Quote from Mohd El-Erian of Pimco, manager of the world's largest bond fund.
"The concept of stall speed is not something that's familiar to the markets," he said. "That's what I find is terrifying. We can talk about the probability of recession when unemployment is already too high, when the financial deficit is 9 percent of (gross domestic product), when interest rates are already at zero percent and when a quarter of the homeowners are already underwater on their mortgages. That is a terrifying concept. That is why everything must be done to avoid a slowdown in growth."
http://www.cnbc.com//id/45253864
"The concept of stall speed is not something that's familiar to the markets," he said. "That's what I find is terrifying. We can talk about the probability of recession when unemployment is already too high, when the financial deficit is 9 percent of (gross domestic product), when interest rates are already at zero percent and when a quarter of the homeowners are already underwater on their mortgages. That is a terrifying concept. That is why everything must be done to avoid a slowdown in growth."
http://www.cnbc.com//id/45253864
4 comments:
As I enter the final decades of my life, I've taken time to reflect upon the "legacy" I'm leaving behind.
Like most Singaporeans of modest means, my "legacy" will largely be the type of Singapore I leave behind for my children & grandchildren.
In a country where I have the responsibility & privilege of "one man, one vote", I am responsible for the government I got and passing onto my next generation.
Below is a 17 minute video from TED.com. The speaker is Richard Wilkinson in July 2011. I'd be surprised if the first 2 minutes does not grab your attention. And yes, Singapore also gets a couple of mentions.
http://www.ted.com/talks/lang/eng/richard_wilkinson.html
rex comments as follows,
I do not understand what is the reason for Mr Tan posting Mr Mohd's quote in the blog. Mr Mohd of Pimco, warns that "slowdown in growth" is disasterous, everything must be done to continue growth at all times.
Are we not always complaining on this blog and numerous other blogs, that singapore's growth is too fast and we should consider adopting a just break-even approach, and that we should stop pursuing GDP growth and profits relentlessly, with no regard to any other repercussions in society?
There are two issues - One, IS SLOWDOWN IN GROWTH acceptable? The Pimco expert says no.
The second issue is INCOME DISTRIBUTION. This issue is not the subject of the article, which says nothing about it. However a commentor above has brought it up, but it is tangential to the topic which was raised in the Pimco Manager's speech.
I am more wondering about the pimco expert's warning and insinuation that growth must be maintained always.
IS it true>?
Can we live by just achieving a modest growth or maybe breakeven and not growing phenomenally and wrecklessly? The two casinos' of course they are GROWTH, too...
Isn't that the problem with Singapore today, that we just go for growth growth growth growth - which indeed we have achieved but at enormous social costs.
in summary, i don't fully subscribe to the view of the Mohd Erian as quoted above.
rex
My question to El-Erian is whether his company involve in the speculating and betting of sovereign bonds (like using margin to short en masse)? If his company does that, then there is no point for him to be concerned with the world economy and unemployement because his company is part of the problem.
Reply to Rex:
My view is that the global economy is in a very bad shape and it will be very difficult to salvage the situation. As Modh Al-Erian said, without growth, the economy will collapse, and I agree with it.
With growth, the situation will not get better - it will only delay the problem to a future date (and the problem will get bigger).
Singapore is in a different situation in terms of current economic growth - but we have the same problem of a property bubble and high cost of doing business. We may face the same challenges sometime later.
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