Thursday, February 11, 2016

The Risk Factor

Mohamed A. El-Erian

Will United States Treasury bills retain their gold-plated status? What would a more freely floating Chinese renminbi mean for the world economy? Is the eurozone a good bet to survive and grow? Can emerging-market countries somehow insulate themselves, at long last, from the destructive effects of volatile global capital flows?

In the early 1990’s, Bill Clinton’s adviser and campaign manager, James Carville, quipped that if he could be reincarnated, he would come back to life not as a king or a pope, but as the bond market, “which can intimidate everyone.” Indeed, financial markets now seem to have governments more at their mercy than ever before, as Europe’s sovereign-deb

But financial markets are neither evil and dictatorial nor beneficent and democratic. They need to be understood, not vilified. And few people have been more successful at comprehending financial markets – both theoretically and practically – than Mohamed A. El-Erian, CEO and co-CIO of PIMCO, one of the world’s largest investment companies, with approximately $1.2 trillion of assets under management.

El-Erian, whose career has taken him from the International Monetary Fund to managing Harvard University’s endowment, is one of the few financiers whose words consistently move markets. Unlike most financiers, he is willing and able not only to explain the arcane workings of bond and other asset markets, but also to synthesize the fundamental factors – economic policies, growth prospects, or sector-specific trends – that move them. His description of the post-financial-crisis global economy as a “new normal” of slow growth and high unemployment for the foreseeable future encapsulated and ratified what many feared but few would say.

Every month in The Risk Factor, written exclusively for Project Syndicate, Mohamed El-Erian combines the highest professional and managerial experience with his proven analytical talent to provide an essential guide to key economic developments that no ordinary pundit or academic observer can match.

Read More Read Less

Commentaries available in 12 Languages

Recent commentaries

Calculator  macro
Economics 23

The End of the New Normal?

Just when the notion that Western economies are settling into a “new normal” of low growth gained mainstream acceptance, doubts about its continued relevance have begun to emerge. Instead, the world m… read more

Great Wall of China
Economics 18

The Chinese Economy’s Great Wall

The renminbi's recent decline, which has thrown Chinese stock markets into turmoil and drove the government to suspend trading twice last week, highlights a major challenge facing the country: how to … read more

Graduation ceremony.
Education 41

America’s Education Bubble

If not handled carefully, the pursuit of an important social goal can sometimes have serious economic and financial consequences. America’s effort to expand access to student loans – a fundamentally g… read more

12 pages