Central Banks in Lose-Lose Situation: El-Erian

Aug.14 -- Mohamed El-Erian, Bloomberg Opinion columnist and chief economic adviser at Allianz, talks about what matter most to market participants, monetary policy and the prospects of an economic recovery. He speaks with Bloomberg’s Jonathan Ferro on "Bloomberg The Open." El-Erian's opinions are his own.

[dexlab]

HAHA, the consumer is ‘resilient’ only because the government printed money and dropped it from helicopters ...USD is toast!

[jschreadley]

We are 3 inches and 2 seconds away from becoming the largest, most indebted, and most arrogant banana republic in the world. And through our indifference and cowardly subservience to the one-percenters, we will get exactly everything we deserve.

[shauna]

This man is well read. His space is busting at the seams with books. He also doesn't deal in absolutes which is nice.

[cybervigilante]

Congress won't get off its ass since They're set for life with guaranteed retirement and healthcare, and a big job when they leave from companies they "helped."

[sadigov]

It’s a square root of a lose-lose situation. We are mathematically doomed-doomed square!

[bolesfamily]

For anyone paying attention from the beginning, we knew it was a multi-round strategy. The problem is, most of the people in charge around the world don't understand or care about Game Theory at all whatsoever.

[heavyassaultmode]

Amazing revelation. Those of us still working aren't the ones that support the economy-the people spending money they don't have on things they don't need are doing it for us. Fantastic. Maybe the rest of us should stop working and sit at home until someone mails us a hand-out. So much wrong here one could write an economics PhD thesis discrediting all the fiscal and monetary policies which have been ignoring fundamentals for the past 5 decades.

[planetcave]

How about just stop over inflating assets based on valuations and an economy that's not there?

[DavidRanalli]

This guy nailed the segment. I think based on what he said we should be really working to simply adapt our businesses. People have to start making money again, be it at home or in commercial environments. So many people are pushing for things to go back, but COVID has shown that there are new ways to play this economic game, and we are also facing a boatload of pressures at once. Let’s get to work 💪🏼

[meh]

There is no way out of this crisis without unwinding debt through inflation.

[eshmunvideochannel]

You can't have confidence in continued liquidity supply by the Fed.

According to data from the U.S. Treasury, the Treasury borrowed an unprecedented $2.753 trillion in privately-held net marketable debt in the second quarter. Treasury said it expects to borrow $947 billion in the third quarter; followed by a massive issuance of $1.216 trillion in the fourth quarter of this year. That is about $546 billion per month or about 34% of the current monthly GDP print of about $1.6 trillion per month.

I don't need any experts to tell me this is unsustainable, its glaringly obvious and the Fed knows it. Then you have the additional problem that the market melt up has created. The rise to new highs is solely built on confidence in the Fed. When that confidence is lost as the market realises there are actually hard limits to how fast money can be printed (you can't print at the rate of your GDP, 34% is way bad enough) they will fall worse than they did in March and the Fed won't have any powder. That will be game over for the US dollar. Your countries problem is that you can't afford to keep printing at the current rate and at the same time you can't afford to stop printing at the current rate. Its a frightening catch 22 situation. You should have never tried to re-inflate it only makes your problems worse. A hard landing of asset prices would have been a much stronger base for the economy in the long run. The largess that is happening in equity markets with fictional play money is not only an embarrassment to the concept of free markets, capitalism and price discovery, its the wrong solution. In fact its the problem not a solution at all.

[chadwells]

At what point will the Fed be able to raise interest rates? What are the ramifications of keeping them near zero for a long period of time?

[andrewhart]

To the game theory point - should have EVER thought this was a one round game especially in the United States as a world leader...I love the concept though...It miiiight not hopefully be a multi round game for US politicians! :)

[tieyiklunmliu]

It would be hilarious if central banks start loading up on gold stocks.

[DonFather]

Decreased employment means decreased production and decreased profits for businesses. Add that to their mounting costs and I'm worried that there will be hightened inflation in the coming years if everything stays this way, at least for food and necessities.

[smusunuri]

El-Erian does not say clearly about particular thing. But only general stuff.

[miken]

Government approached this as a short term problem and threw money at it. This is a long term problem and money would be better spent on long term recovery after the crash. Maybe a jobs program to give people skills and job experience until they can move into the private sector. I heard a suggestion of changing the Peace Corps to focus on U.S. cities instead of third world countries. Our cities are turning into third world dystopian cities.

[planetcave]

Shut down central banks and bring back local, regional and state-chartered banks - big banks/government is the problem not the solution.

[richm]

Priced in gold (real money), the market has been going down for quite a while. Wake up!

[delphisrichard]

Start the printers, invest in ink and paper