PIMCO executive Mohammad El-Erian continues to pound on what he calls the “new normal”
Bloomberg: Americans may have to get used to unemployment greater than 8 per cent for the first time since 1983 and an economy that won’t grow much beyond 2 per cent as a consequence of the lost confidence in consumer credit that shattered financial markets.
By this time next year, “the market will realise that potential growth for the U.S. is no longer 3 per cent, but is 2 per cent or under,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.
El-Erian’s comments echo statements made by GE (GE) CEO Jeff Immelt about the end of rapid growth.
Reuters: General Electric Co’s growth will be “harder to come by” in coming years given the prospect the global economy may grow at a slower pace once it emerges from recession, the company’s chief executive said.
Jeff Immelt said he would look to shift more of GE’s resources to China and other emerging markets set to play a larger role in driving economic growth as tighter credit forces the U.S. consumer to rein in spending.
In a way, this isn’t so horrible. Western Europe, the US, Japan… we’re all old, wealthy countries. And you wouldn’t expect old, wealthy countries to grow particularly rapidly. We’re in wealth preservation mode. Rather than focusing on revving our growth engines (and it should be noted that everyone’s talking about growth in a very narrow sense. Lifestyle improvements through better technology and cheaper goods aren’t likely to stop anytime soon), the key now is capital and societal preservation.
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