Mohamed El-Erian: A period of major global realignment

December 3, 2010

Mohamed El-Erian, PIMCO’s CEO, is #45 on Foreign Policy’s list of the 100 Top Global Thinkers of 2010. He tells Chrystia that his big idea is a “recognition that we are living in a period of major global realignment.”  This rapidly changing environment favors emerging markets, which are accustomed to periods of upheaval, as well as businesses, which have the metrics and flexibility required to make quick course corrections. The developed world has been hobbled by years of inertia, he says, and is at a disadvantage in responding to these global shifts.

In El-Erian’s eyes, being an outsider is fundamentally connected to being a top global thinker.  He credits his unconventional background — growing up in Egypt, studying four different schools of economics at Cambridge, and analyzing emerging markets for 15 year at the IMF — with his ability to spot the realignment in world economic growth towards the developing world.

El-Erian attributes PIMCO’s success to its heterodox culture — the investment giant’s motto is to be “constructively paranoid,” and once a year management invites a “shadow” investment committee to its Newport Beach offices to second-guess the portfolio managers’ investment decisions.

In FP‘s words, El-Erian belongs on the list “for reminding us just how bad things could get:”

The world’s best financial minds have closely watched the prognostications of this Oxbridge-trained economist ever since January 2007, when Mohamed El-Erian, then the head of Harvard University’s endowment, bet $1.6 billion of the school’s money that global markets were headed for a downturn — and turned out to be right.

Author of the 2008 book When Markets Collide, a former IMF economist, and head of investment colossus Pimco, El-Erian helped popularize the term “the new normal” to describe the post-crisis economic era: one in which growth remains stubbornly low everywhere but the developing world. This year, as hopes for a rapid recovery have faded, he has penned a series of full-throated articles warning that world leaders aren’t taking the potential consequences of a prolonged downturn seriously enough.

Read more about El-Erian at Foreign Policy.

Posted by Peter Rudegeair.


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This vid major bummed me out. I’ve been hoping that “the new normal” might be a little less bleak. This morning the lead story in my Reuter’s morning news is Bernanke saying what El-Erian is saying, and the same things I’ve been thinking, in my darker moments.

Four to five years of unemployment if you are past your thirties is pretty much a permanent lifestyle change. No one knows the future, and opportunities have an odd way of presenting themselves, but the mind has to be in a state to recognize and embrace them, and unemployment has a way of producing ‘functional depression’.

For older people… I used to do financial planning; at some point it came to me that the retirement plan for the later years (>70) of the Boomers, when their health starts declining, is going to be suicide. A lot of people simply thought the numbers would prove to be wrong, and something would come through for them, or they would simply keep working. They won’t.

We have to cut the deficit, and at the same time are going to be under enormous pressure to maintain the safety net. Our next war will be with our children.

Posted by ARJTurgot2 | Report as abusive

My my, what a depressing comment. I know enough about Mr. El-Erian and his remarkable bearishness – hardly surprising in a bond trader talking up his position – to take a pass on this video. But the gloom of the above comment! Boomers contemplating suicide in their 70s! Going to war with their children! My late father once remarked that Americans always go off the deep end; things aren’t good, they’re GREAT or things aren’t bad, they’re AWFUL, we’re all gonna die. Come off it, the end of the world isn’t coming anytime soon. America has been through much, much worse and survived and prospered. This time won’t be any different.

Posted by Gotthardbahn | Report as abusive

Wake up and smell the coffee. We are over $10 trillion in debt, just finished two years of almost $1.5 trillion in annual deficits, and are on track – by the White House OMB’s own estimates – for another trillion dollar plus deficit this fiscal year. Yet, we still believe we can live in an entitlement riddled society. We believe like sheep the government’s explanations of the financial crisis, hence have allowed them to pile on more regulation to choke our economy, and most of us don’t care how much money the government confiscates (taxes) as long as they are confiscating it from someone else (which, by the way, is the sentiment that caused us to end up with a federal income tax in the first place!) We are so brainwashed we now, against the counsel of our Founding Fathers, no longer are wary of government, but fear and loath corporations instead!

Posted by beofaction | Report as abusive