Comments 15

不稳定的经济秩序？

Jan 30, 2017 Mohamed A. El-Erian

拉古娜海滩—发达经济体从全球经济中撤退——英国更是从地区贸易协定中撤退——最近大受关注。眼下，全球经济的基础结构摇摇欲坠，这可能造成影响深远的后果。

不管是可以选择还是不得不尔，世界上绝大部分经济体都是多边体系的一部分，在这个体系中，它们的发达国家同侪——特别是美国和欧洲——拥有大量特权。其中三个特权尤其突出。

首先，由于它们发行世界主要储备货币，发达经济体能用印出来的纸交换其他经济体生产出来的商品和服务。其次，对大部分全球投资者来说，这些经济体的债券几乎是资产组合配置的天然组成部分，因此这些国家的政府预算赤字部分可以用其他国家的储蓄来融资。

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Mohamed A. El-Erian

Writing for PS since 2010
100 Commentaries

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers in 2009, 2010, 2011, and 2012. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

0 Comments on this paragraph, 22 in all 22 Comments on this article

jean nutson Feb 8, 2017

Could be best described as a dangerously destabilizing global order since the economy and financing is intricately woven into all the other sectors of society, Largely due to uncertainties about exactly how future situations are going continue sustaining the bedrock of the system through financing and capitalizing of businesses and Governments .
jagjeet sinha Feb 6, 2017

PUBLIC INFRASTRUCTURE ASSETS - REAL ENLIGHTENMENT
The World always needs Provision of Public Infrastructure Assets - Schools and Hospitals were ordained 2500 years ago.
The Sangha in Asia created The World's Greatest Corporation - 3 billion in Asia benefited from The First Enlightenment
The Church in Europe - 500 years later - took over and led Humanity to its next heights - The Second Enlightenment.
The Anglosphere - c 1500 - took over from The Mediterranean, and vastly expanded the domain of Public Infrastructure Assets.
In expanding the domain, The Anglosphere encompassed The Atlantic and The Pacific besides The Mediterranean.
In this Third Enlightenment - Transportation Telecommunications Urbanization Utilities Defense were added.
In challenging The Third Enlightenment, The Challengers - France Germany Russia Arabia China - are still struggling.
But unless The Alternative promises and creates The Fourth Enlightenment - their struggles so far are in vain.
There are several Planets - with their own Orbits and Moons - that dream of supplanting The Anglosphere.
There will always be One Sun for The Solar System - but there is room for several Suns in The Universe.
The Creator allows numerous Suns - provided Each Sun is capable of providing Real Enlightenment.
Honesty is the First Step in Real Enlightenment - Authority with Accountability.
You cannot travel The Path unless you become The Path.
Hssen Bittayyib Feb 5, 2017

لقد دخل النظام الرأسمالي الدولي مند أوائل السبعينات في أزمة دورية فريدة من نوعها مزجت بين خصائص الكساد و التضخم حتى عرفت باسم أزمة " التضخم ألركودي Stagnation و بسببها أخذ النظام الرأسمالي الدولي يمارس تأثيره على البلاد النامية من خلال ميكانيزمات النظام الاقتصادي الدولي السائد بحيث يضاعف من الآثار السلبية على تجارة هذه البلاد من الصادرات الأولية وتتجلى: - مشكلة تجارة المواد الأولية في مشكلتين أساسيتين
- مشكلة الوصول إلى أسواق الدول المتقدمة.
- مشكلة عدم الاستقرار السعري أو مشكلة معدل التبادل.
ففي الوقت التي كانت تتطلع فيه الدول النامية إلى تحسين أدائها الاقتصادي ومن تم تحسين أوضاعها الاقتصادية و الاجتماعية رغم المشاكل التي كانت تتعرض لها تجارة المواد الأولية، بدأت حكومات الدول الصناعية في تطبيق سياسات انكماشية على مستوى الاقتصاد الكلي للسيطرة على التضخم، لكن جزءا كبيرا من كلفة السيطرة على هذا التضخم و إدخال تغيرات هيكلية في الشمال وقع على عاتق الجنوب من الناحية الفعلية ([7]). فقد كان على الدول النامية أنها تدفع أكثر فأكثر من المبالغ لخدمة ديونها وتستلم فأقل من إيراد صادراتها.
Colin Doyle Feb 5, 2017

The Bretton Woods institions are arguably cracking because of the vast trade surpluses by countries like China and Germany. Keynes proposed the ´bancor' system to make surplus states responsible to buy more from their trading partners. That is still a winning, growth promoting solution. Imposing border taxes will cost jobs and promote conflict.
B Wilds Feb 1, 2017

One of the most important things to remember about the global currency system is that by design it is fairly closed. This means relative value tends to merely shift back and forth between the four major currencies that dominate the system, this is the main reason currencies appear more stable than they really are.

It only becomes a real problem for governments to deceive us as to the real value of our currency when this bond is broken. Unstable currency markets can be a precursor to massive shifts in value and a sudden drop in confidence. It is logical to think that in such a situation insiders would be the big winners. More on this subject in the article below.

http://brucewilds.blogspot.com/2016/08/currency-games-scream-major-risk.html
Mauricio Duran-Loriga Feb 1, 2017

Butterflies have already flapped.. future chaos coming

One of the main consequences of WW I was that Great Britain lost its influence in the Balkans, its military dominance, and therefore was no longer able to guarantee international trade flows.

From 1918 till 1931 the Sterling entered a period of growing mistrust from other countries, and British reserves sank to the point the Bank of England decided to abandon the gold standard.

That marked the start of the transition from the sterling to the dollar as reserve currency. Between 1931 and 1944 Bretton Woods agreement, the economic order was permanently unstable on a worldwide basis. Trade wars, currency wars, protectionism, isolationism, you name it.

Recent military advantage achieved both by Russia and China over the US are making the latter unable to guarantee international trade flows. In plain sight, although mischievously unreported by Western media outlets.

This is starting to cause the refusal from eg China to continue buying and bearing US debt as reserves. Once the refusal of bearing US debt and the mistrust in the US dollar becomes widespread, the FED will allow a great financial panic as the excuse to reshape world monetary system, where the dollar will switch its reserve currency status in favor of the SDR, or Bitcoin, or doo-doo-coin, you name it.

Ever since Greenspan established ultra loose monetary policy, the US economy has been a phantom economy, where the sole policy has been to prop-up all asset prices, specially financial assets.

As the phantom economy collapses under the fiat dollar regime, the corrupt elites will launch a phantom currency as a last effort to avoid the unavoidable.

Why "phantom" currency? Just because it will be the currency of no country (no army), with no backing asset whatsoever, no Treasury, no central bank (no economic mandate then), could even be a digital currency with no printed notes...

Breathe in. Think how much confidence would Y O U personally credit to that entelechy.

Countries will jump into frantic trade wars, currency wars, isolationism, protectionism et al, mirroring 1930's, mirroring circa 5000 years of monetary foolishness.

The economic instability will be several orders of magnitude greater than that of 1930's, causing widespread pain and unrest. Some countries will undergo massive deflationary shocks, while others will brace for inflationary depressions.

Be it by a world war (an outcome that I very much doubt) or be it by the catastrophic crumbling of overindebted Western economies (USA and Europe) Chinese politicians (after a snail's pace seemingly never ending process) will reach a Napoleon moment and back its currency (at least partially) with the gold they have been buying for the last decade as if there was no tomorrow, depleting Western coffers.

If China decides then that it wants the Yuan to become the world's reserve currency, it will have to effectively guarantee international trade flows. An outcome that I feel Chinese politicians will not even take into consideration.

Or else, China can officially sail along with the SDR as the phantom reserve currency, while by backing its currency with a hard asset, allow foreign central banks decide which currency they want to hold as reserves in their balance sheets. The Yuan becoming then de facto world's reserve currency without China burdening itself with the duty of policing world international trade flows.

Russia's S-500 cutting edge air defense system and undetectable China's Dong Feng 41 aircraft carrier killer missile are the butterfly flapping that will throw the world as you know it into chaotic sway until the dust settles.

The former ideas are my current take on the likely path of events, whatever the timing.

With chaos, alas, everything but certainty is guaranteed.
slightly optimistic Jan 31, 2017

Needed reforms? Regardless of what new rules are agreed, many states refuse inspection of their finances by cross-border organisations they are members of. Audit can be threatened with treason for reporting accurate figures outwith the sovereign State.
markets aurelius Jan 31, 2017

Love the "Laguna Beach" at the opening of this essay. Sitting there pondering the inequity and unstable nature of the world as the sun rises on lovely Laguna Beach.

It's worthwhile pointing out that the "enormous privileges" enjoyed by the advanced economies are completely unraveling because of the corruption of banking, finance, central banking and government in these privileged economies.

First, the currency markets are known to be rigged and continue to be tilted to benefit those at the core of the system (banks). The little slaps on the wrists of various banks -- trivial fines for rigging markets -- are meant to show that this is being addressed, but we all know government regulatory structures, particularly in the U.S., are both unwilling and unable to do effective law enforcement, so the corruption is allowed and encouraged to persist. And it almost surely will continue. Those "bits of paper" -- i.e., developed-market currencies -- are nothing more than the vehicles and accounting tools for outright theft. Oh, and because of this corruption, capital is massively misallocated -- bad signals from interest-rate, FX and capital markets leads to bad investment. What you end up with is endless leveraging of corporate balance sheets to support share buybacks. Guess who benefits most? Guess who will be long gone when the tab has to be paid?

This misallocation of capital mostly facilitates the accumulation of an ever-growing share of the world's wealth in the hands of a truly small minority of inside players in these markets, who have managed to position their operators throughout the system to ensure this continues. Is it any wonder capex is down in the midst of this massive tunneling of wealth to a tiny elite. Or that productivity is collapsing? Honest actors at reputable firms outside banking and finance wouldn't dare allow themselves to be in a position of having to rely on or trust these people, because they know they will be skinned alive in the process. And, because every avenue of redress has been corrupted, there is nothing they can do about it. Hence their desire to hold enormous amounts of cash and not invest it in capital that would improve productivity.

Second, the markets in which those "quasi-automatic component(s) of portfolio allocations" -- i.e., government bonds -- trade also are corrupt. A lot of those pieces of paper have been taken from investors and monetized by the various global QE programs, which supercharged the wealth transfer from the tax payers supporting those governments issuing those pieces of paper to the global oligarchy that gathers in Davos every year at this time for its ritual hand-wringing about the decline of civilization.

Lastly, the "final key advantage" in governance of these post-WW2 supranational banking organizations are led by the same bad actors who completely destroyed the underpinnings of the interest-rate, FX and banking markets. One of them even was convicted in France of malfeasance, and yet retains her office! These people are recruited from the same banks and law firms that have so profoundly corrupted markets. Is it any wonder these institutions are untrustworthy and are failing as well?

We live in a time of profound corruption. This destroys the trust in institutions -- banks, courts, governments -- needed for markets to function. This never self-corrects: History has shown bad actors never willingly relinquish control over the wealth-generating apparatus once it has be seized and control has been taken. And the folks with the control of the levers of power all have something on each other, which is what maintains the system's inertia. The resolution of this corruption will be, as it always is, painful and horrid.
Michael Public Jan 31, 2017

Another excellent article from Mohamed, which aims towards clear and honest understanding of the current problems even if solving it will cause short term issues at his employer. More articles like this from the other authors in this forum please.
Michael Public Jan 31, 2017

Part of what is happening also arises from fundamentals.

In 1950 there were only a few (white) nations who possessed modern industry, education and government. Today, the Chinese economy, the Indian programming schools and proper government happening in places like Namibia mean so called West (and Japan) no longer have a monopoly on being the only developed nations. Their comparative advantage has been eroded which means either they must increase productivity, work smarter or or their lifestyles will become more in line with those outside the West.
Jose araujo Jan 30, 2017

How does El-Erian explain the scandinavian success, or Korea...

He again shows he has no clue on what is happening in the world or in the development of economies.

If there are distorted asset prices, where is the arbitrage? If central banks are issuing to much money, where is the inflation?
- Jose araujo Feb 1, 2017
  
  @Mauricio, those examples were just to contradict El-Erian. IMHO development comes from good governance, sound industrial, education and innovation policies, and the development of internal Demand. Small countries are not doomed.
  
  Regarding your point on inflation, I think you are missing one point which is the change on the demand for liquidity. If US bonds and the Dollar loses part of its appeal has a reserve of value (namely for foreign investors) than suddenly your demand of liquidity will drop, and inflation will be triggered via the size of the monetary base.
  
  If the money applied by China in the US economy starts returning home, then you will have inflation.
- Mauricio Duran-Loriga Jan 31, 2017
  
  @ Jose
  
  Scandinavian success? education firmly directed towards common society wellness. Norway has biggest oil output per capita worldwide, Sweden did an absolute state of the art resolution of its banking crisis...
  
  Korean success? Korea 2000 equals Japan 1950. They are replicating the Japanese boom model. Wait for the bust when international capital flows reverse course.
  
  Inflation happens by disproportionately overprinting (we are very short at that), energy commodities supply scarcity (currently unprecedented oil glut), or labor force scarcity (China and India provide endless cheap workforce). None of them are present as of today, and not likely to be present in the foreseable future.
  
  Monetary transmission mechanism stalled dramatically since 2008. The banking sector sold securities to the central banks, and the proceeds were deposited at the central banks accounts via overnight repo. Even when overnight repo yield negative interests, in what constitutes an unprecedented cost of carrying cash forward.
- Jose araujo Jan 31, 2017
  
  Michael, you know perfectly well that it doesn't work like that. Monetary transmission mechanism isn't direct, so for that to be happening we would have to have massive bank loans to traders and to agents buying stocks.
  
  I purpose an alternative which is the blue chip stocks being a close substitute for US Bonds and money, and that's IMHO what's driving this stocks up.
  
  We have no arbitrage going, no IPO's wave, etc. So there are no signs of market exuberance.
- Michael Public Jan 31, 2017
  
  The central banks don't issue the money to consumers so no inflation. Instead, it goes to guys like the author with billions in AUM. This drives up the asset prices, which is really just another type of inflation.
M M Jan 30, 2017

The author has made many nuiances in this article and I have some news for him, sometimes it takes a fire to put down another one. A new financial system shall emerge and much sooner than any economists can predict, and it won't emerge out of Davos, or Laguna Beach, or W. DC or so on....
- M M Jan 31, 2017
  
  Mike, the answer to your question falls under the category of ...so on...above.
- Michael Public Jan 31, 2017
  
  Where will arise from? Hopefully not from Trump Towers...
Paul Daley Jan 30, 2017

The problem here is that the "enormous privileges" Mohammed talks about can produce enormous capital movements, equally large exchange rate movements and huge deficits on current account, if those privileges are not handled responsibly. And, in fact, the responsibilities that come with handling world currencies haven't been handled well in either Britain or the United States. Mohammed asserts that governments have dropped the ball, but that is only because of earlier bad decisions to restrict central bank interventions to asset markets. Had the FED the power to lend against earned income when needed via government channels like the IRS withholding system, its interventions would entirely emulate the effects of any government's fiscal policy without distorting asset prices or creating the financial flows and financial imbalances that the world has struggled to cope with.

So, I would say that Mohammed is looking in the wrong place for a solution. No one is going to help the United States and Britain preserve "an enormous privilege," if it is one, and democratic majorities in the the United States and Britain are not going to work to preserve that "privilege," if they see it as a curse. Change will have to come and, hopefully, it will be the smallest change compatible with resolution of the problem. To my eye, that means developing a second channel for central bank action that it could use to stimulate the economy without distorting asset prices, even in the absence of government action.
eusebio manuel Jan 30, 2017

Free trade is good when it is practiced on an equal footing with nations of similar democratic values and environmental and labor laws
- Michael Public Jan 31, 2017
  
  Yes. otherwise it just becomes a race to the bottom. Children can always sew Nike sneakers cheaper than adults...
Jerry F. Hough Jan 30, 2017

The financial community pushed a policy that in the US tripled the marked since 2009 and has produced stagnant wages for the bottom 90%. Europe is the same as the SDs became right-wing and are being replaced by nationalistss.

The financial community needs to learn that we can have other Revolutions of 1848 and that it must accept democracy. Even now El-Erian does not even mention in his discussion of mistakes.

The problem, of course, is that El-Erian may be right on the point that he does make. By forcing those like Trump to attack the foreign economic system to change things, it may produce a recession. If so, the support for the nationalists in Europe will soar as it did in the 1930s.