to the increasingly worrisome outlook for the global economy. FULL POST

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Topics: Economy • Emerging Powers
Pity the policymakers
Greek Prime Minister George A. Papandreou discussing his country's debt woes at the recent Eurozone summit. EU policymakers agreed to fresh loans to help reduce Greece's 350-billion-euro debt. (Getty Images)
July 22nd, 2011
12:30 PM ET

Pity the policymakers

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian

NEWPORT BEACH – I don’t know about you, but whenever I am in an airplane experiencing turbulence, I draw comfort from the belief that the pilots sitting behind the cockpit’s closed door know what to do. I would feel very differently if, through an open door, I observed pilots who were frustrated at the poor responsiveness of the plane’s controls, arguing about their next step, and getting no help whatsoever from the operator’s manuals.

So it is unsettling that policymakers in many Western economies today resemble the second group of pilots. This perception reflects not only the contradictory pronouncements and behavior of policymakers, but also the extent to which economic outcomes have consistently fallen short of their expectations. FULL POST

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Topics: Economy • Europe
Sleepwalking through America’s unemployment crisis
May 23rd, 2011
08:00 AM ET

Sleepwalking through America’s unemployment crisis

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More on PIMCO’s Secular Forum can be found here. For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian

The scope and composition of unemployment in America is problem that has yet to be sufficiently recognized for its increasingly detrimental impact on the country’s social fabric, its economic potential and its already-fragile fiscal position and debt dynamics.

Let us start with the facts:

- At 8.8% almost three years after the onset of the global financial crisis, America’s unemployment rate remains stubbornly (and unusually) high;

- Rather than reflecting job creation, much of the improvement in recent months (from 9.8% in November last year) is due to workers exiting the labor force, thus driving workforce participation to a multi-year low of 64.2%; FULL POST

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Topics: Economy • United States
May 20th, 2011
01:16 PM ET

Global economy: Hobbling and muddling

Editor's Note: Mohamed El-Erian, CEO and co-CIO of PIMCO, is the author of When Markets Collide. More on PIMCO’s Secular Forum can be found here. For more from El-Erian, visit Project Syndicate or follow it on Facebook and Twitter.

By Mohamed El-Erian

Colleagues from around the world recently gathered at PIMCO’s headquarters in California for our annual Secular Forum, when we leave behind high-frequency issues for a few days and, instead, debate what the next 3-5 years hold for the global economy.

The perspective is global, informed by the insights of outside speakers, and the focus is on what is likely to happen, as opposed to what should happen.

The last two Secular Forums projected that, after the global financial crisis, the world economy would not reset in its traditional, cyclical manner. Instead, it faced multi-year re-alignments of both a national and global nature.

The world economy would heal, but in a slow and uneven fashion, as advanced economies muddled through while the more dynamic emerging world gradually closed today’s income and wealth gaps. FULL POST

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Topics: Economy • Emerging Powers • Global
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