Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

U.S. Going into Double Dip Recession, Pimco's El-Erian Calls U.S. Economy 'Terrifying'

Economics / Double Dip Recession Nov 23, 2011 - 12:25 AM GMT

By: Bloomberg

Economics

Best Financial Markets Analysis ArticleONLY ON BLOOMBERG TELEVISION: Pacific Investment Management Co.'s Chief Executive Officer Mohamed A. El-Erian told Bloomberg TV's Betty Liu and Dominic Chu this morning that U.S. economic conditions are "terrifying" as the nation struggles to recover from recession. El-Erian also said the odds of the U.S. returning to recession are as high as 50%.


On the U.S. going into a double-dip recession:

"I am worried. We've had two bits of unfavorable news in the last 24 hours. One you reported this morning, which is that we have less economic momentum than we thought we had - 2% growth as opposed to 2.5%. The second is that yesterday we had no policy momentum. We're worried about the concept of stall speed, that 2% growth may not be enough for an economy that still has to de-lever. We put the chance of a recession at one-third to one half, which is really high given initial conditions."

On policy makers in Washington, D.C.:

"[Policy makers] are totally off the track. It's not a failure to agree on medium-term fiscal reforms, it's also a failure to give air cover for other things that need to be done -- in housing, in the labor markets, in credit. We have no policy momentum. Let me tell you what I find most terrifying: we're having this discussion about a risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time when the fiscal deficit is 9%, a time when interest rates are at zero."

On what factors could be driving a double-dip recession:

"This is a fragile economy. It doesn't mean we don't have strength, we certainly do - the corporate sectors are as strong as we have ever seen it in terms of balance sheets. We have incredible entrepreneurial spirit. But we're facing all these structural headwinds, and the big concern is the possibility of us being tipped over by Europe. Things in Europe, as you mentioned a few minutes ago, are getting worse, not better."

On solutions in the U.S.:

"Unlike Europe, the U.S. doesn't face an engineering problem - it faces a political problem. The solution is not an engineering nightmare. You can actually put it on paper and get it done. But it's been a political nightmare. What we'd like to see is the political class to come together and agree on the steps that need to be taken." "As you have heard us say over and over again, Bill Gross has been saying it, I've been saying it, other PIMCO colleagues have been saying it -- it's structural in nature. We need medium term structural reforms to increase the growth potential and job creation potential of this economy. We can do it. This is different from Europe. Europe has both a political problem and an engineering problem. Our problems are small relative to Europe, but if we wait they will become larger."

On the S&P's statement that US rating is unaffected by the supercommittee:

"That is what S&P is telling us. We have to remember that S&P still has us on negative outlook which means unless things improve over the next three years, there could well be another downgrade. The ratings agencies in general are in a very tough position. We talked about at PIMCO's investment committee yesterday. They've been beaten up a lot, both for what they have done and for mistakes that disrupted the markets for a while. It is hard to be a ratings agency today. You have to read these comments in that context. They are under fire."

On Joseph Stiglitz's comments that austerity measures make the crisis worse:

"I think [Stiglitz] is right, in the sense that the muddled middle, where Europe has been, is no longer sustainable. The crisis that started in the outer periphery, Greece, not only has shifted to the inner periphery and the outer core, Spain and Italy, but it has also impacted France which is the inner core."

"Europe needs to make a choice if it wants to save the euro, and it should save the euro. There's only two choices: one is a full fiscal union, a political decision with a very large bill. The other [choice] is a smaller, less-than-perfect euro zone, which has political implications but has a smaller bill. That is a political decision that Germany must take. The quicker it takes it, the more likely it will be able to save the euro."

On the options that could save Europe:

"There are no easy options. That's why the process is paralyzed. Wherever the policy makers look, they see tremendous costs and tremendous disruptions. The tendency has been to do too little, too late. There is no costless way forward at this point, and that is a problem that all of us have to internalize and understand, that there are no easy solutions."

On Europe being the single biggest threat to the U.S. economy:

"Left to our own, we would muddle along with the risk of stall speed, but one thing we cannot cope with is the major shock from one of the largest economic areas of the world, Europe. Already we're seeing investors stepped back from markets because of the anxiety. The more that happens, the more dysfunctional these markets become."

On whether the Fed should implement QE3:

"I smiled when one of your guests said earlier that the Fed has been the only adult in Washington. That is true. It has been the only institution willing to take steps. As you pointed out, because the Fed has taken these steps, it has taken pressure off of the rest of Washington to do its part…Other agencies haven't stepped up to the plate. It is time for other agencies to step up. The effectiveness of the Fed is declining, unfortunately, day in and day out."

On what the Fed should do:

"Chairman Bernanke has made it clear and he's repeating it three times, saying that when they look at these unconventional policies, they recognize the benefits but there are costs and risks. What we call collateral damage, unintended consequences."

"[Bernanke] recognizes that that equation, that balance, is shifting from potential benefits to costs and risks. Looking forward, if they were to do QE3, they may get some benefits, but I suspect there would also be quite a bit of collateral damage and distortions put into the system that would take us years to overcome."

"[Collateral damage would be] pressure on the currency. What you will see is pressure on the functioning of markets, you will see people stepping back, because more and more non-commercial forces will be determining market outcomes. We will also see questions about the credibility of the Fed and the political autonomy of the Fed."

bloomberg.com

Copyright © 2011 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules