El-Erian’s Remarks On Winning The Depressionary War And Losing The Post-Crisis Peace

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homeDARPAcontributorsnewsforumszh-tshirtstoredonaterssmanifesto 4closureFraud Exclusive – President Obama Falls Victim to Chase Robo-Signer Posted by: 4closureFraud Post date: 10/10/2010 – 23:24 It’s not the foreclosure affidavits only. Hello? It’s the whole kit-n-caboodle. it’s the fabricated assignments of mortgage, fake allonges, robo-stamped endorsements in blank, and satisfactions of mortgage, ignoring SEC and IRS regulations, disregard for the steps required by the REMIC rules. It’s all the top national banks and their servicing arms. The whole of it is a sham. Don’t believe the propaganda that insists otherwise. A Different Direction for the Foreclosure Mess? Posted by: Bruce Krasting Post date: 10/10/2010 – 22:36 I have to believe this is happening. The only question is,”How much?” FORECLOSUREGATE AND OBAMA’S ‘POCKET VETO’ Posted by: ilene Post date: 10/10/2010 – 23:09 Then they got cute and produced either the actual note, a copy of the note or a forged note, or an assignment or a fabricated assignment from a party who at best had dubious rights to ownership of the loan to another party who had equally dubious rights, neither of whom parted with any cash to fund either the loan or the transfer of the obligation. . . . Navigation PollsDonate To Zero HedgeRecent posts Shopping cart View your shopping cart. User login Username: * Password: * Create new accountRequest new password Zero Hedge Reads Angry BearBearish NewsBoom Bust BlogChina Financial MarketsChris Martenson’s BlogContrary InvestorCoyote BlogCredit WritedownsDaily CapitalistDaneric’s Elliott WavesDealBookDealbreakerDr. Housing BubbleFalkenblogFibozachiFund My Mutal FundGains Pains & CapitalGlobal Economic AnalysisGonzalo LiraImplode-ExplodeInfectious GreedInvesting ContrarianJesse’s Café Américain Market FollyMax KeiserMinyanvilleMises InstituteNaked CapitalismOf Two MindsPension PulseShanky’s TechBlogThe Daily CruxThe Mad Hedge Fund TraderThe Market TickerThe Technical TakeThe Underground InvestorWall St. Cheat SheetWashington’s BlogWealth.netWhen Genius Prevailed Home El-Erian’s Remarks On Winning The Depressionary War And Losing The Post-Crisis Peace Tyler Durden's picture Submitted by Tyler Durden on 10/10/2010 13:11 -0500

AIGAmerican International GroupBill GrossFailGlobal EconomyMean ReversionMeltdownNew NormalRealityUnemployment

Pimco’s Mohamed El-Erian continues to attempt to push for the bond over the equity case, most recently with his just released lecture remarks for the Per Jacobsson Foundation. In it the New Normal economist reconciles, once again for all those who missed it the first few hundred times, just what the New Normal means, and warns about a short-sighted, cyclical response by the international community, being extremely vocal in his critique of the post-crisis response, which is nothing less than a continuation of the emergency measures that prevented what some believe would have been an all out collapse had Goldman and AIG been allowed to fail: “Two years ago, policymakers from around the world gathered here in Washington, DC and recognized that the world was on the verge of an economic meltdown. Together they initiated an impressive set of measures, showing a commonality of purpose, narratives, interests, and actions. The private sector also responded as companies and households took steps to navigate the sudden stop in global financial flows. The war against a global depression was won. History books will report with admiration on the crisis management phase. Unfortunately, they will be less generous when it comes to the post-crisis period. Having won the war, industrial country societies are in the process of losing the peace. Indeed, absent some important mid-course corrections, industrial countries confront the prospects of low growth; high unemployment that is increasingly structural in nature; welfare losses, including a growing number of citizens falling through the large gaps created by overly stretched safety nets; and a rising risk of protectionism.This dichotomy between winning the war and losing the peace is an important one. It points to shortfalls in diagnosis, inappropriate operational constraints, and the fact that structural and balance sheets imbalances that were years in the making cannot be overcome immediately.”

From El-Erian’s conclusion:

It also reflects an excessive intellectual reliance on shortcuts, including short-term mean reversion. Indeed, an important part of the disappointing post crisis outcomes is due to the high degree of active inertia that dominates industrial countries, including difficulties in shifting from a cyclical mindset to one that also acknowledges issues pertaining to national and global paradigm shifts and debt overhangs.

It is increasingly urgent for industrial societies to move beyond cyclical responses by also taking a longer, more secular view. Multilateral institutions can and should play a more important role in helping to navigate this critical transition. But to translate the possible into the probable, multilateral institutions must step up their efforts to deal with long-standing, well known problems—and do so by going well beyond the currently measured pace.

In closing, we should not forget the insight of the philosopher Lawrence Peter Berra. Mr. Berra, a legendary baseball player and manager—and better known by his nickname “Yogi Berra”—once said “The future ain’t what it used to be.” Let us all hope that the global economy responds to this reality with the required degree of courage, imagination, purpose and steadfastness that it displayed in dealing with the global financial crisis.

Hardly anything revolutionary here, suffice to say that Pimco’s agenda to get QE at any and all costs is more than obvious, and continues on Friday’s remarks by Bill Gross which have made it all too obvious for all to see, just what the Fed will do on November 3. As always, we will confirm whether the Newport Beach bond manager is once again buying Mortgage and USTs on margin, thus removing any doubt as to what the Fed may have leaked, and will do.

Full video can be seen below, while El-Erian’s full speech is linked here.

 

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by whereismyorange
on Sun, 10/10/2010 – 13:14
#639532

Anyone else see the mcdonalds adds?

Those frys look delicious…

Login or register to post comments by bugs_
on Sun, 10/10/2010 – 13:17
#639535

I’m El-Erian you fool can’t you see

who be the next treasury secretary

i’ll kick bloombergs ass down the street

don’t step i’m packing goldman heat

Login or register to post comments by Minion
on Sun, 10/10/2010 – 13:19
#639541

Herding the public into what Stewart Thompson calls “the paper money blast furnace” – “Growth with safety” until the banksters shut the door and light it off. 

The public is running to paper while the Chinese govt. is gobbling up rare metals, farm commodities, and Russian military equipment.  How does the price of AK47’s change when the government runs out of money?

Login or register to post comments by TexDenim
on Sun, 10/10/2010 – 13:22
#639546

Is QE2 a certainty now? Check out this graph from Richard Fisher’s speech in Minnesota on October 7th:

 

 

I am afraid that despite recent speculation in the press and among market pundits, we did little at that meeting to settle the debate as to whether the Committee might actually engage in further monetary accommodation, or what has become known in the parlance of Wall Street as “QE2,” a second round of quantitative easing. It would be marked by an expansion of our balance sheet beyond its current footings of $2.3 trillion through the purchase of additional Treasuries or other securities. To be sure, some in the marketplace 

including those with the most to gain financially?read the tea leaves of the statement as indicating a bias toward further asset purchases, executed either in small increments or in a “shock-and-awe” format entailing large buy-ins, leaving open only the question of when.

Since the FOMC meeting, a handful of my colleagues have fanned further speculation about QE2 by signaling their personal positions on the matter quite openly in recent speeches and interviews in the major newspapers. Hence the headline in yesterday’s

 

Wall Street Journal, “Central Banks Open Spigot,”3

a declaration that surely gave the ghosts of central bankers past the shivers and sent a tingle down the spine of gold bugs from Bemidji to Beijing.”

 

Counting chickens before they hatch? 

 

Login or register to post comments by Paul E. Math
on Sun, 10/10/2010 – 13:57
#639579

Fisher is the only (alternate) member of the FOMC who in any way resembles an inflation hawk.  The rest are full Keynesian doves – it is their votes that will decide on QE2 and they are all in favor of it.

To me, Fisher stands out enough that it makes me wonder if this is some kind of coordinated stance. 

What I mean is, ‘they’ collectively decide that Fisher will play the role of inflation hawk to temper the expectational aspect of inflation.  I think they want inflation but they don’t want the inflation expectations that lead to higher wage demands and social unrest.  Hence the need for someone in the Fed to jawbone down expectations.

And if we do get high inflation expectations, they simply appoint Fisher as Fed chairman, proclaiming him the new Volcker.  This way, a rise of a few bps in the overnight rate would give the Fed added credibility thus greater effect in dampening inflationary forces.

A bit of a conspiracy theory, sure.  But it still may be true.

Login or register to post comments by Lux Fiat
on Sun, 10/10/2010 – 20:09
#639951

Was reading an interesting Mauldin article with some quotes from a recent Fisher speech (http://investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2010/10/08/the-ride-of-the-keynesian-cowboys.aspx).  As referenced above, there is real concern that falling dollar could make US equities and other assets undesireable to foreigners.  It amazes me that Bernanke, who is so ballyhooed as a financial crisis historian extraordinaire, seems so blind to much of that history outside of the “Great Depression”.   Re the risk of cooling foreign investment, and even worse, flow reversal, from the Fisher speech:

“Far too many of the large corporations I survey that are committing to fixed investment report that the most effective way to deploy cheap money raised in the current bond markets or in the form of loans from banks, beyond buying in stock or expanding dividends, is to invest it abroad where taxes are lower and governments are more eager to please. This would not be of concern if foreign direct investment in the U.S. were offsetting this impulse. This year, however, net direct investment in the U.S. has been running at a pace that would exceed minus $200 billion, meaning outflows of foreign direct investment are exceeding inflows by a healthy margin. [emphasis added]  We will have to watch the data as it unfolds to see if this is momentary fillip or evidence of a broader trend. But I wonder: If others cotton to the view that the Fed is eager to “open the spigots,” might this not add to the uncertainty already created by the fiscal incontinence of Congress and the regulatory and rule-making ‘excesses’ about which businesses now complain?”

Login or register to post comments by RockyRacoon
on Sun, 10/10/2010 – 22:50
#640214

Another interesting part:

Here’s an interesting note I picked up while looking at employment data by age and education (with seven kids, these things are important to me!). There is a cohort that has seen its employment level rise. That would be men and women over 65. The total number of people over 65 who are employed has risen by 318,000 over the last year, accounting for nearly all the job growth (although one bit of data is from the establishment survey and the other is from the household survey, but that should be close enough for government work).

Think about that. Almost all the job growth has come from those who have reached “retirement age” (whatever that is) continuing to work or going back to work. The unemployment rate for young people 16-19 is 26%. The unemployment rate for black youth is an appalling 49%. (This is not an abstract piece of data. I have two adopted black sons, so this figure means something in the Mauldin household.) Next time you go into malls, Barnes and Nobles, fast food places, notice again the work force. These are the jobs that traditionally went to those starting out.

Login or register to post comments by Lux Fiat
on Sun, 10/10/2010 – 23:07
#640245

If I had added all the very interesting parts, it would have pretty much amounted to the entire article.  Mauldin doesn’t always fire on all cylinders, but he did on this one.  I’m going to have to read the Fisher speech in its entirety as well.  I’m not sure if he really means it (seems so based on past interviews, etc.), or if it is one heck of a good cop/bad cop routine,…or possibly both.

Login or register to post comments by liberal sodomy
on Sun, 10/10/2010 – 13:28
#639551

Let this “jewish” money system COLLAPSE and take them and isntreal with it.

Login or register to post comments by jeff montanye
on Sun, 10/10/2010 – 22:10
#640167

got my doubts about the comment in general but i like “isntreal”.

Login or register to post comments by RockyRacoon
on Sun, 10/10/2010 – 22:43
#640215

You need a new schtick man.

Login or register to post comments by michigan independant
on Sun, 10/10/2010 – 14:13
#639554

“efforts to deal with long-standing, well known problems”

And there you have it Students, quiz Novemeber. Your gridlocked sickness to self serving avarice have already sealed the mathematical fate Dear Senator’s of our Nation born in Blood. http://www.opensecrets.org/politicians/index.php

Your snack food called The Middle Class is almost over. To whom do wish to pleasure next with your wisdom of balance for decades. Time to consume the next Class by sliding a feather commonly used to tickle the back of the throat to your ideological God FOMC. 

Login or register to post comments by VK
on Sun, 10/10/2010 – 13:35
#639557

I can’t believe this guy gets paid for this drivel. In economics the better bullshitter wins, no wonder keynesian crap is still being followed. The greatest depression hasn’t been prevented, heck the CMI index is showing that the 2010 contraction in GDP is worse than the 2008 contraction. The only people who won were on wall street and the lobbyists. The rest of the US was sent on a course to hell. The stock market will meet reality one day and PIMpCO will be run into the ground as the masses riot.

Login or register to post comments by drwells
on Sun, 10/10/2010 – 17:30
#639870

Nassim Taleb blew a big chunk of his credibility by writing a blurb for this guy’s obligatory brick, unless someone had a gun to his head.

Login or register to post comments by kaiserhoff
on Sun, 10/10/2010 – 13:47
#639570

Just one more bail-out please, please, PLEASE…, so we can get our nuts out of this vise.  Gotta hand it to Pimco. They can do the “cat on a hot tin roof shuffle” and make it look like they intended to do that.  Impressive.

The great Peter Drucker said we have to ask the naive questions.  Here’s a good one.  Under what scenario will long bonds be worth more 3-5 years out, than they are worth now?

 

And the great Yogi Berra said “I didn’t say half the things I’ve said.”  We should all be so fortunate.

Login or register to post comments by midtowng
on Sun, 10/10/2010 – 13:54
#639575

I don’t see any mention of the lack of any real, structural financial reforms.

Login or register to post comments by bank guy in Brussels
on Sun, 10/10/2010 – 14:01
#639585

Interesting and somewhat ironic that the Egyptian-heritage Mohamed El-Erian, presumed to be a Muslim, is with the world’s largest bond fund, dealing with billions of payments in interest –

When payments of interest, what Muslims call « riba », are much more actively forbidden within the Islamic religious tradition, than has been maintained within Christianity and Judaism.

As ZH readers have noted, it is possible that the Western world’s bigoted war-making on Islamic countries, is partly motivated by the Islamic tradition having such a strong opposition to interest slavery. Given that the Western oligarchs make their living from « riba » interest-slavery, this seems a likely factor.

And El-Erian is certainly aware of the issues, and the major Islamic efforts to create a world where interest payments are outlawed and do not exist. When El-Erian was at the Harvard Management Company, he commented publicly in favour of a book on « Islamic Finance » by Mahmoud A. El-Gamal.

Wonder if one day Mohamed El-Erian, sharing his name with the founder of the Islamic faith, is going to face some major heat from Muslim intellectuals for his making a living as one of the top traders in the entire world, of billions in prohibited and forbidden interest payment « riba ».

Login or register to post comments by lynnybee
on Sun, 10/10/2010 – 15:34
#639688

Someone finally said it !  The truth has been spoken.   Sharia law does not permit USERY.     USERY.    USERY.    ………. this is the fight .     Thank you for saying it, I stood up at my desk, clapped my hands & cheered that someone came out & said this.    regards to all on my favorite website !

Login or register to post comments by Hunch Trader
on Sun, 10/10/2010 – 15:36
#639689

Surely you don’t think islamic finance works without profit?

Interest is the profit. Only in islamic finance, it is not called ‘interest’.

You can call it ‘bullshit’ as long as I get my profit.

 

Login or register to post comments by michigan independant
on Sun, 10/10/2010 – 20:22
#639866

I suggest 100 year foot prints back in time and find as many also do is Captial Markets and Govenments have Limited Choices. Working GeoCorporate for over thirty years clarifies roles and responsibilities only. The main point I convey is that Capital is tolerated by any Government in any time. Banks on the other hand are to be held in suspect and sceptical contempt in any age as it should be. What is moving only is fungible skills you pocess if you are not needed here, or executed there as a circumstance to your ideological gravity. There is only one way to produce innovation other than learn it, which thank God Government cannot do. Innovators are tolerated only and any group survives serving others, and not be contolled by others gives you hope to do so. Given bents of minds seek to control, as innovators seek to survive. We had to pull out our people in zones before they where executed in Chad and Sudan then. You can do simple query to who was subcontracted to eradicate the indigenous souls.

It never stops other than opinions. I would rather live to serve my creator but many souls wish to die for there creator or serve a payment to do either as mentioned above.

Many have read there wisdom but few can follow it.

Login or register to post comments by Rodent Freikorps
on Sun, 10/10/2010 – 14:28
#639603

Elvis Presley – Poison Ivy League 64′

 

Login or register to post comments by Traveler-2
on Sun, 10/10/2010 – 15:09
#639646

Fuck, what is going on?  Reading middle English was far easier than understanding all of this shit.  Damn, hand me that bourbon bottle……

No wonder the middle classes are sleezing along with football and Dancing with the Stars. Ignorance is indeed bliss.

Login or register to post comments by tradewithdave
on Sun, 10/10/2010 – 15:21
#639672

I’m confused.  It sounds like the “new normal” is how does Pimco get out of bonds and into equities before the QE2 launches combined hyperinflation and U.S. dollar collapse?  All this time, I thought that the “new normal” meant replacing the law of the land with Sharia law quoting Mr. El-Arian; “The global financial crisis has also undermined the standing and credibility of the Anglo-Saxon economic model that emphasizes liberalization, deregulation, interconnectivity, and unfettered markets.”  Which is it?  Could it be both?  I need to see a show of invisible hands.   

Dave Harrison

http://www.tradewithdave.com

Login or register to post comments by steveo
on Sun, 10/10/2010 – 16:09
#639763

The middle chart is GLD/SLV. You can see this is an excellent indicator, when this ratio is at a bottom, the market usually tanks, within 3 to 5 days, but sometimes immediately. The trick is figuring out when the bottom is. 
 
This top chart is SPY/VIX I plotted it just to see if any interesting effects came up….none really 
 
The Bottom chart is SPX, the S&P 500, follow each purple line from the GLD/SLV bottoms. Amazing methinks. The two highlighted candle patterns are similar, the first one started the Head of the infamous 2009 Head and Shoulders Bear trap. The second one is NOW. 
 
And finally, a boatload of other charts for your free consumption. 
 
Like this stuff? Sign up as a follower and then follow on your Google reader. 
 
http://oahutrading.blogspot.com/

Login or register to post comments by RockyRacoon
on Sun, 10/10/2010 – 22:46
#640219

Alright already…..

Login or register to post comments by the rookie cynic
on Sun, 10/10/2010 – 16:25
#639795

Here’s where he calls for more aggressive intervention and international cooperation:

“This dichotomy between winning the war and losing the peace is an important one. It points to shortfalls in diagnosis, inappropriate operational constraints, and the fact that structural and balance sheets imbalances that were years in the making cannot be overcome immediately.

It also reflects an excessive intellectual reliance on shortcuts, including short-term mean reversion. Indeed, an important part of the disappointing post crisis outcomes is due to the high degree of active inertia that dominates industrial countries, including difficulties in shifting from a cyclical mindset to one that also acknowledges issues pertaining to national and global paradigm shifts and debt overhangs.

It is increasingly urgent for industrial societies to move beyond cyclical responses by also taking a longer, more secular view. Multilateral institutions can and should play a more important role in helping to navigate this critical transition. But to translate the possible into the probable, multilateral institutions must step up their efforts to deal with long-standing, well known problems—and do so by going well beyond the currently measured pace.”

I’m not an expert in bonds. Can any of you ZH’ers hypothesize about what happens to PIMCO’s portfolio if there’s no QE2?

Login or register to post comments by lynnybee
on Sun, 10/10/2010 – 16:40
#639813

….. yes, well, there’s a big difference between “making a profit” & charging people 29% interest on borrowed money, as in credit cards ….. i read somewhere (cannot provide reference) that the typical interest rate @ a SHARIA bank is 6.5% ………. that’s all I’m saying is there’s this diff between gouging people or charging a fair interest rate.

Login or register to post comments by cdskiller
on Sun, 10/10/2010 – 17:23
#639861

El-Erian is a douchebag to be mocked. Nothing he says is worthy of dissection. “Two years ago, policy makers from around the world…recognized that the world was on the verge of an economic meltdown.”

The world wasn’t on the verge of anything, punk, you and your friends were. And all the measures that were implemented didn’t save anybody OTHER than you and your friends. Everything and everybody else was sacrificed to keep you from suffering. Have you taken a look around you? Nothing was averted. The damage is still evolving. The fraud is still being uncovered. The “long-standing, well-known problems” are the ones you should see when you look in the mirror every morning.

Years ago, before the crisis hit, I had a nice long exchange with this douchebag in which I tried to get him to admit the dangers posed by the size of the credit derivatives market in general, the sudden explosive growth in the credit default swaps market, and the OTC nature of it all. His response? “Derivatives are a useful and necessary tool to help manage risk.”

Yogi might say, “Once a douchbag, always a little smelly.”

Login or register to post comments by Mitchman
on Sun, 10/10/2010 – 17:54
#639900

+1000!  Well said.

Login or register to post comments by lynnybee
on Sun, 10/10/2010 – 20:26
#639968

yes, very well said ………. it made an impact on me, I like what you wrote :   The world wasn’t on the verge of anything,  you and your friends were.  

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