From every angle, the extremity of this state of affairs – in which those with access to credit do not need it, and those who do cannot get it – is highly problematic. If left unattended, it leads to a gradual, and then accelerated, renewed deleveraging of the economic system, with the highest first-round costs – a longer unemployment and growth crisis – borne disproportionately by those least able to suffer them. In the next round, as the system slowly implodes, even those with healthy balance sheets would be impacted, accelerating their disengagement from a deleveraging world economy.
All of this slows social mobility, tears already-stretched safety nets, worsens inequality, and accentuates genuine concerns about the functioning and sustainability of today’s global economic system.
Read it at Project Syndicate
Repairing the Global Plumbingby Mohamed A. El-Erian
He gets what's wrong but still doesn't get the crucial distinction between currency issuer and currency users in offering solutions. Paul McCulley, where are you when we need to be advising El-Erian and Gross that they are in over their heads on these issues.
2 comments:
Tom,
McCulley seems to have gone "Grizzly Adams" as he has grown his hair long and grew a big beard and let his hair go gray after leaving PIMCO.
This was similar to Neel Kashkari who when he left Paulson's Treasury, he moved up into the mountains of Northern California and built a log cabin and just got away from it.... now Kashkari shaved and went to PIMCO. Sort of an inverse McCulley.
I dont think these guys have any real answers.
They yes are good at pointing out the issues but then come up short of proposing solutions, the solutions seem to consistently elude them.
Resp,
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