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Mohamed A. El-Erian

Mohamed A. El-Erian

Chief Economic Adviser, Allianz. Author of NYT bestsellers "When Markets Collide" and “The Only Game in Town.”

Articles by Mohamed A. El-Erian

The COVID Silver Linings Playbook

4 days ago

The old adage that every crisis represents an opportunity is certainly true in the case of COVID-19. Now that the pandemic has lasted longer and wrought more destruction than many initially anticipated, it is all the more important that policymakers seize on the positive trends it has incidentally set in motion.

CHIPPING NORTON – The human tragedies and massive economic disruptions caused by COVID-19 have rightly commanded the attention of the public and policymakers for more than six months, and should continue to do so. But in managing the immediate crisis, we must not lose sight of the opportunities. The oft-quoted line about not letting a crisis go to waste has rarely been more relevant.

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Reading the Dollar Doldrums

August 11, 2020

A sharp decline in the relative value of the dollar this year has been met with cheers from those hoping for a short-term boost to the US economy, and with hand-wringing by those worried about the currency’s global standing. But while both views reflect underlying truths, neither tells the whole story.

LAGUNA BEACH – A near-10% drop in the value of the US dollar since its March high has given rise to two distinct narratives. The first takes a short-term perspective, focusing on how a depreciation could benefit the US economy and markets; the second takes the long view, fretting over the dollar’s fragile status as the world’s reserve currency. Both narratives contain some truth, but not enough to justify the emerging

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Is a China-US “Rivalry Partnership” Possible?

July 21, 2020

One must hope that China and the United States will eventually arrive at an understanding that great-power competition does not preclude cooperation to resolve major global challenges. The main challenge will be to avoid a damaging derailment during what is likely to be a long and bumpy journey toward this destination.

LAGUNA BEACH – Not a day seems to pass without further evidence of the mounting economic tensions between China and the United States, the world’s two largest economies. This growing antagonism will have a bigger immediate impact on China than on the US, as bilateral decoupling fuels a broader ongoing process of deglobalization. And the negative spillover effects for a subset of other countries – which

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Post-Pandemic Economic Leadership Begins in America

June 23, 2020

No matter how big an economy is, it is heavily influenced by US economic growth, financial stability, and policy spillovers. With the COVID-19 crisis, the evolution of the global economic-policy paradigm has become an urgent matter, and the rest of the world must not suffer the consequences of a US that does too little, too late.

LAGUNA BEACH – What does the future hold for the global economy? As it stands, the most likely answer, unfortunately, is lower growth, worsening inequality, distorted markets, and rising financial risks. But this outcome is not preordained. With timely changes to the policy paradigm, policymakers can lay the groundwork for a more dynamic, inclusive, and resilient economy.

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Saving the Developing World from COVID-19

April 15, 2020

The COVID-19 pandemic could devastate parts of the developing world. But with a concerted, cooperative, and holistic approach, the international community can avoid a large-scale humanitarian tragedy in vulnerable regions – and protect the rest of the world from destabilizing blowback.

LAGUNA BEACH – Declining coronavirus infection rates and plans to begin easing lockdown measures in some parts of the developed world have provided a ray of hope after weeks of unrelenting gloom. But, for many developing countries, the crisis may barely have begun, and the human toll of a major COVID-19 outbreak would be orders of magnitude larger than in any advanced economy. With the United States having recently recorded more than

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The Race Between Economics and COVID-19

March 26, 2020

For years, the economics profession has suffered from a stubborn reluctance to adopt a more multidisciplinary approach. But now that the COVID-19 pandemic is transforming economic life the world over, the profession has no choice but to leave its comfort zone.

LAGUNA BEACH – With the coronavirus devastating one economy after another, the economics profession – and thus the analytical underpinnings for sound policymaking and crisis management – is having to play catch-up. Of particular concern now are the economics of viral contagion, of fear, and of “circuit breakers.” The more that economic thinking advances to meet changing realities, the better will be the analysis that informs the policy response.

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Adapting to a Fast-Forward World

February 18, 2020

The world is going through a period of accelerating change, as four secular developments illustrate. Firms and governments must make timely adjustments, not only to their business models and operational approaches, but also to both their tactical and strategic mindsets.

LONDON – Firms and governments must increasingly internalize the possibility – indeed, I would argue, the overwhelming probability – of an acceleration of four secular developments that influence what business and political leaders do and how they do it. Decision-makers should think of these trends as waves, which, especially if they occur simultaneously, could feel like a tsunami for those who fail to adapt their thinking and practices in a timely manner.

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Is Trump’s Iran Strategy Working?

January 16, 2020

The Trump administration’s unilateral approach to trade and foreign adversaries like Iran is reminiscent of the Reagan administration’s strategy against the Soviet Union. Both game theory and the historical record show that aggressive "non-cooperation" can be effective, but only if it is used carefully.

NEWPORT BEACH – US President Donald Trump’s authorization of the targeted killing of Iranian Quds Force commander Qassem Suleimani is, in many ways, similar to his administration’s approach to trade. In both cases, the administration has demonstrated a willingness to surprise by unilaterally leveraging US strength in the pursuit of long-term outcomes, despite considerable short-term risks and without wide consultations. As

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Central Banks Face a Year of Mounting Challenges

January 9, 2020

After committing to monetary-policy normalization in 2018, the US Federal Reserve and the European Central Bank spent the past year reversing course with further interest-rate cuts and liquidity injections. Yet, given mounting medium-term uncertainties, central bankers cannot assume calm conditions in 2020.

SEATTLE – After a year that involved one of the biggest U-turns in recent monetary-policy history, central banks are now hoping for peace and quiet in 2020. This is particularly true for the European Central Bank and the US Federal Reserve, the world’s two most powerful monetary institutions. But the realization of peace and quiet is increasingly out of their direct control; and their hopes would easily be dashed if markets

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The Global Economy’s Luck May Run Out

December 16, 2019

Compared to this time last year, the prospects for markets and the global economy heading into 2020 are surprisingly bright. But look further ahead and you will encounter deep uncertainty, suggesting that policymakers around the world would do well to implement inclusive-growth policies sooner rather than later.

ABU DHABI – This being December, my natural inclination is to review the past year’s economic and financial developments to help policymakers and investors anticipate what might be coming in 2020. This year is ending on a relatively positive note, especially when compared to the same time last year. There is hope of a global growth pickup, trade tensions have lessened, and central banks have reaffirmed that

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How the IMF Can Battle Gradual Irrelevance

November 19, 2019

These days, the International Monetary Fund’s policy recommendations – especially as they pertain to the advanced economies – have little impact. Although this is partly a consequence of more inward-looking national politics in richer countries, the Fund itself is not blameless.

NEW YORK – This year, I didn’t attend the October annual meetings of the International Monetary Fund and the World Bank in Washington, DC. Instead, I paid close attention to reports of the gathering and talked to people who were there whom I respect. What emerged is depressing for the wellbeing of the global economy. In particular, the prospect of continued weakness and fragmentation pressures will compound the challenges to the credibility

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Lagarde’s Edge Is Europe’s Opportunity

September 26, 2019

The eurozone economy urgently needs a more comprehensive pro-growth policy approach at both the national and regional levels, or else a second lost decade will be all but assured. Hope for the continent now rests squarely on the shoulders of Christine Lagarde, the highly accomplished incoming president of the European Central Bank.

LONDON – A highly regarded doctor assumes the care of a chronically impaired patient who is growing weaker and more vulnerable. The patient’s longstanding treatment is not only becoming less effective; now it is also introducing harmful side effects. A better approach exists, but it is not available at the new doctor’s hospital. And in the facilities where it is available, the doctors are

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Who Lost Argentina, Again?

September 10, 2019

With a presidential election approaching next month, Argentina is once again on the cusp of a crisis that could end in depression and default, owing to mistakes made by everyone involved. Should President Mauricio Macri secure another term, he must waste no time in reversing the country’s economic deterioration.

CERNOBBIO – Investors and economic observers have begun to ask the same question that I posed in an article published 18 years ago: “Who lost Argentina?” In late 2001, the country was in the grips of an intensifying blame game, and would soon default on its debt obligations, fall into a deep recession, and suffer a lasting blow to its international credibility. This time around, many of the same contenders

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Trade Disruption Is a Symptom of a Deeper Malaise

August 9, 2019

Trade tensions are a symptom rather than a cause of the world’s underlying economic and financial malaise. Moreover, an excessive focus on trade could deflect policymakers’ attention from other measures needed to ensure faster and more inclusive growth in a genuinely stable financial environment.

NEW YORK – It’s only a matter of time until the escalating tensions between China and the United States prompt many more economists to warn of an impending global economic recession coupled with financial instability. On August 5, Bloomberg News said that the yield curve, a closely watched market metric, “Blares Loudest US Recession Warning Since 2007.” And Larry Summers, a former US Treasury Secretary who was

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Are Central Banks Losing Their Big Bet?

July 19, 2019

Following the 2008 global financial crisis, central banks bet that greater activism on the part of other policymakers would be their salvation, helping them to normalize their operations. But that activism never came, and central bankers are now facing a lose-lose proposition.

ZURICH – In recent years, central banks have made a large policy wager. They bet that the protracted use of unconventional and experimental measures would provide an effective bridge to more comprehensive measures that would generate high inclusive growth and minimize the risk of financial instability. But central banks have repeatedly had to double down, in the process becoming increasingly aware of the growing risks to their

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America’s Unusual Recovery is Now Also its Longest

June 11, 2019

After overcoming significant political and economic headwinds during the past decade, the US economy now appears to have undergone its longest sustained expansion in history. Yet, behind the data showing historically low unemployment and long-awaited wage growth lie vulnerabilities that cannot be ignored.

LONDON – Data released over the next few months will show that the current US economic expansion is the longest on record. But while the United States continues to outperform other advanced economies, this success has yet to dispel many Americans’ persistent sense of economic insecurity and frustration; nor does it alleviate concerns about the lack of policy space to respond to the next

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How Inflation Could Return

May 22, 2019

After years of low inflation, investors and policymakers have settled into a cyclical mindset that assumes advanced economies are simply suffering from insufficient aggregate demand. But they are ignoring structural factors at their peril.

NEW YORK – Debates about inflation in advanced economies have changed remarkably over the past decades. Setting aside (mis)measurement issues, concerns about debilitatingly high inflation and the excessive power of bond markets are long gone, and the worry now is that excessively low inflation may hamper growth.
Europe’s Only Decision

Norbert Kamil Kowaczek/EyeEm/Getty Images

The

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Why Economics Must Get Broader Before It Gets Better

March 8, 2019

Even as the public’s skepticism toward their profession has grown, economists have continued to ignore increasingly obvious flaws in their analytical frameworks. A discipline long dominated by “high priests” must now adopt a more open mindset, or risk becoming irrelevant.

NEW YORK – The economics profession took a beating after most of its leading practitioners failed to predict the 2008 global financial crisis, and it has been struggling to recover ever since. Not only were the years following the crash marked by unusually low, unequal growth; now we are witnessing a growing list of economic and financial phenomena that economists cannot readily explain.

Jose Luis Pelaez Inc/Getty Images

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The Dialectic of Global Trade Policy

February 20, 2019

It is often said that with risk comes opportunity. What initially was viewed as an unfortunate US shift to protectionism may in fact have opened a window to improve the functioning of the global economy and world trade.

MUNICH – There is a subtle yet important change occurring in how political leaders think about international trade, including how to remedy long-standing problems. It results from a key distinction between the “what” of trade (where there is relatively broad-based agreement among countries) and the “how” (where differences have tended to undermine important relationships, whether transatlantic or between China and the world’s advanced countries). As a result, there is some room for greater optimism than is

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Reimagining Davos

January 30, 2019

At the recent World Economic Forum annual meeting in Davos, participants made the same mistake they always do: extrapolating from the recent past rather than looking genuinely into the future. Three key changes would enable the event to fulfill its considerable potential.

NEW YORK – I do not attend the annual meeting of the World Economic Forum in Davos. But my sense is that, as in previous years, this year’s participants ended up extrapolating more from the recent past than genuinely looking into the future for pivots and tipping points. This was true both at the macro level and in terms of the key individual issues that attracted the most attention, according to multiple media reports (and the media are extremely well

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Overestimating the EU Economy

December 18, 2018

If the EU were a soccer team, it would not lose games for lack of a game plan or due to inadequate capacity. The problem is that the team as a whole is not playing cohesively, and all of the top players are struggling individually, owing to messy problems at home.

ABU DHABI – The European Commission, the International Monetary Fund, and the OECD predict that, on average, the European Union’s economy will grow by 1.9% next year, a rate that is broadly consistent with the average of 2% expected for this year. But the picture this paints may prove to be overly optimistic, not only because the growth rate itself is likely to disappoint, but also because there is significant downward pressure on the EU’s growth potential beyond 2019

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Brexit and the Global Economy

November 22, 2018

The United Kingdom’s divorce negotiations with the European Union have dragged on through multiple déjà vu moments, and the consensus among experts is that the economic fallout will be felt far more acutely in Britain than in the EU. But policymakers worldwide would benefit from watching the process closely.

WASHINGTON, DC – The singular issue of Brexit has consumed the United Kingdom for two and a half years. The “if,” “how,” and “when” of the country’s withdrawal from the European Union, after decades of membership, has understandably dominated news coverage, and sidelined almost every other policy debate. Lost in the mix, for example, has been any serious discussion of how the UK should boost productivity and competitiveness

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Why Italy is the Latest to Question Policy Orthodoxy

October 26, 2018

The budget standoff between Italy’s anti-establishment government and the European Commission has rattled markets and brought back memories of the eurozone sovereign debt crisis. EU officials should remain open to unconventional economic-policy approaches, and the Italians should show that they are serious about long-term reforms.

PARIS – Global markets, policymakers, and risk managers are watching the budget skirmish between Italy’s government and the European Commission closely. The episode highlights a growing tendency among governments in both advanced and emerging economies to question economic policy orthodoxy. As this trend intensifies, economists and market participants need to think harder about, and communicate much better, the

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Managing the Global Factor Better

September 27, 2018

The IMF is the body best suited to serve as a trusted adviser and an effective conductor of the global policy orchestra. If it is to fulfill that role, however, it must strengthen its credibility as a responsive and effective leader. That means listening to its members, then guiding them toward more harmonious policies.

SEATTLE – Imagine a world in which the annual meetings of the International Monetary Fund were more client-driven. Ahead of the gathering – this year’s will take place in Indonesia in October – the IMF would solicit from its 189 member countries three key policy issues on which to focus, not only in official discussions, but also in the numerous seminars that are held in parallel. The result would be an agenda that responded

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Can Turkey Rewrite the Crisis-Management Rules?

August 16, 2018

Rather than sticking with the approach taken by numerous other countries – including Argentina earlier this year – by raising interest rates and seeking some form of IMF support, Turkey has shunned both in a very public manner. Unless it changes course, the government risks much wider damage – and not just in Turkey.

LAGUNA BEACH – Whether by accident or design, Turkey is trying to rewrite the chapter on crisis management in the emerging-market playbook. Rather than opting for interest-rate hikes and an external funding anchor to support domestic policy adjustments, the government has adopted a mix of less direct and more partial measures – and this at a time when Turkey is in the midst of an escalating tariff tit-for-tat

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A “Reagan Moment” for International Trade?

July 9, 2018

In the 1980s, US President Ronald Reagan initiated a military spending race with the Soviet Union that ended up altering the global balance of power in ways that affected many countries worldwide. Could Donald Trump’s tariff race with China lead to a similar outcome?

NEW YORK – The latest round of tit-for-tat tariffs by the United States and China has intensified the ongoing global debate about whether the world is facing a mere trade skirmish or heading rapidly toward a full-blown trade war. But what is really at stake may be even more fundamental. Either accidentally or by design, US President Donald Trump’s administration may have paved the way for a “Reagan moment” for the international trade regime.

Drew

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Four Lessons from Egypt’s World Cup Experience

June 28, 2018

Egypt’s qualification for the World Cup showed that the country is capable of competing at the highest international level. Rather than treating its loss as a failure, Egyptians should view it as a learning experience, one that can guide the country as it seeks to achieve its full potential.

LAGUNA BEACH – Egypt’s national soccer team rode to Russia for their first World Cup finals in 28 years on a wave of lofty expectations and potent fan enthusiasm. They are now returning home having lost all of their games – no small disappointment for a country that takes both soccer and national pride very seriously. Now, a blame game has erupted from which no one seems to be spared.

Barcroft Media

Thomas

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Why Markets and Political Scientists Disagree on the G7

June 19, 2018

Contrary to the warnings of some political analysts, even after the recent debacle in Canada, the G7 can and will play a role – albeit a less important one – on the global stage. But that does not mean that the summit’s failure was cost-free.

WASHINGTON, DC – To say that this month’s summit of G7 leaders in Canada was an unusual one would be an understatement. A traditionally friendly and predictable gathering of like-minded countries was marred by finger-pointing and disagreement, resulting in an inability to achieve consensus on a final communiqué. But, while political analysts were quick to declare the end of the G7’s coherence, integrity, and usefulness, markets were unfazed. In fact, the longer-term outcome may well

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Managing the Risks of a Rising Dollar

May 14, 2018

Some may view the US dollar’s appreciation as consistent with a longer-term rebalancing of the global economy. But, as Argentina’s recent request for IMF financing starkly demonstrates, a sharp and sudden dollar appreciation risks unbalancing things elsewhere.
NEWPORT BEACH – Argentinian President Mauricio Macri’s government has asked the International Monetary Fund for a loan that it hopes can stem a peso rout that has driven up interest rates, will slow the economy, and threatens the reform program. This reversal of fortune for the economy partly, though far from fully, reflects broader pressure created by the US dollar’s recent appreciation – a process that is set to accelerate, because both monetary-policy and growth differentials are now favoring the United States.

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The Global Trade Game

April 6, 2018

History is less likely than game theory to provide useful insights into where the latest trade dispute between the US and China may be heading. The question, ultimately, is whether new tariffs will eventually lead to a more cooperative game, or to a competitive one in which everyone loses.
CAMBRIDGE – The trade confrontation between the United States and China is heating up. After firing an opening salvo of steep tariffs on steel and aluminum, the US administration has released a plan for a 25% tariff on 1,333 Chinese imports – worth about $50 billion last year – to punish China for what it views as decades of intellectual property theft. China has fired back with a plan to slap 25% levies on a range of US goods, also worth about $50 billion. In response to what he labels

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