The Insider: Exclusive Insights from Dr Mohamed A. El-Erian
Dr El-Erian was the keynote speaker at the 10th Asian Financial Forum 2017 in Hong Kong where he examined the current economic and political impact on global markets while analysing investment risks and opportunities for the year ahead.
About Dr Dr Mohamed A. El-Erian
Dr Mohamed A. El-Erian is the Chief Economic Advisor at Allianz and Chair of US President Barack Obama’s Global Development Council.
He was the former PIMCO CEO and co-CIO, alongside Bill Gross who co-founded PIMCO. He was also the President and CEO of Harvard Management Company, the entity that manages Harvard’s endowment and related accounts. Since 2007, he has been chair of Microsoft’s Investment Advisory Board.
He took part in an exclusive dialogue with participating global finance and business leaders, moderated by Mr Andrew Sheng, Distinguished Fellow of Asia Global Institute in The University of Hong Kong.
Exclusive Dialogue with Mohamed A. El-Erian
Dr Mohamed A. El-Erian shared his thoughts on the economic doldrum of income disparity and the failure of globalisation.
On Income Disparity & Failure of Globalisation
“You borrow growth from the future – that’s what Central Banks do … … so that the future growth will be much higher, and the growth rate can be managed and distributed.”
He went on to describe how when debt becomes too big, it crushes the system. What happen next is capital wouldn’t come in, resulting in the classic debt over-hang. He cited the example of Latin America and its lost decade in the 1980s, which is an example of a self-inflicted debts and failure of globalisation.
The New Normal
An interactive dialogue led to the current state of the global economy: Low growth, Low Interest Rate – coined as The New Normal.
He pointed that where people are expecting that it is a cyclical phase in the economy. He emphasised:” It’s not a cyclical shock. It’s a structural shock.”
And with the aftermath of The New Normal – the global consensus, especially Central Banks and policy makers are going for “lower for longer.” This is evidential in the interest rate environment, with some countries running at zero or negative interest rates. Many countries have also restructure their economy, preferring to slow the pace of economic growth.
Exclusive Insights on the Modern System
“Modern system cannot run at low speed, and without breaking the system,” Dr Mohamed A. El-Erian exclaimed. He cited the example of Uber and Airbnb that will force the economy to change.
He also added: “The longer the low growth, the higher the anger, and the result might be negative interest rate.” He concluded that the economy is now at a T Junction and that Central Banks can no longer run with The New Normal (Low growth, Low Interest Rates).
“Low growth (will) become high growth, and the current artificial financial stability (will) become genuine financial system.
With an incisive end to the dialogue, he be-warned: ” Else, low growth becomes recession.” A strong and clear message from Dr Mohamed A. El-Erian.
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About Dr Mohamed A. El-Erian
Mohamed A. El-Erian is Chief Economic Advisor at Allianz, the corporate parent of
PIMCO where he formerly served as chief executive and co-chief investment officer. He chairs President Obama’s Global Development Council, is a columnist for Bloomberg View and a contributing editor at the Financial Times.
Dr. El-Erian first joined PIMCO in 1999 and was a senior member of PIMCO’s portfolio management and investment strategy group. He rejoined the company at the end of 2007 after serving for two years as president and CEO of Harvard Management Company, the entity that manages Harvard’s endowment and related accounts. Before coming to PIMCO, Dr. El-Erian was a managing director at Salomon Smith Barney/Citigroup in London and before that, he spent 15 years at the International Monetary Fund in Washington, D.C.
Dr. El-Erian has served on several boards and committees, including the U.S. Treasury Borrowing Advisory Committee, the International Center for Research on Women, the Peterson Institute for International Economics, the IMF’s Committee of Eminent Persons and the New York Fed’ Investor Advisory Committee on Financial Markets. He is currently a board member of the NBER, the Carnegie Endowment for International Peace, New America, and Cambridge in America. Since 2007, he has been chair of Microsoft’s Investment Advisory Board. He holds a master’s degree and doctorate in economics from Oxford University and received his undergraduate degree from Cambridge University. He is an Honorary Fellow of Queens’ College, Cambridge University.