Mohamed El-Erian, the head of PIMCO, recently delivered this lecture at the St. Louis Fed. Here are two passages from his conclusion:
“After diffusing a material threat of a global depression, central banks in the advanced economies did a good job in maintaining a certain status quo in the midst of too much debt, too little growth, too much inequality, and a historic global economic realignment. Critically, they succeeded in their overwhelming priority of avoiding an economic depression.”
“Where the global economy goes from here will depend less on the actions of central banks and more on whether others, including other government agencies and private sector participants that have the ability to act but lack sufficient willingness to do so, finally step up to the plate. Only with the supportive actions of others can central banks pivot – away from using the unsustainable to sustain the unsustainable, and toward a better equilibrium for them and for the global economy (i.e., sustainability).”
He believes it is possible that our country’s leaders can put us on a ‘sustainable fiscal trajectory’ of manageable debt and modest economic prosperity. It is refreshing to read some guarded optimism from an informed and honest scholar such as Dr. El-Erian.